Dean Witter Reynolds
Encyclopedia
Dean Witter Reynolds was an American
stock broker
age and securities firm catering to retail clients. Prior to its acquisition, it was among the largest retail firms in the securities industry with over 9,000 account executives (ranking third in the US in 1996) and was among the largest members of the New York Stock Exchange
. The company served over 3.2 million clients primarily in the U.S. Dean Witter provided debt and equity underwriting and brokerage as well as mutual funds and other saving and investment products for individual investors. The company's asset management arm, Dean Witter InterCapital, with total assets of $90.0 billion prior to acquisition was one of the largest asset management operations in the U.S.
In 1997, Dean Witter's parent company Dean Witter, Discover, Inc., which also owned Discover Card
, merged with investment banking house Morgan Stanley
to form Morgan Stanley Dean Witter. The combined firm later dropped the Dean Witter name. In 2009, the Dean Witter retail operations were transferred to Morgan Stanley Smith Barney, a joint venture with Citigroup.
For many years, the company used the corporate slogan, "We measure success one investor at a time," which was later adopted by Morgan Stanley
.
The following is a summary of the financial results of Dean Witter prior to its merger with Morgan Stanley
:
and was a member of other major securities, futures and options exchanges. Dean Witter offered a broad range of securities and savings products that were supported by the firm's underwriting
and research activities as well as order execution
. Closely related to its securities business, Dean Witter provided investment consulting services to individual investors. The firm managed approximately $10.4 billion of assets in its consulting business as of the end of 1996. Within its securities business, Dean Witter focused on three segments:
firm, even before its merger with Morgan Stanley
. Like many of its peers, Dean Witter provides a range of advisory services to corporate clients including mergers and acquisitions
, divestitures, leveraged buyout
s, restructuring
s and recapitalization
s. The Company generally does not commit capital to merchant banking transactions.
However, the firm always maintained a strong connection between its investment banking business and its core business focused on individual investors. As a result, the investment banking division was involved in the research, development and origination of investment products focused on individual investors including limited partnership
s and other retail-oriented products.
The Company's InterCapital subsidiary, with $90.0 billion of assets under management
as of December 31, 1996, was one of the largest investment management
businesses in the U.S.
business. Discover Card, which today operates is the Company's most widely held proprietary general purpose credit card and generated a majority of Credit Services' revenues and net income in 1996. Prior to its merger, Dean Witter's credit cards business accounted for 52% and 47% of the company's net income in 1995 and 1996, respectively.
In addition to the Discover Card, the company operated the NOVUS Network. In the mid-1990s, the NOVUS Network was the third largest domestic credit card network and consisted of merchant and cash locations that accept card brands that carry the NOVUS logo. In addition to the Discover Card, this the NOVUS network included Private Issue Card, the BRAVO Card and the National Alliance
For Species Survival SM Card.
as a retail brokerage firm in 1924. With its original offices at 45 Montgomery Street in San Francisco, California
, Dean Witter would be among the largest West Coast brokerage firms in the U.S. Among Witter's original partners were his brother Guy and their cousins Jean C. Witter and Ed Witter as well as Fritz Janney. Prior to founding his own firm, Witter had been a co-founder of Blyth, Witter & Co., another San Francisco based brokerage in 1914. After Witter's departure, Blyth would continue on his own (ultimately acquired by Paine Webber
in 1979) and the two firms would remain competitors for decades.
Witter's family had moved to Northern California from Wausau, Wisconsin
, settling in San Carlos, California
in 1891. Before founding his own firms, Dean Witter had worked as a salesman for Louis Sloss & Company from his graduation from the University of California, Berkeley
in 1909 until 1914. Dean Witter would lead his company until his death in 1969.
In its early years, Dean Witter focused on dealing in municipal and corporate bonds. The company was highly successful in its first five years, purchasing a seat on the San Francisco Stock Exchange in 1928 and then opening an office in New York and purchasing a seat on the New York Stock Exchange
in 1929. Although a relatively young company, Dean Witter survived Wall Street Crash of 1929
and the Great Depression
, posting profits every year during the 1930s and into the 1940s.
The company grew rapidly during the 1950s and 1960s, establishing itself as a major U.S. brokerage house and developing a reputation for innovation in the securities industry. In 1938, Dean Witter established its national research department, and in 1945, became the first retail securities firm to offer a formal training for account executives. In 1953, the firm entered into an agreement to merge with Harris, Hall & Co.
, a Chicago investment banking and securities firm spun out of Harris Bank
after passage of the Glass Steagall Act. In the early 1950s, Harris, Hall was one of the 17 U.S. investment banking and securities firms named in the Justice Department
's antitrust investigation of Wall Street commonly known as the Investment bankers case. In 1962, Dean Witter became the first firm to use electronic data processing — a feat that paved the way for securities handling on Wall Street
.
Following Witter's death in 1969 and the retirement of Guy Witter the following year, Jean Witter's son, William M. Witter, who became CEO of Dean Witter & Co. After numerous brokerage firm acquisitions, Dean Witter went public in 1972. Dean Witter's initial public offering (shortly after the IPO of Reynolds Securities) was part of a rush of Wall Street firms to sell an interest in their privately held businesses to public investors, following Merrill Lynch's initial public offering in early 1971.
founded U.S. Foil Company, later Reynolds Metals
(Reynolds wrap), and his great uncle was the founder of R. J. Reynolds Tobacco Company (RJR). Among Reynolds' partners were Thomas F. Staley (Staley was Reynolds’ cousin, the grandson of Major D. Reynolds, an older brother of R.J. Reynolds), Charles H. Babcock and John D. Baker.
Like Dean Witter, the company survived the Depression, generating a profit each year. In 1934, Reynolds acquired F.A. Willard & Co. With the acquisition, Reynolds tripled its sales and shifted its emphasis toward underwritings.
In 1958, Reynolds passed its leadership to the next generation with Thomas F. Staley departing and naming Robert M. Gardiner to head the firm. Under Gardiner, Reynolds embarks on major expansion, acquiring 26 offices from A.M. Kidder & Co. Reynolds acquired another three offices and opened nine firms in new regions in the U.S. in the early 1960s.
Reynolds was incorporated in 1971 as Reynolds Securities in advance of an initial public offering. By early 1971, there was speculation that Merrill Lynch would sell shares to the public. Reynolds initial public offering (and shortly thereafter Dean Witter's IPO) was part of a rush of Wall Street firms to sell an interest in their privately held businesses to public investors, following Merrill Lynch's initial public offering. In 1976, Reynolds implements REYCOM, the most sophisticated high-speed wire system in the industry. Meanwhile, the firm was continuing its expansion, acquiring its first international offices in Lugano
and Lausanne, Switzerland. A year later, Reynolds acquired Baker Weeks & Co. whose strength was securities research.
At the time of its merger with Dean Witter in 1978, Reynolds Securities had over 3,100 employees in 72 offices producing gross revenues of nearly $120 million.
s and Washington, D.C.
After completion of the merger, Dean Witter Reynolds generated revenue of more than $520 million.
In 1981, Dean Witter Reynolds was acquired by Sears, Roebuck and Company
in a $600 million transaction. Sears' core retail business was facing several challenges, and the company decided to diversify into new businesses, including financial services. Sears, which was already in the financial services business through its ownership of the Allstate Insurance Company
announced a major acquisition initiative in financial services. In addition to the acquisition of Dean Witter, Sears also acquired Coldwell Banker, the real estate brokerage company in 1981. Sears intended for Dean Witter to form the foundation for a larger Sears Financial Services Network that would be available to customers through the company's retail stores.
Sears named Philip J. Purcell
, a strategic planner at the Sears Chicago headquarters and former McKinsey & Co. consultant, to head Dean Witter. Purcell moved to New York to run the operation from Dean Witter's office. At the time of the Sears acquisition, Dean Witter Reynolds had a retail broker force of over 4,500 account executives in over 300 locations with over 11,500 employees in total. For the year ended 1980, Dean Witter Reynolds generated over $700 million of revenue.
Under Sears ownership, in 1986, the firm launched the Discover Card
, a new brand of credit card
outside the well established Visa, MasterCard
and American Express
networks. Unlike other attempts at creating a credit card to rival MasterCard
and VISA
, such as Citibank
's Choice card
, the Discover Card quickly gained a large national consumer base. It carried no annual fee, which was uncommon at the time, and offered a typically higher credit limit than similar cards. Cardholders could earn a "Cashback Bonus," in which a percentage of the amount spent would be refunded to the account (originally 2%, now as high as 5%), depending on how much the card was used. Discover offered merchant fees significantly lower than those of other widely-accepted credit cards. Eventually Discover grew to become one of the largest credit card issuers in the U.S.
Sears' financial services initiative proved highly successful as Discover grew through the late 1980s and early 1990s. Furthermore, the substantial investment in the Discover business also began to pay off, with the business becoming highly profitable. The early 1990s were also a period of rapid growth for Dean Witter Reynolds as its strategy of focusing on the distribution of proprietary mutual funds through its extensive retail brokerage network began to bear fruit.
Dean Witter's core securities business and its Discover business generated combined revenue of $59 billion in 1992 and Sears announced that it would seek to monetize its investment through a public offering. In 1993, 20% of the company was spun off from Sears to shareholders, and the company was subsequently renamed Dean Witter, Discover & Co., with two primary operating subsidiaries: Dean Witter Reynolds and Discover Card. Later that year, the remaining 80% of shares were distributed to Sears' shareholders, giving Dean Witter complete independence from Sears.
Dean Witter's corporate headquarters were located in New York City's 2 World Trade Center (i.e. South Tower), where the firm had occupied over 864000 square feet (80,268.2 m²) since 1985. Dean Witter was one of many tenants whose offices were evacuated as a result of the 1993 World Trade Center bombing
, which took place during the firm's spinoff from Sears. Following, the firm's merger with Morgan Stanley, the firm's headquarters would be moved to 1585 Broadway on the edge of New York's Time Square. Morgan Stanley Dean Witter would still have a large presence at the World Trade Center on September 11, 2001.
Dean Witter was the first big brokerage company to get into the online trading business when it bought a small San Francisco-based outfit called Lombard Brokerage in 1996.
Although Morgan Stanley was the more prominent partner, Dean Witter's focus on retail investors, mutual funds and credit cards which were seen by the stock market as generating more stable cash flows than Morgan Stanley's investment banking business, had by the time of the merger made it the more valuable partner in terms of market capitalization. Dean Witter's CEO, Philip Purcell, the main architect of the merger, became chairman and Chief Executive Officer of the merged group. The merger marked the pairing of a storied investment banking firm with a retail brokerage (that had been owned by a retailer) that was often termed "white shoes and white socks". In order to avoid tension during the integration of the two firms, Purcell and Morgan Stanley's CEO John Mack decided not to choose between the two brand names. Instead, they combined the names of the two firms and put the Morgan Stanley Dean Witter brand on almost all of its operations.
Eventually, to foster brand recognition and marketing, the Dean Witter name was dropped from the retail services division in 2001, leaving the current name Morgan Stanley. In 2009, the Dean Witter retail operations were transferred to Morgan Stanley Smith Barney, a joint venture with Citigroup.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
age and securities firm catering to retail clients. Prior to its acquisition, it was among the largest retail firms in the securities industry with over 9,000 account executives (ranking third in the US in 1996) and was among the largest members of the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
. The company served over 3.2 million clients primarily in the U.S. Dean Witter provided debt and equity underwriting and brokerage as well as mutual funds and other saving and investment products for individual investors. The company's asset management arm, Dean Witter InterCapital, with total assets of $90.0 billion prior to acquisition was one of the largest asset management operations in the U.S.
In 1997, Dean Witter's parent company Dean Witter, Discover, Inc., which also owned Discover Card
Discover Card
The Discover Card is a major credit card, issued primarily in the United States. It was originally introduced by Sears in 1985, and was part of Dean Witter, and then Morgan Stanley, until 2007, when Discover Financial Services became an independent company. Novus, a major processing center, used to...
, merged with investment banking house Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
to form Morgan Stanley Dean Witter. The combined firm later dropped the Dean Witter name. In 2009, the Dean Witter retail operations were transferred to Morgan Stanley Smith Barney, a joint venture with Citigroup.
For many years, the company used the corporate slogan, "We measure success one investor at a time," which was later adopted by Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
.
Business overview
Prior to its merger with Morgan Stanley, Dean Witter Reynolds was a diversified financial services organization that provided a broad range of investment and consumer credit and investment products and services. Dean Witter operated in two lines of business: securities (including investment banking) and credit services and its operations were primarily focused on the U.S.The following is a summary of the financial results of Dean Witter prior to its merger with Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
:
| Year | 1996 | 1995 | 1994 |
|---|---|---|---|
| Revenue Revenue In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover.... |
$1,132 | $1,338 | $998 |
| Operating Income | $506 | $788 | $658 |
| Net Income Net income Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings... |
$951 | $856 | $741 |
| Total assets | $17,344 | $15,507 | - |
| Shareholder's equity | $5,164 | $4,834 | - |
Securities business
Dean Witter's traditional business was as a full-service securities brokerage. The company maintained a network of over 9,000 account executives. DWR was among the largest members of the New York Stock ExchangeNew York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
and was a member of other major securities, futures and options exchanges. Dean Witter offered a broad range of securities and savings products that were supported by the firm's underwriting
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
and research activities as well as order execution
Order (exchange)
An order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange.These instructions can be simple or complicated...
. Closely related to its securities business, Dean Witter provided investment consulting services to individual investors. The firm managed approximately $10.4 billion of assets in its consulting business as of the end of 1996. Within its securities business, Dean Witter focused on three segments:
- Equity SecuritiesEquity (finance)In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
- Dean Witter provided order executionOrder (exchange)An order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange.These instructions can be simple or complicated...
, stock trading and equity research services primarily to individual investors but also to institutional clientsInstitutional investorInstitutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
. In many equity securities, Dean Witter acted as a market makerMarket makerA market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
and as a specialistMarket makerA market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
on various exchanges. Dean Witter's research department provided economic analysis and commentary, market and quantitative research, as well as making recommendations with regard to broad individual companies and industry sectors.
- Fixed Income Securities - Dean Witter provided trading and order executionOrder (exchange)An order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange.These instructions can be simple or complicated...
services for a broad range of fixed income securities, including U.S. Treasury bonds, mortgage-backed securities, corporate bonds, municipal bondMunicipal bondA municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any...
s and certificates of deposit. The Company was a primary dealer in U.S. Treasury bonds. The firm largely eschewed proprietary tradingProprietary tradingProprietary trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with the firm's own money as opposed to its customers' money, so as to make a profit for itself...
focusing its trading activity on establishing and maintaining inventory of various securities.
- FuturesFutures contractIn finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
- Dean Witter also provided order executionOrder (exchange)An order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange.These instructions can be simple or complicated...
and clearing servicesClearing (finance)In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
for the trading of futures contractFutures contractIn finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s.
Investment banking
Dean Witter also operated as an investment bankingInvestment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
firm, even before its merger with Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
. Like many of its peers, Dean Witter provides a range of advisory services to corporate clients including mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
, divestitures, leveraged buyout
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
s, restructuring
Restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
s and recapitalization
Recapitalization
Recapitalization is a sort of a corporate reorganization involving substantial change in a company's capital structure. Recapitalization may be motivated by a number of reasons. Usually, the large part of equity is replaced with debt or vice versa...
s. The Company generally does not commit capital to merchant banking transactions.
However, the firm always maintained a strong connection between its investment banking business and its core business focused on individual investors. As a result, the investment banking division was involved in the research, development and origination of investment products focused on individual investors including limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
s and other retail-oriented products.
The Company's InterCapital subsidiary, with $90.0 billion of assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
as of December 31, 1996, was one of the largest investment management
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
businesses in the U.S.
Credit cards (Discover Card and Novus)
Dean Witter was also active in the issuance of credit cards through its Discover CardDiscover Card
The Discover Card is a major credit card, issued primarily in the United States. It was originally introduced by Sears in 1985, and was part of Dean Witter, and then Morgan Stanley, until 2007, when Discover Financial Services became an independent company. Novus, a major processing center, used to...
business. Discover Card, which today operates is the Company's most widely held proprietary general purpose credit card and generated a majority of Credit Services' revenues and net income in 1996. Prior to its merger, Dean Witter's credit cards business accounted for 52% and 47% of the company's net income in 1995 and 1996, respectively.
In addition to the Discover Card, the company operated the NOVUS Network. In the mid-1990s, the NOVUS Network was the third largest domestic credit card network and consisted of merchant and cash locations that accept card brands that carry the NOVUS logo. In addition to the Discover Card, this the NOVUS network included Private Issue Card, the BRAVO Card and the National Alliance
For Species Survival SM Card.
History
Dean Witter Reynolds traced its origins to two firms: Dean Witter & Co. founded in 1924 and Reynolds & Co. (later Reynolds Securities) founded in 1931.Dean Witter & Co. (1924-1970)
Dean Witter & Company was founded by Dean G. WitterDean G. Witter
Dean G. Witter was a U.S. businessman who co-founded Dean Witter & Company, which became the largest investment house on the West Coast....
as a retail brokerage firm in 1924. With its original offices at 45 Montgomery Street in San Francisco, California
San Francisco, California
San Francisco , officially the City and County of San Francisco, is the financial, cultural, and transportation center of the San Francisco Bay Area, a region of 7.15 million people which includes San Jose and Oakland...
, Dean Witter would be among the largest West Coast brokerage firms in the U.S. Among Witter's original partners were his brother Guy and their cousins Jean C. Witter and Ed Witter as well as Fritz Janney. Prior to founding his own firm, Witter had been a co-founder of Blyth, Witter & Co., another San Francisco based brokerage in 1914. After Witter's departure, Blyth would continue on his own (ultimately acquired by Paine Webber
Paine Webber
Paine Webber and Company was an American stock brokerage and asset management firm that was acquired by the Swiss bank UBS AG in 2000. The company was founded in 1880 in Boston, Massachusetts, by William Alfred Paine and Wallace G. Webber. Operating with two employees, they leased premises at 48...
in 1979) and the two firms would remain competitors for decades.
Witter's family had moved to Northern California from Wausau, Wisconsin
Wausau, Wisconsin
Wausau is a city in and the county seat of Marathon County, Wisconsin, United States. The Wisconsin River divides the city. The city is adjacent to the town of Wausau.According to the 2000 census, Wausau had a population of 38,426 people...
, settling in San Carlos, California
San Carlos, California
San Carlos is a city in San Mateo County, California, USA on the San Francisco Peninsula, about halfway between San Francisco and San Jose. It is an affluent small residential suburb located between Belmont to the north and Redwood City to the south. San Carlos' ZIP code is 94070, and it is within...
in 1891. Before founding his own firms, Dean Witter had worked as a salesman for Louis Sloss & Company from his graduation from the University of California, Berkeley
University of California, Berkeley
The University of California, Berkeley , is a teaching and research university established in 1868 and located in Berkeley, California, USA...
in 1909 until 1914. Dean Witter would lead his company until his death in 1969.
In its early years, Dean Witter focused on dealing in municipal and corporate bonds. The company was highly successful in its first five years, purchasing a seat on the San Francisco Stock Exchange in 1928 and then opening an office in New York and purchasing a seat on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
in 1929. Although a relatively young company, Dean Witter survived Wall Street Crash of 1929
Wall Street Crash of 1929
The Wall Street Crash of 1929 , also known as the Great Crash, and the Stock Market Crash of 1929, was the most devastating stock market crash in the history of the United States, taking into consideration the full extent and duration of its fallout...
and the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
, posting profits every year during the 1930s and into the 1940s.
The company grew rapidly during the 1950s and 1960s, establishing itself as a major U.S. brokerage house and developing a reputation for innovation in the securities industry. In 1938, Dean Witter established its national research department, and in 1945, became the first retail securities firm to offer a formal training for account executives. In 1953, the firm entered into an agreement to merge with Harris, Hall & Co.
Harris, Hall & Co.
Harris, Hall & Co. was midwestern investment banking firm headquartered in Chicago. The firm was spun out from Harris Bank and would leater merge with Dean Witter & Co. in 1953....
, a Chicago investment banking and securities firm spun out of Harris Bank
Harris Bank
BMO Harris Bank is a subsidiary of Montreal-based Canadian bank Bank of Montreal. Today the bank holding company is formally named BMO Bankcorp, Inc....
after passage of the Glass Steagall Act. In the early 1950s, Harris, Hall was one of the 17 U.S. investment banking and securities firms named in the Justice Department
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
's antitrust investigation of Wall Street commonly known as the Investment bankers case. In 1962, Dean Witter became the first firm to use electronic data processing — a feat that paved the way for securities handling on Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
.
Following Witter's death in 1969 and the retirement of Guy Witter the following year, Jean Witter's son, William M. Witter, who became CEO of Dean Witter & Co. After numerous brokerage firm acquisitions, Dean Witter went public in 1972. Dean Witter's initial public offering (shortly after the IPO of Reynolds Securities) was part of a rush of Wall Street firms to sell an interest in their privately held businesses to public investors, following Merrill Lynch's initial public offering in early 1971.
Reynolds Securities (1931-1978)
Reynolds & Co. was founded in 1931 in New York City by Richard S. Reynolds, Jr., a 22-year old tobacco heir. Reynolds' father Richard S. Reynolds, Sr.Richard S. Reynolds, Sr.
Richard Samuel Reynolds, Sr. was the founder of the U.S. Foil Company.Reynolds was born on August 15, 1881 in Madison County, NC. He was the nephew of leading tobacco producer R.J. Reynolds and the son of Major Abraham David Reynolds . He married Julia Louise Parham on December 21, 1904. Reynolds...
founded U.S. Foil Company, later Reynolds Metals
Reynolds Metals
Reynolds Group Holdings is an American packaging company with its roots in the Reynolds Metals Company, was the second largest aluminum company in the United States, and the third largest in the world...
(Reynolds wrap), and his great uncle was the founder of R. J. Reynolds Tobacco Company (RJR). Among Reynolds' partners were Thomas F. Staley (Staley was Reynolds’ cousin, the grandson of Major D. Reynolds, an older brother of R.J. Reynolds), Charles H. Babcock and John D. Baker.
Like Dean Witter, the company survived the Depression, generating a profit each year. In 1934, Reynolds acquired F.A. Willard & Co. With the acquisition, Reynolds tripled its sales and shifted its emphasis toward underwritings.
In 1958, Reynolds passed its leadership to the next generation with Thomas F. Staley departing and naming Robert M. Gardiner to head the firm. Under Gardiner, Reynolds embarks on major expansion, acquiring 26 offices from A.M. Kidder & Co. Reynolds acquired another three offices and opened nine firms in new regions in the U.S. in the early 1960s.
Reynolds was incorporated in 1971 as Reynolds Securities in advance of an initial public offering. By early 1971, there was speculation that Merrill Lynch would sell shares to the public. Reynolds initial public offering (and shortly thereafter Dean Witter's IPO) was part of a rush of Wall Street firms to sell an interest in their privately held businesses to public investors, following Merrill Lynch's initial public offering. In 1976, Reynolds implements REYCOM, the most sophisticated high-speed wire system in the industry. Meanwhile, the firm was continuing its expansion, acquiring its first international offices in Lugano
Lugano
Lugano is a city of inhabitants in the city proper and a total of over 145,000 people in the agglomeration/city region, in the south of Switzerland, in the Italian-speaking canton of Ticino, which borders Italy...
and Lausanne, Switzerland. A year later, Reynolds acquired Baker Weeks & Co. whose strength was securities research.
At the time of its merger with Dean Witter in 1978, Reynolds Securities had over 3,100 employees in 72 offices producing gross revenues of nearly $120 million.
The Dean Witter Reynolds merger and the Sears acquisition (1978-1993)
In 1978 Dean Witter and Reynolds merged to form Dean Witter Reynolds Organization Inc. (DWRO) in what was then the largest securities industry merger in U.S. history. The resultant company, Dean Witter Reynolds, was the fifth largest broker in the U.S. One year later Dean Witter Reynolds became the first securities firm to have offices in all 50 U.S. stateU.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
s and Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
After completion of the merger, Dean Witter Reynolds generated revenue of more than $520 million.
In 1981, Dean Witter Reynolds was acquired by Sears, Roebuck and Company
Sears, Roebuck and Company
Sears, officially named Sears, Roebuck and Co., is an American chain of department stores which was founded by Richard Warren Sears and Alvah Curtis Roebuck in the late 19th century...
in a $600 million transaction. Sears' core retail business was facing several challenges, and the company decided to diversify into new businesses, including financial services. Sears, which was already in the financial services business through its ownership of the Allstate Insurance Company
Allstate
The Allstate Corporation is the second-largest personal lines insurer in the United States and the largest that is publicly held. The company also has personal lines insurance operations in Canada. Allstate was founded in 1931 as part of Sears, Roebuck and Co., and was spun off in 1993...
announced a major acquisition initiative in financial services. In addition to the acquisition of Dean Witter, Sears also acquired Coldwell Banker, the real estate brokerage company in 1981. Sears intended for Dean Witter to form the foundation for a larger Sears Financial Services Network that would be available to customers through the company's retail stores.
Philip J. Purcell
Philip J. Purcell was the former Chairman and CEO of Morgan Stanley in the late 1990s and 2000s. He previously served as Chairman and CEO of Dean Witter and managed the firm under its ownership by Sears, Roebuck & Co....
, a strategic planner at the Sears Chicago headquarters and former McKinsey & Co. consultant, to head Dean Witter. Purcell moved to New York to run the operation from Dean Witter's office. At the time of the Sears acquisition, Dean Witter Reynolds had a retail broker force of over 4,500 account executives in over 300 locations with over 11,500 employees in total. For the year ended 1980, Dean Witter Reynolds generated over $700 million of revenue.
Under Sears ownership, in 1986, the firm launched the Discover Card
Discover Card
The Discover Card is a major credit card, issued primarily in the United States. It was originally introduced by Sears in 1985, and was part of Dean Witter, and then Morgan Stanley, until 2007, when Discover Financial Services became an independent company. Novus, a major processing center, used to...
, a new brand of credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
outside the well established Visa, MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
and American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
networks. Unlike other attempts at creating a credit card to rival MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
and VISA
VISA (credit card)
Visa Inc. is an American multinational financial services corporation headquartered on 595 Market Street, Financial District in San Francisco, California, United States, although much of the company's staff is based in Foster City, California. It facilitates electronic funds transfers throughout...
, such as Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...
's Choice card
Choice (credit card)
Choice was a credit card test marketed by Citibank in the United States, announced in 1977 and first issued in 1978. It was one of the first cards to offer a cash-refund program and no annual fee. Choice was intended to create a rival to Visa, MasterCard, and American Express, but proved...
, the Discover Card quickly gained a large national consumer base. It carried no annual fee, which was uncommon at the time, and offered a typically higher credit limit than similar cards. Cardholders could earn a "Cashback Bonus," in which a percentage of the amount spent would be refunded to the account (originally 2%, now as high as 5%), depending on how much the card was used. Discover offered merchant fees significantly lower than those of other widely-accepted credit cards. Eventually Discover grew to become one of the largest credit card issuers in the U.S.
Dean Witter Discover (1993-1997)
Dean Witter's core securities business and its Discover business generated combined revenue of $59 billion in 1992 and Sears announced that it would seek to monetize its investment through a public offering. In 1993, 20% of the company was spun off from Sears to shareholders, and the company was subsequently renamed Dean Witter, Discover & Co., with two primary operating subsidiaries: Dean Witter Reynolds and Discover Card. Later that year, the remaining 80% of shares were distributed to Sears' shareholders, giving Dean Witter complete independence from Sears.
Dean Witter's corporate headquarters were located in New York City's 2 World Trade Center (i.e. South Tower), where the firm had occupied over 864000 square feet (80,268.2 m²) since 1985. Dean Witter was one of many tenants whose offices were evacuated as a result of the 1993 World Trade Center bombing
1993 World Trade Center bombing
The 1993 World Trade Center bombing occurred on February 26, 1993, when a truck bomb was detonated below the North Tower of the World Trade Center in New York City. The 1,336 lb urea nitrate–hydrogen gas enhanced device was intended to knock the North Tower into the South Tower , bringing...
, which took place during the firm's spinoff from Sears. Following, the firm's merger with Morgan Stanley, the firm's headquarters would be moved to 1585 Broadway on the edge of New York's Time Square. Morgan Stanley Dean Witter would still have a large presence at the World Trade Center on September 11, 2001.
Dean Witter was the first big brokerage company to get into the online trading business when it bought a small San Francisco-based outfit called Lombard Brokerage in 1996.
Merger with Morgan Stanley (1997-2009)
In 1997, Morgan Stanley Group, Inc. and Dean Witter Discover merged to form one of the largest global financial services firms: Morgan Stanley Dean Witter.Although Morgan Stanley was the more prominent partner, Dean Witter's focus on retail investors, mutual funds and credit cards which were seen by the stock market as generating more stable cash flows than Morgan Stanley's investment banking business, had by the time of the merger made it the more valuable partner in terms of market capitalization. Dean Witter's CEO, Philip Purcell, the main architect of the merger, became chairman and Chief Executive Officer of the merged group. The merger marked the pairing of a storied investment banking firm with a retail brokerage (that had been owned by a retailer) that was often termed "white shoes and white socks". In order to avoid tension during the integration of the two firms, Purcell and Morgan Stanley's CEO John Mack decided not to choose between the two brand names. Instead, they combined the names of the two firms and put the Morgan Stanley Dean Witter brand on almost all of its operations.
Eventually, to foster brand recognition and marketing, the Dean Witter name was dropped from the retail services division in 2001, leaving the current name Morgan Stanley. In 2009, the Dean Witter retail operations were transferred to Morgan Stanley Smith Barney, a joint venture with Citigroup.
Acquisition history
The following is an illustration of the company's major mergers and acquisitions and historical predecessors:Notable alumni
- Chris GardnerChris GardnerChristopher Paul Gardner is an American entrepreneur, investor, stockbroker, motivational speaker, author, and philanthropist who, during the early 1980s, struggled with homelessness while raising his toddler son, Christopher, Jr...
, whose autobiography was turned into the 2006 feature film The Pursuit of HappynessThe Pursuit of HappynessVarèse Sarabande released the soundtrack on January 9, 2007, which included sixteen tracks.-Box office:The film debuted first at the North American box office, earning $27 million during its opening weekend and beating out heavily promoted films such as Eragon and Charlotte's Web...
, interned at Dean Witter Reynolds - John Moore, Baron Moore of Lower MarshJohn Moore, Baron Moore of Lower MarshJohn Edward Michael Moore, Baron Moore of Lower Marsh PC is a British politician who was Member of Parliament for Croydon Central from February 1974 until 1992. During the Premiership of Margaret Thatcher he enjoyed a meteoric rise through the ranks of government which culminated in him serving as...
, stockbroker - Jean ChatzkyJean ChatzkyJean Sherman Chatzky is an American financial journalist, author and motivational speaker. Chatzky has given personal financial advice on various TV shows...
, research analyst - Ronald P. SpogliRonald P. SpogliRonald P. Spogli is the former United States Ambassador to Italy and to San Marino. He was confirmed by the U.S. Senate on June 30, 2005, after being nominated by President George W. Bush on June 9. He was preceded by Mel Sembler as Ambassador to Italy and is the first American ambassador to San...
, investment banker - Rick RescorlaRick RescorlaCyril Richard "Rick" Rescorla was a retired United States Army officer of British birth who served with distinction in Northern Rhodesia as a member of the Northern Rhodesia Police and as a soldier in the Vietnam War as a Second Lieutenant in the United States Army...
- Thomas J. WilsonThomas J. WilsonThomas J. Wilson is chairman, president and chief executive officer of The Allstate Corporation and Allstate Insurance Company.Wilson is also a member of the corporation's board of directors...
- Thomas J. HealeyThomas J. HealeyThomas J. Healey is a Senior Fellow and Adjunct Lecturer at Harvard University’s John F. Kennedy School of Government where he teaches the course in Financial Institutions and Markets. He is also involved in various alternative investment activities through Healey Development LLC.Mr. Healey joined...
- Catherine MeyerCatherine MeyerCatherine Irene Meyer, Lady Meyer is the wife of Sir Christopher Meyer, the former British Ambassador to the United States. She is the founder of the charity Parents & Abducted Children Together .-Background and Career:...
- George DavidsohnGeorge Davidsohn-Early life and career:Davidsohn was born in Montevideo to a Jewish family originating from Transylvania; when he was ten, the family moved to New York City where his father worked as a diplomatic consul. At 14, Davidsohn started his career on Wall Street as an IBM punched-card clerk, while...
- Gretchen MorgensonGretchen MorgensonGretchen C. Morgenson is a Pulitzer Prize-winning journalist who writes the Market Watch column for the Sunday "Money & Business" section of the New York Times.-Life:...
- Garo H. ArmenGaro H. ArmenDr. Garo H. Armen is a Turkish-born, of Armenian descent, USA businessman.He was born on January 31, 1953, in Turkey. He moved to New York in 1970. According to the New York Times he became a messenger boy for a nonprofit Armenian organization. In the article Armen stated, "I worked five hours a...