Dean Witter Reynolds


Dean Witter Reynolds was an American stock brokerage and securities firm catering to a variety of clients. Prior to the company's acquisition, it was among the largest firms in the securities industry with over 9,000 account executives 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 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 the acquisition, was one of the largest asset management operations in the U.S.
Dean Witter Reynolds was founded in 1978 as the merger of Dean Witter & Co. and Reynolds Securities, which was then the biggest merger in the history of Wall Street. The company was acquired by Sears in 1981, and was renamed "Dean Witter, Discover & Co." in 1993 when Sears spun off the company. The company also owned Discover Card.
In 1997, Dean Witter, Discover & Co. merged with investment banking house Morgan Stanley to form "Morgan Stanley Dean Witter & Discover Co.". The combined firm later dropped the "Discover Co." name in 1998 and further the "Dean Witter" name in 2001.
For many years, the company used the corporate slogan, "We measure success one investor at a time", which was later adopted by Morgan Stanley.

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 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:
Year199619951994
Revenue$1,132$1,338$998
Operating Income$506$788$658
Net Income$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 Exchange 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:
Dean Witter also operated as an investment banking 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 buyouts, restructurings and recapitalizations. 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 partnerships 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.

Credit cards (Discover Card and Novus)

Dean Witter was also active in the issuance of credit cards through its Discover Card 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. founded in 1931.

Dean Witter & Co. (1924–1978)

Dean Witter & Company was founded by Dean G. Witter 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 brokerages on the West Coast. Among Witter's original partners were Guy and Jean, as well as cousin Ed Witter and Fritz Janney. Prior to founding his own firm, Witter partnered with Charles R. Blyth to found Blyth, Witter & Co., another San Francisco based brokerage in 1914. After Witter's departure, Blyth would continue on his own 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 with 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 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 the 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, became CEO of Dean Witter & Co. After numerous brokerage firm acquisitions, Dean Witter went public in 1972. Dean Witter's initial public offering 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, together with Charles H. Babcock and Thomas F. Staley. In particular, Thomas F. Staley was Reynolds' cousin. In 1951, another senior partner, John D. Baker, joined the company. Reynolds' father Richard S. Reynolds Sr. founded U.S. Foil Company, later Reynolds Metals, and his great uncle was the founder of R. J. Reynolds Tobacco Company.
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 a 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 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.