While 2007 turned out to be a rocky year for the financial services industry, 2008 promises to be even more tumultuous. New leadership is in place at Citigroup and Merrill Lynch after the massive writedowns stemming from the subprime loan and credit markets mess. And, the pain isn't over yet.

At this year's roundtable, held Nov.14 at The Down Town Association in Lower Manhattan and moderated by Senior Editor Tony Chapelle, six men and two women who place advisors in firms across the country shared their views of the significance of what happened and what's ahead. The provocative discussion hit a range of topics: Wachovia's acquisition of A.G. Edwards, the strength of the deals being offered advisors and even which wirehouse might be sold. They didn't always see eye-to-eye on the issues, but in the excerpts that follow, you will see just where they all stand.

The Main Event

Tony Chappelle, OWS: First of all, what's the biggest story of 2007?

Michael King: The whole change that's occurring at Smith Barney and Merrill Lynch.

Bill Willis: I'll talk about collateralized debt obligations [CDOs] a little bit—very complicated topic. Wall Street itself does not [yet] know the extent of the potential damage here. Although the tone seemed upbeat coming out of the [November] Merrill Lynch conference—or at least contained. Of course, every time I hear the word 'contained,' I'm pretty sure that it's much bigger—and that has been the case. It's the second round of it all. It led to the overthrow of two empires really—Merrill Lynch and Smith Barney. The question is, 'How much more is out there that's really spooking Wall Street right now?'

King: Most of us remember when nobody left Smith Barney—about two years ago it started to open up. The plan that they put into effect now—the retention package—is a good one. Sallie Krawcheck did a very good job with that—keeping the older brokers. They can buy their books out; that will keep a lot of the older, bigger producers there because you get that enormous deal to retire over a period of time. That's a very smart move. But it's not going to affect the younger brokers much.

Of course, the other shocker—the really big shocker—is Merrill Lynch. I would say Smith Barney and Merrill were the two toughest places to pull people out of. But [now] Merrill brokers are at least willing to look. Doesn't mean we'll get a move, but they're getting out there.

Danny Sarch: This scandal is different for two big reasons. The first is that this was not based upon greed or a couple of bad people bringing them down. It strikes me more as just incompetence in putting so [many] of their eggs in one basket. And the second thing is that that it's not attached to retail so...the retail guys were not affected by this. I have yet to talk to a retail broker [who] said they had CDOs in their client's accounts.

That said, the anger that they have at the way that the firms have [landed] them in the press, so that they have to deal with their clients—dealing with the irony of an investment firm losing so much of [its] own money—has created this enormous backlash of anger, which has nothing to do with what they do every day.

The Merrill guys and the Smith Barney guys are rightfully proud of what they do every day. And then, to see their names so prominently in the press in this way, based upon incompetence of people above them and wasting the firm's capital—it really has created a tremendous amount of anger.

Mindy Diamond: I agree with Danny that this was not a question of greed or anything criminal. It was about poor risk assessment, risk analysis, risk management. And unfortunately Smith Barney and Merrill Lynch were at the head of it. What it's done is create a real problem for all of Wall Street—certain firms obviously more high-profile and more affected than others.

We're seeing a lot of Merrill and Smith Barney brokers who had never thought about moving, who had tons in their F Cap at Merrill or tons in their wealth accumulation plan at Smith Barney—suddenly it's making them rethink.