When Morgan Stanley Dean Witter Discover changed the name of its Lombard discount brokerage unit to Discover Brokerage Direct, it caused some Dean Witter reps to wonder about how the unit would compete in the future.
The reason for the name change, the parent company said, was to "Better reflect our close alliance with our parent company's enterprise." Lombard's Web site, which was recently revamped, became adorned with the very recognizable Discover logo. The changes have prompted many to wonder if Discover Direct isn't creating an attractive alternative for Dean Witter's own customers.
"Why wouldn't a customer who has a long-term relationship with Dean Witter consider trading at a discount with a unit that's attached to the firm?" asks one Dean Witter broker.
At a recent industry marketing show, Discover Brokerage Direct President Eric Roach announced that the on-line discounter will at some point offer research, direct trading of bonds, foreign securities and IPOs, and some basic financial planning services (see "Report from the SIA Sales and Marketing Meeting," next item).
Although no firm date has been announced to offer Morgan Stanley research via the site, a Discover Brokerage Direct spokesperson says plans are "in the works." That doesn't surprise Dean Witter reps who say the firm's research is the most powerful marketing tool in its arsenal.
But some Dean Witter reps feel the firm's plans on integrating Lombard have been kept from them, and with the uncertainty following the merger with Morgan Stanley, the on-line trading efforts haven't helped.
"We have no objection to competition or change," says one veteran Dean Witter producer. "But this feels a little like a betrayal."
Calls to Morgan Stanley Dean Witter about the situation were referred to Discover Direct, which declined to discuss how the discounter's mission might fit into the overall strategy of a broker-driven organization.
The reason they took a pass? The subject, says a spokesperson, is too sensitive.
At the SIA show, Roach was emphatic that Discover Direct wasn't in competition with Dean Witter's full-service reps.
Some large firms such as Merrill Lynch, Prudential and First Boston are developing their own on-line trading capabilities. Other dealers may well buy small discounters that are operating primarily through the Web.
"The on-line brokerage industry has become so hot, a lot of companies would like to grab a part of it," says William Burnham, an analyst at Piper Jaffray.
