Merrill Lynch

In the late 1990's, Merrill Lynch, a full-service brokerage firm, came under attack from discount firms, electronic brokerage firms, and new entrants brought about my deregulation. Merrill Lynch's new competitive threats were spurred mainly by new technologies and deregulation. With deregulation, banks could now act as brokers and security dealers, which added more competitors to an already crowded industry. The advent of the internet enabled discount brokers to target more affluent, self-serving investors with their electronic and online-trading offerings. The new internet-based economy put more information into the hands of the investors, which led a large of number of investors to look for firms that enabled online trading for the lowest price.

Merrill Lynch's new competitors were discount brokers like Charles Schwab. Charles Schwab capitalized on the trends of the new information age. In 1999, 31% of all trades were conducted online, and this number was growing daily. Charles Schwab aggressively promoted its online trading technology and significant numbers of investors flocked to their online accounts. With the increased flow of financial information to investors, many investors felt they no longer needed to pay such a premium for a full-service broker like Merrill Lynch.

Up to this point, the average Charles Schwab customer was 45 years old, with 95,000 average income, and about $100,000 in assets. This was compared to Merrill Lynch's average customer, which before the launch of Integrated Choice, had customers that tended to be older (53 yrs), and more affluent (> $100,000 in assets). Merrill Lynch's sweet spot was its priority clients which averaged 60 years of age with net assets of $650K. However, as Charles Schwab started aggressively targeting more affluent individuals with its technology and reduced trading rates, they started attracting the more affluent investors that would typically sign with a full-service firm. Merrill Lynch and Charles Schwab's customer sets started to become very similar.

Merrill Lynch responded in 1999 with the launch of Integrated Choice. Integrated Choice was a suite of products designed to capture clients from the do-it-yourself investor who doesn't want to use a broker, to clients who want to rely completely on a broker.