Earlier today, J.P. Morgan announced an agreement to distribute primary underwritten equity and fixed income products through Fidelity retail clients. This gives the venerable JPM the opportunity to get a retail distribution avenue that it has lacked. Citi has Solomon, Merrill and Morgan Stanley have their huge retail networks, UBS has Painewebber, the list goes on. But J.P. Morgan has lacked the ability to distribute products through a retail distribution. No doubt, this would be an issue when the bankers are marketing their capabilities to a potential IPO candidate. Retail distribution of shares is often perceived as a necessity in the IPO and secondary offering world given the "stickiness" of retail customers (they follow a buy and hold strategy). Many institutions, hedge funds especially, that buy into investment banking underwritten offerings dump the shares on a small rise post-offering, which can hurt the stock since volume on new shares can be low in the first few days. Hence the attraction of retail investors for underwritten deals. Retail investors enjoy keeping their stocks in a portfolio for years due to expectations that a) "it will turnaround at some point" or b) the tax ramifications of selling a high flyer are too high.

But is this announcement from JPM a great thing? Forbes says maybe, but there could be headaches. "The Fidelity deal comes as the biggest brokers are looking for ways to reduce the appearance of conflicts between the divisions that package investment products and those that sell them. Citi, one of the main targets of conflict investigations by securities regulators and New York Attorney General Spitzer, sold its asset-management division last year to Baltimore's Legg Mason in exchange for the firm's retail brokers."

It will be interesting to see how this pans out for Dimon and JPM. Forbes points out that the juggernaut Goldman Sachs has never had a retail distribution network and that that has not stopped the investment bank from being at the top of every league table. I guess we'll have to wait and see.