Fidelity Move Underscores Intermediaries’ Importance

With investment choices expanding and corporate-benefits staffs contracting, employers are relying on intermediaries and advisers more to help with investing their qualified plan benefits, both for themselves and their employees.

So Fidelity Investments, which has long lagged its rivals in 401(k) production, is relying on a different sort of contraction to boost its qualified plan business and its use of intermediaries. The Boston company last week established Fidelity Retirement Business Unit, which begins with $48 billion of assets under management and will target intermediaries such as broker-dealers, discount brokers, and financial planners to distribute its retirement plans and the investments customers use in them.

The unit incorporates four divisions that were formerly part of Fidelity’s Investments Institutional Services Co. arm: retirement product development; internal sales; external retirement specialists and retirement services; and product and program development, retirement sales and retirement operations.

Donald C. Holborn, executive vice president and head of Fidelity Retirement, said he hopes this will increase distribution of Fidelity’s current and coming retirement products.

Retirement services “is a natural market. If we wanted to grow, we needed to consolidate,” said Mr. Holborn, who had been a national sales manager for Fidelity’s independent broker-dealer channel and directed sales of retirement and other products.

He said the unit will offer new services to advisers who work in the qualified plan market, including a database that will let them analyze each client’s retirement plan individually.

Products to be developed by the unit include one for teachers that is slated to become available by yearend, Fidelity Advisor 403(b). The retirement savings product will be sold through advisers only and will be Fidelity’s first 403(b) plan offering for intermediaries.

Historically, Fidelity has done a good job selling its investment products through financial intermediaries. Sales of its funds through bank brokerages, for example, rose 48% last year, to $3.4 billion. The company was fourth in sales through bank brokerages, behind Putnam Investments, Aim Management Group, and Franklin Resources Inc. Fidelity sells its products through 4,200 financial institutions, including 1,200 banks.

Burton Greenwald, an analyst based in Philadelphia, said Fidelity’s retirement-business consolidation is a good move.

“Companies rely on advisers to make recommendations,” he said. “In order to reach the employers and sell your 401(k) products, you have to sell through the channels they are buying from.”