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New Strategies for Stockbrokers: Merrill Lynch & Co. in the 1940s

In recent years business historians have expressed renewed interest in the entrepreneurial tradition of scholarship which flourished at the Harvard Business School in the post-WW II era and which produced, among others, the acknowledged dean of modern business history, Alfred D. Chandler, Jr. [Chandler, 1956]. This article focuses on the new strategies adopted by the senior partners of Merrill Lynch & Co. during the early 1940s, which was an extremely critical period in the firm's development [Merrill Lynch Corporate Archives]. These innovative polices reflected the vision of Charles Merrill, who had created the enterprise a quarter century earlier. His goal was to promote greater public trust in the honesty and reliability of Merrill Lynch brokers, with the hope of generating more trading volume by customers, old and new. Recognizing the enormous success of life insurance companies in soliciting the savings of middle class households, Merrill sought to persuade more U.S. households to invest in common stocks and to make them customers of his revitalized brokerage house. Although prominent investment bankers have attracted the attention of financial historians, almost nothing has been published in scholarly circles about firms in the more mundane brokerage field [Carosso, 1970, 1979, 1987; Chernow, 1990; Sobel, 1991]. This article fills in a narrow slice of a very wide knowledge gap. Despite his significant contributions to the development of modern capital markets, little has appeared in print about the career of Charles Merrill. Merrill actually had three rather distinct and extremely successful business careers. From 1914 to 1930, he was an underwriter and merchant banker; from 1930 to 1940, he shifted his attention to Safeway Stores, the national grocery chain, in which he held a controlling interest; and from 1940 to 1956 he headed what became, after two major mergers, the brokerage firm of Merrill Lynch, Pierce, Fenner & Beane. This last career on Wall Street was the most influential because of its impact on the institutional structure of the U.S. financial services sector. Merrill brought "Wall Street to Main Street"-a catch-all phrase which communicates in dramatic language how his brokerage firm was able to convince tens of thousands of upper-middle class households in mid-sized cities across the nation to invest regularly in common stocks. By 1940 the firm operated branch offices in most of the nation's 100 largest cities.