Broker response to James Gorman's appointment as president of the Merrill Lynch U.S. Private Client Group in September ranges from positively glowing to downright stinging.

Some question how well Gorman understands what they do for a living since he's never been a broker.

“The sense around here is that he's a marketing guy and absolutely clueless about the investment side of the business,” says a Midwest Merrill producer. Gorman visited branches in his area earlier this summer and delivered motivational speeches, he says (see “Gorman Responds,” below).

But an East Coast rep thinks Gorman has a solid grasp of brokers' responsibilities and daily challenges.

“He's terrific, a visionary,” the producer says. “He says what he means, no dancing around the issues.” Brokers who don't like Gorman are uncomfortable because he's shaking up the status quo, this veteran broker says.

“The old guard in management and the sales force is upset with Gorman because he's making them work,” he says. “He's making them change their businesses.”

For example, Gorman implemented a segmentation strategy that included the rollout of a wealth management group and the ongoing transfer of 500,000 smaller accounts from brokers to call centers. The changes ruffled quite a few feathers.

A broker in the Southeast says Gorman demonstrated his leadership skills via satellite presentations, which became more frequent in the weeks before his Sept. 21 appointment.

“He's been delivering lots of encouragement and advice, which sometimes we don't think we need,” the rep says. “But we really do.”

Gorman, 43, has served as the firm's No. 2 retail executive since May 2000. He joined Merrill in July 1999 as executive vice president and chief marketing officer, having been a consultant to the firm as a senior partner with McKinsey & Co.

Gorman Responds: I'm No Greenhorn

RR caught up with James Gorman a week after he was appointed president of Merrill Lynch's retail unit.

RR: How thoroughly do you understand what brokers do on a daily basis? One broker called you “clueless.”

Gorman: I don't mind. You should've heard what they said about me when I started here.

I've been in and around the industry for about 20 years, 12 years in the states. I have a Series 7. And I've probably been in more brokerage offices than any person in this country with the exception of Launny Steffens and one or two others. I go on all the recognition trips and talk to FAs every day. I've met with hundreds of clients and made presentations.

I ran the retail financial services practice at McKinsey, where I advised half a dozen securities firms here and in Canada, England, Asia, Australia and Europe. … I haven't come in from Mars.

RR: Brokers say you're a straightforward person, not a politician. Is that your style?

Gorman: Very much. I believe when you have a problem, you deal with it straight up. If you make a mistake, you admit to it and move on.

We're in a people business, and people can smell if you're trying to duck and weave. So the best way to build trust and support is to be straight. If you're consistent, you're honest and you answer people directly, it makes a difference.

RR: Are you accessible to brokers?

Gorman: I answer all my own calls from FAs. I deal with all my own e-mails. If they want to talk to me they can call me, and I'll call them back in five minutes.

RR: Do you have a personal philosophy on life, a motto?

Gorman: I'm a born optimist. I believe in confidence and competence. I don't think it's good enough to just be smart. I think you've gotta be confident with your clients. And my clients are our employees.

RR: Merrill lost 1,700 brokers in the first six months of 2001, partly due to branch closures overseas. Are you planning to trim the U.S. sales force?

Gorman: Frankly, I'm very comfortable with our size now. Our turnover in the United States is running lower than last year. I think the markets are causing some of the less-capable producers to give up the business.

There was some intense recruiting activity, particularly in the first quarter, which is dying down. And while I will selectively recruit, I think building a strategy around recruiting is a fool's errand.

RR: Will brokers enjoy the freedom to run their businesses as they see fit at Merrill Lynch?

Gorman: If you went into any Merrill office you would see [many] different business models. I'm in our Fifth Avenue office in midtown Manhattan. We have a team with 45 people and one of our top producers has just his sales assistant. There is a whole range of styles and behaviors. The stereotype that all Merrill Lynch FAs are the same is ridiculous.
— M.H.

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