The collapse last week of NationsBank Corp.'s partnership with Dean Witter, Discover & Co. sounded the death knell for banks' experiments in building investment products muscle through joint ventures.

It was the last of three big deals to unravel this year.

Last month, First Bank System scuttled a similar arrangement with IDS Financial Services, a unit of American Express. And in July, Chemical Banking Corp pulled the plug on its joint venture with Liberty Financial Cos.

But the NationsBank-Dean Witter venture -- dubbed NationsSecurities -- was the granddaddy of them all.

Unveiled to nearly unanimous acclaim in October 1992, it called for NationsBank and Dean Witter to jointly market stocks, bonds, and mutual funds to customers in bank lobbies nationwide.

More recently, the venture had run into legal tangles, with some of its brokers alleging to securities regulators that they had been encouraged to use inappropriate sales tactics. NationsSecurities officials have denied the charges.

Last Thursday, the two partner's announced that they would go their separate ways on Nov. 15.

NationsBank's decision to walk away from the partnership "is a very significant blow to joint ventures between banks and outside marketers," said Kun Cerulli, president of Cerulli Associates, Boston. "I think you'll see a lot less of these arrangements from here on."

As mutual fund fever began to grip the banking industry in t992, banks embraced such joint ventures as a way to acquire quickly the aggressive sales culture needed to compete for retail investment dollars.

But while bankers saw an upside in such arrangements, they also detected drawbacks.

"If you're in a partnership, you never have total control over the program or the investor," said Thomas Munsell, managing director of Fleet Financial Group's investment services subsidiary.

In the past year, many banks have shifted to acquiring mutual fund companies rather than sharing their resources with a partner. Mellon Bank Corp.'s landmark

purchase of Dreyfus Corp. is the most prominent example, but there have been smaller deals as well.

Fleet, for instance, purchased a family of funds from International Business Machines. "Buying in many ways makes more sense." Mr. Munsell said. Charlotte, N.C.based NationsBank is widely rumored to be on the prowl for such acquisitions.

NationsSecurities downplayed its dissolution with a press release labeled, "Dean Witter/NationsBank Relationship Enters a New Phase."

Under the arrangement, NationsBank will acquire 100% of the program to sell investment products in its branches. Dean Witter will take over a fledgling program to make the service available to other banks.

Once the breakup is final, Charles R. King -- a NationsBank Corp. veteran who is currently the No. 2 man at NationsSecurities -- will rise to the top spot of president and chief operating officer. Vincent P. Walls, who currently holds that post, will return to Dean Witter.

Ellison Clary, a NationsBank spokesman, said the association with a household name like Dean Witter had enabled NationsBank to build up its investments busness.

He declined to say exactly why the deal unraveled, but said the move was unrelated to the brokers' allegations of improper gales practices.

"It's time for NationsBank to take full control," Mr. Clary said.

Industry observers said one possible explanation is that the joint venture wasn't delivering the benefits that were expected.

When NationsSecurities was unveiled, NationsBank chairman Hugh McColl said it would break even by 1993. And by 1997, he said, the banking company's share of profits would reach $50 million to $60 million annually.

In a July interview with the American Banker, Mr. Walls, the president of NationsSecurities, said profits remained slim and wouldn't hit $50 million until 1998. What's more, the partnership "didn't provide the kind of service, results, or image that NationsBank wanted," Mr. Cerulli said. Dean Witter's high-powered brokerage culture may have been a poor fit for the bank, which wanted to boost its mutual fund assets without pressuring customers into purchases, he said.

Edward Furash, chairman of Furash & Co., Washington, said banks need to balance these competing goals in order to best serite their relatively conservative customer base, "Otherwise, you're just a securities firm selling against other securities firms," he said.

The end of the joint venture means that NationsBank will have to rethink its strategy for distributing its funds outside its nine-state market, said A. Michael Lipper, president of Lipper Analytical Services, Summit, N.J.

"A lot depends on whether they will hire additional product development people," he said. Others were more sanguine. "It's just an example of two good companies that decided to go. their own way after realizing that they had different goals and expectations," said William Shiebler, president of Putnam Investments, Boston.

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