Investment Bank Death
If you are still of the mindset that your local Merrill broker is the guy to talk to about your “money”, think again. An excerpt from the NY Times:
“For years, analysts have said that Merrill, as well as Morgan Stanley, a similar stand-alone investment bank, may have to merge with a larger commercial bank. But in recent months, the hum of speculation has taken on a higher pitch. The talk comes as the two firms’ stock prices continue to lag behind those of their peers: Merrill’s is down 20 percent from its high this year, while Morgan Stanley’s is off 23 percent from its 2004 peak. That both the future and the relevance of these two storied Wall Street institutions are being questioned at all is testimony to the broad changes in the financial landscape over the last few years. The Morgan Stanley name embodies the essence of white-shoe financial wisdom, dating to the 1930’s, when the firm was carved out of the original J. P. Morgan. For its part, Merrill Lynch, as the first Wall Street firm to popularize the idea of marketing stocks and bonds to small investors, symbolizes the idea of democratized stock ownership in America. Universal banks like Citigroup and J. P. Morgan, with their swollen balance sheets and ripe ambitions, are encroaching more than ever on Merrill’s and Morgan’s turf. European banks like Barclays, Royal Bank of Scotland and HSBC are also looking to expand in the United States. Even onetime regional banks like Bank of America and Wachovia have been hiring droves of investment bankers and brokers. Merrill Lynch and Morgan Stanley, in other words, are being squeezed on all sides. “The business models of these firms may not be sustainable,” said Richard Barrett, who runs the Credit Suisse First Boston investment banking unit, which is responsible for bank mergers. “Inevitably, Morgan Stanley and Merrill Lynch should align with the big balance-sheet providers.”
Start making the transition now to running your money (or at least use a money manager) — as it appears days of chit chat with the friendly neighborhood broker may be going the way of the dinosaur. If you don’t bring value — what’s the point?
