Financial History Issue 127 (Fall 2018) | Page 31

of Sutro & Co. indicated that we needed the flexibility of the corporate structure.” Sidney Schwartz became a special adviser to the firm. Warren Berl was named presi- dent and treasurer. When Hall died in 1971, Berl became chief executive officer, a position he held until 1983. The son of Edwin David Berl, Warren Harry Berl was a San Francisco native and a 1942 graduate of Stanford Univer- sity. After serving in the US Navy during World War II, he joined his father’s firm, Edwin D. Berl & Sons (originally called H. Berl & Son, founded in San Francisco, 1882). In 1957, Sutro & Co. merged with Edwin D. Berl & Sons, and Warren Berl joined Sutro & Co. Early in Berl’s tenure, regional brokerages seemed to be surviv- ing the bear market, as well as competition from national firms. But after the NYSE changed its competitive rate structure in 1975, Sutro & Co. felt the need “to diver- sity its product line so less of its business [was] dependent on commissions,” and it expanded into municipal and corpo- rate bonds, tax shelters, insurance and estate planning. By 1977, the firm had 440 employees and about $8 million in capital. Warren Berl’s family also started a legacy of its own within the Sutro firm. His brother, John D. Berl, joined Sutro & Co. and became a senior vice president of the Los Angeles office. His son, Douglas A. Berl, joined the San Francisco office. In 1983, Berl became chairman of the executive committee and was succeeded by Ross L. Cobb. A native of Vermont, Cobb joined the firm in 1959 as a mail clerk. The son of a carpenter, Cobb was a graduate of the University of Vermont. He moved to San Francisco after serv- ing in the Air Force during the Korean War. Cobb, who had been director of operations since 1968, had been president and chief operating officer since 1972. He became chairman of the board and chief executive officer in 1983. John Hancock Mutual Life Insurance Company (1986) By the time Cobb became chief executive officer, deregulation added another layer of challenges for the firm. Starting in Decem- ber 1982, deregulation of interest rates for banks and savings institutions led to a drain on capital from money market mutual funds into new banking money-market accounts from $195 billion to $37 billion. According to The Palm Beach Post, “The banks offered higher interest rates than the money-market funds and, unlike the money funds, the banks’ deposits are insured by the federal government.” The Post reported that “Funds that [operated] primarily in areas where banks were especially aggressive have been hit the hardest,” including Sutro’s Money Market Fund which declined from $208.4 million to $129.1 million. Warren Berl was quoted as saying, “There’s no doubt about it, the banks hurt us.” In 1986, Sutro & Co. was bought by the John Hancock Mutual Life Insurance Company. Based in Boston, John Hancock was “one of the nation’s largest and old- est insurance companies,” and like many firms around this time, began to diversify into financial services. John Hancock was a big advocate of deregulation, which also paved the way for these cross-industry acquisitions. In the early 1970s, the NYSE changed its rules allowing member firms to sell insurance products, and in the 1980s, “the Federal Reserve loosened the restrictions that prevented the merging of insurance companies and banks with investment firms.” After the sale, Cobb retired from the firm. Sutro & Co. remained a part of John Hancock until 1996, when John Han- cock decided to end its effort to diversify and concentrate on its insurance business. It sold Sutro & Co. along with Tucker Anthony, Inc., another brokerage house it bought in 1982, to “an investor group led by corporate buyout specialist Thomas H. Lee for about $180 million.” The new holding company that merged the firms was called Freedom Securities. At the time, Sutro & Co. had “about 620 employees in 21 offices, most of which are in California and the West,” while Tucker Anthony had “1,300 employees in 39 offices located largely in the East- ern United States.” The logic behind the merger was “to capitalize on each organi- zation’s name recognition, historical areas of expertise and close community ties while lessening the [firm’s] reliance on a single region’s economy,” and draw- ing on “the experience and tenure of its investment executives, which [had] often led to long-term relationships with clients in their respective communities,” among other cultural characteristics like a focus on personalized service. Freedom Securities Corporation (1996) Tucker Anthony Sutro Corporation (2000) Sutro & Co. and Tucker Anthony Inc. went public in 1998—two years after the firm was sold. Then in 2000, Freedom Securities, the parent company, changed its name to Tucker Anthony Sutro. The following year, Tucker Anthony Sutro was sold to the Royal Bank of Canada (RBC), founded in 1901, which was then “Canada’s largest commercial bank.” It was combined with Dain Rauscher, a Min- neapolis securities firm RBC bought in 2000. RBC’s purchase of Tucker Anthony Sutro was part of its plan to expand in the American market. By merging its sub- sidiaries, RBC created “the ninth largest full-service securities firm in the United States.” The new firm was called RBC Dain Rauscher. With that change, both the Tucker Anthony and Sutro names were lost. According to Irving Weiser, the chairman, president and chief executive officer of Dain Rauscher, “The move to the RBC name is part of a strategy to create a national firm… Brand recognition across the country is the No. 1 benefit.” Others disagreed. Regarding the name change, Richard Skaggs, the son of the founder of the San Francisco firm Davis Skaags & Co. said, “They should try to save the name Sutro… The silly bastards. The whole state of California knows the name.”  Susie J. Pak is an Associate Professor in the Department of History at St. John’s University (New York). A graduate of Dartmouth College and Cornell Uni- versity, she is the author of Gentlemen Bankers: The World of J.P. Morgan (Harvard University Press), a Trustee of the Business History Conference, co-chair of the Columbia University Economic History Seminar and a member of the editorial advisory board of the Business History Review. She is also a member of the Financial History editorial board. About This Series  The “Where Are They Now?” Series traces the origins and histo- ries of 207 of the underwriters of the 1956 Ford Motor Company IPO. The research for this series has been generously funded by Charles Royce of The Royce Funds.  |  Fall 2018  |  FINANCIAL HISTORY  29