February 16, 2010 / 7:23 PM / 8 years ago

Fidelity's Abigail Johnson ducks succession question

* Rare talk by Boston mutual fund company heiress

* Avoids questions on Fidelity succession plans

* Says Fidelity also an "information processing company"

By Ross Kerber

MIAMI, Feb 16 (Reuters) - In a rare public speech, Fidelity Investments Vice Chairman Abigail Johnson steered clear of succession plans at her family's mutual fund company and instead focused on technology.

Investors have eagerly awaited news of who will run Fidelity, given the imminent departure of its No. 2 executive at the end of March and the upcoming 80th birthday of its longtime chairman and chief executive officer -- Johnson's father -- in June.

Johnson treated a few hundred executives at the National Investment Company Service Association conference in Miami to a litany of details about improving computer systems and back-office technology.

"We at Fidelity view ourselves just as much a financial information processing company as an investment management firm," she said on Tuesday. "That may not be too newsworthy."

Johnson, 48, has not granted interviews in several years and rarely speaks in public, even though the future of family-controlled Fidelity would appear to turn on her intentions.

Many expect Abigail Johnson eventually to run Fidelity when her father, patriarch Edward C. "Ned" Johnson III, steps down, in part because of the number of different positions she has held while rising through the ranks.

Since 2005, she has overseen Fidelity's retirement plan services segment after running the company's fund investment unit for four years. She first joined the firm founded by her grandfather full-time in 1988 as a stock analyst after getting an MBA from Harvard Business School and spending two years as a management consultant.

Still, the company has passed on several chances to lay out a succession plan in recent years -- most recently in January, when President Rodger Lawson announced he would leave at the end of March.

STAYING ON SCRIPT

Dressed in a dark suit and speaking confidently to the NICSA crowd, Johnson waved off reporters' questions about her future prospects or the status of her father.

She also stayed on script when taking questions from the audience, declining to offer details on how recent cost-cutting in the company's computer systems improved customers' experience, as she had said in her prepared remarks.

"Let's not get specific," she said. "Take my word for it, more than two examples exist."

Several attendees said they found Johnson's nuts-and-bolts focus a pleasant surprise.

"I like analyzing and managing large-scale transaction processing platforms, record-keeping administration, and brokerage trading services," said Johnson, whom Forbes ranked No. 17 among the richest Americans in 2009.

Fidelity has tested "35 million lines of software code," she noted.

"I was pleased at the technical detail she was able to offer," said Scott Powell of Pittsburgh financial software maker Confluence.

Robert Devault, director at Transamerica Asset Management Group in Florida, said that while other fund companies also are racing to reduce costs with better computer systems, "she seemed to be more focused" compared with rivals.

CHURN IN THE RANKS

Churn in Fidelity's top ranks, right up to the executive suite, have brought succession questions to the forefront.

After the announcement of Lawson's retirement in January, the company said a nine-member executive board that includes Abigail Johnson and reports to Ned Johnson would make management decisions.

The younger Johnson told reporters she would not discuss details of the company's recent wins and losses in the market to run retirement plans for big employers.

But during her remarks, she made it clear that running retirement plans and improving customer service depended on having smooth-running systems and squeezing out incremental improvements.

"Even a small reduction in errors and rework can have a significant impact," Johnson said. "When computer systems cause errors, you can end up with The Dreaded NIGO - the 'not in good order' transaction," and risk alienating customers.

Fidelity doesn't seem to have had that problem too often. It has $1.5 trillion under management and more than $3 trillion under administration in segments such as keeping track of retirement-plan statements.

Though less profitable than its mutual fund management business, Fidelity's administrative operation helped preserve the company's income while many publicly traded rivals faltered in the recession.

Johnson offered some policy advice on Tuesday, suggesting regulators make it easier to send electronic-only statements to customers.

And she highlighted Fidelity's recent deals with BlackRock Inc (BLK.N) and MetLife Inc (MET.N), which are aimed at building on the company's strengths. (Reporting by Ross Kerber; Editing by Lisa Von Ahn)

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