Early Adopter Fidelity, 72, Takes on Greater Tech Focus
Fidelity Investments, a 72-year-old, family-controlled firm, plans to shed its image as a retirement plan and mutual fund manager and focus on being a tech company. The company is spending billions of dollars to compete in new technologies like blockchain, artificial intelligence and virtual reality.
Fidelity executives say the company wants to measure itself against tech firms like Nvidia, not its more traditional Wall Street rivals like Charles Schwab. It’s recruiting top talent in Silicon Valley to make that happen.
Fidelity was doing fintech before fintech was cool, said CEO Abigail Johnson. Her grandfather, Edward C. Johnson, founded the company in 1946 and is still quoted as saying it’s better to “take intelligent risks rather than follow the crowd.”
The company has always embraced new tech. In the 1960s, the firm bought its first mainframe computer, which took up the entire floor of an office building. In the 1970s, Fidelity was the first to sell retail mutual funds directly through a toll-free telephone line and had the first voice-activated computer response system for stock prices and yield quotes. In the 1980s, it rolled out Fidelity Money Line, the first nationwide electronic funds transfer for money market funds, and a voice-activated computer answering system.
Fidelity spends $2.5 billion on technology annually, including FCAT, another innovation center that came along 10 years later called Fidelity Labs and enterprise services. The innovation centers have become a place where employees can take risks, including the creation of a mobile app, a chatbot named Cora and the secretive blockchain efforts.
CEO Abby Johnson said the company was an early investor in blockchain. Despite being one of the riskiest and most volatile asset classes, the company still subscribes to supporting cryptocurrency. Flash forward to December of last year when bitcoin rose to almost $20,000, “behold — the price goes up and all the sudden we’re making money, which was never the intent,” Johnson said, declining to say how much. Fidelity customers to check their cryptocurrency balances on the Fidelity mobile app through a partnership with Coinbase. In 2015, it started enabling charitable donations in bitcoin.
Although most of its brokerage peers are also spending big on technology, Fidelity has managed to fly under the radar, according to one analyst who covers its competitors. Richard Repetto, principal at Sandler O’Neill & Partners pointed out there’s less scrutiny on Fidelity’s spending, investments and returns and, compared to a public company, it doesn’t really have to share what it’s working on.
“Fidelity is a sleeping giant,” Repetto said. “Or at least they’re not a well known giant as far as what they’re actually doing.”
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