Fidelity Chairman Announces Retirement
In an announcement we’ve long anticipated, Fidelity made it official on November 21: Chairman Ned Johnson plans to retire at the end of the year, naming his daughter and current Fidelity CEO Abigail Johnson as his successor.
We view this change as essentially positive, one that will enable the fund titan to continue to grow and evolve while retaining the philosophy and culture upon which Fidelity’s well-deserved reputation is built.
“Surrendering your badge to the new sheriff in town is never easy,” Adviser Investments Chief Investment Officer Jim Lowell told Barron’s. “This might have taken too long for Ned, but I think this healthy for the family, and the company.”
It’s been clear to us
since her appointment as president of Fidelity Financial Services in 2012 that Ms. Johnson would inevitably ascend to the top of the company, and her embrace of technology and product innovation will be a major factor in helping Fidelity react to sweeping changes in the industry.
Ms. Johnson began her career at Fidelity at age 27 in 1988 and worked as an analyst and portfolio manager on a number of funds while learning the ropes of the investment business that she went on to lead, becoming head of Fidelity’s Asset Management division in 2001. In subsequent roles, she managed every aspect of Fidelity’s distribution business, growing its scale and scope to serve its 25 million customers. She became CEO in October 2014.
Ms. Johnson’s appointment is the latest branch on the family tree. Ned Johnson assumed the CEO role from his father and firm founder Edward Johnson II, in 1977, a position he held until passing the torch to his daughter in 2014 while remaining chairman. Following this next transition to Ms. Johnson, the 86-year-old Johnson will become chairman emeritus, maintaining an office at Fidelity headquarters and continuing to consult periodically with his daughter and the firm’s board of directors.
We do not expect the transition or new leadership to have any negative impact on Fidelity investors. We’ve long viewed Ms. Johnson as a highly capable leader, and someone who Mr. Johnson knows has proven her constant value and her lasting worth.
In a broader scope, this marks more than the end of a chapter at Fidelity; it’s the end of an era. Mr. Johnson joined the firm in 1957 as a research analyst, went on to manage Fidelity’s Trend fund from 1958–1967 and served as the first helmsman of the Magellan fund from 1963–1971 before assuming executive control of the company in 1972.
Johnson quickly became known as an innovator in the financial services industry, pioneering the direct marketing of mutual funds in the 1970s and making Fidelity the first company to enable customers to write checks with their money market accounts. In 1972, Fidelity oversaw $3.9 billion in assets; Mr. Johnson hands over the keys to a company with $5.5 trillion in assets under administration upon his retirement. Not a bad run.
In an internal memo to employees, Johnson expressed his optimistic outlook for the firm’s future: “While we have enjoyed much success, evolving customer preferences and new regulatory requirements are transforming the investment management industry. However, we are prepared to seize the opportunities in this changing competitive landscape. I have never felt more confident about Fidelity’s future than I do now.”
If you’ve followed our coverage, you know that, after a late start, Fidelity is pushing aggressively into the ETFA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index.
market, including its attempt to “reinvent”
the asset class with actively managed ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index.
that look to capitalize on Fidelity’s strong reputation for active management.
Fidelity has also been aggressively keeping pressure
on Vanguard in their ongoing “fee wars” under Ms. Johnson’s watch, as we’ve covered
in recent years
. Given that fees are often a key factor distinguishing one firm’s ETFs from another’s, we expect to see these products get even cheaper for investors moving forward given her commitment to remaining competitive in the space and providing investors with low-cost options.
All indications are that Ms. Johnson will continue to innovate and move Fidelity forward. She’s been hailed by board members for her attention to new technology and inventive products. We see Ms. Johnson’s leadership as likely to be as focused on leveraging technology as her father’s career was by bringing Wall Street to investors of all stripes nationwide.
About Adviser Investments
Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016.
For more information, please visit www.adviserinvestments.com or call 800-492-6868.
Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.
Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. factors, strategies, affiliations, services offered and fees charged.
Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance.
Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility.
© 2018 Adviser Investments, LLC. All Rights Reserved.