Break with Tradition

After years of being described as "We, the People," the Wall Street brokerage house of Merrill Lynch, Pierce, Fenner & Smith decided to live up fully to its nickname. Merrill Lynch had made itself the world's biggest broker--with 152 worldwide branches, 526,000 account holders and $900 million in assets. Last week, breaking the traditions of a clubby business in which firms are customarily held by only a few partners, Chairman Michael McCarthy, 60, announced Merrill Lynch's intention to sell its shares to the public if he can get the New York Stock Exchange to approve.

Merrill Lynch has been an innovator ever since Charles Merrill wove it together from four smaller houses in 1941. It helped in the long campaign to regain the public's trust in the financial community by putting its salesmen on flat salaries, eliminating carrying charges on accounts, and pioneering in informative advertising. When Mike McCarthy, a former grocery-chain consultant, took over as managing partner in 1957, he found the firm's old partnership setup as unwieldy as its name. He revamped Merrill Lynch into an incorporated brokerage house whose stock is now divided among 419 shareholders, the majority of whom are officers or employees. Last year's profits: $12 million.

To sell shares to the public, Merrill Lynch must first persuade the Stock Exchange to change its longstanding rule that every holder of brokerage-firm stock must first be approved by the exchange; the rule would obviously make the public sale and free trading of its stock impossible. McCarthy concedes that this approval may take years; the exchange is slow to change and is, after all, controlled by many of the insiders who prefer to keep Wall Street a club. But the Midwest Stock Exchange already has opened the way for public ownership, and Merrill Lynch feels that the Securities and Exchange Commission's recent call for more public participation may help persuade the New York Exchange to follow suit. If it succeeds, Merrill Lynch will not only open a new field to public investment, but will be able to do for itself what it has so often done for other companies: raise funds for expansion through public participation.

Some keener competition is abuilding for Merrill Lynch. Francis I. du Pont, Wall Street's fastest growing brokerage house (92 branches), last week announced plans to acquire Chicago's A. C. Allyn & Co. (24 branches). The du Pont firm was set up in 1931 by Francis du Pont, a great-grandson of Eleuthere Irenee du Pont, founder of the Du Pont chemical empire, and grew big by catering to Wilmington's richest carriage trade. Now headed by Francis' son, Edmond du Pont, 57, the firm long ago broadened its sights beyond Wilmington, can use Allyn's brokerage network to expand even further its fast growing business. The move will strengthen du Font's position as the nation's second biggest broker but, with $300 million in assets, du Pont will still be only one-third as big as Merrill Lynch.

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