Krawcheck calls on Merrill’s old guard

As part of her leadership role at Merrill Lynch & Co. Inc., Sallie Krawcheck has shown clear deference to the firm's storied past and has assiduously worked the phones, reaching out to leading members of the firm's old guard, including former chief executives David Komansky and Daniel Tully.

As part of her leadership role at Merrill Lynch & Co. Inc., Sallie Krawcheck has shown clear deference to the firm’s storied past and has assiduously worked the phones, reaching out to leading members of the firm’s old guard, including former chief executives David Komansky and Daniel Tully.

Tapped by Bank of America chief Ken Lewis to lead Merrill Lynch’s global wealth and investment management sector, Ms. Krawcheck, who has met some brokers and employees in the New York area, also has chatted with Winthrop H. Smith Jr., scion of one of the firm’s founders, and former chairman of Merrill Lynch International Inc., and John L. “Launny” Steffens, former chief of Merrill’s retail-brokerage business.

“She said she has a deep appreciation for the firm and its culture,” said one former Merrill executive, who asked not to be identified.

The former executive, who received a brief phone call from Ms. Krawcheck and may get together with her for lunch in the near future to discuss more details, said the call came as no surprise. Ms. Krawcheck, whose title is president of global wealth management and investment management, covered Merrill Lynch as an analyst in the 1990s when she was with Sanford C. Bernstein & Co. Inc. of New York.

Ms. Krawcheck has been communicating with current Merrill advisers, too.

“For years I have admired this company, and its component parts, immensely,” Ms. Krawcheck wrote in an internal note to advisers and employees Aug. 7. “I promise that I will work for all of you, and with all of you, to the utmost of my ability, respecting the culture that you all have created and building on the business’s industry leadership.”

Culture is a serious thing at Merrill Lynch, and many in the industry believe the firm can regain its status as the leader of the retail-financial-advice industry if the culture of “Mother Merrill” is somehow burnished and restored.

“We know her,” the former Merrill official said. “She’s a sound bet.”

It has been two tumultuous years for Merrill Lynch, which went from being an independent company and undisputed leader in the retail-brokerage business to being swallowed by a bank and losing its foothold as the biggest brokerage house.

In the fallout from the credit crisis, Bank of America Corp., which is based in Charlotte, N.C., acquired Merrill Lynch of New York on Jan.1.

Ms. Krawcheck, who most recently was head of Smith Barney of New York, is the latest in a line of leaders looking to invigorate the firm’s 15,000 brokers and advisers, who, along with the rest of the industry, have been demoralized by the historic market collapse.

What’s more, Merrill advisers have witnessed the takeover of their firm by Bank of America, an outcome which, a year ago, most in the industry would have thought inconceivable.

Meanwhile, Merrill brokers and executives have seen dizzying changes of leadership.

These began in 2007, when chief executive E. Stanley O’Neal, re-sented by some of the old guard for his role in Merrill’s collapse, left the firm.

His replacement, John Thain, oversaw the January acquisition by Bank of America and was supposed to lead the combined bank’s new global wealth management area, among other responsibilities.

But Mr. Thain was pushed out by BofA chief executive Ken Lewis, reportedly because of Merrill’s larger-than-expected losses.

Leadership of the firm’s retail brokers also has been rocky.

Brokerage chief Bob McCann, who resigned in January after the BofA takeover, was replaced by Dan Sontag, who spent 30 years at Merrill. But Mr. Sontag bowed out after Ms. Krawcheck was given the job on Aug. 3.

The fact that Ms. Krawcheck reached out to the likes of Mr. Komansky and Mr. Tully deeply impressed one industry observer.

“These are the guys who made Merrill Lynch Merrill Lynch,” said Steve Winks, principal with SrConsultant.com of Richmond, Va., and a supporter of Ms. Krawcheck.

“And if she can channel these guys, and get the old guard on her side, that could be absolutely huge for her success,” he said.

Regaining some of Merrill’s fraternal culture would lead the firm back on a path of innovation and market leadership, he said.

Over the past two weeks, Ms. Krawcheck has made an impact, observers said. A Merrill spokeswoman said she’s visited with and met close to 250 employees and advisers in the New York area, and will travel to other offices in the coming weeks.

Ms. Krawcheck is also committing her own money to her new employer. On Wednesday, she bought more than $1 million of Bank of America stock, according to a filing with the Securities and Exchange Commission.

The investment is a bet she can rebuild Merrill’s “Thundering Herd” of brokers and advisers. And to do that, the firm is priming the pump to recruit reps of all stripes — not just jumbo producers.

In a teleconference with external recruiters Aug. 10, the first such confab since midwinter, Merrill recruiting head Don Geisler outlined the specific details of Merrill’s strategy to attract new talent and expand its brokerage force.

The plan involves luring young and relatively inexperienced rookies, top veterans and others in the middle.

“We want brokers, brokers, brokers,” one recruiter who declined to be identified said in summing up Mr. Geisler’s call.

For top producers who generate in the range of $800,000 or more in fees and commissions per year, Merrill is offering one of the most competitive packages on Wall Street, said another recruiter on the call, who also asked not to be identified.

The deal starts with an upfront bonus of 140% of the broker’s previous year’s fees and commissions. A broker can add to that each year for five years, and receive a bonus based on a percentage of assets delivered.

To qualify, the broker must bring 65% of his or her assets from his prior firm to Merrill in the first year. The broker would also be required to increase those assets to a level 1.5 times what he or she had at the prior firm by the fifth year, the second recruiter said.

Along with those top producers, Merrill also is targeting brokers who range from the first to the third quintile in production, or the top 20% to 60%, recruiters said.

“Merrill is giving recognition to the fact that there are phenomenal brokers whose numbers are off because of the market,” the second recruiter said.

The firm is also looking to hire potential rising stars, the recruiters said. That would include brokers with just a few years’ experience who annually generates $200,000 or more in fees and commissions. Merrill Lynch also is reopening its broker training program.

E-mail Bruce Kelly at [email protected].