Fidelity Investments

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Fidelity Investments Inc.
Privately held company
Industry Financial Services
Founded 1946; 71 years ago (1946) (as Fidelity Management and Research Company)
Founder Edward C. Johnson II
Headquarters Boston, Massachusetts
Area served
Worldwide
Key people
Abigail Johnson, CEO[1]
Kathleen Murphy, President
Products Investment management
Mutual funds
Brokerage firm
Revenue Increase US$15.9 billion (2016)[2]
Increase US$3.5 billion (2016)[2]
AUM Increase $2.13 trillion (2016)[2]
Owner Abigail Johnson and family (49%)
Employees and ex-employees (51%)
Number of employees
45,000, including 5,000 in Boston (2016)[2]
Website Fidelity.com

Fidelity Investments is a multinational financial services corporation based in Boston, Massachusetts.

Fidelity Investments operates a brokerage firm, manages a large family of mutual funds, provides fund distribution and investment advice, retirement services, wealth management, securities execution and clearance, and life insurance.

History[edit]

The company was founded as Fidelity Management & Research (FMR) by Edward C. Johnson II in 1946.[1] In 1969, the company formed Fidelity International Limited (FIL) to serve non-U.S. markets.[3] It was spun off in 1980.[3] In 2010, it was rebranded as 'Fidelity Worldwide Investment'.[4] In 1982, the company started offering 401(k) products.[1] In 1984, the company offered computerized stock trading.[1]

In 1997, Robert Pozen was named CEO.[5] In 2010, Fidelity Ventures, its venture capital arm, was shut down, and many of the employees created Volition Capital.[6] In 2011, Fidelity changed the name of its international division from Fidelity International to Fidelity Worldwide Investment and a new logo was introduced.[7] In 2012, the company moved its Boston headquarters to 245 Summer Street.[8]

Current operations[edit]

Mutual funds[edit]

FMR has three fund divisions: Equity (headquartered in Boston, Massachusetts), High-Income (headquartered in Boston) and Fixed-Income (headquartered in Merrimack, New Hampshire). The company's largest equity mutual fund is Fidelity Contrafund, which has $107.4 billion in assets,[9] making it the largest non-indexed fund in the US. The current manager of Contrafund is William Danoff.

Fidelity Magellan is another large equity fund, with $15.5 billion in assets.[10] Its current manager is Jeffrey Feingold, who also manages the Fidelity Trend Fund. It was previously managed by Ned Johnson from May 2, 1963 to Dec. 31, 1971, Peter Lynch from May 31, 1977 to May 31, 1990 and Harry W. Lange from 2005 to 2012.

Brokerage[edit]

Fidelity Investments operates a major brokerage firm and has investor centers in over 140 locations throughout the US. Through its subsidiary, National Financial Services LLC, Fidelity Investments provides services to its correspondent broker-dealers, institutional investment firms and registered investment advisors including brokerage clearing and back office support and a suite of software products for financial services firms. National Financial was the custodian for over $443 billion in assets, in 4.3 million accounts as of September 30, 2010.[11]

Benefits outsourcing[edit]

Fidelity Personal, Workplace and Institutional Services (PWIS) is the largest provider of 401(k) retirement plan services with $1.4 trillion under administration[12] and $32 billion in total defined contribution assets, as of 2015.[13] Other services provided include pension administration, health & welfare administration, stock plan administration as well as payroll and other record-keeping services.

Devonshire Investors[edit]

The company's Devonshire Investors arm is a division that gives the owners of the company the ability to make other investments outside its funds.[14]

Assets include Veritude, an employment agency for jobs at Fidelity.[15] The company has been a major investor of real estate, owning the Seaport Center and 2.5 million square feet of office space in Boston.[16] It formerly owned Community Newspaper Company, the largest chain of newspapers in suburban Boston, Massachusetts, sold to the Boston Herald in 2000[17] and now owned by GateHouse Media. Fidelity has also strategically invested in the telecom/managed services/data center industries, including COLT Telecom Group in Europe,[18] MetroRED in South America, and KVH Co. Ltd. in Japan. Since 2008, all MetroRED ownership has been completely divested.

It was formerly heavily invested in commercial lumber and building materials.[19] In 2013, they sold Boston Coach, a limousine and black-car service, founded in 1985 by Ned Johnson after waiting too long for a taxi, to Harrison Global.[20] It formed ProBuild Holdings in 2006 and sold it to Builders FirstSource in 2015.[21]

Donor-advised fund[edit]

Fidelity manages a donor-advised fund, Fidelity Charitable, in 1991, becoming the first commercial DAF provider. As of 2017, Fidelity Charitable is currently the largest charity by donations from the public, surpassing the United Way. Tax donations to a DAF can be registered in the year of the donation, when the beneficiary may be being chosen. In a 2015 survey by Fidelity Charitable, 90% of donors who responded stated this benefit as the main reason for starting donations using a DAF. Donors also cite that this allows them to give more to charity. Investments in a DAF register interest until the distribution is given to a beneficiary.[22] Fidelity Charitable produces a report "Women and Giving" that examines differences in giving attitudes, strategies and priorities across generations and gender.[23]

In 2016, Fidelity Charitable raised nearly $7 million in bitcoin. As of June 2017, the organization's annual report said that nearly $2 billion had been committed by all funding methods, with almost $9 million in bitcoin.[24]

Legal issues[edit]

Document retention fines[edit]

In February 2007, the NASD, a division of the Financial Industry Regulatory Authority, fined 4 FMR-affiliated broker-dealers $3.75 million for alleged registration, supervision and e-mail retention violations. The broker-dealers settled without admitting or denying the charges.[25]

In 2004, Fidelity Brokerage paid $2 million to settle charges by the U.S. Securities and Exchange Commission that employees altered and destroyed documents in 21 of its 88 branch offices between January 2001 and July 2002. Fidelity has internal inspections every year to make sure it is complying with federal regulations. Management was accused of pressuring branch employees to have perfect inspections and gave notice of the inspections and that at least 62 employees destroyed or altered potentially improper documents maintained at branch offices including new account applications, letters of authorization and variable annuity forms.[26]

Misrepresentations[edit]

In May 2007, NASD fined two Fidelity broker-dealers $400,000 for preparing and distributing misleading sales literature promoting Fidelity's Destiny I and II Systematic Investment Plans, which were sold primarily to U.S. military personnel. As part of the settlement, the FMR affiliates were required to notify Destiny Plan holders who want to increase their investments in existing Destiny Plans that additional shares of the underlying fund can be purchased outside the Destiny Plans without paying the additional sales charges.[27]

Ownership and management[edit]

Fidelity Investments Investor Center on Boylston Street in Boston

Johnson Family[edit]

The founding Johnson family, individually and through various trusts, owns stock representing a 49% voting interest in FMR, and have signed agreements pledging to vote all their shares as a bloc. Edward Johnson III was chairman of the group, but was replaced by his daughter, Abigail Johnson. Abigail was once the largest single shareholder with about 25% ownership, but in October 2005, it was reported that she had sold a "significant" portion of her shares to family trusts, and that there were doubts as to whether she was still in line to succeed her father.[28]

Employees and ex-employees[edit]

Most of the remaining 51% of the company is held by various Fidelity employees and ex-employees, including fund managers and ex-managers, such as Peter Lynch.[29]

Offices[edit]

FMR's corporate headquarters are in Boston, Massachusetts, with the largest U.S. operations located in Merrimack, New Hampshire; Smithfield, Rhode Island; Westlake, Texas; Covington, Kentucky; Durham, North Carolina; Albuquerque, New Mexico; Cincinnati, Ohio; Salt Lake City, Utah; Jacksonville, Florida; Greenwood Village, Colorado; and American Fork, Utah. It also has offices in Canada in Toronto, Montreal, Calgary and Vancouver. Fidelity Management and Research in 2009 opened offices in both Hong Kong and Tokyo, Japan to add capabilities to its small cap research.

In 2004, Fidelity established its first presence in India by opening an office in Mumbai. However, their offices in India mostly serve back-office function and do not make any investments related decisions.[1] The company has over 4,000 employees in India. Its second largest software development facility (after the United States) is in Bangalore and Chennai.

Fidelity Investments Ireland was established in 1996 as the European offshore development centre for Fidelity Investments and now employs over 1,000 people with offices in Dublin and Galway. Fidelity also has offices in France, Germany, Belgium, Italy, Spain and Switzerland and London for its HR Solution business HR Access.

Marketing[edit]

Paul McCartney marketing campaign[edit]

Fidelity has experimented with marketing techniques directed to the baby boomer demographic, releasing Never Stop Doing What You Love, a compilation of songs by Paul McCartney. McCartney became the firm's spokesman in 2005 in a campaign entitled "This Is Paul." On the day of the disc's release, company employees were treated to a special recorded message by Paul himself informing them that "Fidelity and [he] have a lot in common" and urging them to "never stop doing what you love".[30]

See also[edit]

References[edit]

  1. ^ a b c d e Fidelity: Our Heritage
  2. ^ a b c d Healy, Beth (February 16, 2017). "Despite struggling stock funds, Fidelity reports record revenue, profit". Boston Globe. 
  3. ^ a b Newton, Gill (February 16, 2017). "Fidelity Worldwide Investment is going its own way in America". IR Magazine. 
  4. ^ Kaso, Hysni (September 14, 2010). "Fidelity International rebrands as ‘Fidelity Investment Managers’". Investment Week. 
  5. ^ GILPIN, KENNETH N. (April 22, 1997). "2 Executives Get New Posts At Fidelity". New York Times. 
  6. ^ Moore, Galen (January 11, 2010). "Fidelity’s venture capital arm breaks off". Boston Business Journal. 
  7. ^ Pearce, Andrew (June 2, 2015). "Fidelity Worldwide Investment COO exits". FN London. 
  8. ^ Healy, Beth (November 16, 2012). "Fidelity plans to move Boston headquarters". Boston Globe. 
  9. ^ Fidelity® Contrafund® Fund - NYTimes.com
  10. ^ Fidelity® Magellan® Fund - NYTimes.com
  11. ^ National Financial web site, About Us
  12. ^ http://blog.runnymede.com/401k-providers-2015-top-20-lists
  13. ^ http://blog.runnymede.com/401k-providers-2015-top-20-lists
  14. ^ Leung, Shirley (August 9, 2013). "A heavy loss in Fidelity’s pursuit of the perfect tomato". Boston Globe. 
  15. ^ Vertitude Jobs
  16. ^ DIESENHOUSE, SUSAN (April 9, 2000). "Fidelity: A Major Investor in Real Estate, Too". New York Times. 
  17. ^ BARRINGER, FELICITY (September 29, 2000). "THE MEDIA BUSINESS; Fidelity Sells Newspapers To Boston Herald Owner". New York Times. 
  18. ^ Kunert, Paul (August 12, 2015). "Colt shareholders grab Fidelity offer, declare 'we're outta here'". The Register. 
  19. ^ "Fidelity's ProBuild investment stumbles -- filing". Reuters. November 5, 2009. 
  20. ^ https://www.bostonglobe.com/business/2013/05/23/fidelity-selling-bostoncoach-limousine-group-launched-chairman-ned-johnson/pgujsz0a4xNQqDtDMS0uGI/story.html
  21. ^ "Builders FirstSource Completes Acquisition of ProBuild" (Press release). Globe Newswire. July 31, 2015. 
  22. ^ "A philanthropic boom: “donor-advised funds”". The Economist. Retrieved 2017-04-06. 
  23. ^ "Generational and Gender-Based Differences in Giving: Do They Matter?| Nonprofit Quarterly". Non Profit News For Nonprofit Organizations | Nonprofit Quarterly. 2017-05-11. Retrieved 2017-05-12. 
  24. ^ "Fidelity Charitable Has Raised $9 Million in Bitcoin So Far in 2017 - CoinDesk". CoinDesk. 2017-06-29. Retrieved 2017-06-30. 
  25. ^ "NASD Fines Four Fidelity-Affiliated Broker-Dealers $3.75 Million for Registration, Supervision and Email Retention Violations" (Press release). Financial Industry Regulatory Authority. February 5, 2007. 
  26. ^ "SEC and NYSE File Settled Action Charging Fidelity Brokerage Services for Violating Federal Securities Laws and NYSE Rules in Connection with Document Alteration and Destruction" (Press release). U.S. Securities and Exchange Commission. August 3, 2004. 
  27. ^ "NASD Fines Two Fidelity Broker Dealers $400,000 for Distributing Misleading Sales Literature About Systematic Investment Plans Sold to Military Personnel" (Press release). Financial Industry Regulatory Authority. May 8, 2007. 
  28. ^ "Johnson still Fidelity successor?". CNN. October 28, 2005. 
  29. ^ Fidelity Investments (March 18, 2013). "Activities and Management of FMR. Proxy statement, special meeting of shareholders of Fidelity Advisor Series VII Fidelity Select Portfolios to be held on May 14, 2013. p. 20.
  30. ^ Abelson, Jenn (September 8, 2005). "Brand on the run: Struggling Fidelity turns to ex-Beatle to lure boomers". Boston Globe. 

External links[edit]