BOSTON -- A man known by some as "The King of Schmooze" -- Peter J. Smail -- assumed control of the juggernaut of the defined contribution market, Fidelity Investments' $360 billion 401(k) business.
He also will be in charge of the company's burgeoning total benefits outsourcing services.
After 11 years under the intense marketing style of Robert L. Reynolds, Fidelity Investments promoted Mr. Smail and Ellyn A. McColgan, both midlevel lieutenants, to take over its $591 billion institutional businesses.
Fidelity reorganized the institutional retirement businesses that Mr. Reynolds ran and now oversees from a distance, since his promotion July 3 to chief operating officer. He had been president of Fidelity Investments Institutional Retirement Group.
Mr. Smail, already president of the 401(k) business unit, Fidelity Institutional Retirement Services Co., now heads a new unit, Fidelity Employer Services Co., that combines the 401(k) business and benefits outsourcing services.
Ms. McColgan, president of Fidelity Tax-Exempt Services Co., the 403(b) unit, leads the rest of Fidelity's institutional businesses as president of Fidelity Investments Institutional Retirement Group.
Fidelity watchers note a big difference in the management styles of the charismatic Mr. Reynolds, who is popular with Fidelity's large clients, and Mr. Smail. The two men have worked together for all of Mr. Reynolds' 16-year tenure at Fidelity.
Mr. Smail "has been there forever," but "he's not flashy. He's not a chest-beater. He's a doer. Reynolds may not have been the world's best business manager, but he was a great promoter. Maybe Fidelity doesn't need a promoter anymore for that business," said Ward Harris, managing director, McHenry Consulting Group, Berkeley, Calif.
`King of Schmooze'
Another source close to Fidelity, who preferred not to be identified, called Mr. Smail, "the King of Schmooze."
"He can put on a client conference like you can't believe, and it's amazing to watch him work a roomful of clients. He can do it, but not the same as Bob Reynolds. Bob set the wheels in motion. It's up to Peter to keep them moving."
In the past decade, U.S. tax-exempt assets managed by Boston-based Fidelity Investments increased to $591.1 billion as of Jan. 1, from $30.3 billion as of Jan. 1, 1990, according to data provided by Fidelity. Assets managed for 401(k) and 457 plans increased to $360.4 billion as of Jan. 1 this year, up from $7.3 billion Jan. 1, 1990.
Fidelity is by far the largest manager of defined contribution plan assets in the United States, according to data from Pensions &Investments' annual money manager surveys.
Outsiders know Ms. McColgan less well than they know Mr. Smail, but agree with Mr. Reynolds' observation that she has made strong inroads in the difficult 403(b) market.
While outsiders and insiders noted that Fidelity's success in the defined contribution market does have something to do with the company being in the right place at the right time in the development of that market niche, all acknowledged that much of the credit is due Mr. Reynolds.
He was given leadership of Fidelity's new 401(k) plan business unit, Fidelity Institutional Retirement Services Co., when it was formed in 1989. He moved up to head all institutional retirement plan services at FIIRG in 1996.
As a reward for that success, Mr. Reynolds not only assumed the COO position from James Curvey, but also was named vice chairman of Fidelity, along with Robert C. Pozen, who will continue as president of Fidelity's investment management side. Mr. Curvey will remain vice chairman and will return to his old job as president of Fidelity's burgeoning capital and venture business.
Reporting to chairman
The new triumvirate reports directly to Edward C. Johnson III, Fidelity's 70-year-old chairman and chief executive officer.
The move reflects "what we all know, that the fund business is maturing while the other two areas affected by today's announcements, namely the venture capital side and retirement services, have long-term prospects for significant growth," said Jim Lowell, editor of FidelityInvestor.com, an online newsletter that tracks Fidelity.
Mr. Reynolds, at 48 the youngest of the three vice chairmen, denied rumors that his new role or the expansion of the top management team was, in effect, naming him Mr. Johnson's successor, in the event that Mr. Johnson's daughter, 38-year-old Abigail Johnson, decides not to head her family's company.
"I'm going to be managing the day-to-day business . . . all the traditional elements of the COO's job -- HR, finance, technology. Don't read anything else into this. James Curvey's move back to the capital side is a natural passage, as is my move," Mr. Reynolds said.
A large part of Mr. Reynolds' focus will be on distribution of Fidelity's investment products through retail, institutional and intermediary channels, in both the United States and abroad, he said.
"Fidelity is unique in that it crosses the waterfront on distribution. We have different competitors on each distribution platform and we are able to command resources and focus teams to cover each," Mr. Reynolds said.
Putting a proven performer like Mr. Reynolds onto the distribution challenge was a smart move by Fidelity, said Andrew M. Silton, president of AMS Financial Consulting Services, Chapel Hill, N.C., a new vendor consulting firm.
"Money management organizations will be increasingly putting the strongest business talent on distribution and technology," two areas now under Mr. Reynolds' oversight, said Mr. Silton.
"No one expects to get the kind of tail wind they've had from the equity markets during the last decade and in order to keep fund operation going, money managers need to make sure that distribution works to generate cash flow," Mr. Silton added.
Protecting investment
And Fidelity had to protect its investment in Mr. Reynolds so that he wouldn't leave, said McHenry Consulting's Mr. Harris.
"You've got to have a place to give your people to go within the company or they'll leave. It's that simple," Mr. Harris said. "One thing that Fidelity is really good at is developing a dynamic tension that keeps people guessing. It's the house that Ned (Johnson) built and this is definitely part of his design."
But that tension may have been reaching a dangerous peak, hence Mr. Reynolds' promotion now, said Mark Naber, managing director and head of consulting services at mutual fund consultants, the Optima Group Inc., Fairfield, Conn.
