View From New York: Goldman loses shine in service

The week, however, was hardly a write-off for Mr Steinberg or for his employer. Merrill, Wall Street's biggest securities firm, was the first to release its annual proxy statement to shareholders, detailing how it paid senior executives.

While Merrill executives are not rewarded the way Goldman Sachs partners are, pay levels have risen more than 30 per cent in the past year, to judge from the dollars 10m in compensation it paid its chief executive, Daniel Tully, in 1993.

A new survey of corporate finance and investment directors also suggests that Merrill is gaining on Goldman, Wall Street's last big private firm, in other ways. While Goldman again took top honours in Financial World magazine's annual poll, ranking first in 10 of 26 performance categories, Merrill - basically a retail broker 10 years ago - replaced it in the overall best service listing.

Worst of all, the 150 chief investment officers named Goldman as having suffered the worst deterioration in service - the result, analysts suggest, of concentrating its resources on taking care of the giant hedge funds that have become its most profitable clients.

'It seems that anywhere Goldman stumbles, Merrill gains,' says David Carey, the author of the report. Merrill, which led in eight of the survey's categories, replaced it as Wall Street's best equity underwriter, service provider and research source. It also led in under- writing high-yield debt and initial public offerings.

Merrill, in fact, is the only Wall Street house to have successfully transformed itself from a brokerage into a rounded securities firm, serving institutional and investment banking clients as well the retail market. Shearson, Prudential Securities, Donaldson Lufkin Jenrette and Dean Witter - with the backing of powerful parents such as American Express, the Prudential and Equitable insurance companies, and the Sears retail chain - all failed.

The US executives were also asked to rate the best overall foreign brokerage - UBS, NatWest, Kleinwort and Smith New Court took four of the top five rankings - as well as the firms that served them best overseas. Morgan Stanley topped the list, followed by Goldman and Merrill.

Incidentally, Mr Steinberg's fixed-income research department managed a respectable third.