When did former Merrill Lynch brokerage head Dan Sontag learn that Sallie Krawcheck was being brought in as his boss?
A source close to the matter tells us that Sontag learned of Krawcheck’s hire just minutes before the hire was publicly announced. Shortly afterwards, Sontag resigned from Bank of America.
The news that Sontag was getting a new boss came in a phone call from Brian Moynihan, according to a person familiar with the matter. Sontag was taken off guard by the news, the person said. He was surprised he was being told so late. It seemed to him that hiring an outsider to run the brokerage might look like a betrayal of promises that had been made to brokers to bring stability to the business.
Some brokers at Merrill fear what changes Krawcheck might have planned. Many believe that she was brought in to change the compensation formula, perhaps putting them on a salary along the lines of US Trust employees. Others say that Krawcheck is unimpressed with Merrill’s senior management and is engaged in a hiring spree to bring in new talent.
When Bank of America took over Merrill, the top brokers were given huge retention bonuses equal to approximately 100% of their trailing 12 month “production” (which is financial adviser talk for fees earned by the firm). But fees have reportedly trailed off since then, putting pressure on Bank of America to justify the super-sized bonuses. Bank of America may be looking to reduce the amount it pays brokers going forward. But market pressures from Morgan Stanley and UBS may prevent it from making desired cutbacks.
Sontag couldn’t be reached. Merrill Lynch did not return our call seeking comment on the story.
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