BofA’s Darnell Vows to ‘Get Out of the Way’ as Leader of Merrill Brokers
Bank of America Corp. (BAC)’s David Darnell, the commercial banker put in charge of the lender’s Merrill Lynch brokerage, promised employees he’ll do anything including “get out of the way” to help them improve results.
Darnell, 58, addressed the Charlotte, North Carolina-based lender’s 16,241 financial advisers on Sept. 13 for the first time since being named co-chief operating officer. His message: leaders including John Thiel, head of U.S. wealth management and Andrew Sieg, head of global wealth and retirement solutions, will be running the show.
“My job is to do everything I can to help and if not, I’m going to get out of the way,” Darnell told a standing-room only, town hall-style meeting at One Bryant Park in New York, according to an account obtained by Bloomberg. Existing managers are “who’s going to run this business, and I want to be very clear about that.”
Darnell must reassure members of the world’s most profitable brokerage -- known as the “Thundering Herd” because of Merrill’s bull logo -- that they’ll be unscathed by the latest management shuffle. Ever since Bank of America took over Merrill Lynch & Co. in 2009, the firm has faced speculation that top-performing brokers would leave amid concern that their new parent would erode Merrill’s culture and pay.
The firm’s advisers saw John Thain, Merrill’s chief executive officer, ousted within weeks of the takeover. Earlier this month, Sallie Krawcheck, head of the division that included the brokerage, was forced out as CEO Brian T. Moynihan shook up management. Darnell was named to run the bank’s operations along with Thomas K. Montag, 54, who oversees trading, investment banking and corporate banking.
Darnell, the former president of commercial lending who started at a predecessor to Bank of America more than three decades ago, is now responsible for operations including deposits, credit cards, mortgages and wealth management, which includes the brokerage. He professed respect for Merrill’s brokers during the New York meeting and said he wouldn’t change their compensation or brand, which “is going to be strong forever,” he said.
Susan Thomson, a Bank of America spokeswoman, confirmed Darnell had made the remarks and said she couldn’t comment.
“His objective right now is simply to steady the ship,” said Tim White, a partner at Dallas-based executive recruitment firm Kaye/Bassman International Corp. Darnell is addressing advisers’ concerns that he’ll run the business “to the lowest common denominator. But there will be changes because they need to cut costs. If Bank of America could sell investment advice through an ATM machine, they’d do it.”
Advisers will be in charge of offering bank products to clients when needed, Darnell said. Brokers, who depend on commissions and fees, had complained that the lender pushed them to hawk credit cards, mortgages and other bank products as part of a company-wide “cross-selling” strategy, according to two Merrill Lynch brokers who asked for anonymity because they weren’t authorized to speak publicly.
The guiding principle for cross-sales will be customer demand, “where you’re there to take care of a client and whatever that client needs,” Darnell said. “It’s your decision based on your client’s need.”
Rivals including Morgan Stanley Smith Barney, UBS AG and independent brokerages have stepped up efforts to poach top Merrill advisers, said Jonathan Henschen, a broker recruiter based in Marine on St. Croix, Minnesota. Enticements from a large firm may be worth as much as 300 percent of an adviser’s trailing 12-month revenue, he said.
What She Said
Darnell’s comments echoed the sentiment of his predecessor’s opening remarks to the brokerage two years ago. Krawcheck, 46, reassured advisers that she wouldn’t turn Merrill “into a place I’ve been before” after she joined Bank of America from Citigroup Inc. in August 2009.
“Those are great institutions, but this is a fantastic, fantastic business,” Krawcheck said.
Bank of America’s wealth management division produced $506 million in net income in the second quarter on $4.5 billion in revenue, while the overall company posted a record $8.8 billion loss on expenses tied to faulty mortgages. The lender has lost half its market value this year on concern that costs from the 2008 takeover of subprime lender Countrywide Financial Corp. could force it to issue new shares to bolster capital.
Moynihan, 51, has said he can trim $5 billion in expenses from consumer banking, partly by eliminating 30,000 jobs over the coming years. The next phase of Project New BAC, Moynihan’s efficiency plan, starts next month and examines wealth management, commercial and investment banking operations.
When asked if that effort will yield the same level of savings as the first phase, Moynihan said this month at a conference that there could be less opportunity for cost-cutting because staff compensation is a large component of expenses.