Charles Merrill: Investing for the People


Merrill Lynch is one of the those names that is synonymous with finance and investing.  The brand itself carries so much weight that it’s mere association can lend credibility wherever it is used.  But that doesn’t happen by accident.  That sort of reputation can only be created through a unique breakthrough, a compelling personality, an inspiring story.  And the story of its co-founder, Charles E. Merrill, has all of that and more.  It’s a story of guts, perseverance, and opportunism.  It’s a gritty study of what it takes to build an empire in a burgeoning American economy. 

Who was Charles Merrill?

Charles Merrill was born in a small town in Florida, USA in 1885 and with the exception of his school being devastated by the Great Fire of 1901, he had a relatively normal childhood.  It was clear from very early on that he was talented and his parents made sure to give him every opportunity to leverage that.  After school he spent time at Amherst College and the University of Michigan Law School before moving into the business world proper.

In 1913 he formed Charles E. Merrill & Co which would be the first glimpse of what was to come.  Two years later he joined forces with his good friend Edmund C. Lynch and thus Merrill Lynch was born.  The crowning achievement of the firm that really put it on the map was the orchestration of a 1926 merger that would create the Safeway food chain.  This deal and the subsequent investment banking services provided helped to drive the group to more than 3,500 different stores by 1931.

When the Great Depression was on the horizon, Merrill realised something that almost no one else did.  With insight that some might call prophetic, he anticipated the stock market crash in 1929 and did what no one else was doing – he divested most of his holdings and just held the cash.  This turned out to be a stroke of genius and while so many of his contemporaries were holding on for dear life, he had the liquidity to make moves in that time of tremendous uncertainty.  He restructured the firm and adjusted to the circumstances of the time – becoming one of the first modern investment banks and going to create enormous wealth as a result.

His legacy stands to this day and he remains a canonical example of investment banking with his name alone carrying tremendous status across the world.  When he died at age 70 he left behind a very different America to the one he had been born into, and much of the modern financial system can be attributed to the ideas he espoused.

The Father of Chain Store Financing

His work with Safeway seems all too normal now but at the time, his chain store strategy was not received as well.  Most investors did not see the benefits of the business model and it took his rapid scaling of the business to prove them wrong.  He realised that there was tremendous power in consistent branding and operations – at least in the minds of consumers.  If they could know exactly what to expect when they walked into a Safeway then it would hold a much more prominent place in their buying considerations.  No matter where you went across the country, you could count on a Safeway chain store to be there and to service your needs.  There was a familiarity that was comforting and the strategy worked.  The stores saw great success all across the country – with large crowds frequenting them for day-to-day shopping.  In some ways, this represented the future of American shopping at the time and the focus on clear branding was a masterstroke.

This model came with significant risk, of course, because of the speed at which they scaled up their stores.  But Merrill believed that the land grab was worth the investment because if you could be seen everywhere then you were sure to win market share and nurture the loyalty of shoppers.  He turned out to be right and it was a runaway success.  The model was proven and quickly became an industry standard as retailers aimed to secure visibility and awareness through their ubiquity.  Once you had one store that was sustainable, the race was to see how fast you could expand that concept and bring it to as many Americans as possible – while still maintaining the recognisable branding and consistent offerings that your core audience valued.  

This was just one example of when Merrill thought very differently to his peers and contemporaries and was willing to put his money behind his convictions.  Many more were to follow.  

The Contrarian

When the bubble burst in 1929 and triggered the great stock market crash that is now part of every economic history you’ll ever read, Merrill was already out of the market.  In fact, he had been warning his clients of an impending crash for a year or two already.  He recognised what so many didn’t – that the great hype that was in the stock market at that time did not have the fundamental foundations to sustain it and was being carried on emotion alone.  When he had that realisation he did everything he could to convince anyone he spoke to that they needed to divest and prepare for a pretty serious market correction.

This was met with ridicule for the most part, because asset prices just continued to rise.  He caught a lot of flak for his concerns and was mostly touted as someone who was paranoid – even within the circles of ultra-sophisticated investors.  Nonetheless, he stuck to his guns and the research that he had done – going against the crowd entirely.  This was an example of true contrarian thinking – a term that hadn’t been coined back then but perfectly describes his investment temperament.  When everyone around him was saying one thing, he used first principles thinking to arrive at a different outlook and put his money where his mouth was, not bowing to social pressure and having a lot of success as a result.

It’s easy to praise this in hindsight because he was proven right, but we have to appreciate just how difficult this was to do at the time.  He paid a significant social and reputational cost in the years preceding the great depression and that’s the sort of conviction that is the hallmark of great investors the world over.

Once the crash had happened, trust in the financial system was at an all-time-low.  Greedy capital markets were considered the villain and the cause of so much pain and suffering.  It would take a lot to revive the image of the American stock market as a real vehicle for growth.  Merrill was on that crusade for years – doing everything he could to convince people that even though they had gone through the crash of a lifetime, stock market investing still remained the best possible way to push the economy forward and to create individual wealth.  He did this by championing the idea that these investments should be open to absolutely everyone, as long as they understood the risks.

Democratising Investing

Even though his business was, for the most part, in orchestrating giant transactions between large corporations, his personal view was that the stock market should not just be an opportunity restricted to the wealthy.  He was very passionate about the idea that the average American should be able to buy shares and participate in the wealth creation that was happening in stocks.  This was an unpopular opinion at the time but he thought of it as a personal mission to bring more people into the investment circles and give them the same opportunities that were afforded to wealthy individuals.

So, true to form, his firm began to transform and held a range of different seminars where the general public could come in to learn how to invest.  The most famous anecdote from these seminars is their planning for parents with young kids.  The seminars were known for having child care providers present so that the kids could be taken care of while both the husband and the wife attended the seminar.  This was novel and led to a lot of normal Americans coming into the stock market.  It’s hard to imagine now because the stock market is much more accessible in modern times, but this truly was a special mission that did a lot for the democratization of share investing.

He did the same for the bond market – turning a traditionally opaque security into an approachable consumer product that would become just as much a part of an average American’s life as their insurance policies.  By widening the scope of what investments were available to normal people he deserves a lot of credit for the economic growth that came in his wake.  

Marketing Flair

His penchant for bringing investing to the masses also carried into the way that he marketed his financial products.  At the time, financial giants like JP Morgan and the like did not do any advertising or personal solicitation of investors because it was considered uncouth and unprofessional.  They felt that it degraded the high-class status that financial instruments had at the time.  Merrill felt no attachment to those preconceived ideas and was of the opinion that as long as he was upfront and educated people about the risks of certain investments then why couldn’t he go out and look for investors?  So, he did just that.  He began to advertise and market his bonds – in turn creating a brokerage business model that would form the foundation of so much of what was to come.

His marketing was revolutionary in stripping the mystery away from these transactions and laying out the economic potential in a way that could be understood and appreciated by those outside of the financial world.  As a result, great masses of people were able to be a part of the financial boom at the time and with Merrill by their side they felt confident and included.  This brokerage model is the forefather of modern money managers and opened up the markets in a way like no one had ever done before him.


Potentially the most important policy decision that Merrill made in his firm was to pay his brokers a salary as opposed to using a commission model, as was common in the industry at the time.  He did this because he wanted align the incentives of his salespeople with his customers.  Instead of chasing volumes and doing whatever was needed to make a sale, his employees could genuinely work with their clients to make the best decisions for their unique circumstances, unburdened by the pressure of having to earn commissions.

This gave the firm tremendous reputational strength and became the core feature of the brand – leveraging on the earlier work done to democratise investing.  Everything he did was focused on serving the customer as best they could – an attitude that just wasn’t that common in the dog-eat-dog investment world of the time  It really did bring Wall Street to the masses.   


Charles Merrill remains one of those investment pioneers whose unique ideas and convictions changed the way that the American financial system works forever.  He didn’t bow to the elevated status of those who came before him, but built a firm that was inclusive and straightforward – with a focus on the customers it was serving.  He made it possible for a middle-class family to have access to the same wealth generation tools that were previously hidden behind the walls of the wealthy.  This alone cements his legacy as one of the greatest financial moguls of our time.  But we cannot forget his personal investment success as a contrarian thinker and opportunistic entrepreneur – turning Merrill Lynch into a firm that still receives the utmost of respect from Wall Street in modern times.  There’s a lot to learn from Charles Merrill and his messaging and ideals could not be more relevant than they are in 2021.  

Leave A Reply

Your email address will not be published.