Barron's article, "Ride 'em Dave"
a few tidbits from the article:
"Merrill, the nation's largest brokerage, still has too many layers of management, and its costs remain bloated. For every dollar of net revenues the firm collects, a full 52.2 cents goes for compensating employees. That compares with 49.5 cents at Morgan Stanley Dean Witter.
Komansky acknowledges the high costs, but he blames them in part on Merrill's rapid expansion overseas and the spending needed to maintain the firm's top-flight network of retail brokers. Clearly, he would rather talk about revenue growth than cost-cutting, and he makes a pretty convincing case for Merrill's prospects."
"Even though an estimated 30% of all retail stock trades are done online now, Merrill has chosen to stay out of this business. One reason is that the firm's brokers were afraid many of their clients would opt to do low-cost Internet trading with Merrill instead of sticking with the traditional, more expensive, full-service route.
The man in charge of straightening out this sticky situation is John Steffens, 57, head of Merrill's U.S. retail operations. Steffens has made his share of colorful speeches vilifying online trading, sometimes suggesting that it should be ranked just a notch above gambling. He still feels investors need a broker's advice, but he knows that Merrill has to jump into the online fray.
Like several other smart players, Merrill does not want to get involved with the frantic stock jockeys who make dozens of online trades a day"
"Now Merrill must increase its asset-management business, both at home and abroad. Currently, asset management contributes only 7% of Merrill's revenues"
"In fact, Merrill's acquisition binge in recent years has caused its goodwill to balloon from next to nothing in 1993 to $5.46 billion in 1997. And its long-term borrowings have more than doubled, from $13 billion in 1993 to $43 billion at the end of last year."
"Adding to the pressure is the fact that at the end of last year a few Mercury funds underperformed their peers dramatically"
"Merrill is also trying to get its brokers to push accounts that require an annual fee. Such fee-based accounts are attractive because the broker gets paid a fee based on a percentage of the client's assets under management instead of getting paid per trade" |
