Fidelity Investments
Fidelity Investments is a prominent privately held financial services company headquartered in Boston, Massachusetts, established in 1946. As one of the world's largest mutual fund companies, Fidelity serves over 40 million individual investors and manages total customer assets valued at approximately $9.9 trillion as of March 2023. The company offers a wide range of services, including mutual funds, retirement plans, online brokerage, and employee benefits, positioning itself as a leader in the retirement planning sector, particularly in 401(k) management.
Fidelity's innovative approach to investment management has evolved since its founding, with a history of adapting to changing market conditions and investor preferences. The firm has also distinguished itself through technological advancements, being an early adopter of online services in the investment industry. Despite its successes, Fidelity has faced various challenges, including legal issues and internal management controversies, as well as the impact of competition from passively managed funds. The company's influence is significant in both national and global financial markets, making it a key player in the investment landscape.
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Fidelity Investments
Company Information
- Date founded: 1946
- Industry: Mutual funds; employer benefits and retirement administration; brokerage services; real estate
- Corporate headquarters: Boston, Massachusetts
- Type: Private
Fidelity Investments is a privately held global company based in Boston, Massachusetts. Into the mid-2020s, the Johnson family held 49 percent of the shares, with the remaining 51 percent distributed among executives. In 2024, the company employed a staff of more than 76,000, offered hundreds of mutual funds, and served tens of millions of individual investors. Fidelity is one of the two largest mutual fund companies in the world. In September 2024, its total customer assets under administrations were valued at $15 trillion.
Fidelity provides financial services that include mutual funds, human resources administration services, employee benefits services, online brokerage, and real estate investments. It also provides retirement plans for private companies and government, university, and nonprofit organizations and is one of the largest 401(k) retirement providers in the United States. Fidelity also manages benefit plans for companies and provides financial services for institutional investors. Among its accomplishments, Fidelity has distinguished itself as a technology leader among its competitors. In the mid-1990s, it was among the first investment companies to have a website. In the twenty-first century, it developed a sophisticated online investment management and brokerage capability for its customers.
History
In 1930, an investment corporation known as the Fidelity Fund was formed. After thirteen years of operation, Edward C. Johnson II purchased the Fidelity Fund and made himself president and director. In 1946, Johnson started a new organization, Fidelity Management and Research Company, the predecessor of Fidelity Investments, to provide research and advice to the Fidelity Fund.
Johnson's fund management approach marked a departure from what were then usual fund management practices. First, he moved away from principally preserving capital assets. Asset preservation, especially following the stock market crash of 1929, was understandable, but Johnson saw investment management as a means to increase investors' capital. Second, instead of relying on "blue chip" stocks that were perceived as relatively safe investments, he invested in common stocks from newer, less established companies with the potential to substantially increase in value. In the 1950s, Fidelity Capital, one of what would eventually be hundreds of Fidelity Funds, invested in companies such as Xerox and Polaroid that would demonstrate aggressive growth.
The 1960s were generally an era of prosperity for the American economy until the bear market of 1969, a fact reflected in Fidelity's growing value and in the new business areas it entered. Among these was the increasingly important specialty of retirement planning for individuals, corporations, and those who were self-employed. This business area would eventually include not only an array of investment plans but also services that Fidelity would offer to corporations in corporate retirement plan management.
In the 1970s, Fidelity added to its investment programs. The new CEO and chairman, Johnson's son, Edward C. "Ned" Johnson III, introduced money market funds as an investment instrument. In the 1980s, Fidelity grew along with an improving economy, creating several subsidiaries and managing funds. In the market crash of October 1987, Fidelity suffered dramatic decreases in value, in large part due to the aggressive nature of many of its investment programs. Fidelity did recover, although it again suffered reverses starting in 1992. Fidelity continued to expand, however, and by 1996, its assets were $509 billion.
In the twenty-first century, Fidelity's success became more difficult to sustain as it coped with domestic and international economic issues and investors' changing preferences. Management issues in 2005 had an impact. Ned Johnson's daughter, Abigail P. Johnson, who joined Fidelity in 1988 as an analyst, became head of the company's mutual fund division in 2001. Her father removed her from the position in 2005, however, after the funds did not perform to expectations. As a result, although Fidelity would not comment publicly, it was rumored that Abigail Johnson, long assumed to be Ned Johnson's successor, might not become CEO. Speculation increased when it became known that she had sold a large portion of her shares in Fidelity to a Johnson family trust that year. Abigail Johnson went on to serve in other executive roles at Fidelity, however, and any doubts about Fidelity's succession plan ended when she was promoted to president in 2012 and then also named CEO in 2014. Ned Johnson continued to serve as chair of the board.
By the mid-2010s, Fidelity faced serious internal discussions about the direction of the company. Much of this surrounded the future of Fidelity's longtime focus, the mutual fund. Mutual funds are essentially the collected money of a group of investors invested in various types of instruments (such as money markets, stocks, or bonds). Actively managed, the fund's objective can range from aggressive growth and higher risk to more conservative growth and lower risk. Mutual funds can be specialized according to the nature of the industries that the manager invests in or even international in scope. However, the rise of passively managed stock-index funds—which track an index and are not run by making selective investments in corporations—led many financial experts to question whether investors would continue to value mutual funds. Fidelity, along with other investment funds, saw significant withdrawals from its managed funds in favor of passively managed funds. Ultimately, the company did diversify its offerings but continued to emphasize managed funds.
Fidelity's slow but steady diversification helped it weather volatile stock market fluctuations in the late 2010s. In early 2019, the company reported a record $20.4 billion in revenue for 2018, with the company's annual income surpassing $6 billion for the first time. Though its rival, Vanguard, continued to develop, Fidelity beat Vanguard in availability of order types in early 2023, offering more options for web, desktop software and mobile app ordering. Additionally, the company's trading commission was lower on average than Vanguard. However, Fidelity's revenue for 2022 was $10.865 billion, a 30 percent decline from the previous year. Still, these numbers rebounded in 2024, when Fidelity’s revenue was $13.5 billion, a 24 percent increase from 2023.
Impact
Fidelity has had a major influence on the national and global financial sector as a leader in the mutual fund and personal investment industry, as well as one of the leading managers of retirement plans and other benefits for employers. The company not only manages important assets of millions of customers but also has an economic impact as a large employer and taxpayer. Its corporate presence is seen not just in its Boston headquarters, but in regional offices around the United States and worldwide. It has been included on various publications' lists of top investment firms, as well as related rankings such as Forbes magazine's lists of best overall employers, employers for women, employers for diversity, and employers for new graduates. The company has also had an influence on other financial services providers through its pioneering use of technology, including early online services and involvement with cryptocurrencies such as Bitcoin. In 2024, Fidelity launched the Fidelity Wise Origin Bitcoin Fund, expanding its foothold in the cryptocurrency sector.
Despite its considerable track record of financial success, Fidelity has also faced challenges and controversies. Like many financial institutions, it saw a number of legal and regulatory issues in the twenty-first century. For example, in 2004, the company settled charges with the US Securities and Exchange Commission (SEC) over alleged tampering with and destruction of documents. Broker-dealers affiliated with Fidelity have also been fined for issues such as misrepresentation of investment plans and record retention violations. A 2016 investigation by Reuters noted that the Johnson family was involved in a potential conflict of interest through a venture capital firm that directly competed with Fidelity, though no outright criminal activity was found. In 2019, the financial media reported multiple lawsuits against the company over alleged hidden fees for 401(k) plans, and a US Department of Labor investigation into the issue was launched. Lawsuits continued in the 2020s with a former employee suing for discrimination and hostility in the workplace and many settlements for various accusations were carried out.
Bibliography
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“Fidelity National Financial Revenue 2010-2024.” Macrotrends, www.macrotrends.net/stocks/charts/FNF/fidelity-national-financial/revenue. Accessed 24 Jan. 2025.
"Index We Trust." The Economist, 11 June 2016, www.economist.com/news/finance-and-economics/21700401-vanguard-has-radically-changed-money-management-being-boring-and-cheap-index-we. Accessed 24 Jan. 2025.
“Introducing the Fidelity Wise Origin Bitcoin Fund (FBTC).” Fidelity, institutional.fidelity.com/advisors/investment-solutions/asset-classes/alternatives/fidelity-wise-origin-bitcoin-fund. Accessed 24 Jan. 2025.
Kerber, Ross. "Profit at Fidelity Rockets 20% in 2005." The Boston Globe, 3 Mar. 2006, archive.boston.com/business/articles/2006/03/03/profit‗at‗fidelity‗rockets‗20‗in‗2005. Accessed 24 Jan. 2025.
McLaughlin, Tim. "How the Owners of Fidelity Get Richer at Everyday Investors' Expense." Reuters, 5 Oct. 2016, www.reuters.com/investigates/special-report/usa-fidelity-family. Accessed 24 Jan. 2025.
Rooney, Kate. "Fidelity Notches Record Profit and Revenue Despite a Slowdown in Stock Markets." CNBC, 21 Feb. 2019, www.cnbc.com/2019/02/21/fidelity-investments-annual-report-2018.html. Accessed 24 Jan. 2025.
"The 10 Best Fidelity Mutual Funds To Buy Now." The Street, 19 Dec. 2023, www.thestreet.com/topics/mutual-funds/fidelity-best-funds. Accessed 24 Jan. 2025.
"We Are Fidelity." Fidelity, www.fidelity.com/about-fidelity/fidelity-by-numbers/corporate-statistics. Accessed 24 Jan. 2025.