LINCOLNSHIRE, Ill. — Key staff departures at Hewitt Associates Inc.'s defined benefit and defined contribution consulting arms are straining the company's ability to service investment consulting clients and are fueling rumors that Hewitt will sell its defined contribution business to Fidelity Investments, Boston.
Seven senior U.S. consultants at Hewitt Investment Group, the investment consulting division, bolted during the past six months, in part because of a change in the group's compensation structure, ex-Hewitt consultants and competitors say.
Following defections, Hewitt officials resigned from at least one consulting job. "We were informed that … their capacity has been thereby reduced (by the departures), and that Hewitt just doesn't feel that they're able to serve the University of Alabama System going forward," said Kellee Reinhart, spokeswoman for the $800 million university endowment in Tuscaloosa.
In addition, the July departures of Stacy Schaus and Lori Lucas, two well-known executives at Hewitt Financial Services LLC, the defined contribution and brokerage division, are fueling rumors of the sale to Fidelity.
"Hewitt's on fire," said one source familiar with the Lincolnshire, Ill.-based firm. "Their HR business is not profitable, they're losing money, shares are down and it's affecting all business lines. Hewitt has talked to guys at Fidelity about selling. There's no deal yet, but Fidelity is interested."
Talks have been informal, and no investment banker has been hired, the source said.
Said James F. Wilson, a senior research analyst with JMP Securities, San Francisco: "They are in as much turmoil as can be. It's not unreasonable to think they will sell off pieces. The DC business could be a possibility. The mutual fund guys love that business" and could be interested in an acquisition, he said.