One day after The Wall Street Journal reported that Merrill Lynch was looking to slash its spending in its retail unit by $300 million to $400 million a year, President Stan O’Neal took the opportunity today to try and calm some fears of massive spending cuts.
“We cannot cost-cut our way to prosperity,” O’Neal said during a conference call announcing the company’s third-quarter financial results on Thursday morning. “We continue to invest in people, on a leaner cost basis.”
He did not say exactly how much money, if any, the firm plans to cut from the U.S. brokerage business budget. The firm continues to scrutinize costs in each business unit and allocate resources according to its potential for growth, O’Neal said.
Although the international private client group has been seen by some analysts as a likely target for cutbacks because of the losses it is posting, O’Neal said the firm remains committed to taking advantage of growth opportunities outside the United States when appropriate.
In a press release, the firm said it would concentrate on high-net-worth investors overseas. Merrill’s international private client group posted a pretax loss of $51 million for the nine months ended Sept. 30. By contrast, profit margins in the U.S. Private Client Group (USPCG) have improved since last year. The USPCG earned $988 million in pretax profits during the first nine months of the year, down just 8% from the same period last year.
Merrill also reported in its conference call that it has a total of 150 so-called “Private Wealth Advisors” located in metropolitan areas throughout the United States. These 150 brokers are inside 40 broker teams and serve investors with $10 million or more at Merrill.
On the other end of the investor scale, Merrill says it has exceeded its goal of transferring 500,000 smaller accounts to its call centers, which it calls the Merrill Lynch Financial Advisory Center. Client satisfaction and retention rates are high at the call centers, the firm reported. Combined with the firm’s online trading service, ML Direct, the company has some 900,000 accounts doing business with the firm by telephone or via the Web.
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