Changes at the Top

Fidelity announced on April 19, 2007 that Bob Reynolds, its COO and second-in-command, is retiring and Ned Johnson is assuming a more proactive role while Abigail Johnson (Ned’s daughter and heir apparent) will be joined by rising star Ellyn McColgan as the trinity that will lead Fidelity forward. For reasons that I will detail below, I think that this is welcome news for shareholders and employees alike.

First, I want to say goodbye to Bob Reynolds; a key figure at Fidelity for as long as I’ve been tracking the company and a significant contributor to not just Fidelity’s retirement plan business but the retirement planning business as a whole. Bob’s success in that role, while invisible to most, means that he’s got a thumbprint on nearly everyone’s 401(k) plan. And while his more than 20 years of hard labor in the mines at Fidelity have earned him a retirement kitty that most would envy and only a handful could best, I think he deserves the fruits of his labors as much as he deserves to learn how to rest.

That said, Fidelity’s announcement about significant changes at the top of their management pyramid have been a while in coming. I view it as a necessary reshuffling at the top based on several missteps in their various businesses as well as come confusion about the message and mission of its core fund business. Nearly two years ago, Fidelity launched Pyramis Global Advisor, its bid for an institutional money management firm, and to this day it’s hard to know who is running that show, let alone what its products are; that’s like opening the barn door only to remember that you forgot to put horses in the stalls in the first place. Over the past several years, Fidelity has seen several heads of FMR Co., the mutual fund firm we know inside and out, come and go – a sign to me that management was treading lightly trying to figure out what the top brass wanted them to do rather than stepping boldly based on where they knew the business had to go.

With the ascension of Ellyn McColgan, the days of whine and poseurs are over. She’s a no-nonsense, driven, leader who has earned her stripes the best way: she has consistently executed well on every role she’s been assigned to and has earned the respect of her mentors, seniors, peers, and rank and file who know her to demand excellence based on her example and not some text book theory of how to succeed in business. Moreover, to meet her is to know that this is not someone who is simply interested in running a big business well; she is passionate, deeply passionate, about Fidelity and seeing Fidelity not simply maintain but increase its leadership role as the flagship financial services firm for shareholders like you and me. This passion has been evident from her start at Fidelity, and has only increased; a fact that is never lost on anyone who has dealt with her, worked for her, or simply listened to her.

Ellyn’s role, which I view (rightly or wrongly) as complementary (not secondary) to Abigail’s, means that we have a dynamic partnership at the top at the time when Fidelity needs it most – not just based on recent indirection and indecision, but also with due regard for securing a better future for itself and us. Enabling Ellyn and Abby to work in tandem while Ned is still calling the overall course, means that he can see if this is the best leadership team to lead Fidelity into the future, a future that must proceed without him at some point in time. I will be watching them as closely as he will, but I suspect neither of us will be disappointed.

Don’t mistake my words for flowery or faint praise. When missteps are made, you know I point them out. But this time around, I think Fidelity is taking a clear and distinct step in the right direction.


You can read more about this change in this morning’s Boston Globe. I spent nearly all yesterday afternoon being grilled by their business reporters. Click here for the 2nd Globe article. Click here for the Boston Herald’s take. The Wall Street Journal also has a nice article. (You do need to be a subscriber to read the full article.)