Merrill Lynch, in the wake of the Sallie departure, announced a reorganization this week. John Thiel, widely respected within the “thundering herd” of the Merrill Financial Advisers, did away with two different layers of management.
Before I really get started, everyone who follows the Wirehouse World knows that Reorgs happen every eighteen months anyway, and not just within Merrill Lynch. Though it is big news, it's not like we are amending the Constitution.
Merrill used to have Directors (Complex Managers), who reported to 16 Regions, who reported to three divisions. In addition, there used to be a parallel structure for PBIG, Merrill's High Net worth Advisers, whose offices reported up to their own regions. Now, there is no longer a separate regional reporting structure for PBIG and there are no longer Divisions. Of the three former Divisional officers, two (Don Plaus and Bill Lorenz) are now “Market Executives”, and one (Greg Franks) is “retired.” And from 16 regions, Merrill now has eleven of these “Market Executives”. With me so far?
So what does this mean to the average Merrill Financial Adviser in the branch, who rarely has any contact with this exalted level of management? And what does it mean to the Directors who run the day to day business of Merrill Lynch in the field?
In the halcyon days before the Financial Crisis, Merrill Lynch Directors had much more control over their businesses than they do now. For example, they were able to hire and fire staff as well as trainees, pretty much by themselves. Bank of America, culturally much different and many times larger, instituted processes for these decisions. The best Directors always insulate their Brokers from the changing tides above them; weak Directors complained about how their jobs got tougher and lost the respect of their Advisers.
On the surface, Merrill appears to have gotten leaner. Reduced layers of management presumably mean decisions can be made faster. That is only true, however, if those remaining managers are empowered to make the decisions that were formerly made above them. For example: Divisional Directors had to make Big Money Decisions (BMDs) in compliance, recruiting, and real estate. Compliance enforcement and settlement decisions have reputational risk; recruiting decisions are costly and can make or break a Branch's reputation amongst Advisers in the community; real estate decisions resonate for ten years or longer with enormous financial consequences. Let's assume that each of the eleven regions has one case in each of those three categories in a given month. That means that 33 BMDs are going to either be made by Thiel and his staff (can you say “bottleneck”?)or by Directors and Market Executives who are going to be empowered to make bigger decisions than they historically have made, even in Merrill's more entrepreneurial past.
My take: I just find it hard to believe that the Bank of America process driven culture, which creates a title for a new position called “Head of Capacity and Initiative Management”, will allow a Merrill Lynch middle manager to make multi-million dollar decisions.
