FMR Corp., the parent company of Boston-based Fidelity Investments, plans to eliminate annual raises amid concern that U.S. stock markets may decline for a fourth year.
As part of a “conservative” expense plan, this year’s budget didn’t include raises that are typically given in July, Fidelity spokeswoman Anne Crowley said. If the stock market and U.S. economy
improve before then, the program could change, she said.
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Fidelity, the largest mutual fund firm, is trimming costs after assets under management fell 12 percent in 2002 and its
domestic stock funds had net redemptions for the first time in at
least four years. Money managers have been firing workers and
reducing the number of funds as share prices fell the past three
years, the longest losing streak since the Great Depression.
The Standard & Poor’s 500 Index has declined 3.3 percent this
year, after dropping 23 percent in 2002. Last year, Fidelity had
$3.6 billion in outflows from U.S.-based stock funds, the firm’s
most popular ones, according to Financial Research Corp. At year-end, it had $773.8 billion in managed assets.
Two years ago, Fidelity didn’t give raises to employees who made more than $75,000, Crowley said. Last year, while raises were available to everyone, the company fired about 1,695 people, or
5.4 percent of its workforce. Fidelity ended the year with 29,142
employees, down 7 percent from 2001.
Some divisions, including Fidelity Brokerage Co., were told of this year’s budget plan in a memo last week.
“We view this action as a temporary, but prudent measurerequired in response to current economic conditions,” said the
memo, which was posted on the Internet and confirmed by Crowley.
The decision to cut raises will be reviewed “as business
conditions improve,” the memo said.
Fidelity Brokerage handles trading accounts for individual
and institutional investors, and distributes mutual funds directly
to customers. Ellyn A. McColgan was named president of the unit in
October, replacing Kevin J. Kelly, who took a leave of absence.
Customer assets at Fidelity Brokerage fell 8.5 percent last year to $723.1 billion, Crowley said.
Bloomberg News
