Boston — Three green Fidelity flags hang limp over the entrance. It's after 5 p.m. and this brassy storefront office that opened in June is nearly empty. An occasional commuter whisks in to make a quick transaction or grab a brochure before scurrying off to catch a ride home.
But appearances may be deceptive. By Fidelity's count, an average of 300 to 500 people use the center daily. From January through April 15 (the IRA season), it expects clientele to top 1,000 a day.
Fidelity Management and Research is one of several mutual funds that are, in a sense, going public. Traditionally, the mutual fund business has been conducted by mail or by phone. Now, partly in response to more walk-in customers and a desire to reach a bigger share of the general public, some funds are opening street-level storefront offices.
To customers, these offices mean longer hours, easier access, and a wider range of services, as well as a face-to-face opportunity to see who's handling their money.
For the once-cloistered mutual funds, it's a new marketing avenue for products. Promoters say it also offers a way to stem the exodus of money-market fund shareholders, who went back to the banks and their insured money market deposit acounts, and educate them to the investment possibilities of other funds. And it may give mutual funds another weapon as deregulation opens the door to competition from banks, brokerages, and insurance companies.
The utility of this concept became apparent between 1979 and 1982 as vast numbers of new investors were attracted first by money market funds and then by IRAs. ''People kept showing up at our (sixth-floor office) door; we had no way to accommodate them,'' says Dennis E. Nelson, vice-president of Fidelity Marketing Corporation. ''They were standing in the hall. And they were showing up in spite of the fact that we had never encouraged them to visit.''
As yields in money funds dropped, another need for face-to-face encounters arose: to introduce the neophyte money fund investor to other funds.
''There was the stock market rise. And meanwhile the money market yield had gone down,'' says Richard J. Vesely, vice-president of marketing at Delaware Management Company. ''Many investors asked, 'What do I do now?' They began asking about other funds.
''Now, people are getting educated about the equity concept,'' he says. ''We have to explain what money funds and equity funds are. That becomes time-consuming. The staff spends more time with inquiring investors. That's why the storefront concept is helpful.''
Just the same, the jury is still out on it.
''It's too new to know if it will generate enough business to offset the higher cost,'' says Steven Norwitz, spokesman for T. Rowe Price Associates, which has ''no plans as of now'' for a walk-in center. ''They can be a substantial increase in the cost of operation. The advantage of a mutual fund is that it operates on a low margin. (These centers) are starting to fall into a bank operation with a lot of brick-and-mortar costs,'' Mr. Norwitz says.
Nonetheless, a few months ago T. Rowe Price took a step closer to its customers by opening a ''cash counter'' for new orders and additional investments in the lobby of its main office in Baltimore.
Other funds welcoming walk-ins include the Boston-based Scudder Stevens & Clark and Stein Roe & Farnham in Chicago. Scudder, with walk-in offices in eight cities, led the way with the first storefront center early last year. Stein Roe opened its center in Chicago the first quarter of this year, and ''if initial reception remains anywhere near the level we've experienced, we're likely to consider opening others,'' says Marshall B. Front, a Stein Roe partner.
While Fidelity is a relative newcomer, its center is the most ambitious of the lot.
There are three levels with a floor-to-ceiling glass front. The entry level is decked out in gleaming brass railings atop glass supports. Two touch-screen computer terminals and two multi-projector slide shows flank the information desk. Brochures cover the area just behind the desk. To the left and right of the entrance are direct phone lines to Fidelity service representatives and discount brokerage traders. The top floor is filled with young, low-key sales representatives sitting at walnut desks, in plush mauve chairs. The basement floor, punctuated by four-foot-tall palms, is given over to service personnel with desktop computers.
''There's an old school of thought in investing circles, in a very small minority, that investing one's money is a very private and sensitive affair, says Mr. Nelson at Fidelity. So to expect people to transact that business in such an open environment may be asking a little too much. Obviously we don't happen to believe that. Our openness has the advantage of saying, 'We have nothing to hide.' ''
He credits the center as the prime reason for the record volume of new accounts and deposits of ''about $2 to $3 million'' daily, which overall is about a 40 percent increase over last year, he says. And he points out that the average dollar transaction of walk-in shareholders is higher than those using the mail.
''Maybe they're concerned about seeing and feeling out this organization that is investing their money. Maybe the comfort level is increased and affects the dollar level invested,'' Nelson theorizes. Or maybe a face-to-face explanation of a complex product makes a difference.
Fidelity has found that its cash-management type of account, USA, has done well in this environment. And Mr. Front at Stein Roe says, ''The IRA business has been particularly helped'' by the street-level approach.
Fidelity has walk-in offices in three other cities: New York, Houston (two), and Dallas. By the end of November it plans centers in Chicago, San Francisco, and Washington. Most of the others are little more than information counters and desks for salespeople. Not all are at street level.
The Boston location is ''a marketing laboratory. We're using it to try a lot of different things,'' says Nelson. By next year, ''we're thinking of adding an educational facility (on the fourth floor) and offering a continuing series of investment seminars,'' he says.