Creating A Single National Stock Brokerage Company (BAC)(UBS)(MS)(C)

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When Bank of America (BAC) bought Merrill Lynch, one huge retail brokerage team was married with a smaller one. Morgan Stanley (MS) will probably take over the Smith Barney unit of Citigroup (C). The Wachovia broker network, which used to be called Prudential, has been married off.

Now there is word that UBS (UBS) may sell its brokerage to Morgan Stanley.

According to the FT, "UBS signaled its willingness to take dramatic steps to overhaul its business in response to the financial crisis by holding talks late last year with Morgan Stanley over the sale of its US brokerage unit." The UBS unit used to be Paine Webber.

About a decade ago, there were six or seven really large stock brokerage businesses. By the middle of this year, there may be only three. There are back-office efficiencies in putting together these businesses and the weakest brokers can be fired to cut costs. But, the move is not necessarily good for investors. Fewer brokers mean fewer people to compete for business. It may mean higher fees.

Discount brokers have taken a place at the table.They should make up for some of the loss of competitiveness as full-service brokerages consolidate. But, they don’t. Millions of investors still want to deal with a single person and have that single person give them advice. The investor who wants those services can get them from fewer and fewer firms. Investors really lose something by that.

Douglas A. McIntyre

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