Abby Johnson, president of FMR LLC, the parent company of Fidelity Investments, told a room full of entrepreneurs that being a privately held business (FMR is owned by employees and the Johnson family) has pushed the company to innovate in-house.
“We don’t do acquisitions,” except for very small transactions, Johnson said in an interview Friday at TiECON East, a Boston summit for entrepreneurs in the fields of information technology, cleantech, education and life sciences. “We don’t have a public currency that would make any [major] acquisition viable. Everyone in the company understands this. We build stuff ourselves and over the long term that’s been very good” for Fidelity.
Fidelity’s build-not-buy attitude may not have encouraging to so-called FinTech (short for financial tech) entrepreneurs in the audience who were perhaps looking to score big by selling out to the mutual fund giant. But Johnson added that Fidelity is eager to invest, partner and buy from startups. Indeed, through its Fidelity Ventures arm and other activities, Johnson said, Fidelity is looking for partners that can help the company differentiate itself from competitors.
One category Fidelity is particularly keen to win is the newest generation of investors. Millennials are looking for “a new front door, or a different-looking front door” than the traditional 401(k), she said. Demand for new tools for younger investors, she added, is being driven by employers who are frustrated that their new employees are ignoring advice about retirement plans.
Fidelity, which has been an early mover in enabling its retail customers to use mobile devices for some transactions, is moving to deploy similar mobile services for its workplace customers. She said the company also is experimenting with other digital tools and tactics like “gamification,” which rewards users with points and other digital incentives for making smart financial choices.
Fidelity is one of the largest providers of workplace plans, such as stock plan services, health savings accounts and more. In 2013 the company served some 23.8 million employees, up from 22.9 million in 2012. Overall, its entire portfolio of assets under administration totaled $4.62 trillion last year, up from $3.88 trillion the year before.
Despite the company’s scale and influence in the public markets (not to mention its role in managing the nest eggs of millions) Fidelity and Johnson maintain an incredibly low profile. For example, when Johnson was promoted to president of FMR in Sept. 2013, from the role of president, Fidelity Financial Services, the company did not issue a press release or announce her elevation to the public.
Johnson demurred somewhat when asked about “growing up Fidelity.” Her grandfather, Edward C. Johnson II, founded the company. Her father, Edward C. (Ned) Johnson, is CEO. Abby Johnson, ranked No. 10 on Fortune’s annual ranking of the Most Powerful Women in American business, is a front runner to succeed her father as the company’s top executive.
Johnson said her parents were “happy, well-adjusted people who pursued their passions” and encouraged all their children to do the same. She said she was curious about their work in “the way any kid would be. You want to know what your parents do all day when you’re working your butt off at school.”
Fidelity’s private status certainly abets Johnson’s aversion to publicity–and it may help spark innovation by taking game-changing acquisitions off the table. But it Johnson admitted that not being a publicly traded company has one drawback: While the firm doesn’t have the pressure to meet investors’ earnings expectations every quarter, she said, “the downside is that there’s the potential to lose a little bit of discipline.” As Fidelity’s heir apparent, it is up to Johnson to find ways to keep everyone on track.