financial services

BoA Should Tell Customers Why It Bought Merrill

The Monday shocker that two cornerstones of the U.S. financial services industry-- Merrill Lynch and Lehman Brothers--were sold and in Chapter 11, respectively, gave stocks a swift kick through the floor.

With investor anxiety at a high, should Wall Street firms talk to customers and to the public at large, or stay quiet? Should Bank of America, which is set to acquire Merrill Lynch for $50 billion, trumpet the news to build consumer confidence or at least explain its decision to buy the firm--or swallow Merrill Lynch as quietly as possible, napkin to mouth?

The deal will make Bank of America the largest brokerage on Earth, with $2.5 trillion in client assets and some 20,000 advisors. It also gives Bank of America a 50% stake in BlackRock, which has $1.4 trillion in assets under management, and global expertise in debt underwriting, equities and M&A advice.

In a release, Bank of America chairman and CEO Ken Lewis said: "Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders."

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Jack Trout, a Greenwich, Conn.-based marketing consultant, says it is critical that Bank of America talk to its customers. "They should without a doubt launch a news-generating campaign: 'Why we bought Merrill Lynch'," he says. "There has to be some rationale put on the table that explains it, and explains what the future of Merrill Lynch will be as a result."

Tim Calkins, professor of marketing at Northwestern University's Kellogg School of Management, thinks Merrill Lynch will have to do likewise. "Merrill has to be proactive to reassure [customers] that their deposits are safe," he says. "Longer-term, it will be interesting to see what Bank of America will do with the Merrill brand, and how they put their portfolio [of investment companies] together."

Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and UBS are considering donating $7 billion each to a pool to fund the liquidation of Lehman Brothers' assets.

Charles Schwab, at its Web site, is advising investors about how to navigate financial-services stocks, and how to understand which Wall Street firms' assets might be affected by a fire sale at Lehman Brothers.

Trout says financial firms, whether they have ties to Lehman Brothers assets or not, should do likewise. "If only to stand up and say, 'We're okay, don't worry about us," he says. "But they have to go right to customers and prospects. Every bank out there and even regional players have to step up and go to their customers and prospects and give them an explanation of where things are."

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