A Conversation with Fidelity President Ellyn McColgan

Ellyn McColgan, a 13-year Fidelity veteran, has climbed another rung of the corporate ladder as she recently was promoted to president of Fidelity Brokerage Company, one of Fidelity Investments' largest businesses. She rises to the post from her previous role of president of Fidelity Financial Intermediary Services, succeeding Kevin Kelly. Her new role entails management of Fidelity's vast retail- and institutional-brokerage operations, as well as its direct mutual-fund sales. FBC is comprised of Fidelity Personal Investments, Fidelity Institutional Brokerage Group, and Brokerage Operations and Technology. Fidelity Investment's 2003 technology budget is $2 billion, which is unchanged from 2002. WS&T's Editor-in-Chief Kerry Massaro discussed some of McColgan's new challenges as she set out to take up her new post.

Wall Street & Technology: What do you consider the largest challenge of your new position?

McColgan: Re-inspiring customers and our own employees about the market. Investors have been through a rough couple of years and we need to reach out to them with a message that is fresh and inspiring about the possibilities that are still available to people. But, it's not just about investors. It's about employees in the financial-services industry as well, including our advisers and representatives in our investor centers. Basically, everybody in financial services is pretty worn out after three years of a down cycle.

WS&T: I know that one of the groups you will be overseeing is the Brokerage Operations and Technology Group. What are your top priorities for that group?

McColgan: There are three priorities. One would be productivity improvements in the technology that supports the foundation of our business - in other words improving existing technology. The second is focusing on how to make the technology work even better for customer service. The third is to identify the top two or three opportunities for market innovation in technology.

Can I say just a couple of words about those three things? Let me start with productivity. We are a big company, we process lots of transactions, we have millions of customers, so the basic production systems that we run every day need to be maintained and run as cost effectively as possible. That's all the behind-the-scenes work that takes thousands of people to do. We never write any ink about it, if you will, but we spend a lot of time and energy there.

The second is customer service. Our customers deal with us in any number of different ways - all of which use technology. We need to make all of those customer-facing systems as user friendly as possible, and we need to have the standard of service for customers be the same across all of those platforms, no matter how you do business with us. That's much easier said than done.

The third thing that is very important to us as a company, with all the money that we spend on technology, is to identify those things that will truly separate us in the market for innovation. The most obvious example of that would be our ActiveTrader Pro Web site (a direct-access Web application for people who trade more than 36 times a year, developed in 2002).

WS&T: You mentioned getting closer to your customers, what technology are you using to do that?

McColgan: The answered is layered. Customers either deal with us on the phone, through our Web site or in person. Our philosophy, over the years, has been to build the same capability across all those platforms - whether you came in through a branch or via the phone - you could do the same transactions.

What we find now, in fact, ten years later, after investing in all of these things, is that customers use the technologies for different things and we have to be smart enough to know what outlets are used for what types of transactions.

... Oh, I'll give you an example: Remember, years ago, when voice- response systems were considered the best technology around? What we did was build these really complicated trees so that you could go off and do any transaction you wanted to do. Well, now that would drive you crazy, you would never do that. Now about 80 to 90 percent of calls on voice response are for balance and quotes, so now we use voice response for balance and quotes. You know, so simplify it so it is easily accessible

WS&T: What is Fidelity doing to comply with the new Patriot Act?

McColgan: Fidelity has established an Anti-Money Laundering Office to set consistent policy across all its business units. Among other things, we are: providing computer-based anti-money laundering training to all appropriate employees; performing due diligence concerning foreign financial institutions, including required certifications from foreign banks; and enhancing our suspicious-activity investigation and reporting capabilities, both for our own businesses and our correspondent broker/dealer clients.

WS&T: Considering Fidelity's vast brokerage force, how does the firm monitor and archive e-mails and instant messages to comply with document-retention rules?

McColgan: We have systems in place for Fidelity's brokerage company to comply with document-retention rules. We also continually monitor and assess our technology and processes, and we continually upgrade and enhance our systems' capabilities to fulfill customer-service, operational and regulatory requirements.

WS&T: How do you work with your technology group? Does the CIO or CTO report directly to you?

McColgan: Yes, the head of all brokerage technology reports directly to me and he manages the development across all of our businesses and all of our platforms. So, for example, whether it is regarding the Web or voice response or the mainframe, it all reports into one person and we do have a consolidated budget. There is another technology group for Fidelity.com, which is a separate tech group that does not report in to me, but we coordinate all Fidelity.com development with them.

WS&T: Fidelity has been a leader in the wireless area in financial services, and now wireless has taken a little bit of a backseat, at least at most firms. What is your wireless vision for financial services - are you going to continue to support wireless or pull back from it?

McColgan: I think we are going to continue to invest in wireless as a technology of the future, but I think it is fair to say that it did not play out as we all thought that it would. Remember the advertisements showing investors running to and from meetings doing stock trades on their telephones? I don't think that is what has happened, but virtually everyone I know carries a wireless device of some sort for all kinds of communications purposes, whether or not they are doing trades on it is probably irrelevant.

The simple truth is that we are always in touch with each other and our customers, if we need to be, via all kinds of outlets, therefore I think wireless will always have potential. I think all of us who supported wireless early - as with all of the new technology in the last five years - we learned a lot, and it may evolve into something other than what we expected but I don't think the technology is going to go away.

WS&T: Any thoughts on how the new SEC chairman will impact business?

McColgan: The poor guy, right? I think he has his hands full. I guess we really can't anticipate that yet, but the mutual-fund business in particular, fortunately, has come out of these recent scandals pretty well. It's a tough job, I'm glad I don't have that one.

WS&T: What type of impact or legacy do you hope to leave after your career as president of FBC?

McColgan: I've been here almost 13 years, I love the name and the legacy and the history of Fidelity and if I get to leave any legacy at all what I want is for customers to think of Fidelity first when they think about investing. We do the right things for customers, that's our history, and that is what I'd like us to be remembered for.