Louis Engel: The Man Who Brought Wall Street to Main Street

Louis H. Engel, Jr. was born on November 27, 1909 in Jacksonville, IL. He attended the University of Chicago and was graduated in the spring of 1930 with a Ph.B., or Bachelors of Philosophy Degree. While at Chicago, Engel served as the Managing Editor, and later as Chairman of the Editorial Board, for the school’s newspaper, the Daily Maroon. He was also active in several other organizations where he honed his public relations and writing skills. 

From 1930 to 1932, Engel worked as a staff member at the University of Chicago Press. In 1932, he moved to New York to take a $35.00 a week job writing for the magazine, Advertising and Selling. In 1933, Engel was appointed Managing Editor. He joined Business Week as a reporter in 1934 and in 1936, at age 27, he was made the Managing Editor. In 1940, family friend Ted Braun tried to recruit Engel to the newly merged firms of Merrill Lynch and E.A. Pierce. Braun, who worked as a consultant on the Merrill deal, believed that Charlie Merrill would be putting greater emphasis on marketing and advertising in the combined firms and thought Engel to be a good fit. Engel declined Braun’s invitation and continued on at Business Week.  In 1946, management changes at Business Week forced Engel to seek new opportunities. That summer, Engel interviewed with Winthrop H. Smith, a founding partner at Merrill, but ultimately decided to pass on the opportunity presented to him. Following that decision, Engel signed on as Editor and correspondent for the newly launched Kiplinger publication – Changing Times. Within weeks of starting his new position, Engel determined that his new role at Kiplinger was not going to work for him. In the fall of 1946, Engel called Win Smith at Merrill to inquire whether the Advertising and Sales Promotion Manager position was still available. During that phone call, Engel accepted an offer from Smith and he joined Merrill on November 15, 1946. 

Edwin J. Perkins, author of the book Wall Street to Main Street: Charles Merrill and Middle Class Investors provides this excerpt on Engel’s influence on Merrill’s promotional efforts. 

Engel designed the type of aggressive advertising program that Charlie had been advocating for years. Imaginatively using his own naiveté to create more genuinely informative advertisements, Engel wrote purposefully unsophisticated copy that addressed the questions and concerns of persons geographically and intellectually distant from Wall Street. He presumed that most readers glancing at a brokerage ad knew as little – or even less – about stocks and bonds as he himself had known prior to joining Merrill Lynch. In his copy he tried to explain investing principles in plain and simple language. 

Engel’s unorthodox ideas and his desire for creative independence soon produced conflicts with George Hyslop, his immediate superior. Hyslop, a partner inherited from the Pierce organization, had been assigned primary responsibility for advertising and public relations soon after the merger in 1940. Engel found he could not make a move without checking every little detail with Hyslop, and the policy irritated him to no end. “He insisted on seeing every little two-by-two ad even if it was for hog bellies in the National Butcher magazine,” Engel jokingly recalled. Charlie and Smith soon realized that Hyslop’s managerial philosophy had become an obstacle to progress, and he was eased out of the partnership. After Robert Magowan assumed most of Hyslop’s duties, the advertising department functioned more harmoniously, since Magowan granted Engel far greater latitude in decision making. Magowan was also a supportive ally in internal conflicts with other departments. 

One technique that Engel favored was inviting potential customers to respond promptly through the mail – either by writing a personal letter or by filling out a coupon requesting free and objective information. At one point he told the partners: “We have a research department to analyze people’s portfolios and you never advertise it;…it’s the best thing you’ve got to see, for God’s sake.” Given the green light, Engel launched a major campaign to inform the public about the availability of portfolio analysts on the Merrill Lynch staff. When magazine and newspaper readers responded eagerly to ads inviting them to mail a list of their holdings to the New York office for analysis, the personnel in the research department complained bitterly about the extra workload. An overworked staff argued that Engel’s initiatives had gone too far – another case of “too much of a good thing.” They pressured Magowan to force Engel to scale back the placement of ads proclaiming their services – services for which neither they nor the partners were receiving any direct monetary compensation.

With Charlie’s blessing, Magowan backed Engel to the hilt, and the ads ran on schedule. Magowan told the research department that coping with the heavy inflow of mail was an internal problem that required an internal solution. The advertising department, he reminded the complainers, was producing remarkable results in generating thousands of solid leads for Merrill Lynch brokers nationwide. Engel had demonstrated beyond all doubt that, with the proper advertising, a brokerage firm could attract the attention of thousands of households that were interested in planning for their financial security – households that were expressing a new willingness to consider something other than whole-life insurance policies with modest rates of return. When the onslaught of letters continued, the partners authorized the head of the research department to add more staff to handle the deluge. Charlie and Smith concluded that the maintenance of a large research department was another inescapable high cost of doing business if they wanted to provide reliable services on a mass scale in a thoroughly professional manner. 

Engel’s most innovative advertisement, one that often turns up on lists of the one hundred most influential ads in the nation’s history, appeared in the fall of 1948, approximately two years after he had joined Merrill Lynch. Titled “What Everybody Ought to Know about This Stock and Bond Business,” the ad consisted of six thousand words of very small print squeezed onto a full-size newspaper page. 

The copy was informational and educational – and textbook dry in tone. There were no explicit references to the firm’s own brokerage services in the entire text, but at the bottom right of the page was a small calling card that identified Merrill Lynch as the sponsor and invited readers to request free reprints of the ad in pamphlet form. In the history of print media, no single advertisement with so much seemingly boring copy had ever been published for any product or service. 

At first, Charlie, Smith, and Magowan were only lukewarm about this questionable marketing concept. At five thousand dollars, the cost of running the full-page ad in the New York Times was extremely high relative to the size of the advertising budget (2 percent of the annual appropriation, to be exact).  How many people, the partners wondered, would actually make the effort to read the text and how many, in turn, would respond by asking for reprints of a text that could easily be clipped right out of the newspaper? The partners also debated whether to spend so much money for an essentially generic advertisement that was likely to benefit rival firms. Despite his superiors’ reservations, Engel insisted on gambling a portion of his annual budget on the innovative concept.

A 6,450 word ad written by Engel as published in the New York Times on October 19, 1948

Finally, a compromise was reached. The partners agreed to allow Engel to run a trial advertisement in the Cleveland Plain Dealer, where the cost of space was much lower than in New York. If the ad bombed, they could drop the whole idea without wasting another nickel of the advertising budget. When the public response to the Cleveland experiment proved encouraging, Engel received permission to test the ad in the New York Times. During the week or so after publication, the firm received more than five thousand requests for pamphlet reprints. “What was most amazing,” Engel recalled, “was that we got hundreds and hundreds of long and thoughtful letters.” Some respondents were profusely appreciative. One person wrote: “God bless Merrill Lynch;…I have been wanting to know this all my life;…I owned stocks and bonds and I never really knew what I owned.” The firm ran the same advertisement, or slightly revised versions, in newspapers across the country, not only during the next few months, but, indeed, for years thereafter. The total number of responses exceeded three million, and those returns translated into millions of prospective customers for the firm’s eager brokers. With that one concept alone, Engel proved himself a promotional genius. His subsequent aggressive campaigns, which were typically both educational and eye-catching, set new standards for brokerage firms and other enterprises in the financial services sector. 

As a result of the highly visible Merrill ad campaign, Engel was approached by the publisher Little, Brown and Co. to write a book on the topic. Six weeks later Engel finished the manuscript for “How to Buy Stocks.” The first edition of the book was published in May 1953. It became a best-selling investment primer that was regularly revised in new editions for the next several decades. The eighth edition of the book was published in 1994 by Engel’s co-author and Merrill colleague, Henry Hecht. In total, the book has sold over 7 million copies across its eight editions. 

In 1959 Engel had a “silly idea.” He wondered what the chances of making money would be if you threw a dart at the list of New York Stock Exchange listed companies and you bought the issue the dart hit. He approached Columbia University School of Business and asked if such a calculation could be made. “The school replied, in essence, Great idea. But we only have one lifetime.” 

Engel then turned to his alma mater, the University of Chicago, and in March 1959 he called Jim Lorie, then Professor of Finance at the Graduate School of Business (now Booth School of Business). The underlying question raised by Engel was, relative to other asset classes, how have the returns of stocks performed over the long term. In an early article based on the Merrill ads, Engel had written about and compared the returns of certain stocks relative to the returns of savings accounts and life insurance investments. What Engel sought to quantify was the average return of the market “over the long haul.” 

Professor Lorie was intrigued by Engel’s question from an academic perspective and he proposed that Merrill fund a study to compile the historical data needed to calculate the returns. The Center for Research in Security Prices at the University of Chicago was initially funded by a $50,000 grant from Merrill. The project was publicly announced in August 1960. It was initially projected by the CRSP team that it would take 6 months to research, compile and cleanse the data. The actual time required to complete the database was 3-1/2 years and the research grants received by CRSP from Merrill during this period were approximately $150,000. 

In December 1963, the landmark results of the 3-1/2 year project were announced. Fisher and Lorie published the results in the January 1964 issue of The Journal of Business. In keeping with his earlier full page ad promotion, Engel decided to publish the entire Rates of Return on Investments in Common Stock paper in the Wall Street Journal. Like his 1948 “what everybody ought to know..” campaign, this ad also caught the attention of the investing public, as well as investment professionals and academic researchers.

Reprint of the "Rates of Return on Investments in Common Stocks" Wall Street Journal June 2, 1964

Merrill continued to promote the Fisher/Lorie research results by offering free copies of the article for the next several years. Merrill also funded other smaller research projects at CRSP following the development of the master data files in 1964. 

Louis Engel retired from the firm as Vice President and Partner in 1969. He died in 1982 at the age of 72. You can read more about Louis Engel in One Hundred Minds that Made the Market by Kenneth L. Fisher.  

CRSP thanks Dr. Edwin J. Perkins, Emeritus Professor, University of Southern California, Department of History, for allowing us to adapt and reprint the excerpt from his book Wall Street to Main Street: Charles Merrill and Middle Class Investors, (Cambridge University Press, 1999). His related writing is New Strategies for Stockbrokers: Merrill Lynch & Co. in the 1940s.