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Net to Play Key Role in Lehman-Fidelity Alliance

Investment banker Lehman Brothers has announced a partnership with mutual fund giant Fidelity Investments that marks Wall Street’s latest attempt to use the Internet to reach private investors.

Under the terms of the deal, Fidelity’s retail and individual clients will be able to purchase financial products and services from Lehman traditionally reserved for banks and institutions.

“We’d been institutionally focused for a long time. The Internet provides an attractive option for selling our services to a wider number of people,” said Lehman spokesman Bill Ahearn. “This makes us more competitive. When companies issue stocks or bonds, they will have a wider distribution network.”

Fidelity will market Lehman’s products using a variety of methods. Print ads will appear in Fidelity Focus and Fidelity Outlook magazines, which target institutions and big investors. Information also will be included on customers’ statements.

However, the Internet will be Fidelity’s main marketing tool. Currently the second-largest discount stockbroking operation in the United States after Charles Schwab, most of the company’s business is already done online. It has 2.7 million online retail brokerage accounts, and, as of May, more than 59,000 of the 93,000 trades made each day by Fidelity customers are done via the Web.

“The Internet will be an important vehicle for distribution of information,” said Fidelity spokesman James Griffin. “We will be using our Web site to tell people what’s on offer and utilizing an online calendar to tell people when various IPOs are coming up.”

Fidelity clients also will be offered Lehman’s “10 Uncommon Values,” an investment vehicle based on the company’s annual list of stock selections. In addition, the bank will issue stocks and bonds, provide global economic strategy as well as company reports for Fidelity customers.

“This alliance with Lehman Brothers will provide another strong incentive for customers to consolidate their investments with Fidelity,” said Fidelity chairman Edward Johnson.

Lehman is not the first securities firm to expand its customer base to include retail and individual customers. Morgan Stanley recently merged with a retail firm in order to reach this market. Merrill Lynch also is shifting away from the institutional sector.

If Lehman had dragged its feet any slower, say analysts, it would have missed out on this growing segment of the market.

“This agreement combines the breadth and depth of Fidelity’s retail and Internet brokerage network with our already strong institutional distribution capabilities,” said Lehman chairman Richard Fuld. n

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