| 11 May 2010

It's no secret that Fidelity is a close-knit family organization run by a near-80 year-old patriarch. It's also no secret that they've had a habit of spinning leaders through their revolving doors and raising questions about succession planning and long-term leadership. Roger Lawson was the last such executive to churn out of the Boston firm, which we first reported in January. Since that time we've been waiting to hear who would be next to lead the firm.

Last night Fidelity threw us for a little loop when it announced that it plans not to hire or promote a single chief, but rather to split its business into two separate organizations: the asset management business and the distribution business. The firm said it would promote progeny Abigail Johnson to oversee the distribution business and new-hire and appropriately Irish-sounding Mr. Ronald P. O'Hanley, formerly of Bank of New York Mellon, to head up asset management and corporate services.

This move actually makes sense to us on several levels. First, the two business are very different and should be managed and reported differently.

Second, succession worries persist at the firm. Edward Johnson III will turn 80 this summer and yet he still oversees all day-to-day operations for the firm. He says he has no plans to retire, but firms relying on Fidelity for sales, distribution or product development have a right to wonder about the firm's backstops. By splitting the organization and backing strong unit heads those worries lesson.

Third, and related to number two, this move better positions the firms to make broad moves in each category if required -- whether to acquire firms or to be acquired.

Ms. Johnson will assume the role of president and her new division will be called, "Fidelity Personal, Workplace and Institutional Services." Though we've already dubbed it FiPWIS, it that helps. Yeah, not really. We should point out that Ms. Johnson is also a Director and Vice Chairman of the holding company.

Mr. O'Hanley will be the president of a unit called "Corporate Services." He'll also take on oversight of the firm's legal, administrative and public policy functions. No word yet on whether he gets a seat at the board table. He was a Vice Chairman at BNY Mellon.

E*TRADE (ETFC) recently went through it's own bit of executive shuffling,  replacing its CEO, Donald Layton, with a member of its board, Robert Druskin. The temporary placement helped fuel the rumors that E*TRADE was the target of a potential takeover from firms like TD Ameritrade (AMTD).