Small towns bringing brokers big business Going country: The brokerage industry takes Wall Street to Main Street, as technology and demographics point firms toward small towns.

April 10, 1996|By Ellen Uzelac | Ellen Uzelac,SPECIAL TO THE SUN

There's only one stoplight between stockbroker George E. McLaughlin's house and his office 25 miles away in the Eastern Shore community of Chestertown, population 4,000. His idea of a traffic jam: getting stuck behind a farm tractor.

Normally associated with the hustle and bustle of urban centers, the brokerage industry is going country as Mr. McLaughlin, 46, and thousands of others like him chase the nation's wealth down tidy main streets and rambling country roads.

"Most firms, to some degree, are moving in this direction," said Perrin Long, an independent analyst who tracks securities industry trends. "We're at the beginning of the cycle. More and more firms are beginning to realize that, relative to retail, they must add salespeople, and they are adding them in small-town America. It's really no different than McDonald's and hamburgers. You have to keep putting out more locations."

One firm with little name recognition outside of small-town Zip codes, Missouri-based Edward Jones, has built a small empire with its one-broker outposts, and plans to add up to 300 new offices this year.

Now, the regionals and wire houses -- even local banks -- are working to catch up. Merrill Lynch & Co., for example, has quietly opened offices over the last three years at an average rate of one every week and a half. It hopes to double its number of small-town branches by 1998.

Just what's driving Wall Street to Main Street? New technology and plain old demographics. From anywhere in the country, brokers with the proper computer technology can execute trades, check portfolio holdings and access the latest research from corporate headquarters. Their market: widows, small business owners, farmers, ranchers and, perhaps most significantly, the growing number of retirees retreating to small towns.

"With this equipment, it doesn't matter whether you are on Wall Street or the main street of Chestertown," said Mr. McLaughlin, a branch manager for the Baltimore-based Legg Mason Wood Walker Inc. "And you get to see the customer. Most of the city brokers have never laid eyes on their customers. Here, just to get a sandwich at lunch, I stumble across them."

Not long after Mr. McLaughlin and Joe Sener, a former vice chairman of Legg Mason, opened the Chestertown branch in 1985, Mr. McLaughlin pitched to just about every one of his customers a widely hailed stock that ultimately went sour.

"I went to a Washington College basketball game and across the court, in a moment of silence, a client yelled, 'Hey George, that so-and-so went down the hole. I lost everything,' " said Mr. McLaughlin, whose two-man office has $100 million under management.

"Fortunately, that happened early in my career, and it was very instructive. Living in a small community like this, you have to be careful. You're sitting at church with your clients, you're socializing with them, you're serving on the same boards. All our clients are interested in is income and staying ahead of inflation. You can't really be aggressive with these people. We're not out looking for the next Netscape. We're more interested in relationships. Relationships are important in a small community."

When Jerry Merrill founded Merrill Lynch in 1941, he said he would bring Wall Street to Main Street. More than a half-century later, corporate executives revived that promise.

"There's more opportunity in small towns than we had appreciated," said Paul A. Stein, the head of Merrill's expansion effort into small towns. "[The evidence] suggests that more and more of our customers, particularly those retiring, are moving from urban areas to small towns and rural areas" in search of lower crime, affordable housing and a slower-speed lifestyle.

Most of all, added Mr. Stein, "We're getting much closer to the customer -- and service is better and results are better when the customer and broker meet face to face."

Mr. McLaughlin grew up on Long Island in a small town, and Chestertown reminded him of his boyhood home when he spent a summer there in 1974.

He and his wife planned to play on the Chesapeake Bay that summer, then head down to Florida by fall so that Mr. McLaughlin, just out of the Army, could do master's work in English.

One day, toward the end of summer, Mr. McLaughlin was driving by an old house on the main street of Galena, Md., population 380, when he saw a man nailing up a for-sale sign. The cost: $8,000. Mr. McLaughlin slammed on the brakes, gave the man $100 to hold the house for him and drove home to tell his wife.

"Everything changed that day," said Mr. McLaughlin.

After working in the boat business for several years, Mr. McLaughlin in 1982 entered Merrill Lynch's trainee program, working for three years in the company's Wilmington, Del., office. In 1985, Legg Mason convinced him to help open its Chestertown branch.

There are some drawbacks. For one, he says, his peers at Merrill's Wilmington office are doing twice as much business. But Mr. McLaughlin is home for dinner every night with his family, he coaches a soccer team for seventh- and eighth-graders and he is able to enjoy the glory of the Chesapeake Bay region.

"The trade-off, of course, is the lifestyle. We are like night and day compared with people on the other side of the bay," said Mr. McLaughlin. "I hope to be here for a very long time. You'll have to carry me out feet first."

Legg Mason, apparently, isn't the only brokerage to appreciate Chestertown's assorted riches. Merrill Lynch, as part of its small town expansion effort, opened an office there last May.

Pub Date: 4/10/96

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