Charles E. Merrill

Charles E. Merrill (1885-1956) was the founder of Merrill Lynch, Pierce, Fenner and Smith, the world's largest brokerage firm. A brilliant market analyst and salesman, he reorganized the investment industry to attract small investors into the stock market.

Charles E. Merrill was born in Green Cove Springs, Florida, on October 19, 1885. The son of a physician and drugstore owner, Merrill was educated at the preparatory school of John B. Stetson University in Deland, Florida, and at Amherst College. After leaving college Merrill tried his hand at newspaper work, law school, and semiprofessional baseball before finding his niche in the business world. In 1907 Merrill took a position as office boy in the New York City branch of a textile firm. Within two years he had become a director of the company. In 1909 Merrill joined a commercial paper company, where he created and managed a bond department. After his resignation in 1913 he became a sales manager for Eastman, Dillon and Company, an established Wall Street firm.

In January 1914 Merrill decided to start his own investment banking firm and founded Charles E. Merrill and Co. in office space sublet from Eastman, Dillon. Six months later, when Merrill took on a partner named Edmund Lynch, the firm became Merrill Lynch and Company. After Merrill's successful underwriting of the McCrory Stores the firm gained a reputation as an underwriter of chain stores and grew large and profitable. Because Merrill took stock warrants as part of his commissions and later sold his shares when their value rose, he also amassed a personal fortune. Merrill's biggest success as an underwriter was his organization in 1926 of Safeway Stores, Inc., in which he was the largest shareholder. At the time of Merrill's death in 1956, Safeway was the second largest food retailer in the country.

In 1928 Merrill became convinced that the stock market was overpriced and advised his customers to sell their holdings; those who took his advice (the president, Calvin Coolidge, ignored his warning) were spared the ravages of the great crash of October 1929. Sure that the depression would be longlived, Merrill got out of the brokerage business in 1930, turning over $5 million of his firm's capital to E. A. Pierce and Co. and limiting his involvement to handling the equity securities of his growing list of chain stores, which by this time included First National Stores, S. S. Kresge Company, and Western Auto Supply. In addition, in 1932 he helped to found Family Circle, the first magazine distributed by grocery stores. For Merrill this was semi-retirement, and he spent much of the 1930s enjoying the fruits of his labor in his elegant homes in Southampton, New York, and Palm Beach, Florida.

In 1940 Merrill reentered the brokerage business, bringing about a merger of Merrill Lynch (Lynch had in the meantime died) with E. A. Pierce and Company. Another merger in 1941 created Merrill Lynch, Pierce, Fenner, and Beane—the largest brokerage house in the world, with offices in 93 cities.

In the 1940s Merrill was responsible for making vast changes in the way the investment industry operated. Adapting retailing concepts to stockbrokering, Merrill became determined to attract large numbers of small investors to the market. In 1941, using the slogan "Bring Wall Street to Main Street," Merrill started a campaign both to educate the general public about the stock market and to make changes in the structure of the business that would appeal to small investors. He accomplished the first goal by printing large advertisements and pamphlets in newspapers and magazines (and sending reprints to all who requested them) which described the workings of the investment business in simple language and by setting up a research department that would do stock analysis reports intended for, and freely distributed to, laymen.

In addition, Merrill reorganized his firm to assuage the public fear that stockbrokers were out to bilk the consumer. He insisted that his employees pass a training program so they would be at least minimally educated in the business, and he paid them on salary rather than on commission, relying on profit-sharing and bonuses as incentives. He cancelled service charges and kept commissions low. He instituted an annual report and sent it out to all his customers to assure them that their money was secure with Merrill Lynch.

Merrill's marketing strategy was extraordinarily successful; small investors responded in droves and remained loyal to the company. Although the firm's innovations were widely imitated on Wall Street, Merrill Lynch consolidated its position as the largest brokerage firm in the world. By the time of Merrill's death in 1956 the firm had 115 offices in the United States, more than 100 partners and 570 employees, and on any given day handled more than 10 percent of all the transactions on the New York Stock Exchange. In the 1980s Merrill Lynch, Pierce, Fenner and Smith (the name was changed after Merrill's death to credit a longterm partner) remained the biggest brokerage house in the world.

Merrill was not only one of the most successful stockbrokers in American history, but probably the most innovative and influential in terms of setting the course for investment brokerage. He created a conservative image for Wall Street that would attract the small investor toward acquiring shares in the country's economy and thereby made investing commonplace among the middle-class.

A firm believer in the free capital market, Merrill bequeathed his share of the limited partnership of Merrill Lynch (worth $5.5 million) to the Merrill Foundation for the Advancement of Investment Knowledge, which he had created in 1945 to give grants to institutions to study free enterprise. He donated 95 percent of his $25 million estate to colleges, churches, and hospitals. Charles E. Merrill was married and divorced three times; he had three children. He died on October 6, 1956.


Further Reading on Charles E. Merrill

There is no biography of Charles E. Merrill. His role in American brokerage is discussed in Martin Mayer, Wall Street: Men and Money (1955); Edwin Hoyt, The Supersalesmen (1962); and Robert Sobel, The Big Board: A History of the New York Stock Market (1965) and Inside Wall Street (1977).