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Despite TV ads that have often tweaked full-service brokers, Discover Brokerage Direct appears to be coexisting in peace with its full-service cousin, Morgan Stanley Dean Witter. And now that Merrill Lynch, Prudential Securities and a host of other firms are introducing programs that let full-service customers trade online (and off) at discount prices, the Discover-Dean Witter program seems far ahead of its time.
Predictions that Discover Brokerage would fail-or that many of MSDW's 11,000 retail brokers would flee to other firms rather than see their business cannibalized-have been rampant since Dean Witter bought a small online operation called Lombard Securities in late 1996. But there has been no mass exodus of brokers, and Discover is spending more heavily than ever on marketing and technology development, thanks to the deep pockets of its parent.
Officials at MSDW say that running a retail operation with a split personality has taught them lots about the culture of online investors and the technology's lure to new and seasoned investors alike. They freely concede that the sibling firms are competing against each other for the same business, but they don't care all that much.
"We learned that the customers of online brokerages are the same people as the customers of full-
service firms," says Thomas J. O'Connell, president and chief executive officer at Discover. "We also learned that the concept of online brokerage as a distinct business from broker-based business really isn't true. It's just a different perspective. The Internet allows the customer to control the data. ... The broker's value is in the advice, not in handling the transaction or the data."
To be sure, most of MSDW's rivals are following a different model- offering low or no commissions within the same brokerage unit, often in exchange for requiring clients to keep $100,000 or more of assets in...