Revolving door at Fidelity takes another turn

Fidelity Investments’ revolving door continued to spin last week with its announcement that another high-ranking executive, Charles Goldman, is leaving. The move threatens the company’s efforts to expand its registered investment adviser custody business.

As president of institutional platforms at Fidelity, he oversees Fidelity’s Institutional Wealth Services division for RIAs and the National Financial Services LLC correspondent-clearing unit. When he was hired in November 2008, Mr. Goldman promised to improve service to advisers and to integrate more completely the two units’ offerings for hybrid advisers.

He is leaving at the end of March.

The departure of Mr. Goldman — who “left to pursue other opportunities,” according to a Fidelity spokesman — will hurt the firm as it tries to lure RIAs, said Robert Horowitz, principal of an eponymous wealth management firm with about $20 million in assets.

“Generally, I cannot interpret it as a good thing unless [Fidelity] concluded that he has fixed everything, which seems like a long shot,” said Mr. Horowitz, who prior to starting his own practice in 2003 served as director of an advice initiative for The Charles Schwab Corp. During that time, he helped shape the company’s investment advisory business now known as Schwab Private Client.

Mr. Goldman’s announcement comes as Fidelity is trying to close the gap with Schwab in the amount in assets it holds in custody for RIAs.

Fidelity’s RIA unit houses about $396 billion of assets managed by independent advisers. Schwab oversees just under $600 billion of retail assets on its RIA custody platform.

At the end of last year, Schwab had about 6,000 RIA clients, far more than the 3,000 apiece at Fidelity and TD Ameritrade Holding Corp.

Before coming to Fidelity, Mr. Goldman worked at Schwab from 2001 to 2008, leaving after the RIA business he headed was folded into a unit headed by another executive, James McCool.

“I think it’s a big loss because he was sort of the figurehead for improving service,” said Timothy Welsh, president of Nexus Strategy LLC, a consultant to wealth management firms.

“On some level, it’s business as usual. Fidelity still has a great name and great technology,” Mr. Welsh said. “But from a symbolic point of view, it causes advisers to ask: “What’s going on?’”

That is a question that a lot of Fidelity watchers have been asking.

Just two days before Fidelity announced Mr. Goldman’s departure, the company’s president, Rodger Lawson, said that he also will be leaving at the end of March. His departure, though widely expected, renews speculation about who will succeed Edward C. “Ned” Johnson III, 80, as chairman and chief executive.

The president must be considered the heir apparent to Mr. Johnson, but Fidelity has given no indication that it even intends to fill the position (InvestmentNews, Jan. 18).

Speculation about who will succeed Mr. Johnson has swirled around Fidelity for a long time.

It began in earnest in 2007, when Robert Reynolds, Fidelity’s president and former chief operating officer, resigned after concluding he wouldn’t become chief executive. Mr. Reynolds is now chief executive at rival Putnam Investments.

Mr. Lawson was brought in the same year to replace Mr. Reynolds in the No. 2 slot. At the time, industry experts suggested that Mr. Lawson, who had served as chief executive of Fidelity’s retail operations from 1985 to 1991, was being tapped as president on a temporary basis to allow Mr. Johnson to focus more of his attention on improving fund performance and on finding a successor.

Mr. Lawson’s arrival spurred another departure. Ellyn A. McColgan, at the time president of Fidelity’s distribution business and considered a potential successor to Mr. Johnson, left soon after Mr. Lawson was named president.

Turnover at the top has trickled down within the executive ranks.

Norman Malo, who had served as president and chief executive of National Financial Services since 2003 and who reported to Mr. Goldman, retired in March 2009 and was replaced by Sanjiv Mirchandani.

Michael Clark, a member of the executive committee of Fidelity, left the firm for medical reasons and was replaced in his role as president of its institutional products group by Gerard “Jerry” McGraw, a Fidelity veteran who, for the previous six years, ran operations and services for the institutional products area.

His departure was notable because he had been brought in by Mr. Lawson and hired Mr. Goldman.

As a result, the people most responsible for hiring Mr. Goldman — the people he reported to — have left or are about to leave Fidelity.

That had to be frustrating for Mr. Goldman, said Robert Ellis, a principal at Novarica, a wealth management consultant.

“Here you are at Schwab, and you’ve grown a small unit into being one of the biggest, most profitable parts of their business,” Mr. Ellis said. “You’re recruited to No. 2 Fidelity, who says: “Get out there and convince [advisers] Fidelity’s the new Schwab.’ Then the rug gets pulled out from under you.”

Fidelity, however, insists that there are no hard feelings behind Mr. Goldman’s decision.

“People leave for different reasons,” said spokesman Vin Loporchio. “Whatever the reason, we view change as healthy.”

Fidelity remains committed to RIAs, he said.

While Mr. Goldman will not be immediately replaced, the presidents of the three units that reported to him — Institutional Wealth Services’ Michael Durbin, National Financial’s Mr. Mirchandani, and Fidelity Family Office Services’ Ed Orazem — will report directly to Mr. McGraw, Mr. Loporchio said.

Mr. Goldman will be missed, said Paul Murphy, national sales director at Spire Investment Partners LLC, an RIA and broker-dealer that manages almost $1.5 billion in assets and uses Fidelity as its primary custodian and clearing broker.

“Having said that, the depth and breadth of Fidelity’s senior management team is probably unparalleled in the industry,” Mr. Murphy said.

E-mail David Hoffman at [email protected].