Fidelity Investments became the largest mutual fund operator in the United States by bringing "Wall Street to Main Street."
The Boston-based company was founded in 1946 by Edward C. Johnson II, with $13 million in managed assets. By the time his son, Edward C. "Ned" Johnson III, became chairman in 1977, the company had grown to $5 billion, enough to make Fidelity a major force in the world of mutual funds.
But it was under the younger Johnson that the family-owned financial empire would grow to unheard-of proportions, with $675 billion in managed assets, including 251 mutual funds with 12 million shareholders.
The financial services company, which is considering relocating 2,700 employees to Westlake, introduced a number of innovations to make it easier for people to invest. These ranged from money market accounts with check-writing capability to 24-hour phone services that allowed people to make their own investments.
"He figured out a way to get rid of the broker. That one can't be overstated," said John Bonnanzio, group editor for Kobren Insight Group in Wellesley Hills, Mass., which produces a newsletter on Fidelity funds.
"Fidelity has been looked at as a real marketing machine and that has very much to do with it. This was really what changed the industry. This brought Wall Street to Main Street, if you will."
The privately held company -- one of the last big nonpublic financial institutions on Wall Street -- now employs more than 26,000 people, including 2,700 in Dallas and Irving. It has eight regional operations -- including one in the Metroplex -- with telephone representatives available 24 hours a day. It is the largest provider of 401(k) retirement savings plans in the country.
Although considered an industry leader for more than two decades, Fidelity experienced its biggest growth in the 1980s.
In 1980, Fidelity introduced the first tax-exempt money market fund, which invests in tax-exempt securities such as municipal bonds. Fidelity was among the first to offer money market funds and the first to offer money market accounts that allowed investors to write checks against them.
In 1986, it added a phone system allowing customers to invest by phone, a hallmark of the discount brokerage business that cut down on broker fees and gave people more direct access to their investments.
"Mr. Johnson's philosophy is that you need to be actively involved in your investing so you understand what your money is being invested in," said Vicki Anderson Granado, director of corporate communications for Fidelity. "That is very much the premise under which Fidelity works today."
Although the phone system tended to cut brokers and advisers out of the loop, Fidelity also has an Advisor Funds series of funds that are distributed through 950 banks, 1,700 brokers and dealers and 65 insurance companies.
"Basically, if we used the regular Fidelity funds, they would charge our clients a fee but the adviser who was giving the recommendations would not receive a fee," said Kim Dignum, a certified financial planner with Dignum Financial Services in Fort Worth.
Still primarily known for its mutual funds, Fidelity Investments began an advertising campaign last year to highlight a full range of financial services, including flat-rate commissions and electronic fund and brokerage services.
"It does appear that they are branching in every direction at this point," Dignum said. "Basically they look like, in their vision, they are trying to cover every facet of financial services."
The company is often cited for its investment in technology; Fidelity is expected to spend $500 million for computer hardware, software and networks this year, Anderson Granado said.
"Fidelity has one of the strongest research departments on the street. It's phenomenal," Dignum said. "Obviously the strength in that is that when their managers are looking at different companies, they have such strong research on the different companies available."
For Fidelity, using the Internet could be the innovation that the telephone was 20 years ago, Anderson Granado said, noting that 60 percent of Fidelity's trading now takes place on personal computers.
"We have over the last year tried to increase awareness of what we offer electronically," Anderson Granado said. "It's what our customers are wanting. It is a growth area, but it is because our customers are growing in that area. We are always looking at what is the next thing we can offer to our customers."
Staff Writer Kierstan Gordon contributed to this report.
Andrew Backover, (817) 685-3808
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