Unlocking Real Value Blog

The Unhappy Marriage of ML/BofA – The Saga Continues

Any way you slice it, the cultural problems between the “old” Merrill Lynch and parent Bank of America persist. Part of the problem is the classic meshing of a bank with a brokerage firm.

Business Week’s article this week on the firm (entitled “The Bull Whisperer”) highlighted many of the potential causes of the continuing conflict – Bank of America’s “connectivity” initiative (a.k.a. encouraging/mandating cross-selling of proprietary products), the desire of the bank to have brokers get rid of smaller accounts (or at least offer smaller clients less service), the low price of the stock, the continuing bad press surrounding the bank, etc.

Whether you support the notion that the partnership is not working – Merrill brokers are leaving in larger numbers than the competition – or you think the partnership is working – brokers have access to more liability-side services – there is one clear lesson: brokers just don’t like being told what to do. All other reasons aside, and regardless of the rationale – increased bank profitability – the connectivity initiative is only going to drive more brokers away.

The bottom line is that the large broker/dealers will continue to exist, and many brokers will continue to make the move to independence. Regardless of the reasons for the larger number of brokers leaving ML, the lesson for upper management is that you can’t ignore cultural differences. To do so will lead to continued unhappy marriages like the ML/BofA one.

Having said that, I understand that in the case of this merger there really was no choice – the merger happened at the apex of the financial crisis and ML was headed toward certain bankruptcy. So in cases like this, management needs to be a little smarter, recognize the irreconcilable cultural differences and stop trying to put a square peg in a round hole.

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