The advice that helped many clients survive the Great Depression

In 1929, Charlie Merrill wrote a letter with advice that ultimately helped many of his clients survive the Great Depression, setting a precedent for client service and timely, actionable advice that remains the hallmark of Merrill Lynch today.

Much has been written about the companies that survived the stock market crash of 1929 and how they did that. Not as much attention has been given to the individual investors who survived that infamous Black Tuesday. In the 1920s, many Americans borrowed money from banks to buy stocks, contributing to the burgeoning stock trade. According to Time magazine, in 1929, two out of every five dollars a bank loaned were used to purchase stocks. When the market crashed completely, many people went from wealth to ruin overnight. Possibly all Americans were affected to some degree. However, there were those who weathered both the crash and the Great Depression that followed far better than others.

That same year, the founding president of Bank of America's Merrill Lynch, Charlie Merrill, predicted the stock bubble on Wall Street and saw that people were in too much debt. After careful analysis to confirm his suspicions about where the markets and economy were headed, Merrill wrote a letter to clients advising them to reduce their debt holdings and review their stock portfolios in light of current market conditions.

Charlie warned that stock prices had peaked and the bull market would come to an abrupt end. In his letter, Charlie did not advise clients to sell stocks indiscriminately. Instead, he advised them “to lighten obligations, or better still, pay them off entirely.” Merrill Lynch clients who heeded his advice made it through the crash better than those who did not act on his letter.

That same year, Merrill Lynch liquidated a portion of its own stock portfolio just as Charlie advised the firm’s clients to do. Explaining this decision in an employee memo, Charlie wrote, “We try to run our business in a safe and high-grade manner, giving our customers the maximum protection at all times.” At the time, Merrill Lynch had more than $20 million in cash credit balances, which allowed the firm to strengthen its reserves over the course of that year. When the crash happened in October 1929, Merrill Lynch was prepared for the downturn as were many of its clients.

This tradition of research, advice and guidance, all leading to client service are hallmarks of the firm, and financial advisors continue to provide timely, accessible advice today.

Visit one of our Heritage Centers for an up close look at this and other stories from our bank’s history. Learn more