Monday, January 28, 2008

Donald Regan CEO Strategy at Merrill Lynch 1971

Donald T. Regan (a Harvard degree holder) became C.E.O. in 1971. He managed Merrill for the consequences of May Day, 1975, when the Government abolished fixed commissions on stock sales, sparking cut-throat competition in the brokerage business. The changes wrought by the iron-willed chairman are still felt at Merrill and through the industry.

Regan fathered the Cash Management Account, or C.M.A., which combined the characteristics of a debit card, money market checking account and brokerage account.

He also led Merrill on its first major diversification drive. He envisioned the company as a ''three-legged stool'' supported by businesses in the securities, insurance and real estate industries.

Merrill would offer customers one-stop shopping for all their financial needs, and relieve the company's dependence on the cyclical brokerage business.

To establish the investment banking division, Regan tapped Schreyer, who had run the Government securities business and the New York branches, a very visible post. The division, later to be Capital Markets, encompassed underwriting, mergers and acquisition services and institutional sales, trading and research; it did not achieve critical mass until 1978 when Merrill acquired the old-line investment banking firm of White, Weld & Company.

Still, retail commissions continued to provide the lion's share of Merrill's revenues.

Don Regan had eased Merrill's brokers into the brave new world of financial services; Bill Schreyer accelerated the process. The time had passed when a broker could spend his day simply dispensing market wisdom (mostly provided by his research department) and booking buy-and-sell orders. Brokers were to be known as ''financial consultants,'' and they were expected to learn how to sell the new products, including life insurance and mutual funds, into which Schreyer was pouring Merrill's money.

The old-fashioned customer's man had trouble adapting to the asset-management strategy, and Merrill is still developing approaches to cope with this problem. The selling skills and knowledge a broker needs in daily contact with customers are very different from those called on to book a single order for a life insurance policy or to persuade a customer to set up a trust. ''I think it's very difficult to be good at all these areas at once,'' says Ronald E. Vioni, a veteran Merrill broker. The company has adjusted its hiring and training policies to develop a cadre of new-look brokers, and has dispatched 200 so-called ''specialists'' to the branches to help sell the non-securities products.

Merrill's target customer has at least $50,000 in household income. By the year 2000, with the baby boomers at their top earning capacity, the number of households above the $50,000 level is expected to double, as is the total of their assets. Something to shoot for, but will the asset-management strategy carry Merrill to its profit goals?

Newyork Times, June 10, 1990

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