What makes Fidelity Investments a giant in the financial world? Founded in 1946 by Edward C. Johnson II, Fidelity Investments has grown into one of the largest asset managers globally. With over $5.4 trillion in assets under management and nearly $14.1 trillion in assets under administration, Fidelity offers a wide range of financial services. From pioneering 401(k) products in the 1980s to launching the first zero expense ratio mutual funds in 2018, Fidelity has consistently pushed the envelope. The company’s commitment to innovation, like embracing blockchain technology and digital assets, keeps it at the forefront of the financial industry.
Key Takeaways:
- Fidelity Investments, founded in 1946, has grown into a global financial powerhouse, offering a wide range of services and pioneering innovative products to meet the evolving needs of its diverse customer base.
- The company's rich history, technological advancements, and commitment to employee ownership and community support have shaped its legacy and positioned it as a leader in the investment management industry.
The Early Days of Fidelity Investments
Fidelity Investments has a rich history that dates back to the mid-20th century. Let's explore how it all began and some key milestones in its early years.
- Founding: Fidelity was founded in 1946 by Edward C. Johnson II, who transformed the "Fidelity Fund" into Fidelity Investments.
- Corporate Structure: Initially known as Fidelity Management & Research (FMR), the company was incorporated in Massachusetts on May 1, 1930.
- Approval During Great Depression: During the Great Depression, the "Fidelity Fund" was the only fund approved by John C. Hull, the Securities Director for Massachusetts, due to widespread bank failures.
Expansion and Innovation
Fidelity didn't just stop at mutual funds. The company expanded its services and embraced technology to stay ahead.
- Expansion: In 1969, Fidelity formed Fidelity International Limited (FIL) to serve non-U.S. markets. FIL was spun off in 1980 into an independent entity owned by its employees.
- 401(k) Services: Fidelity started offering 401(k) products in 1982, becoming a major player in retirement plan services.
- Computerized Stock Trading: In 1984, FMR began offering computerized stock trading, enhancing its technological capabilities.
Leadership and Growth
Leadership changes often bring new directions and growth. Fidelity has seen significant leadership that has shaped its path.
- CEO Robert Pozen: In 1997, Robert Pozen was named CEO of Fidelity, leading the company through significant growth and innovation.
- Geode Capital Management: In 2001, Geode Capital Management was established to run and incubate investment strategies for FMR. It was spun off as an independent company in 2003.
- First ETF: In 2003, Fidelity launched its first ETF, the Fidelity Nasdaq Composite Index Tracking Stock Fund (ONEQ).
Mutual Funds and Investment Services
Fidelity is well-known for its mutual funds and investment services. Here are some key facts about their offerings.
- Mutual Funds: FMR has three fund divisions: Equity (Boston), High-Income (Boston), and Fixed-Income (Merrimack, New Hampshire).
- Largest Equity Mutual Fund: The Fidelity Contrafund is the largest non-indexed fund in the U.S., with $107.4 billion in assets, managed by William Danoff since 1990.
- Fidelity Magellan: Another large equity fund is the Fidelity Magellan, with $15.5 billion in assets, managed by Jeffrey Feingold since 2014.
- History of Magellan Fund: The Magellan Fund was founded by Ned Johnson in 1963 as the Fidelity International Fund and was renamed Magellan in 1965.
Brokerage and Financial Services
Fidelity's brokerage and financial services have made it a household name in the investment world.
- Brokerage Services: Fidelity operates a major brokerage firm with investor centers in over 140 locations throughout the U.S.
- National Financial Services: Through its subsidiary, National Financial Services LLC, Fidelity provides services to correspondent broker-dealers, institutional investment firms, banks, trusts, family offices, and registered investment advisors.
- Assets Under Administration: As of September 30, 2010, National Financial had custody over $443 billion in assets in 4.3 million accounts. By 2023, this number had grown to over $4.5 trillion in AUM and nearly $12 trillion in AUA.
Digital and Technological Advancements
Fidelity has embraced digital assets and technology to stay relevant in the modern financial landscape.
- Benefits Outsourcing: Fidelity Personal, Workplace and Institutional Services (PWIS) is the largest provider of 401(k) retirement plan services, with $1.4 trillion under administration and $32 billion in total defined contribution assets as of 2015.
- Fidelity Digital Assets: In 2018, Fidelity established Fidelity Digital Assets to provide products and services to institutions investing in bitcoin and other digital assets.
- Fidelity ZERO Funds: In 2018, Fidelity launched the Fidelity ZERO Funds, the industry’s first zero expense ratio self-indexed mutual funds for individual investors.
- Blockchain Technology: In 2017, Abigail Johnson spoke about blockchain technology’s potential benefits at Consensus 2017, one of the largest blockchain conferences in the U.S.
Retirement and Customer Support
Fidelity offers a range of retirement services and customer support to help individuals manage their financial futures.
- IRA Services: Fidelity offered its first individual retirement account (IRA) a year after the passage of the Employee Retirement Income Security Act (ERISA), allowing people to save pre-tax dollars in IRAs.
- Customer Support: Fidelity has live customer support available by calling 800-835-5095.
- Fidelity Life Events Hub: Fidelity’s Life Events hub is an online resource created to help people plan for and manage life’s most significant moments, including managing a job change, caring for aging loved ones, experiencing divorce, and navigating the college journey.
Financial Studies and Apps
Fidelity conducts studies and offers apps to help people manage their finances better.
- Financial Resolutions Study: In 2023, Fidelity conducted a study on Americans' financial resolutions, finding that two-thirds of Americans were considering a financial resolution amidst uncertainties.
- Gen Z and Millennials: The study revealed that Gen Z and Millennials were more likely to consider money resolutions and were more optimistic about 2023 compared to other generations.
- Fidelity Bloom App: The Fidelity Bloom app is a free financial app and debit card that helps users save more, spend less, and feel better about their finances using behavioral science with built-in features.
Educational Initiatives
Fidelity offers various educational initiatives to help individuals improve their financial literacy.
- Financial Wellness Month: In January during Financial Wellness month, Fidelity offers 31 days of educational events, daily financial tips, interactive tools, and a broad range of solutions to inspire people to kick off the new year with a renewed focus on their finances.
- Free Financial Plan: Fidelity provides a free, flexible plan to help individuals create a financial plan tailored to their needs, whether it's building emergency savings, paying down debt, managing spending, or saving for retirement.
Local and Global Presence
Fidelity's reach extends both locally and globally, serving a diverse range of clients.
- Local 26 Individual Account Plan: Fidelity has overseen the Local 26 Individual Account Plan since its creation in 1982, managing over 10,000 participants.
- Global Presence: Fidelity has offices across the U.S., including locations in Washington, D.C., Maryland, Virginia, and globally in the U.K., Ireland, Central Europe, Asia, and the Pacific Rim, India, and Bermuda.
Assets and Ownership
Fidelity's assets and ownership structure reflect its commitment to long-term strategies and employee involvement.
- Assets Under Management: As of June 2024, Fidelity Investments manages $5.4 trillion in assets under management and $14.1 trillion in assets under administration.
- Privately Held Company: Fidelity is a privately held company, which allows it to focus on long-term strategies and make sound judgments for the benefit of its customers and business.
- Employee Ownership: The Johnson family holds 49% of the company, while the remaining 51% is held by employees, reflecting a strong commitment to employee ownership.
Leadership Legacy
The Johnson family has played a significant role in Fidelity's history and growth.
- Edward Johnson II: Edward Johnson II was appointed CEO of Fidelity Fund in the 1940s and grew the fund from $3 million to $10 million by infusing his family trust into the company.
- Edward Johnson III: Edward Johnson III took over in 1977 and implemented significant changes, including allowing checkwriting on Money Market funds and 24-hour a day service. He also changed Fidelity to a private company.
- Abigail Johnson: Abigail Johnson joined Fidelity in 1988 and became CEO in 2014. She has been instrumental in exploring crypto and bitcoin investments, including launching Fidelity Digital Assets.
Competitive Landscape
Fidelity has faced competition but continues to innovate and expand its offerings.
- Index Funds: In 2000, Fidelity started offering index funds to compete with Vanguard, a major competitor in the investment management industry.
- ETF Success: Despite its efforts, Fidelity has not been particularly successful in the ETF market, although it has made significant strides in other areas of investment management.
- Venture Capital: Fidelity has also ventured into venture capital but has not achieved great success in this area compared to other financial institutions.
Customer Base and Innovation
Fidelity serves a diverse customer base and continues to innovate to meet their needs.
- Customer Base: Fidelity helps millions of individuals manage their financial goals, supports more than 28,200 businesses with employee benefit programs, and serves over 16,200 wealth management firms and institutions.
- Innovation: Fidelity continues to challenge the status quo and harness innovation to move faster and create value for its customers and clients. The company develops new products and services to stay ahead of evolving financial needs.
Community and Philanthropy
Fidelity is committed to giving back to the community through various initiatives.
- Fidelity Foundation: Edward C. Johnson 2d and Edward C. Johnson 3d established the Fidelity Foundation, pledging the firm's commitment to communities served by Fidelity.
Technological Milestones
Fidelity has achieved several technological milestones that have shaped its operations.
- First Computer Purchase: Fidelity purchased its first computer in the early days of its operations, marking the beginning of its technological advancements.
- Trend and Capital Funds: Fidelity introduced Trend and Capital funds, two of the industry’s first aggressively managed equity funds.
- Puritan Fund: The Fidelity Puritan Fund was introduced as the first Fidelity mutual fund with a goal of deriving income from stocks.
International Expansion
Fidelity's international expansion has allowed it to serve a global clientele.
- Research Office in Japan: Fidelity International Limited, founded in Bermuda, also opened a research office in Japan to manage mutual funds available exclusively to overseas investors.
Innovative Products
Fidelity continues to introduce innovative products to meet the needs of its clients.
- Fidelity Daily Income Trust: The Fidelity Daily Income Trust (FDIT) was launched as the first money market fund to offer a checkwriting feature.
- Fidelity ZERO Funds Launch: The Fidelity ZERO Funds were launched in 2018, offering zero expense ratio self-indexed mutual funds for individual investors.
Blockchain and Financial Studies
Fidelity has shown interest in blockchain technology and conducts financial studies to help individuals make informed decisions.
- Blockchain Conference: Abigail Johnson spoke about blockchain technology’s potential benefits at Consensus 2017, one of the largest blockchain conferences in the U.S.
- Financial Resolutions Study Insights: Fidelity shares resources and insights to help individuals make and keep financial resolutions, emphasizing the importance of planning ahead for uncertain times.
Fidelity Investments: A Legacy of Innovation and Growth
Fidelity Investments has grown from a single mutual fund in 1946 to one of the largest asset managers globally. With $5.4 trillion in assets under management and $14.1 trillion in assets under administration, Fidelity's impact on the financial world is undeniable. From pioneering 401(k) services to embracing blockchain technology, Fidelity consistently pushes the envelope. The company's commitment to innovation is evident in its launch of zero expense ratio funds and the establishment of Fidelity Digital Assets. Leadership from the Johnson family, especially Abigail Johnson, has steered the company through decades of change and growth. Fidelity's focus on customer needs, technological advancements, and employee ownership sets it apart in the financial industry. Whether you're an individual investor or an institution, Fidelity's extensive range of services and products aims to help you achieve your financial goals.
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