The end of Merrill Lynch?

What if being associated with a firm that must admit its poor judgment in order to acquire needed capital loses its allure?

Brands are the most ephemeral, yet perhaps most valuable, of corporate assets. Unlike physical assets or intellectual property, the core elements of a brand — the emotions, feelings and connotations connected to a specific product or service — aren’t even a company’s possession. They reside in the heads of consumers and shape their behavior.
That’s a long preamble to my belief that the retail franchise of Merrill Lynch & Co. Inc. is in big trouble.
For sure, the threat arises from the current financial mess in which the company finds itself. But it’s not so much the erosion of the New York-based financial giant’s balance sheet I’m worried about (that’s the job of wonder boy John Thain, who gets paid handsomely to tend to such matters). I’m more concerned about the erosion of Merrill’s brand image among affluent retirees and near-retirees, and perhaps even more crucially, among its advisers and those who might consider becoming a Merrill adviser.
What is it that represents the Merrill brand? It’s the bull, of course, symbolizing growing investments and determination. But it’s a lot more.
Among old-timers, Merrill stood for bringing Wall Street to Main Street. It was the brokerage firm that rode the crest of the great post-war rise in stock prices. It was the firm that restored the credibility and allure of equity investing that had been destroyed in 1929. The Merrill brand meant buying a share of America.
When Merrill bought White Weld & Co. in 1978, it started building its strength in investment banking, trading and the capital markets. The company’s brand image, especially among its retail customers, took a subtle turn. Merrill still meant equities, of course, but it also meant being a big, smart investment bank.
To those on Wall Street, Merrill may not have seemed as clever as Goldman or as “white shoe” as Morgan Stanley (until the acquisition of down market Dean Witter) or as aggressive as Bear Stearns or Drexel Burnham (may they rest in peace).
But to its retail clients, Merrill was a powerhouse.
For retail clients, the “Merrill-ness” means being associated with rich, smart financial experts who really know what’s going in the markets and who can use that magical power to help make money.
Merrill advisers, more avid imbibers of the corporate Kool-Aid than clients, have long believed that their firm was the best.
Recent events have undermined that belief. The arrogant and inept reign of E. Stanley O’Neal started the downward slope that the hiring of Superman John Thain was intended to reverse.
But Thain’s “the worst is behind us” speeches are becoming less credible as they increase in frequency.
Now that the current write-offs have made Merrill much less big and rich, what happens when advisers and clients no longer believe that Merrill is especially smart?
What if being associated with a firm that must admit its poor judgment in order to acquire needed capital loses its allure?
To my mind, if Merrill’s devalued stock price is no longer a retention tool, if its open architecture means that its clients can access the same products anywhere, and if trusted advisers begin to feel that their profits are being siphoned off to pay for the mistakes of traders, bankers and management, the end of Merrill’s retail brand is quite possible.
Even mighty brands can fall. For every Lexus that zooms into our consciousness from nowhere, there’s an Oldsmobile that vanishes. Will Merrill be your father’s brokerage firm?

Evan Cooper is the senior managing editor and online editorial director of InvestmentNews.

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