BUSINESSWEEK ONLINE : FEBRUARY 21, 2000 ISSUE
FINANCE A Quick Scramble up Fidelity's Ladder The mutual-fund giant taps a mass-marketing veteran Gail J. McGovern got off to a controversial start at Fidelity Investments. In September, 1998, the Boston mutual-fund giant lured her away from the top consumer marketing job at AT&T. When Fidelity put her in charge of its 3,284 phone operators and 77 branch offices, her first move was to send letters to 30,000 Fidelity customers who were the most frequent callers to its service center. Her message: Quit tying up the phone lines and use automated phone and Internet services instead. It was hardly the ''Reach Out and Touch Someone'' approach made famous by AT&T. Even so, most customers switched to automated services, and none pulled their account, McGovern claims. ''It was an obvious solution to a business problem.'' Whatever bad taste it left with Fidelity customers, it put a shine on McGovern's star inside Fidelity. On Jan. 25, McGovern, 47, was named president of personal investments, the company's top consumer marketing post. She now oversees Fidelity's online brokerage business and advertising, a job that lands her on Fidelity's powerful 15-person operating committee, headed by Chairman Edward C. ''Ned'' Johnson III. The two executives who outrank her--Johnson, 70, and President James C. Curvey, 64--are nearing retirement age, though they've not signaled when they plan to do so. Johnson's daughter Abigail, age 38, who owns 25% of Fidelity, stands to replace her father. She is now second-in-command in Fidelity's fund unit. If McGovern succeeds, she and Abigail could eventually hold the two top jobs. McGovern's first order of action in her new post, she says, is ''to make Fidelity No. 1 in brokerage and continue our leadership in mutual funds.'' Her longer-term goal is to offer every financial service Fidelity customers want. It won't be easy. Sure, Fidelity, with 6.5 million customers and $955 billion in managed assets, has no competitor threatening its dominance in funds. But it was an online brokerage latecomer in 1997, and has been playing catch-up. ''Millions of our customers own Fidelity funds but don't even know we're also a broker,'' she says. Fidelity's market share in online trading volume moved up from fifth place at the end of 1998, to fourth at the end of 1999, according to U.S. Bancorp Piper Jaffray Inc. And last year, Fidelity surpassed Charles Schwab & Co. in online accounts, 3.5 million to Schwab's 3.3 million. But Schwab is outpacing Fidelity in terms of assets: It ended the year with online brokerage assets of $349 billion, vs. Fidelity's $269 billion. MIXED SIGNALS. Some say McGovern's marketing experience is something Fidelity sorely needs. ''Fidelity has been plagued by a lack of a coherent strategy,'' says James Punishill, a senior online finance analyst at Forrester Research who also consults for Fidelity. An example: Fidelity sent mixed signals last year when it simultaneously ran two ad campaigns with seemingly contradictory tag lines, ''Invest for the Long Run'' and ''Every Second Counts.'' McGovern isn't likely to make such mistakes, say former AT&T colleagues. McGovern has a genial personality and political skills that helped her rise through AT&T's ranks. Her efforts to bundle long-distance with other products, such as wireless and Internet services, helped slow the company's long market-share slide, says Alex Mandl, a former AT&T president who now runs Teligent Inc. Still, the former computer programmer's lack of brokerage experience could be a stumbling block. ''You also need operations expertise and an understanding of what investors need,'' says Gregory Smith, an analyst at Chase Hambrecht & Quist. McGovern says she won't match Schwab's recent moves to go after active traders because most of Fidelity's customers don't want the service, and those who do already pay commissions lower than Schwab's. Instead, McGovern wants to ''serve up what customers need before they realize they need it.'' With competitors aiming to do the same, she'll need a strong strategy in order to succeed. By Geoffrey Smith in Boston with Steve Rosenbush in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS A Quick Scramble up Fidelity's Ladder RESUME: Gail J. McGovern INTERACT E-Mail to Business Week Online

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