Intelligence

Abigail Johnson, CEO of Fidelity, speaks out

Reporter: Vested staff

This week’s Vested Suggested features stories that the team at Vested is reading and thinking about to begin the week.

Names make news: Two prominent executives at Fidelity — Abigail Johnson, who in 2014 succeeded her father as CEO; and Kathleen Murphy, who leads the personal investing unit responsible for the industry’s first zero-fee index funds — gave a rare interview to Peggy Collins at Bloomberg. It is worth reading in full, but here are some excerpts.

On the rationale behind the no-fee offering: Johnson: “I’m very down on conventional advertising. … 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.”

On how 24- to 38-year-old consumers are impacting products: Murphy: “[Millennials are] pushing the entire industry to make the whole investment experience easier. They’re the first users and then the rest of the world catches up. We design things for millennials and then calibrate to older people.”

On other demographic changes: Murphy: “We’re in the midst of a $22 trillion shift in assets to women, because of longevity, because they’ll outlive their spouse, because of divorce, whatever. Second, and related, 9 out of 10 women will be the sole decision-maker in their household on their finances at some point in their life, either due to the death of the spouse, divorce, or because they stayed single over the course of their career.”

On sexual harassment and gender bias in the workplace: Johnson: “Men and women [at Fidelity] see the facts the same way. But how they feel about the facts is often very different.”

Making cuts: “U.S. money managers are taking steps to rein in everything from pay to jobs to travel as they try to sustain margins in the face of heightened competition.”

Dark stores: Lawyers representing big-box retailers want property tax assessors to believe their clients’ massive, crowded storefronts are worth the same as empty buildings of the same approximate size. In many cases, they are winning. This is reducing the tax bill of those properties — great for shareholders, but not for the ordinary people who live in the communities stuck with a reduction in property tax revenue. Local lawmakers are stuck having to either find the revenue elsewhere or cut public services.

‘We can, however, do better’: It is the 40th birthday of the 401(k) fund, and numerous people have decided it is the perfect time to crap all over it. “It’s like going to the doctor, being told to go educate yourself on your anatomy, and then to pick one of these three drugs to take,” said one source. “You are making people do what they aren’t supposed to do.”

Said another: “The big failure with the 401(k) is that it was supposed to be easy and popular, and we were supposed to expand coverage from 50% to nearly 95%,” and then, well, didn’t.

Portraits of the coming retirement crisis: “When Barb Strickert married, she and her husband wrote down a one-year plan for their lives together. And a three-year plan. Five- and 10-year plans, too.” …

“[Now], she and Brian no longer write down their plans.”