Merrill Lynch

And the men behind the brand are...
Charles Merrill and Edmund Lynch

Charles Merrill believed there were thousands of potential investors who weren't being served by traditional brokerage houses. He would service the small investor and collect their paltry $10 commission checks while the big brokers would stay with the social and economic elite.

Merrill had come to New York from Amherst College and the University of Michigan in 1907 to work in the financial office of a textile group. In 1909 he started on Wall Street at George H. Burr & Company, a commercial paper house looking to expand into bonds. Merrill became that bond department.

At the 23rd Street YMCA Merrill met Edmund Calvert Lynch, a Johns Hopkins graduate who was making his way selling soda fountain equipment. The two forged a lifelong friendship and Merrill found a place at Burr & Company for his new pal.

In January 1914 Merrill left to test his ideas about selling securities to the proletariat. He began in sublet space and in May moved to his own tiny place at
7 Wall Street. He persuaded Lynch to join him and in 1916 Merrill Lynch & Company was formed. Both men were 29.

The firm began as a distributor of new securities, especially in the emerging chain store business. Merrill Lynch brought out stock issues for S.S. Kresge,
J.C. Penney, Western Auto and Safeway. From the beginning Merrill believed in educating the public about markets and showing them how to become investors. They set standards that a broker must consider the customer's particular circumstances when suggesting investments. This was especially important when dealing with small investors.

By the late 1920s Merrill became worried by the speculative excesses of the stock boom. In 1928 he wrote his customers: "Now is the time to get out of debt. Sell enough securities to lighten your obligations or pay them off entirely." The advice was so diametrically opposite of other financial advisers at the time that Merrill was racked with self-doubt and consulted a psychiatrist. After a few visits his therapist handed his portfolio to Merrill to sell, saying, "If you're crazy, then so am I."

He had a tougher sell with his own partner. Merrill drafted a stern letter to Lynch early in 1929 stating that the firm must liquidate its debts. Lynch replied from Paris, "I don't agree with your thinking, but I will not disagree with your actions. If you wish, please sell all my holdings."

Merrill Lynch weathered the Stock Market Crash in 1929 but Merrill decided to sell his retail commission business and concentrate on investment banking, which he did for several years. Lynch died in 1938 at the age of 53 as the brokerage business was slumping. Merrill searched for a new direction for the firm.

He was one of a very few Wall Streeters to notice a 1939 Roper public opinion survey which showed almost total distrust, disinterest and misunderstanding of financial markets. Stockbrokers were routinely considered legalized bandits. Worse yet, one out of every eleven people thought the Stock Exchange was the place their butcher went to order pork chops.

Merrill ordered his own study to find out what people wanted in a securities firm. He came up with a blueprint for a new company that would be a "department store of finance bringing Wall Street to Main Street." Merrill advertised not only to build trust in his new firm but in Wall Street as well.
By the end of 1940 he had 12,000 new accounts out of an entire investor pool of 50,000. He was on his way to two million accounts.

But the average transaction brought in $10 and cost $14. Merrill Lynch, completely unprecedented in the brokerage business, published an annual report listing a loss of $309,000 in 1940. Increased efficiency in effecting transactions stemmed the losses. Profits would reach $5,000,000 by 1943.

Merrill then suffered a severe heart attack. Afterwards he was only able to return to the office on few occasions but kept a steady stream of memos and phone calls flowing from his house. He remained very much the Directing Partner until his death in 1956.