Back-office unit put under front-office umbrella

In the wake of a top-level executive’s retirement, Fidelity Investments has realigned two divisions that cater to banks, brokerages and other middlemen.

Boston-based Fidelity put its institutional brokerage group, which provides back-office services to financial companies under a unit responsible for selling funds, and other securities.

The change took effect last month with the retirement of J. Gary Burkhead, the former head of Fidelity’s retail and brokerage groups.

No layoffs expected

“It seems like a natural fit,” says Richard Sincere, president of Sincere & Co. LLC, a Holliston, Mass., consulting firm that specializes in the adviser market. Mr. Sincere was once a marketing executive at Fidelity. “It’s better than having two people fighting for the same client.”

Under the new setup, Robert P. Mazzarella, 54, president of Fidelity’s Institutional Brokerage Group, reports to Kevin J. Kelly, 44, president of Fidelity Investments Institutional Services Company Inc. Previously, the two units were run independently, with both Mr. Mazzarella and Mr. Kelly answering to Mr. Burkhead.

Discussions about uniting the two units began about two years ago, says Mr. Kelly.

“With Gary’s retirement, there was an opportunity to make that happen,” he adds.

Fidelity Investments Institutional Services Co. has $211 billion under management and 1,800 employees. Fidelity’s Institutional Brokerage Group, meanwhile, employs about 900 people and is custodian to $245 billion as part of its correspondent business.

In addition, the brokerage group has custody of $44 billion for registered investment advisers. Overall, Fidelity oversees $955 billion.

The move, which is not expected to result in any layoffs, reflects Fidelity’s efforts to further exploit existing customer relationships.

A bank that relies on Fidelity to provide it with back office services, for example, is now more likely to be approached by Fidelity about selling its funds.

blistering pace

“Obviously, there are huge leveraging opportunities,” says Mr. Kelly, a rising star at Fidelity.

“There are significant clients that we have distribution partnerships with that may not necessarily be clients with the institutional brokerage group. This may be a way to help in the development of that opportunit,.” Mr. Kelly says.

No doubt Mr. Kelly, who is also responsible for overseeing Fidelity’s Canadian operations, is counting on the realignment to help sustain the blistering pace at which Fidelity is selling its adviser funds.

Sold through the wholesalers, Fidelity’s Advisor fund family posted net sales of $6.3 billion in 1999, up from $2.8 billion the year before. The 42-fund family was the fourth best-selling group in its channel last year, behind Alliance ($11.8 billion), MFS ($8.9 billion) and American ($7.1 billion), according to Boston’s Financial Research Corp.

Aided by the recent introduction of 10 funds, Fidelity’s share of the $1.5 trillion brokerage market reached 4.21% at the end of last year, up from 4.16%, says FRC.

If all goes well, Fidelity’s reorganization will go unnoticed by clients.

The two units will continue to operate independently.