By Joseph A. Giannone and Rick Rothacker
NEW YORK (Reuters) - Merrill Lynch brokerage boss John Thiel is firmly committed to cross-selling products from parent Bank of America to investors, something he says clients want and that will help advisers make more money.
Thiel's views come after his predecessor Lyle LaMothe told Reuters he quit last year because he had concerns with the bank's approach to wealth management, where selling an array of products and services distracted advisers from their central role of managing client finances and investments.
Scores of brokers who have left Merrill cited similar worries about being part of a bank-brokerage combination, including the perceived pressure to sell Bank of America loans and other services.
But Thiel, a 23-year veteran of Merrill's brokerage and private banking businesses, has a message for the naysayers: joining forces with Bank of America is not only better for clients, but it will also help advisers make more money.
Ten months into his role leading more than 16,000 brokers, the head of the bank's Merrill Lynch U.S. wealth management unit is impressing upon the troops that the marriage of banking and brokerage is an advantage to be exploited rather than an irritation to be resisted.
"We compete against banks, because now everybody is a bank," Thiel told Reuters in a wide-ranging interview where he talked about Merrill's plans to add advisers, attract more wealthy Americans and take full advantage of the big bank's offerings.
"They all want to get to where we are, to have the ability to deliver both sides of the balance sheet to clients," he said in the interview, conducted last month. A Merrill representative said this week that the firm hasn't changed its views.
The views highlight a debate in wealth management that pits the independence and intimacy of smaller firms against financial giants that provide access to a full array of investments, including products unavailable anywhere else. Wall Street firms, forced to rein in trading and investing since the financial crisis, are leaning on wealth management to pick up the slack.
Morgan Stanley Smith Barney and UBS' U.S. brokerage arm are expanding lending efforts and pursuing more cross-referrals with their investment banks. Wells Fargo & Co, which acquired Wachovia's brokerage during the crisis, makes no bones about its efforts to merge banking and wealth management.
JPMorgan Chase & Co, the largest U.S. bank by assets and one of the world's top private wealth advisers, is building out its retail brokerage business and a private client program for Chase's wealthier retail banking customers.
Bank of America, because it has absorbed the brokerage that brought Wall Street to Main Street, however bears more scrutiny.
Its stock fell 58 percent last year, with its shares closing briefly below $5 in December, amid worries that the bank needed more capital to absorb mortgage losses and meet new international standards. The slide briefly fueled speculation Merrill could be put in play.
Bank of America stock timeline: http://link.reuters.com/jym76s
So far this year, the stock has soared, though it remains 43 percent below its level when the bank acquired Merrill on January 1, 2009. The benchmark KBW Bank Index by comparison fell by about 24 percent in 2011 and is up 1.8 percent since the start of 2009.
Merrill says stock represents a small part of its advisers' compensations and wealth, though Thiel acknowledged the stock's plunge had a "psychological" impact.
U.S. regulators last summer asked Bank of America for possible transactions it could pursue in an emergency, and the issuance of a Merrill tracking stock made the list. Bank of America officials have said all along that Merrill is a core asset and that there is no discussion of a sale or spin-off.
Nor should there be, according to Thiel.
"The fact of the matter is, the capabilities that the broader organization provides us are really making a difference to our clients," he said.
Thiel's views echo those of Bank of America Chief Executive Brian Moynihan, who last month told analysts that while the bank will continue shedding assets and buttressing its capital base, wealth management is an area it wants to keep and expand.
Merrill's brokerage last year generated $13.5 billion of revenue, representing 14 percent of the bank's total revenue and a big help in pushing Bank of America back into the black. Roughly 16,100 financial advisers oversaw $1.5 trillion of client balances at the end of 2011, second only to the 17,649 advisers and $1.65 trillion at Morgan Stanley.
Its experienced brokers are among the industry's most productive, each on average generating $1.1 million in fees and commissions last year. Including about 4,000 trainees who are starting to build a book of business, Merrill brokers averaged $873,000 last year.
Thiel's challenge is to convince Merrill's brokers, known as the Thundering Herd, to embrace a more intense focus on the wealthiest Americans and greater collaboration with the bank. Advisers can make more money and better serve customers if they stick with Bank of America and Merrill, he says.
It's not always an easy sell. Bank of America repeatedly made headlines for the wrong reasons last year, such as an aborted attempt to introduce a $5 monthly fee for debit card holders or controversy over abusive foreclosure practices.
"The company is in the news every day. Having to answer questions about the bank took time from my work of managing assets and moving forward," said Craig Russ, a New Jersey broker who left Merrill in November to join Ameriprise Financial.
Thiel played down these irritations as a small price to pay.
"Even if our advisers have to spend 30 seconds explaining things that other parts of the bank have done, they are more effective serving clients' needs today," he said.
Under Merrill's latest compensation plan, brokers will not get paid on new accounts that are less than $250,000 - the threshold had been $100,000. Fewer than 4 percent of Merrill accounts have less than $250,000, but the new plan reinforces Thiel's goal of encouraging brokers to attract and devote their attentions to rich clients.
Merrill also is hiring hundreds of advisers a year from an expanded training program of 4,000 members, up from 3,000, that was extended to nearly four years to increase its success rate.
Last week the firm unveiled a more aggressive recruiting package to lure its rivals' top brokers, who can receive as much as two times their previous year's revenue, in cash, after 12 months. Recruiters says the offer makes Merrill more competitive after having lost some valued brokers in recent months.
Merrill also is devoting more resources to practice management, education and training for advisers. Spending on training will increase fourfold, with the goal of further boosting productivity.
Equally important to Merrill's future growth is "deepening" client relationships, Thiel said, through collaboration with other parts of Bank of America - from loans and capital markets to estate planning through its U.S. Trust private bank unit.
Thiel plays down the talk of widespread unrest and pending departures by brokers. He says most Merrill advisers welcome the chance to provide a broader array of services than its rivals - everything from business loans and jet financing to such basic conveniences as cashing checks and depositing cash.
"This is a business transformation for the next three to four years," Thiel said. "We can help our advisers and adviser teams double their business between now and the end of the decade, just by getting smarter about how they operate, and give them the resources needed to support them."
That squares with Rocco Papandrea, a New York city broker in his 17th year at Merrill, and one who advises owners of closely held businesses. Bank of America allows him to offer equipment financing for medical practices, for example, or bring in the bank's retirement-plan specialists, he said.
"Our practice was always focused on both sides of the balance sheet," said Papandrea, who applauded the 2009 merger. "The Bull is still here, but we're able to deliver more resources than we ever had. It builds loyalty."
(Reporting By Joseph A. Giannone and Rick Rothacker; Editing by Alwyn Scott, Phil Berlowitz)