Comment: Merrill’s wealth model likely to be dominant partner in new group
Although the dust is far from settled from the shock news of Bank of America’s acquisition of Merrill Lynch, a number of trends are likely to be discernable in the newly created wealth management division of the two groups.
It looks like Merrill by dint of size will be the dominant partner in the newly formed unit, despite BofA buying the Wall Street brokerage. Brand is important in wealth management and the fact that the new combined unit will be called Merrill Lynch Wealth Management suggests something about the likely outcome of the merged units.
Merrill Lynch’s global private client advisers, known as the Thundering Herd, also manages at least twice as many assets as that of BofA’s division – so size will have a bearing on the likely cultural outcome for the new unit.
Media reports suggest Robert McCann, the current head of Merrill’s private client business, will lead the combined business.
If this is the case, McCann has been chosen over Frances Aldrich Sevilla-Sacasa, BofA’s private wealth management head. Sevilla-Sacasa, an ex-Citi and US Trust private banker, is likely to be offered a high profile position at the new unit, possibly head of an ultra-high net worth division that could emerge.
She could also decide to leave – no doubt a few offers are likely to come her way, even a possible job with her ex-boss at Citi, Peter Scaturro, who now heads Goldman Sachs’ private client unit.
Culturally, the changes will mean Merrill’s brokerage model in managing the assets of the wealthy is likely to be adopted more rigorously at the new unit. This will dilute the importance of US Trust brand at BofA. US Trust, one of America’s oldest wealth managers, was based on a Swiss private banking model and targeted the ultra-HNW market.
The New York-based bank was acquired by BofA from Charles Schwab in 2006.
The combined units are likely to create the biggest wealth management group in terms of assets under management in the world – with more than $2 trillion of private client AUMs. Together, they will account for 20% of BofA’s revenues. But this will be of little importance to clients – they will be looking for reassurances during the next few days.
Inevitably, some clients will decide to leave and give their money to smaller wealth advisers and private banks, as their model gains in popularity against the background of a widening crisis for a number of wealth managers who have the misfortune to be attached to investment banking operations. Elsewhere, further rationalization is inevitable.
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