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Business

‘I think the brokers would’ve voted no’: Merrill Lynch brokers on BofA’s Moynihan

By
John Aidan Byrne
Published Sep. 26, 2015, 5:02 p.m. ET

Betrayed, dazed and confused, some call it high treason inside Merrill Lynch.

Merrill’s “Thundering Herd” of financial advisers — nearly 14,400 professionals who manage a staggering $2 trillion in client assets — are licking their wounds after a special shareholders vote last week that backed a move to allow Bank of America CEO Brian Moynihan to keep his chairman’s job, insiders say.

The result of the vote has divided more than conquered.

Merrill advisers, infuriated with the Charlotte, NC, bank’s already tight grip on the levers of power at the much-admired brokerage giant, see it as further reinforcing its control. BofA’s tight-fisted sales and stuffy corporate practices rub many advisers the wrong way, the FAs claim. And Moynihan’s newly strengthened hold as commander-in-chief, both of the board and in the executive suite, has many Merrill FAs acting like raging bulls.

There’s good reason for the FA unrest: BofA’s share price has slid more than 11 percent this year, a sharper dip than at other big banks.

“I spoke to one FA at Merrill who is a shareholder, and he was upset — he voted against Mr. Moynihan retaining the chairman and CEO roles,” industry recruiter Danny Sarch told The Post. The reaction sums up the feeling among a wide swath of Merrill FAs, following the controversial arrangement approved at One Bank of America Plaza in Charlotte by 63 percent of shareholders last week.

One substantial Merrill producer in Manhattan said BofA, fearing a potential backlash, took a low-key approach to how it managed FA expectations. “I think the brokers would have voted no,” said this FA. “We certainly weren’t lobbied; we got no memos nor were we encouraged [to vote] in any extraordinary way like other shareholders were.”

The latest conflict has its origins in a 2009 vote. That’s when BofA shareholders agreed to split the roles of chairman and CEO, titles then held by Ken Lewis before his departure later that year. Lewis helped engineer the bank’s acquisition of then-troubled Merrill Lynch in 2008. But he wasn’t so fortunate with his $4 billion purchase that same year of Countrywide Financial — a deal regarded as a disaster.

Despite the 2009 vote, BofA’s board unilaterally — and some say unaccountably — decided last year to reverse the shareholder vote and recombine the chairman and CEO roles, giving both to Moynihan.

The change went down badly with many shareholders, large and small, from the California Public Employees’ Retirement System to individual brokers, forcing BofA to hold last week’s vote.

Mike Mayo, the outspoken bank analyst at Credit Lyonnais Securities Asia (CLSA), said the vote in support of Moynihan wielding both scepters was hardly a clear mandate.

“The 37 percent No vote is still significant in corporate governance — it sends a strong message to the board to improve its act,” he said. “The whisper number for a ‘no’ was 40 percent a few days before the vote. BofA beat it because they marshaled the huge resources of its bank, engaging third parties to lobby some shareholders.” But that didn’t sway some die-hards.

Analysts say FAs collectively may control as much as 4 percent of BoA stock, mostly tied up in comp plans. And demonstrating their displeasure with BofA, many are believed to have voted no.

Industry recruiter Howard Diamond said BofA’s bank culture can help explain that displeasure. “It has negatively impacted the wealth-management side of the business,” he said.

One former Merrill FA who bolted the bank for a smaller rival out of disgust with BofA’s encroaching culture, said he still owns Merrill stock. But he has never voted as a shareholder. “I never voted this time around either, for fear of corporate retribution,” he said. “I just never felt comfortable with BofA. If everything was fine, BofA was fine — but if they wanted to take somebody out, they would do it.”

Why this seeming paranoia over simply casting a vote? “Bank of America knows who voted — we don’t,” Mayo said.

The Manhattan FA, commenting on the controversial vote last week, said BofA needs to show more respect to its FAs to help bury long-simmering FA complaints. And it starts with the small stuff.

“We’re lucky at our branch to have an understanding manager who goes out on a limb — bringing us in free lunch when it’s too cold to go outside,” he told The Post. “The small stuff can make a big difference.”

A BofA spokesperson responded by pointing to Moynihan’s comment after the vote, “We are pleased our shareholders had the chance to express their views.”