Robert Froehlich, market analyst at Scudder Kemper Investments, told CNNfn's "Before Hours" that increasing competition among major global firms will lead to further consolidation. He said a trend toward simplification is driving these megamergers.

Here is a transcript from that interview.

DEBORAH MARCHINI, CNNfn ANCHOR, BEFORE HOURS: Robert, good to have you with us and you've joined us on a rather auspicious occasion -- the biggest merger on record having been announced today. What are your thoughts?

ROBERT FROEHLICH, SCUDDER KEMPER INVESTMENTS: Well, the biggest record so far this year -- I wish I was smart enough to know what the next one is. The only thing I know for sure is there will be another one even bigger because what's happening is the landscape is changing so dramatically. Ten years ago, it used to be you'd get two small firms that would get together to try to become a sort of medium-sized firm. But because of all the mergers that happened, now we're having major global players get together because, in essence, all the firms that didn't used to be their competitors, now have become competitors.

And so, the landscape has changed so dramatically. It has forced the big global players to have some separation between themselves and between other firms that used to be non-players and now are sort of biting at their heels.

MARCHINI: All right. I registered my shock at your prediction that there would be another one larger still, but I guess I shouldn't have registered it so quickly. We've got Merrill Lynch Incorporated stock up sharply today, along with that of J.P. Morgan and a host of other financial services companies. Tell me, if you would, a little bit about the outlook for brokerage companies' stocks in this environment.

FROEHLICH: Well, I think what you are seeing is that because of the demographics we have here in the United States with aging of the baby boomers, everyone so bullish that we are going to see savings rates increase, and that is going to be very, very strong for all the brokerage houses that we have here. But the real key is going to be simplifying the life for the baby boomers, and I think what that means is what this deal with Salomon Smith Barney and Citicorp is all about - people want their life to be simple. They want to go to one place for banking, whether they want to buy insurance, whether they want to buy stocks, whether they want to checking account, they want to go to one place. And I think that's really the underlying success of this deal is ultimately going to be: Can you package this stuff up to make it simple? And I think that's going to be the rule of the day and I think you're going to see every major securities firm, every big bank is going try to follow suit and say, we, too, have to have a one-stop shopping. We have to give them insurance - whether it's auto insurance, life insurance; whether they want checking account - whatever their financial needs are, they have to be able to come to one simple place and I think that's going to be the wave of the future.

MARCHINI: Would you be an aggressive buyer of bank and brokerage company stocks even at today's somewhat higher prices?

FROEHLICH: Well, I think the prices appear to be higher from a historic valuation, but you know, looking forward, I think this is going to be the best producing industry that we have because look at what's happening. Interest rates aren't going up. I mean, they're trending downward. I think the next move -- at least from the employment report numbers -- is probably going to be easing, not a rate increase.

That becomes very bullish for the banks in a falling interest rates environment. So, the whole securities industry, financial services, should be bullish because of where interest rates are going. Then when you add the speculation of mergers and acquisitions, they are going to run rampant in the next couple months because everyone is going to be convinced -- what is this deal going to do to the other deals that were on the back burner? And so when you add a falling interest rates environment with speculation, it is going to build the prices up even higher. So, I certainly would be a buyer today in this industry.

MARCHINI: All right, Robert, forgive a foolish question, but I thought this stuff was against the law --specifically, the Glass-Steagall Act that separates banking and brokerage?

FROEHLICH: There is a fine line here. What we're going to find out, Deborah, is the fact of the matter is the markets lead Washington. Washington doesn't lead the markets. You know, last week we had some disappointment that Glass-Steagall -- the Chinese wall between the banking industry and securities industry -- wasn't changed. But the fact of the matter is I think this deal is going to force Congress to re-look at the Glass-Steagall Act again because this deal will be able to figure out ways --with holding companies, with subsidiaries -- to get around that outdated law.

But I think the importance is it's going send a signal to Congress to say, wake up. It is not 1933 anymore. We have to change these rules to become a global player, a global powerhouse. And I think the real hidden message is going to be Congress is going have to re-look at what they did last week, and I think they're going to start encouraging deals like this because this is what it's going to take for our financial services industry, to be the global leader it wants to be.