John Launny Steffens said he feels vindicated as he prepares to leave Merrill Lynch & Co. after nearly four decades at the New York financial services company.
As head of Merrills vast brokerage network, a role he held until last year and where he helped build Merrill into the colossus it is today, Mr. Steffens had warned back in 1998 that the do-it-yourself model of investing, centered on Internet trading, should be regarded as a serious threat to Americans financial lives.
Back then his remarks were seen by some as signaling Merrills reluctance to really embrace online trading for retail investors, but now as people shun the Internet in favor of dealing with flesh-and-blood brokers, his remarks seem somewhat prescient.
I feel totally vindicated, Mr. Steffens, 59, said in an interview Thursday after he announced his plans to quit his job as a Merrill vice chairman in June to set up his own company that will serve the super-wealthy.
Though he said he feels his comments about Web brokerage were taken out of context at that time Merrill already had 750,000 online accounts his basic concern remains steadfast, he said. The whole view was that [day-trading] is really simple, the touch of a button, Mr. Steffens said. It had to end badly.
And though Merrill did end up going toe-to-toe with the nations biggest discounter, Charles Schwab Corp., at the end of 1999, tellingly Schwab has sought to become more like Merrill and even acquired a private bank last year.
To succeed in todays financial services market, you have to be able to provide a full menu of financial services and ways to sell them, Mr. Steffens said.
One of the things this market has underscored is the role in having a trusted adviser, he said.
Mr. Steffens credited Merrills ability to offer advice through its 15,000 brokers with bringing in $28 billion of net new assets in the first quarter. He is personally credited by the firm for boosting client assets more than eightfold since he took the reins in 1985, to $1.6 trillion today.
But the advent of online trading is just one major change in his 38-year career. The growth of the global equity markets has been another. I remember the summer of 1963, he said. There were days the market didnt trade one million shares. Now it does that in the first two or three seconds.
Other changes have been more monumental in their implications for the industry, he said.
The 1999 passage of the Gramm-Leach-Bliley Act, which eliminated Depression-era laws preventing convergence among different types of financial companies, has been a boon for the industry, Mr. Steffens said, adding, Gramm-Leach-Bliley was totally in synch with our philosophy.
When the law was enacted, Merrill, which credits itself as the fastest-growing banking company in the country, with $66 billion of deposits at the end of the first quarter, was already becoming a broad-based financial services provider, he said. For a long time, weve been building the capabilities to be a total provider, and theres relatively little that we cant do, he said.
The consolidation fueled by Gramm-Leach-Bliley and by the need for size in financial services will probably continue, Mr. Steffens said. I think its going to continue, although so much has happened already.
Asked whether his departure from Merrill is connected to last years management shakeout, when E. Stanley ONeal succeeded him as head of the brokerage unit, Mr. Steffens said: That basically has nothing to do with it.
Mr. ONeal is among those tipped as a possible successor to David H. Komansky, Merrills chairman and chief executive officer, who is expected to retire in three years.
Merrill is an evolving business, Mr. Steffens said. They had to build new management.
Henry McVey, an equity analyst at Morgan Stanley Dean Witter & Co., said theres no question that Stan ONeal is in charge, and while Launny made a significant contribution since he stepped down, theres a different generation of management overseeing that division.
But Mr. Steffens, who himself started out as a broker 38 years ago, had a special connection with the sales force, Mr. McVey said. Hes still very tight with a large percentage of them and has quite a following.
Mr. Steffens said his talents are best as a business manager, and thats what he plans to do with his as yet unnamed investment management company, which will offer private equity investing and hedge funds to wealthy investors.
But the company, which is to work with rather than compete with Merrill, is not just for the average wealthy person, Mr. Steffens said. It will court customers with at least $20 million of investable assets, he said.