September 15, 2011 will be the three year anniversary of when Bank of America (BAC) announced it was buying Merrill Lynch (MER). It's been well documented in many post-crisis books how the fiercely independent brokerage firm, crippled by losses in securitized mortgages, was forced to sell out to the always acquisitive BAC. Two and a half years after the close of the transaction, who is rescuing whom?
Merrill Advisers tell me that they were worried that the famously HR-centric culture of BAC would soon eclipse, if not just dominate, the old Merrill Lynch culture. Indeed, there are many stories of heavy handed memos and policies going into the field. One Adviser told me: “It seems like every policy change or HR memo has an implicit threat of termination if we don't obey. “ He then used a Star Trek analogy: “You will be assimilated. Resistance is futile.”
That said, Merrill Advisers were given some quick wins. Within months, Advisers had a tab on their desktop that enabled them to see any and all of their clients' B of A monies, from checking and savings accounts, to HELOCs, mortgages and credit cards. Merrill Lynch clients with more than $1 million in assets with the firm are given a substantive discount on a B of A mortgage. And by all accounts, B of A is much better at transacting mortgages than Merrill ever was (after all, Countrywide gave a mortgage to anyone with a pulse!). Finally, there were leads given out to Merrill Advisers, generated from B of A bankers. Very cool.
On the other hand, many Advisers, and indeed their assistants (called “CAs”), are often “encouraged” to cross-sell B of A products to Merrill Lynch clients. These CAs have been given training on how to approach clients about B of A products. For example, clients are often asked about opening up a Bank of America checking account and a new credit card. Merrill Lynch invented the CMA, of course, many years ago, bringing checking account functionality and convenience to the brokerage world. One Merrill Lynch client whom I met socially asked me: “Why the hell do I need a B of A checking account when a CMA does the same thing?” Good question. The very same client, however, loves the “cool factor” of the co-branded Merrill Lynch/American Express black card that his Adviser encouraged him to get. The best Complex Managers within the Merrill system are clearly shielding their biggest producers from the HR oppression as well as any cross selling pressure. Lesser producers are not as fortunate.
The Big Elephant in the Room, however, remains the bad mortgages which remain on the BAC books. Their stock price languishes, as I write this, just north of $11. Do not underestimate the scars of three years ago, when Advisers watched their wealth accumulated in MER evaporate. As news of foreclosures continues to populate the business headlines, BAC and Wells Fargo are undergoing credit reviews. Ironically, perhaps it is the legacy of Merrill Lynch that is now bringing stability to BAC. At what stock price will the backbone of the Merrill Lynch franchise, “the thundering herd”, seek greener pastures, rather than watch the possibility of history repeating itself?