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Wednesday, November 21, 2018

Abby Stands By Active Management, Tackles Barriers to Outreach

News summary by MFWire's editors

Though Fidelity [profile] has grown to be an index fund giant, too, Abby Johnson is standing by active management. (Fidelity had $2.4592 billion in AUM as of March 31.)

Abigail Pierrepont Johnson
FMR (dba Fidelity Investments)
Chair, President, CEO
"I'd like to think that people will continue to pay for active management," Johnson — president, CEO, and chair of the Boston Behemoth — tells Bloomberg. "That's the core value proposition that we've been known for forever."

Johnson shared that tidbit and much more as part of a long interview, alongside Kathy Murphy, head of Fidelity's personal investing unit. Murphy notes that Fidelity is now "the no. 2 provider of index funds in the country." (The biggest index provider, like Fidelity, also offers lots of active funds.)

Kathleen A. Murphy
Fidelity Investments
President, Personal Investing
"We were late to that game," Johnson says. "I like to think we've caught up now."

Murphy and Johnson added that Fidelity's old Spartan index funds brand was "a self-inflicted wound" and that changing the brand to Fidelity Index Funds two years ago was a big help.

Johnson describes asset management as Fidelity's "most profitable business," unsurprisingly, though she warns about how market-dependent it is.

"One of the things that's fund, that I really like about our business, is that we're not just in that asset management box," Johnson says. "We're doing a bunch of other things, too."

In terms of Fidelity's new no-fee index funds, launched alongside eliminations of account minimums and reductions in the number of index fund share classes, Johnson describes those efforts as part of a way to reduce barriers to reaching "so many different people," to address "a fundamental challenge" to the asset and wealth management worlds.

"I'm very down on conventional advertising. Kathy still spends a lot of money doing it, and her team members make a very cogent pitch that it's actually money well spent, but I think that conventional advertising will be less and less the way of the world," Johnson says. "We need to find other ways to get people to give us a try. Having a no-minimum, no-fee offering seemed like a pretty good way to get people to consider us with the minimal amount of friction possible."

"Our core mission centers around trying to bring this complicated world to people who are not experts in a way that they can figure out and navigate and ultimately make a plan for themselves," Johnson adds. "One of the many things that is complicated then is to figure out how to charge for it. You can't charge for every individual thing, because then people would never be able to understand what they were paying for or how much."

Avid Fidelity-watchers will want to dig into the full interview, which covers a host of other topics, including: bringing more women into the Fidelity team; making branches more friendly; getting into blockchain and cryptocurrency; how millennial customers are different; the importance of technology; opportunities to expand overseas; Johnson working with her now retired father; the BlackRock-BGI deal from 2009; and more. 

Edited by: Neil Anderson, Managing Editor


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