Discount brokerage grows as others cut back

ONE-ON-ONE

March 04, 1991

One on One is a weekly feature offering excerpts of interviews conducted by The Evening Sun with newsworthy business leaders. Harold N. Peremel is president of Peremel & Co. Inc., Maryland's largest and oldest locally owned discount stock brokerage firm.

Q. Your firm had a 64 percent growth rate in new accounts and a 13 percent jump in revenue in 1990. Considering that other stock brokerage firms lost business during last year, how did your firm manage to grow?

A.We made a basic premise and a basic decision, and that decision was to aggressively market in the salary environment. I've been a little conservative and I would have held back, but when I have a next generation of people in here -- family -- they came out of college, and said marketing is the way to get them [customers]. So I listened to them, and we have experienced this growth because of this marketing. Aggressive marketing. That's the key. And we've let more people know what are services are and what we've done, and therein lies the secret of our growth.

Q. You're a discount brokerage firm. How does a discount broker differ from a regular broker?

A. A discount broker is a person who can offer a substantial amount of services by lowering their commission rates. For example, a person would go into Merrill Lynch and buy a thousand shares of stork. A thousand shares of stock could cost $800 in commission. We'll charge you $100 for the same thing. So we are quite a bit different costwise and yet we offer many of the services that full-service firm offers.

Q. You had told me earlier that you are primarily a brokerage firm for people who know what they want. Should people come here who really don't know what they want, who are just getting into the stock market for the first time?

A. I believe that a person who really needs a lot of guidance should go to some other kind of firm -- a major firm or a good regional firm. But a person who knows what he wants to do, we're the place for him to be.

Q. What would you say is the general profile of your customer as far as age, income, market sophistication?

A. Our profile is a person from 35 [years of age] on up. Somebody who has an income of $35,000 and up. I would like to back track for one second. We have had people who call us up and say, do you handle this particular mutual fund. Well, a mutual fund which is not very sophisticated. And again there are many different mutual funds depending upon what their objectives are. So that's another avenue which is not so sophisticated. But generally speaking, again, we're for the more sophisticated individual.

Q. I understand that you will be changing your correspondent broker here in the near future. Could you tell us whom you're changing from and to and how this will change your service?

A. For the past six months we have been looking to upgrade our services and the strength of the organization. Many years ago, I cleared through a firm called Cowen & Co. which has been in business since 1918. I recently went back to this company and the same people who I used to do business [ with years ago] are still there which showed me quite a bit of stability. They are one of the outstanding firms on Wall Street. They will offer us the latest state of the art communications systems; they will offer us research for people who want it. . . . I think they will be much more efficient and they have the strength, and the financial strength and the quality of service, to help make us a stronger organization for the 1990s. That's what I was basically looking for. So I am very happy about it, and all our clients are going to really benefit from this.

Q. Could you explain what exactly a correspondent broker is, what role it serves?

A. Sure. A correspondent broker is someone who will do the processing of our order tickets, they will collect dividends, they will issue statements, and also they will provide you with additional services such as a money market if you need it. They are a very important part of our business, and we are strong and becoming stronger if we have a very strong, successful correspondent in back of us.

Q. You had mentioned earlier that your success last year was due to your aggressive marketing. Could you elaborate on what your strategy in marketing was?

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