Merrill May Stand Alone as B of A Targets Retention

With an eye toward preserving brand value as well as employee and customer loyalty, Bank of America Corp. is expected to keep Merrill Lynch & Co.'s wealth management business as a stand-alone unit in New York.

During a press conference Monday announcing the $50 billion deal for Merrill, Bank of America CEO Ken Lewis said he planned to "keep the name and keep the organization intact."

He called Merrill's 16,000 financial advisers its "crown jewel," and Merrill CEO John Thain tried to encourage advisers to stay put by telling them they will get access to millions of B of A's customers.

Executives in the banking company's wealth management businesses, meanwhile, speaking anonymously, said they were looking forward to cross-selling bank products and taking advantage of Merrill's distribution network. And Merrill executives, also speaking anonymously, said Bank of America must maintain the company's brand if it hopes to retain customers and their assets.

One Merrill adviser said he is not naive enough to believe that "everything will be status quo," but "keeping the brand will go a long way," he said, toward calming both customers and advisers.

The Merrill brand, with more cachet among high-net-worth individual and institutional investors, may help Bank of America sell more banking products.

"Banks in general have found it hard to sell investment-related products to their banking customers, but I think selling bank-related products to investment customers is much easier," said W. Christopher Maxwell, a managing partner at the Rock Hall, Md., wealth management firm Conestoga Capital Advisors LLC.

"Bank of America could have a lot of success," he said, "by migrating their current wealth customers to a Merrill Lynch platform and then seamlessly delivering all of these customers both banking and investment services."

Scott Silvestri, a B of A spokesman, said no decision has been made regarding any of Merrill's businesses. "It will be business as usual for awhile," he said, "and we have a detailed integration process that we will work through."

Charles "Chip" Roame, the managing principal in the San Francisco consulting firm Tiburon Strategic Advisors, said some of Merrill's businesses probably will be incorporated into existing B of A businesses but that its wealth management business should stand alone. "I expect the existing B of A brokers and advisers will be rolled into Merrill Lynch," he said. "I think you'll see the retail brokerage business run from New York and the 2,800 or so B of A brokers will be rolled into that."

Mr. Roame said Wachovia Corp. made a similar strategic decision after it bought the A.G. Edwards brokerage and moved its Wachovia Securities arm into the Edwards headquarters in St. Louis.

Analysts said retaining Merrill's advisers would require Bank of America to operate the firm as independently as possible. Merrill has spent recent years divesting its proprietary investment products so its advisers could offer an array of open architecture products and services without concern about potential conflicts of interest.

Though this approach has been duplicated at many banks, Bank of America still has proprietary investment products and services.

Matthew C. Schultheis, an equity analyst at Boenning & Scattergood Inc. in West Conshohocken, Pa., said that whenever a commercial bank buys a brokerage firm it inevitably begins tweaking and this causes some fallout. "Any time you see a brokerage get bought, it's only a matter of time until people start leaving," he said.

Geoffrey Bobroff, an analyst at Bobroff Consulting in East Greenwich, R.I., agreed; "retention is very, very difficult in a situation like this," he said. "It is difficult to retain customers, and it is difficult to retain advisers. Bank of America may want to be your 'everything' bank, but they need advisers in place to do that."

But Mr. Roame argued Merrill's advisers will want to stay with the firm. "Why leave? They are in charge now," he said. "I don't understand why anyone thinks that Merrill is going to get blown up. Bank of America bought a gem, and I really think they intend to keep much of it intact."

Still, both Mr. Roame and Mr. Bobroff noted that B of A kept the U.S. Trust Corp. brand after buying it from Charles Schwab in July 2007.

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