You knew this was going to happen. Since taken over by Bank of America, Merrill Lynch has got to be one of the most mis-managed brokerage firms in existence. The firm has been in complete mayhem since the takeover, principally because the Bank of America bankers do not have a clue as to how to run a brokerage firm. Now, with the stock in the trash (the stock is down FIFTY PERCENT this year alone), Bank of America has announced that they are going to lay off 10,000 employees. Ten Thousand.
And you know it is not the bank executives that are going to go; its going to be the brokerage side, and according to media reports, those layoffs include brokers. Evidence of the complete incompetence of Bank of America to run a broker firm abound.
Remember when Bank of America decided it would be a clever cost savings measure to cut the payouts of its branch brokers? It took their industry low 25% payout, and cut it to 12.5%. Half. Those bank brokers, who bust their butts trying to get bank customers to convert their CDs to mutual funds, had their pay cut in half. The result? Brokers left the bank in droves - they had no choice, their pay was cut in half at the same time the bank cut the referrals from the bankers to the brokers. A true mess. Even Sallie Krawcheck referred to Bank of America's pay policies as "stupid."
Or how about the other clever move when BofA took over Merrill - it cut Merrill brokers off from their own potential customers. Brokers who were in the process of transitioning from US Trust, or <gasp> Bank of America itself were prohibited from bringing their old customers over to Merrill Lynch. I wrote about that in my column "BofA In a Panic?"The arbitrations over that escapade are still going on.
Bank of America's poor decision making was evident from day one. It's retention bonuses to Merrill Lynch brokers were so poorly planned, and so low that there was a massive exodus of brokers from Merrill Lynch. Bank of America decided that a bonus of less than one times trailing 12 was going to keep brokers at the firm, when its competitors were offering 2 times trailing twelve for them to leave Merrill Lynch. Incredibly, Bank of America was surprised that brokers left.
That was October 2008. Then in August 2009 Bank of America decided that chasing million dollar producers away was not a good idea, and it announced that it was looking to hire brokers of all production levels. We discussed that disaster in "Is Merrill Schizophrenic?"
That apparently did not work out either, so in 2010 Merrill announced that it was going to hire rookie brokers, because it did not want to pay for talent. That apparently did not work out too well, since now it is those rookie brokers who are undoubtedly going to be on the firing line.
During all of this, Bank of America refused to join the Broker Recruiting Protocol, which raised the ire of many in the industry, including other firms. It suffered through that mini-fire storm, and then merged all of its brokers into Merrill, resulting in....wait for it....them joining the Broker Recruiting Protocol.
But we are not done. In 2011, Bank of America realized that they were having trouble recruiting new brokers and keeping existing ones . I know, it was no shock to those of us in the industry, but apparently Bank of America was baffled. A rational approach to the problem would be to step up recruiting, sweeten pay packages, and otherwise transform your firm into a business where brokers were proud to say they worked, and were clients were being properly taken care of.
But no, not a Bank of America. Rather than doing anything to make their operating units a better place for clients and employees, Bank of America changed its focus from trying to hire brokers, to attempting to stop the few that they had from leaving. In March of this year, BofA announced unilateral employment restrictions on US Trust advisors. Bank of America gave those advisors an ultimatum - a demand that they sign a new agreement that would effectively sideline them for up to eight months if and when they decide to leave the firm or else risk losing not only their 2010 bonuses but their jobs as well. I discussed all of this back in March, in "BofA In A Panic? Unilaterally Imposes Garden Leave Provisions."
Now, after three years of disasters (we haven't even touched on the employee arbitrations Merrill Lynch has lost, the customer arbitrations that it has lost, and the millions of dollars of fines that have been imposed) Bank of America has undoubtedly jumped the shark - it has reached the point where it is beyond recovery.
Bank of America announced that it will be laying off 10,000 employees, on top of the 2,500 layoffs that it instituted earlier this year.
A damn shame. When I started working with financial professionals in the 1980s, Merrill Lynch was THE brokerage firm. Brokers were proud to work there, clients were well treated, and the firm was well respected.
That is certainly old news, at least from by broker-centric view.
