Fidelity faces another high-level resignation

Fidelity Investments was hit again by turnover at its highest levels yesterday when one of its top executives abruptly resigned just four months after being promoted to head a major division.

Ellyn A. McColgan was widely seen as a candidate for chief executive after her April promotion to president of Fidelity's distribution business, overseeing nearly half the company's 42,000 employees. But her sudden departure now adds another wrinkle to the succession questions facing a company whose chairman, Edward C. "Ned" Johnson III, is 77 years old and shows no sign of slowing down.

She is the fourth top executive to leave Fidelity this year. Former Fidelity vice chairman and chief operating officer Robert Reynolds, himself once seen as Johnson's heir apparent, left in April.

The turnover appears to have solidified the position of Fidelity's new president, Rodger Lawson, a former vice chairman of Prudential Financial who only started work this week.

McColgan's departure also may benefit Johnson's daughter, Abigail P. Johnson, who runs the company's vast employer services division and was recently named as a vice chairwoman of Fidelity's parent company, FMR Corp. John Bonnanzio, editor of the investor newsletter Fidelity Insight, predicted Abigail Johnson is now more likely to succeed her father as chief executive or chairman.

Yesterday Fidelity declined to discuss the reasons for McColgan's departure other than to say in a statement that she "has resigned in order to pursue opportunities outside of the company." McColgan could not be reached for comment.

However, investment industry people who follow Fidelity said one issue may have been a decision by Fidelity last month to have McColgan report to Lawson rather than to Johnson himself. In her previous position, McColgan built Fidelity's brokerage business into a powerhouse, and become well known in local business circles.

McColgan may have viewed the new reporting structure as untenable, these people said, and her departure could put pressure on Johnson to provide more clarity about who would succeed him.

"I don't think the world was big enough for both" McColgan and Lawson, said Darlene DeRemer, a partner at Grail Partners in Boston, a financial services investment bank. Bonnanzio, meanwhile, said McColgan may also have judged that Lawson was more likely to be named chief executive.

"What this is all about is that Ellyn had her eye, like so many others before her, on the brass ring, and it was just put out of reach," Bonnanzio said.

Fidelity spokeswoman Anne Crowley said executives would not grant interviews yesterday, and Johnson and Lawson have previously declined numerous other interview requests.

In an article in The New York Times last month, Johnson said he has no immediate plans to retire, but that the company does have a succession plan in place.

He was also characteristically cryptic about his own children's future at the company. Johnson's son, Edward C. Johnson IV, is an executive at Fidelity's real estate division, and recently joined his sister on the parent company's board of directors.

"The company does not necessarily have to be run day-to-day by a family member. It will be run by the person who is determined to have the right skills and chemistry," Johnson said.

One such candidate could be Lawson, who was chief executive of Fidelity's retail division from 1985 to 1991, where he was known for aggressively marketing low-cost funds. At Prudential, he oversaw marketing and insurance sales in Asian countries.

In disclosing his hire as company president last month, Johnson said, "Rodger has the breadth of financial services experience, as well as experience with Fidelity, which makes him ideally suited for this job."

The executive changes come amid other major developments within the company. Fidelity is in the midst of a complex corporate restructuring that could save millions in taxes and reduce the number of shareholders who own the company's private stock.

Also, the company has been expanding outside its Massachusetts and New England base, creating new offices in North Carolina and Texas. The company reported that profits fell 11 percent last year to $1.18 billion, in part due to increased costs associated with these expansions and heavier spending on technology.

Meanwhile, the company's mutual funds, such as its well-known Magellan fund, have posted middling returns for years amid tougher competition from rivals like Vanguard Group Inc. and American Funds. As of June, Fidelity had $915 billion in mutual fund assets, up 19 percent from a year earlier but trailing American Funds and Vanguard in both total assets and in new funds from investors.

McColgan's duties as chief of distribution and operations division will be temporarily taken over by Lawson, Fidelity said, while the company searches for a replacement.

Crowley said the company is prepared to handle the changes.

"Something that Fidelity has always understood and recognized is that change is inevitable, and the issue is whether a company is prepared to seize the opportunity," she said. "We're a company where change is part of the culture."

In addition to McColgan and Reynolds, other top executives that left Fidelity this year were Stephen P. Jonas, the head of the core mutual fund business, and Jeffrey Carney, who joined Bank of America last week from Fidelity's retirement-services business.

McColgan had overseen Fidelity's online brokerage unit since the end of 2002. It runs its online trading website and competes with the likes of TD AmeriTrade and E*Trade Financial Corp.

The unit has grown quickly, reporting 349,784 average commissionable trades per day, Fidelity said, up 233 percent since McColgan's arrival.

Total client assets stood at $1.87 trillion, up 167 percent, Fidelity said.

Ross Kerber can be reached at kerber@globe.com.