E& R RESEARCH g the Puzzle togethe Merrill Lynch Co Survey Louis O. Constanti Merrill Lynch Co Marketing 310 December 4, 1998 Rayna Kella
Merrill Lynch Co. Survey Analysis E&R Research 524 Pebble Beach Cruces. NM December 4, 1998 rsYnc 5S. Telshor C-101 Las cruces, NM 88011 Dear Mr Co Enclosed is the market research report for Merill Lynch Co. that you requested. In your asked for a study on hess of the eq Priority Clients. The intended results were to be a recommendation as to whether or not you should continue producing the reports, and to whom it is appropriate to send them. This research study was approved on September 14, 1998 and is now completed The results from the survey data collected were very conclusive. We recommend that you determine on an individual basis which priority clients will be benefited by receiving a periodic equity research report The research projects results are very informative and should be considered when deciding how to determine which clients are suitable equity research report recipients We are grateful to you and Merrill Lynch& Co for giving us an opportunity to conduct a primary research study of Priority Clients. Feels free to contact us for clarification of the report, or if any questions arise. Please update us with your decisions after reviewing this report Sincerely Rayna Kellam
Merrill Lynch Co Survey Analysis STATEMENT OF EXPECTATIONS The intention of the research study is To contact Priority Clients having one or more equity positions. You are to provide those clients and contact information To structure a survey that would adequately measure the client's attitudes towards research reports, to measure their responsiveness to the reports, and the reports effectiveness To contact each client over the phone or by mail and conduct survey To analyze survey and prepare recommendations This statement of expectations serves as the contract for this study. All parties signed below acknowledge the above statements and accept them
Merrill Lynch& Co Survey Analysis TABLE OF CONTENTS MERRILL LYNCH &CO. PRIORITY CLIENT SURVEY RESULTS Letter of Transmittal Statement of Expectations Executive Summary Merrill Lynch Co Survey ntroduction Objectives =-“--“““·“” Methodology Comprehensive Results and Conclusions ge Group Desired Information Level of Involvement ++++- Competitor Researc Efficacy of Highlighting Continuity of Reports........-.- Recommendations- 334556781 Limitations and Probl Appendices Appendix A: Research Proposal Appendix B: Cover Letter ……13 Appendix C: Research Report Questionnaire. Appendix D: Frequency, Cross Tabulation, Bar Chart Summaries Appendix E: Frequency, Mode, Median Summaries Appendix F: Sample Research Report.... Illustrations Figure 2: Trading Activity in Eit her Account Figure 3: Types of Investors Figure 4: Positions Held Outside Merrill Lynch............ Figure 5: Receive Reports from Competitors 455667 Figure 6: Highlighting Satisfaction Figure 7: Preference of Reports
Merrill Lynch Co Survey Analysis EXECUTIVE SUMMARY Priority clients at Merrill Lynch Co. are a large part of the client base. A better term for this group of clients is Priority Household. This allows IRA, SEP, and 401(k) holders to be included under this umbrella. Merrill Lynch has more than one million Priority Clients worldwide, and $1.4 trillion in assets. there are 750,000 Priority Households nationwide, 4, 100 in New Mexico, and 700 in Las Cruces. In order to qualify as a priority client, one must have $250,000, cash and assets, held long with Merrill Lynch& Co or $5, 000 in revenues for business cash management clients. M 14 accounts. Eighty-six of those accounts are Priority Client accounts. Further investigation revealed that only 40 clients have equity positions on which there is a Merrill Lynch opinion and thus generate research reports. In this day and age most people invest in vehicles such as mutual funds. This is evidenced by the twenty-year trend toward diversified investing Being a Priority Client allows clients to receive a monthly statement that itemizes their transactions, investments, and returns in a neat and organized format. However, it is mainly an internal classification that provides a means for Merrill Lynch to gauge the productivity and value of client relations with their financial consultants(FCs). In any town in America, there is a need for investing. Las Cruces is one of them. FC's who can identify potential clients. prospect for this industry. Giving clients the status of Priority Client is a marketing strategy used by FCs 3 them and establish close binding relationships with them create an opportunity to succeed wi establish secure relationships with their clients. In fact, it is up to the stockbroker to determine whether a client can be classified as priority client without meeting the criteria mentioned above The equity research report mailed to Priority Clients with one or more equity positions in their portfolio are a means of reaffirming good will and a sense of reassurance to the clients from their FC. They serve two purposes To inform the client of the latest news of their holdings To continue to build the trust and confidence any financial planner needs to continue to serve the client Since the production of the reports are very labor intensive, the feasibility of the production is something that needed to be determined Several areas were identified when determining the boundaries of this study. Age groups, desired information, level of interest, continuity of the research reports, competitor reports, and the effectiveness of highlighting the reports are the factors the questions address. The research bjectives were to identify whether or not the equity research reports were serving the client in one of the two areas mentioned above Exploratory research was conducted in a census of 40 Priority Clients of Mr. live in the Las Cruces area, and others live in a variety of states across the nation and in other parts of the world. Mr. Co needed an inexpensive, exhaustive way to determine the effectiveness of the research reports, thus a telephone and mail survey was conducted with a one or more equity positions were eligible to participate in the survey. Of the 40 surveys h questionnaire consisting of 31 questions. People who are Priority Clients of Mr CO conducted, two refused to participate and eight never answered their phone or were never hom thereby reducing the number of actual participants to 30. This provides a participation rate of 75%. The surveys successfully answered were analyzed using the SPSS Statistical Analysis Computer Program As the research was conducted, the clients would seem to want to have conversations about the questions. The researchers followed the guidelines of not interpreting the questions of the clients. However, as a question initiated a discussion, the researcher would note what they were
Merrill Lynch Co Survey Analysis ing and analyzed it along with the statistical analysis This proved to be very insightful during final analysis E& R Research recommends that Mr ini continues distributing the research reports Rather than sending them to every client eligible, Mr. Constantin should individually survey each Priority Client to determine whether they would like to receive the report, which sections are of most importance to that client, and what can be done to better present the report to them. we also recommend that Mr. o inPidentify which clients are"Internet literate"and educate those clients on the Merrill Lynch Co. capabilities with online research reports
Merrill Lynch& Co Survey Analysis MERRILL LYNCH CO SURVEY INTRODUCTION Investing has become a very exciting way to manage finances. Until August, it seemed as if everyone was trying to cash in on the stock market. During July of 1998, the Dow Jones Industrial Average reached an all time high of 9, 300. It soon thereafter retreated and settled back to the 8.000 s. It has been said that the stock market has been and still is overvalued. But that didn't stop many investors from jumping in feet first. Everyone wants a piece of the pie The advertising by the major financial institutions(Merrill Lynch, Charles Schwab, Smith Barney. etc. )and the start up of many online trading services proves the demand by Americans to become involved in the stock market The World War Il generation and increasingly the baby boomers are the chief investors of the nineties. The elderly represent 12% of the population, and the baby boomers represent 20% of the population. 50% of all households own equity positions. This and the excitement for investing in american stock markets create the potential for many stockbrokers to prospect and gain clients for investing strives to develop and maintain close client relations by providing them with exceptional services. One such service is the distribution of equity research reports to Priority their positions while at the same time reminding them that their FC is concerned about them Merrill Lynch& Co is the largest and most internally regulated financial firm in the world. It has over $1. 4 trillion in assets and more than one million clients. The firm advertises its security and wisdom when handling individual finances. Merrill Lynch has a strong client focus with a shareholder orientation. The firm is committed to creating value for clients by providing wisdom and high quality services that meet clients needs. Merrill Lynch is also committed to creating value for shareholders by emphasizing profitable growth(Merrill Lynch Online). On a daily basis, Merrill Lynch Co. will publish a research report on equities in which it has an opinion Merrill Lynch& Co analysts are divided into industries and within those industries they decide which companies they will analyze and give an opinion The purpose of this study is to assess the effectiveness of the distribution of the reports. The researchers intended to measure what level of interest the Priority Clients take in reading the reports and whether or not to continue sending them OBJECTIVES Key areas were identified when determining the boundaries of the study. The following describe the specific research objectives To identify the interests of each investor as indicated by his or her age group To determine which parts of the research report the clients give their attention To discover the level of interest each investors takes in their portfolio management To conclude the preference, if any, to competitor research reports To evaluate the effectiveness of the highlighting of pertinent information by Mr Constantini And to assess the reasonability of continuing to produce and distribute the equity METHODOLOGY E& R Research conducted an exploratory research study with Mr Priority Clients that consisted of a telephone and mail survey of the primary decision-maker of the account(s) 1
Merrill Lynch Co Survey Analys COMPREHENSIVE RESULTS AND CONCLUSIONS AGE GROUPS Many of the respondent's age ranged from forty to very elderly. Age groups tended to be a major influence on investment decisions. The older an investor becomes, the relatively less illing they are to take risk. This creates potential for less individual equity positions and more holdings in mutual funds and other safer investments. The reverse is true for younger investors one respondent has ten to fifteen and more than fifteen. Five clients aged forty to fifty-nine have five and fewer and five to ten individual equity positions. In conclusion, it may be true that as one matures, they have more time on their hands. The older investors read the research reports more thoroughly than the younger investors. They may have more time to read and analyze equity research reports they receive. There were indications younger investors may not have as much time and skim through them, if they don' t discard them. These implications had a majo impact on the results of the survey The cross tabulation for this information is found in Appendix D on page 45 DESIRED INFORMATION As the equity research reports consist of several sections(statistical data, investment highlights, fundamental highlights, and company update), the attention given to each section varied among clients .4% of the respondents read the fundamental data and the Merrill Lynch corporate estimates 4%paid close attention to the company news 10% follow the Merrill Lynch opinion and the Merrill Lynch corporate estimates 14%prefer to read the statistical information 14%follow the EPs estimates 14%follow the corporate estimates 14% read the fundamental data, Merrill Lynch opinion, and the Merrill Lynch corporate 17% preferred the investment and fundamental highlights 37% follow the Merrill Lynch opinions Statistical data provides information on the latest price(when the report wen tot 52-week highs and lows, EPS estimates, etc. Investment and fundamental highlights bulleted summaries of the latest news and estimates for the company as assessed by rill Lynch analysts. Company news provides detailed information on the latest news of the company. A jority of respondents, 57% claimed they did not want any of the sections omitted from the research report. This result is important because it implies that all of the sections are at the least glanced through and are of some value to most of the clients
Merrill Lynch& Co Survey Analysis Sections Read Did not respond Fundamental Highlights All three Investment Highlights Company Update and 2 Cross-tabs and specific summary data of this section can be found in Appendix D on page 31 LEVEL OF INVESTMENT INTEREST Many clients are not interested in the details of their investments. They prefer to allow their financial consultant (in this case Mr to make most decisions regarding their portfolios. The analysis of the survey was consistent with the two different types of investors passive and active. 67% of the respondents claimed to be passive while 23% claimed to be active. The researchers noted that clients that rated themselves as active investors tended to discuss the questions during the survey more than the passive investors. This has serious implications of whether or not to consider sending the equity research reports aggregately or on a micro level. Focusing on value delivery systems to the most attentive customers would be a more efficient use of resources. Twenty seven percent of respondents also claimed that they traded in either of their accou m recommends. Six of the respondents that claimed to be relatively investors trade less than once a year in either of their accounts. Eight of these passive respondents claimed to have trading activity five to ten times a year, and five respondents as recommended. Two respondents who claimed to be active investors trade five to ten times a year, one more than ten and three as recommended the breakdown of this cross tabulation is found in Appendⅸ D on page39
Merrill Lynch Co. Survey Analysis Figure 2 Trading Activity in Either Accou Less than once As Recommended Type of Investor Relatively passive i Neither passe n COMPETITORS RESEARCH REPORTS was interested in determining whether or not his clients have holdings outside of Merrill Lynch. If they do, do they receive similar research reports on those equities? Forty seven percent of the respondents claimed they did not have any holdings outside of merrill Lynch. Thirty seven percent claimed they did.(16% did not respond to this question. )of this 37%, 4% claimed they receive reports from the competitor. 3% of respondents claimed they prefer the competitor report to Merrill Lynch. This translates to one respondent. Since Mr tmis not able to change the format of the report, and since a small fraction of his clients prefer the competitors, we came to the following conclusions ◆Mr not worry about competitor research report quality and preference due to the low percentage of client preference towards them ntlm continues to highlight relevant information, thus making his reports more unique than the competitions