Fidelity Brokerage Group is thriving in the shadows of the nation's largest mutual fund company.
The group - consisting of five units that provide soup-to-nuts investment services to a mostly institutional clientele - is growing rapidly. Assets under administration recently topped $200 billion, up from $35 billion in 1990 - and that's not counting discount retail brokerage, which operates as a separate arm of parent FMR Corp.
Indeed, the brokerage group routinely accounts for 5% of daily trades on the New York Stock Exchange, fueled in part by orders from portfolio managers at its largest client - its mutual fund affiliate, Fidelity Investments.
While the brokerage group clearly takes a back seat to the fund company, which manages $451 billion, its president, Sherif A. Nada, says there are advantages to being out of the limelight.
"It's fun to be able to leverage Fidelity's name and run with its resources," Mr. Ada said in an interview at his Boston office.
Observers concur. "They've got a great name and they have a great potential client base," said Perrin H. Long Jr., a securities analyst in Darien, Conn.
However, he noted, Fidelity Brokerage Group is just beginning to crack what is shaping up to be a much-contested market: independent investment advisers.
These financial consultants, who typically collect fees for helping clients assemble and manage their portfolios, have been growing in response to investors' demand for unbiased financial advice. They controlled $280 billion in assets at yearend 1995, versus $200 billion a year earlier, according to Cerulli Associates, Boston.
"The asset growth rate has not only increased, but has continued to accelerate," said Mary McAvity, a consultant with Cerulli. While she doesn't expect independent investment advisers to continue growing unchecked, she calls last year's 40% expansion "very healthy."
Fidelity Investment Advisor Group, an arm of the brokerage group that caters to this segment, has amassed $9 billion in assets from over the past four years - $7 billion of it since 1994, according to Mr. Nada.
But it is scrambling to keep up with Charles Schwab & Co., the San Francisco-based discount brokerage, which has raked in $63 billion from investment advisers.
Mr. Nada, an urbane and dapper man who joined Fidelity from Salomon Brothers in 1989, isn't worried. "We are late - no question about it," he conceded. "And it wasn't a smart move to be late."
But, he maintained, Fidelity has its eye on bigger fish than Schwab does. "I'm not putting down Schwab, because I think they're terrific," Mr. Nada said. "But they have a lock on the bottom 7,000 investment advisers."
Schwab's average investment adviser client manages $3 million in assets, he said; Fidelity's manages $21 million. "We're not going to bump heads against Schwab because our product is more aimed at the larger investment adviser anyway," he said.
To catch up with Schwab in the competition for investment advisers' business, Mr. Long said, Fidelity needs "to be more innovative and come out with more personal-computer products." Such product development is handled by the brokerage group's Fidelity Brokerage Technology Group arm.
The investment advisers unit isn't the whole story at Fidelity Brokerage Group. Another big part of the operation is National Financial Correspondent Services, which clears securities transactions for more than 280 broker-dealers, many of them bank subsidiaries. And Fidelity Capital Markets averages almost 73,000 trades a day.
The brokerage businesses at Fidelity - including the discount brokerage headed by Charlie Milligan - are thriving in part because of FMR Corp. chairman Ned Johnson's desire to diversify beyond mutual funds.
"We want to grow the brokerage business because having all your eggs in one basket is not a good idea," Mr. Nada said.
Mr. Hensley, a writer with Modern Healthcare, is a former American Banker staff writer.
