O'Hanley's replacement will come from within the company and is expected to be named in coming weeks, according to a letter to firm employees sent by Abigail Johnson, vice chairman of Fidelity parent FMR LLC.

O'Hanley, 56, was once seen as a possible candidate to head Fidelity until a management shuffle in 2012 left him reporting to Johnson, the daughter of Fidelity Chairman Edward C. "Ned" Johnson III. The change diminished O'Hanley's power and makes his departure less of a drama and more a test of how smoothly Fidelity can fill his shoes.

Word of O'Hanley's exit followed news on Tuesday that Mohamed El-Erian will leave Pacific Investment Management Co, putting the chief investment officer role solely in the hands of Pimco founder Bill Gross -- a similar case of power consolidating back to an asset manager's leader.

O'Hanley joined Fidelity in 2010 and helped reverse a tide of withdrawals by investors from the Fidelity division that offers the firm's best-known vehicles like its $111 billion Contrafund. Performance has improved on many products like the $16 billion Magellan Fund, where O'Hanley oversaw a manager change in 2011.

O'Hanley will leave having taken mainly modest steps to offer exchange-traded funds and other new products that draw the most investor cash these days.

The circumspect approach may have been the right one, but it revealed a shift from the past when Fidelity aimed to dominate broad lines of business, said John Bonnanzio, editor of the Fidelity Insight investor newsletter.

For instance, O'Hanley expanded deals to sell ETFs run by BlackRock Inc and other firms, rather than focus only on building out Fidelity's own ETF lineup.

"That was a real cultural change for Fidelity," Bonnanzio said. Lately the company has rolled out more new products of its own, like a lineup of sector ETFs introduced in October.

Abigail Johnson, Ned Johnson and O'Hanley were not available for interviews, a spokesman said.

O'Hanley said in his own letter to Fidelity employees that he plans to spend more time with his family and to work with non-profit organizations. "Ultimately I will pursue other professional challenges," he added, but offered no specifics.

James Lowell, editor of fidelityinvestor.com, which follows the company's products, said the two obvious internal candidates to succeed O'Hanley are Fidelity equity chief Brian Hogan and Jacques Perold, head of the FMR Co unit under O'Hanley.

Either would be a good choice but would lack the valuable broader experience that O'Hanley brought after joining Fidelity from BNY Mellon Corp, Lowell said.

"Ron brought an outside, institutional perspective to the way Fidelity's business was being run, and that's mission-critical," Lowell said.

Fidelity had $1.87 trillion under management in its funds division at the end of December, according to Lipper data, trailing only Vanguard Group Inc of Pennsylvania, with $2.23 trillion. After several years of outflows, Fidelity reported a net inflow of investor cash of $17.7 billion last year.

(Reporting by Ross Kerber; Editing by Jeffrey Benkoe, Nick Zieminski and Leslie Adler)

By Ross Kerber