While Fidelity has refused to discuss rumors that the firm is preparing for layoffs (and who can blame them?), there is no doubt that the Boston Behemoth is taking steps to cut costs just like everyone else. The cost-cutting was confirmed in a memo sent to employees by Robert Reynolds and published in the New York Post today.

There has been widespread talk in the industry that Fidelity will send another layoff notice once the September 11 anniversary has past. Fidelity spokespersons have declined to comment directly on the rumors while implying that they were inaccurate. The firm continues to tell the media that it has made no plans to change employment levels.

Prior to the layoffs last year, Fidelity executives explained that the firm was using the hard times in the industry as an opportunity to build its business when rivals could not.

Last year the firm let go 760 workers primarily from its retail brokerage business. That decision was made by the head of that business unit, Fidelity officials explained at the time. Last week Fidelity Canada shuttered an operations unit in Toronto.

Despite those cuts, Fidelity has been boosting employment in units that are growing. Earlier this year the Boston firm negotiated a deal that would enable it to expand its Rhode Island location. Jobs added there would primarily support the firm's 401(k) recordkeeping business and benefits outsourcing business.

The Reynolds memo was part of the fund firm's annual budget review process set to run through October and shows that even Fidelity is now being forced to retrench as the bear market shows no signs of abating.

Reynolds called on all Fidelity managers to reassess the "criticality of all functions" as part of an effort to reign in costs. The firm is also seeking ways to further diversify its revenue stream to make it even less dependant on management fees. Fidelity says that just half its revenues are asset based.

Unlike many of its rivals, Fidelity operates as a collection of affiliated but separate divisions. The heads of those businesses are known to have amounts of discretion that make it unlikely for the firm to announce a coordinated company wide layoff.  

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