If you are in the market for a house, the chances are fair that you can find one through a Merrill Lynch & Co. real estate agent, and that you can arrange financing through Merrill Lynch's mortgage company. Merrill Lynch used to be a stockbroker.
If you want a new checking account -- one that lets you earn top-of-the-line rates, write a check for $6.82 to the drugstore, and pay the rest of your bills with a single phone call -- you might want to contact Fidelity Group in Boston. Fidelity is not a bank.
You can buy stocks and bonds in certain Sears stores, insurance in some J.C. Penney outlets, and mutual-fund shares in certain Kroger supermarkets.
Supermarkets, for God's sake. "Honey, be sure to get more milk -- and why don't you pick up another hundred shares of the tax-free bond fund?"
In times like these, a little perspective is in order.
The financial services industry -- banks, investment houses, and insurance companies -- has traditionally been a gentleman's business. Not that its many members weren't concerned with making money, despite protestations to the contrary, gentlemen have rarely been averse to buying cheap and selling dear. But they did so discreetly, surrounding their services with an air of dignity that discouraged unseemly inquiry into fees, commissions, and interest rates.
About 10 years ago, all this discretion began to pale. Inflation was virulent, and investors were shopping around for new deals. Regulations such as minimum fee requirements on stock transactions were abolished. Faced with this changing environment, the financial services industry began to learn the lessons the rest of the economy had learned a century or so earlier -- the lessons, they might be called, of Harley Procter.
Procter was the son of William Procter, who, with his partner, James Gamble, started a soap-and-candle manufacturing business in Cincinnati. The partners ran a dignified, modest-size company -- until son Harley came along. Harley hit on the name Ivory and the slogan "99 44/100% pure." Most other soap-makers sold their soap in big, brown, cheeselike wheels to grocers, who cut off hunks for customers. Procter sold his directly to consumers in neatly packaged white cakes. Thanks to massive national advertising, he was soon selling most of the soap in the United States.
Merrill Lynch actually began experimenting with mass marketing of this sort some time ago. Led by founder Charles E. Merrill -- no marketing slouch himself (legend has it that he made his first big money "selling newspapers at the edge of the red-light district to gentlemen who wanted to cover their faces on the way out") -- the firm began to advertise heavily soon after World War II. It quickly outdistanced its competition.
Not until the 1970s, however, did Merrill Lynch begin to pursue the rest of Procter's strategy in a serious way. Just as Procter & Gamble didn't stick with Ivory, so Merrill Lynch didn't confine itself to stocks and bonds. It discovered it could "manufacture" new "products," then package and sell them -- like soap.
Among Merrill Lynch's first ventures were hot little numbers like tax-shelter deals and commodities funds, since then the firm has moved into real estate and a host of other services. But this time the rest of the industry wasn't so far behind With interest rates hitting new highs, mutual-fund firms invented an item called a money-market fund. Life insurance companies began to write policies combining traditional coverage with high-rate investment vehicles. New computers -- the money industry's equivalent of new industrial machinery -- made it possible to market all these items nationwide without the risk of too many misplaced transaction slips.
The problem was finding customers.
Merrill Lynch itself had no trouble marketing the new products: It cranked up the TV advertising and sent marching orders to its army of brokers. But the others had to scramble. The Bache Group, another brokerage firm, sought out a deal with Prudential Insurance Co. of America, its eye, no doubt, on its new partner's bevy of agents. Shearson Loeb Rhodes waltzed into the waiting arms of American Express, which had a built-in network of cardholders to sell to. Dean Witter was happy to be acquired by Sears and to set up shop next to the lingerie. Companies that didn't get married at least moved in together. Kroger's supermarket-based "financial centers," for example, involve the food giant in a menage-a-trois with Capital Holding Corp. (insurance) and The Vanguard Group of Investment Cos. (mutual funds).
Meanwhile, the line that traditionally separated banks from everyone else in the industry began to blur. Los Angeles's Security Pacific National Bank began to offer brokerage services. Mutual funds, including Fidelity, and such insurers as Prudential moved to buy up banks. The legal issues involved here are murky, and federal regulators may block further moves toward integration. But the driving force behind the changes is unlikely to disappear. It is, as one mutual-fund expert put it, simple enough: "If you can't sell them Corn Flakes, maybe you can sell them Rice Krispies."
Now, you may never buy a stock at Sears, let alone at a supermarket. That does not mean you can safely ignore the new conglomerates.
For one thing, there is a reason why all this manufacturing and marketing have been so successful, and it is not because Merrill Lynch and its confreres have plied us with too much bull. "The two very basic financial instruments by which we have all lived for a long, long time were the savings account and the whole-life insurance policy," observed James S. Riepe, director of T. Rowe Price Associates's mutual funds division, not long ago. "And they failed." The invention of new places to put your money and new ways to protect your assets, in short, met a real need. They still do. And the bigger firms are likely to be out front in coming up with new improvements.
Then, too, you can keep dealing with the same old banker, broker, and insurance agent. But don't be surprised if one or all get bought out -- or if they suddenly try to sell you on tax-managed growth funds and convertible debentures. In the age of the financial supermarket, the mom-and-pop store has to do its best to keep up. So do you.
You may, given the confusion that surrounds the industry at the moment, want to look into hiring a financial planner. Most of the big firms offer financial planning themselves, but the service should be regarded with a modest amount of skepticism. Supermarkets don't have a salesperson walking the aisles with you telling you what you need. Besides, as David Silver, president of Investment Company Institute in Washington, D.C., points out, a company's chief sales pitch is likely to be aimed at whatever provides its basic business. A bank will see itself primarily as selling cash transactions, a brokerage firm will encourage margin trading, and so forth.
The subject of financial planning will be discussed again in this column soon. In the meantime, watch the newspapers. Like any fast-growing manufacturing industry, the financial services business is likely to be trumpeting as many new products as Procter & Gamble. And like any good marketer, it will be looking for new ways to peddle its wares.
You are, you can be sure, on its list of prospects.