Former Merrill Lynch Chairman: Investors Still Question Wall Street's Credibility

Winthrop H. Smith Jr., the former Chairman of Merrill Lynch International, believes that investor skepticism has not subsided in the years following the 2008 financial crisis. "Today I think we have a climate where the credibility of Wall Street has been damaged by the excesses of 2007 and 2008," Smith told Benzinga. "[It was damaged] by some of the egregious compensation that was paid to executives after they ruined some companies, and there is a schism that exists now between Main Street and Wall Street that I think desperately has to be brought back together again." Smith is the son of Winthrop H. Smith, one of the founders of Merrill Lynch. In his new book,

, Smith tells the "complete history" of the company his father helped build. "One of the great parts of Merrill Lynch history goes back to 1939 when my father convinced Charlie Merrill to re-enter the securities business," Smith recalled. "He had been out of it for about a decade, focusing on his grocery business and focusing on the growth of Safeway stores."

At the time, a survey showed that the average American didn't know how to invest. The survey also showed that Americans did not trust Wall Street (sound familiar?). "They didn't think that the average person could get a fair shake," said Smith. "So while there was a lot of negatives, both Charlie Merrill and my father saw an opportunity [to] come up with a strategy that they called, 'Bringing Wall Street to Main Street,' and then probably bringing Main Street to Wall Street."

Smith said that a couple of important steps were taken to help investors. "First of all, they took out some of the conflicts that existed between the brokers and the clients. They took people off of commissions," Smith explained. "They paid the brokers salaries and a bonus based on their performance for the client. They didn't just hire people and turn 'em loose." Brokers were required to enter a "very strong educational" program that consisted of nearly one year of education and training. Brokers were not allowed to sell securities until they completed the program.

"They made sure that research was independent of any other organizational part so it really could give independent research," said Smith. "And then they spent a tremendous amount of time educating the public. Their advertisements in those days were not like the promotional advertisements you see today that boast about being the biggest and the best. It was informational advertising that actually taught people how to invest." Smith said that Merrill Lynch created a "crazy," 6,000-word ad that explained how to invest. "Through that process, they really democratized the capital markets, allowed the average middle-class American to feel that they could trust investing on Wall Street, and it made a huge difference in the economic growth in the '40s and '50s, and was replicated by many others after that," Smith added. Smith retired from Wall Street in 2002, but his work is far from over. He currently owns and operates the Sugarbush Resort, a ski resort in Vermont. Disclosure: