Magazine article American Banker

Merrill Call-Center Probe: Assessing Possible Impacts

Magazine article American Banker

Merrill Call-Center Probe: Assessing Possible Impacts

Article excerpt

An investigation of Merrill Lynch & Co.'s call centers could hurt the firm's opportunity with small investors, analysts say, but they think the company can avert serious harm.

The National Association of Securities Dealers is investigating whether the call centers poorly advised some small investors. Merrill directs investors with less than $100,000 of assets to its call centers. News of the investigation, which is said to have been under way for some time, was first reported in Tuesday's Wall Street Journal.

The big New York brokerage characterized the problem as "growing pains" in the call centers that have since been overcome.

Brad Hintz, an analyst at Sanford C. Bernstein & Co., said Merrill was among the first brokerage firms to divide its customers based on how much they had in assets. The company will have to work hard to avert harm to small investors' perception of it, he said.

Kenneth Worthington, an analyst at CIBC World Markets Corp., said Merrill Lynch probably will not lose existing customers but could lose potential new ones.

"The theory is, little acorns become big oak trees," Mr. Worthington said. "Merrill may be losing some smaller acorns, but Merrill isn't really focused on gathering small accounts. Their marketing and services are not geared for small accounts. Generally speaking, I'd expect smaller accounts to go to discount brokerage firms. That is where those customers get better service at cheaper prices. …

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