Running the Bulls

Throughout its 41-year history, Merrill Lynch & Co. has tried to bring Wall Street to Main Street. By any measure, America's most bullish brokerage house has succeeded. From Bellingham, Wash., to Bradenton, Fla., 75% of all Americans live within 25 miles of one of Merrill Lynch's 476 offices. As a result, the company is bigger than its three closest publicly held competitors--Shearson Loeb Rhoades, E.F. Hutton and Dean Witter Reynolds--put together.

From this position of overwhelming national strength, Merrill Lynch has helped change the ways that Americans spend, save and invest their money. No longer content to be merely the top trader in stocks and bonds, the firm is gearing up to challenge such venerable Main Street denizens as bankers, real estate brokers and insurance agents. Says Chairman Roger E. Birk: "We want to service as much of a person's financial needs as we can."

Since 1979, Merrill Lynch has bought 16 local realty companies in cities from Dallas to San Francisco, and before the end of the year it expects to own 30 firms. By 1983, Merrill Lynch plans to be selling property in most of the 50 states. For those who buy homes, the company helps to arrange financing and offers mortgage insurance. And for executives being transferred from one region to another, Merrill Lynch has a relocation service that will find them new houses and then sell their old ones. As part of this program in the near future, the company plans to help the spouses of these executives find jobs in their new cities.

In Georgia, Colorado and Florida, Merrill Lynch is test-marketing a product that could change the way the life insurance industry does business. The firm offers policies that allow customers to choose whether they want part of their premiums invested in mutual funds containing stocks, bonds or short-term money-market securities. As interest rates fluctuate, policyholders will be able to try to increase the return on their investments by switching their money from one fund to another. In the past, insurance premiums have been tied up mainly in low-return long-term bonds.

While Merrill Lynch's ventures into real estate and insurance are still taking shape, its forays into banking have already shaken the financial community. Merrill Lynch's Ready Assets Trust, known to customers and competitors alike as "the Rat," is the country's largest money-market fund, with assets of $17 billion. It requires an initial deposit of $5,000, but the money earns a high return--last week 17.43%--and investors can write checks (of $500 or more) at any time. Better yet is Merrill Lynch's Cash Management Account. Customers with $20,000 to invest can not only reap high money-market yields but also write checks of any amount or use their accounts to pay for purchases with VISA debit cards. Some 300,000 people have opened Cash Management Accounts, which are available in 35 states, and another 1,000 are joining the program daily.

Innovation and aggressive courting of new clients have always been hallmarks of Merrill Lynch. The pace was set in the early 1940s by the firm's founder, Charles Edward Merrill.* While other brokers often relied on social ties and recruited their customers at cocktail parties, Merrill was a maverick who introduced mass merchandising to the stock market. He wooed Middle America by abolishing service charges, slashing markups on many stock trades, and running lively advertising campaigns in national newspapers and magazines. A sample slogan from a Merrill Lynch ad, circa 1940: "Hats off to a smart little housewife!... When Sue thinks of investments, she consults a reliable organization like Merrill Lynch." The upstart firm grabbed a lead on its stuffy competitors and never looked back.

In 1953 Merrill invited Donald Regan, who had been with Merrill Lynch only eight years, to become, at age 35, the youngest partner in the firm's history. When Regan said that he did not have the $10,000 required for the partnership, Merrill lent him $3,000. Recalls Regan: "I repaid the loan within the next year. All in all, it wasn't a bad deal.

That $10,000 has become $10 million in Merrill Lynch stock." A tough-minded ex-Marine known for adept planning and visionary thinking, Regan rose steadily through the executive suites to become chairman of Merrill Lynch in 1971.

By that time the stock market's go-go years of the 1960s had given way to the slow-slow years of the 1970s. Regan realized that diversification was the key to Merrill Lynch's growth. He led the firm into new product lines such as stock options and tax shelters. Simultaneously, he plotted Merrill Lynch's strategy for creating what was to become the financial supermarket.

During Regan's decade as chairman, Merrill Lynch's revenues surged nearly 350%. Last January he resigned to become Ronald Reagan's Secretary of the Treasury, Powering Merrill Lynch's growth is a disciplined army of account executives that now number 8,600. To their competitors along Wall Street, the firm's brokers are mere cogs in a mammoth money machine. In fact, when Merrill Lynch merged with the old-line investment-banking firm of White Weld, dozens of executives quit to avoid being consumed by the world's largest brokerage house. But there is a strong Marine-like esprit de corps among the troops at Merrill Lynch that stems from the psychological and financial rewards of being the runaway No. 1.

Regan's replacement as chairman, Roger Birk, 50, is a former account executive who joined Merrill Lynch's Minneapolis office in 1954--as a clerk. Like his predecessors all the way back to Merrill, Birk is a planner who sees his company becoming even bigger. Says he: "There's not any single firm that's put all the financial services together, including Merrill Lynch. But I think we're going to be the only one that will be able to pull it off." Merrill Lynch's bold bulls seem destined to range ever more widely across America's financial landscape.

*Edmund Lynch was the first of Merrill's many partners, who over the years included Edward Pierce, Anthony Cassatt, Charles Fenner, Alpheus Beane and Winthrop Smith. Cassatt's name was dropped from the firm's name in 1941, and Smith replaced Beane in 1958.

This file is automatically generated by a robot program, so viewer discretion is required.