Fidelity sees lower results, warns on bonuses

By Ross Kerber and Svea Herbst-Bayliss

BOSTON (Reuters) - Fidelity Investments expects "somewhat lower" results this year and signaled to staff that bonuses and merit pay could suffer as a result.

In an internal memo obtained by Reuters, President Rodger Lawson on Wednesday told staff at the world's biggest mutual fund company that many changes wrought by the recession on the finance industry would be enduring, but said Fidelity was ahead of the downturn.

Addressing bonuses, he said, "Overall bonus funding depends on our aggregate business results, which we expect will be somewhat lower this year than last."

The industry generates the bulk of its revenue from fees based on a percentage of assets under management. Fidelity has about $1.4 trillion in total managed assets.

Steps outlined in the memo will reduce the number of people eligible for merit-pay increases, possibly cut the company's contribution to profit-sharing, and make still-undecided adjustments to annual bonus payments.

Lawson said the changes will "result in compensation being proportionately less dependent on companywide metrics and much more dependent on the contribution of individuals and the performance of their business units."

Fidelity will limit this year's merit increases to employees with "bonus opportunity of 15 percent or less," Lawson said. Traditionally these increases are made in the middle of the year.

"In this difficult period we are sensitive to the recession's pressure on those at the lower to middle levels of our compensation structure," he said in the memo.