Peter Scaturro knows private banking. And when Nationsbank
Bank of America bought the company he ran, US Trust, they thought they were
buying his private-banking expertise at the same time. Think JP Morgan buying
Bank One for Jamie Dimon, or Apple buying NeXT for Steve
Jobs.
BofA didn’t want Scaturro to run the whole bank, but they did want him to run
the private-banking operations. That would actually mean a huge rise in the
total assets under management that Scaturro was responsible for: US Trust had
a perfectly respectable $93 million, but the private-banking arm of Bank of
America had $172 billion, bringing the total up to $265 billion – more
than the leading US private bank, JP Morgan, and vastly more than Citi’s private
bank, which is being run this week by Sallie Krawcheck.
But, it was not to be. Scaturro’s
now resigned, even before he formally took on his new job. The WSJ has all
the gory details: in a nutshell, Scaturro was going to be running the new
private bank in name, but not in fact. The real boss was going to be
Brian Moynihan, Bank of America’s president of Global Wealth and Investment
Management, who clashed with Scaturro on everything from ATM fees to computer
systems.
Moynihan comes a the BofA culture of economies of scale, while Scaturro was
much more comfortable giving highly personalized – and very expensive
– service to billionaires:
Bank of America executives, steeped in a more middle-America culture, also
looked askance at U.S. Trust’s lavish New York headquarters, according to
people familiar with U.S. Trust’s side of the deal…
Mr. Moynihan’s mantra is "scale": Mechanization and a one-size-fits-all
product suite has made Bank of America excel in such areas as branch and business
banking, where products are commodities and where "customer delight"
scores are scrutinized.
Mr. Scaturro, by contrast, preaches "specialized service" to millionaire
and billionaire clients who demand constant attention and performance. The
company’s marketing events include intimate dinners for clients with top authors
or politicians, private concerts and cocktail parties at its Manhattan townhouse.
Mr. Moynihan, according to people familiar with meetings held to orchestrate
the banks’ integration, viewed some of U.S. Trust’s marketing events as overly
costly and ineffective.
Bank of America, and its predecessor NationsBank, has been among the most
aggressive at categorizing its "rich" clients — from super-rich
down to merely rich — and tailoring services along those lines, which has
meant some people accustomed to personal bankers end up steered to toll-free
phone numbers for service.
During one integration meeting, Mr. Moynihan’s team even suggested charging
ATM fees to U.S. Trust clients — seen as the ultimate insult to pampered
customers who entrust millions to their advisers.
The story here will be familiar to anybody in an institution bought by Nationsbank
or Bank of America, including many on the investment-banking side of the BofA
of old. The Charlotte executives love to make acquisitions of operations where
they’re weak, but then they have a habit of imposing their own systems on the
new company, despite the fact that they bought the new company precisely because
its own systems were better. (It’s worth remembering that BofA’s current private-banking
portfolio wasn’t grown organically: it, too, was bought in, through acquisitions
such as that of FleetBoston.)
BofA CEO Kenneth Lewis says that his main job right now is
digesting all the acquisitions that his company has made in recent years. But
this latest news seems to indicate that BofA is still refusing to adjust to
new cultures, and is still insisting on imposing its own methods on everyone
and everything it has bought. Which is unlikely to make the integration process
any easier. As the WSJ notes,
Bank of America reached its unprecedented size through more than 20 acquisitions
during the 1980s and 1990s. As the bank scurried from one deal to the next,
it hemorrhaged customers of companies it had paid dearly to acquire.