Morgan Stanley's Tow-Truck Days Are Over - TheStreet

Morgan Stanley's Tow-Truck Days Are Over

The brokerage giant renames its online presence after itself, ending the run of Discover Brokerage.
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Will the burly, benevolent tow-truck driver please say a few words about

Discover Brokerage

?

No?

Not surprising. It looks like

Morgan Stanley Dean Witter

(MWD)

has banished the Discover ad character to his remote island hideaway -- beat-up ol' truck and all -- for good.

Starting Thursday, Discover Brokerage's Web site will be interred forever, with

Morgan Stanley Dean Witter Online

rising in its place, the company said Wednesday. Morgan Stanley Dean Witter customers who want to place equity trades on the Internet will be able to use the service either on a full-service commission basis, as part of an unlimited trading fee-based account, or as a pure online account.

The cost of an online market order at Discover will double to $30. The firm will expand its proprietary research offering for customers with more than $100,000, and customers will be able to open online accounts in existing and new Morgan Stanley Dean Witter branch offices.

But please, don't weep for Discover. Chief Operating Officer Thomas O'Connell isn't. Any tears he's shedding are more likely from overwhelming glee at finally being in the warm bosom of his giant parent company.

"This is what I went over the wall for," says O'Connell, a former Dean Witter broker.

Discover had a, well, short life. It was born like many discount brokerages, tiny and alone, and given a name it would soon shed,

Lombard

. It got caught early in the online trading wave and in August 1995, headed onto the Internet. Its days alone were soon over.

By January 1997, Lombard had found a friend, and a parent company, in

Dean Witter

. It also had a new name -- Discover (not exactly the well-bred family name but one in line with Dean Witter's country cousin, the Discover credit card). Discover's new parent headed into a marriage in May of that year with powerhouse Morgan Stanley.

Discover, off in San Francisco, was left largely alone.

And things weren't going all that well in terms of growth, some people say. Dan Burke, an analyst at

Gomez Advisors

, remembers that last year "Discover wasn't knocking the cover off the ball in terms of bringing in the accounts." (Gomez declines to disclose its clients.)

Deutsche Bank

ranked Discover ninth in terms of share of the online trading market during this year's second quarter, and its account growth was below that of competitors like

E*Trade

(EGRP)

. Last week, Morgan Stanley said that in the third quarter accounts doubled from the year-ago quarter while trading volume was up 55%. The company doesn't break out figures for online trades.

Meanwhile, as full-service competitors like

Merrill Lynch

(MER)

and

Prudential

loudly unveiled their online strategies, Morgan Stanley remained quiet, with Discover waiting innocently in the wings.

Oh, it did make some moves to acknowledge that it had an online broker. Discover's last words (at least, its latest print campaign) finally included the benediction: "A Morgan Stanley Dean Witter company."

And there were signs Discover was aiming for higher ground -- Morgan Stanley-type ground, that is. "They were trying to appeal to a more affluent investor," says Burke at Gomez. Its efforts included offering access to IPOs and fixed-income research to customers with asset-based accounts worth more than $100,000.

So even if Discover is gone, its rebranded Web site is sure to live on, competing head-to-head with the likes of Merrill and even

Charles Schwab

(SCH)

.

Not one to be left out of that crazy advertising game those online brokerages play, Morgan Stanley will spend more than $100 million in 2000 on its brand, Morgan Stanley CEO Philip Purcell said Wednesday.

But

Securities and Exchange Commission

Chairman Arthur Levitt, who worried so much earlier this year about Discover's advertising, can breathe easy now. His concerns about commercials where tow-truck drivers own island countries thanks to online trading can be laid to rest as well. There will be no truck drivers in the new Morgan Stanley Dean Witter Online advertisements. If no one else will say it, Purcell will.

"They won't be the same, they'll be a little less edgy," the proud Purcell says of the ads. "But they'll be a little more edgy than traditional Morgan Stanley Dean Witter ads."