Must Hang Sallie
- Joshua M Brown
- September 6th, 2011
Sallie Krawcheck's firing is yet the latest example of a grand tradition dating back thousands of years - tossing a sacrificial maiden into the volcano to calm the angry god of the island. With few moves left, Bank of America ($BAC) CEO Brian Moynihan chose to "send a message" with an absurd restructuring that included the marquee-name firing of the Merrill Lynch President.
But unfortunately for Brian and the rest of the B of A brass, the island is still angry and the gods won't be satiated with either offerings from Buffett or the hanging of Ms Krawcheck, as they will soon find out for themselves.
I'm going to go on the record here and say publicly that despite anything you may read about Sallie Krawcheck this week, the truth is that she did her best but never really had a shot. Krawcheck was lured away from Citi a few years ago* to do the impossible - take the melting iceberg that is Merrill Lynch and somehow turn it into the statue of David. Yes, she went after the job, one of the biggest positions in finance to be sure. But there was never any chance that she could make it work - because no one could have.
Sallie couldn't change the fact that the brokers at Merrill want to be thought of as wealth managers, not salesmen, not anymore.
Sallie couldn't change the fact that these "wealth managers" had zero interest in being affiliated with the banking giant from Charlotte in any way once the rescue was accomplished in the wake of Lehman's failure.
Sallie couldn't change the fact that the brokers have no interest in peddling bank products or making referrals to other divisions within the slimeball supermarket. She also couldn't change the fact that the clients are wise to game as well and that they are not very excited about having their retirement accounts be "synergized" either.
Sallie couldn't change the fact that the jig is up, and everyone knows that Merrill Lynch's fiduciary responsibility is to the shareholders of Bank of America first and the clients second.
Sallie couldn't change the fact that once the brand name is tarnished, there is little reason for the salesforce to stay.
Sallie couldn't change the fact that when retail brokers lose out on all the best banking deals to the firm's hedge fund clients, there is little reason for the salesforce to stay.
Sallie couldn't change the fact that with no IPOs and no solid reputation, there is nothing to justify working at Merrill for an industry-worst payout and that the only thing keeping talent there had become contract bondage and inertia.
Sallie couldn't change the fact that the best of the best were not waiting for BofA to spin off Merrill, they were content to spin themselves off into their own RIA firms or undergo the prisoner exchange process to join Morgan or UBS.
Sallie couldn't change the fact that there will probably be room for only two or three big brokerages and that the four-way death match between Morgan Stanley Smith Barney, Wells Fargo Wachovia Pru and JPMorgan Chase would probably have killed them all in the end - UBS sees the writing on the wall, look no further than all their denials about putting Wealth Management up for sale.
Sallie couldn't change the fact that once Merrill customers began asking their brokers about whether the parent company could survive, morale was bound to lead to someone's ouster.
And lastly, Sallie couldn't change the fact that Wall Street Culture is and has always been primarily about saving one's own ass. And in the end, that's why the President of the most profitable and stable business within BofA had to be fired.
Sallie, you tried, but the game was unwinnable from the moment you took the job. The Age of the Big Brokers is over and the shrinking of Merrill was inevitable.
*Correction: She had been out of Citi for almost a year when hired by Ken Lewis, not lured away, as per Bank of America spokesperson.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.