PALM BEACH, Fla. - Fidelity Investments Inc. has made its investment advisory, brokerage clearing services and capital markets units stand-alone businesses
Speaking at Fidelitys fifth annual executive forum here Monday, Ellyn McColgan, president of Fidelity Brokerage Services, said the company has separated out the three units to raise its institutional brokerage profile and to attract more financial institution customers.
"We are in the brokerage business, and that means retail and institutional. We want to emphasize that we are not just retail brokerage," McColgan said, adding, "We want to grow these businesses quickly."
Each unit will maintain its own budget and staff and will be run by a president. Jay Lanigan will head up Fidelity Registered Investment Advisors. Norman R. Malo will head up National Financial. And Craig Messinger becomes chief at Fidelity Capital Markets.
The rearrangement runs counter to the national convergence trend. For months, analysts and executives have said that financial services companies cannot be successful if they are organized vertically.
Ann C. Mahrdt, a principal at the Chicago analytical firm Spectrem Group, said in a report that to be effective, firms have to combine their investment and insurance operations. She also said that extracting units to target specific markets can cause problems.
"Initially, some financial institutions will spin off strong businesses to give them more accountability, but this can make it much more difficult to cross-sell," Mahrdt said in an interview Monday.
Some stand-alone businesses, such as Fidelitys brokerage clearing, are effective because they offer specific operational or technological capabilities, she said. Those units are usually not interested in cross-selling, she said.
McColgan said she is confident Fidelitys new approach will create cross-selling opportunities. It can offer other products, such as individual retirement account rollovers, mutual funds, and fixed-income products, to banks using its brokerage clearing services, she said.
"We don't want to push Fidelity products at our customers, but we want them to know" the products are available, McColgan said. "We want them to be able to use our products to compliment what they have available to their customers."