Inside Fidelity: The Private Dynasty That Changed American Investing

Jonathan Boyar (00:00):

Jonathan Boyar (00:02):

Important disclosures and disclaimers apply to this episode. Please listen to the end of the episode for the full disclaimer. One of the best parts of hosting this podcast is the people I get to meet and the conversations it allows me to have. I was in the middle of reading House of Fidelity by Justin Bear and kept thinking this was a story my audience would really enjoy. Fidelity is a company that millions of Americans know, but very few truly understand. It also has a special connection to Boyar Research. It was one of our firm's first clients back in the 1970s. So I reached out to Justin and I was thrilled he agreed to come on the podcast. In this conversation, we discussed the rise of the star portfolio manager, why Fidelity's private family controlled structure mattered so much and the dramatic succession battle inside the Johnson family.

(00:53):

I really enjoyed this conversation. I hope you do as well. Welcome to The World According to Boyar, where we bring top investors, bestselling authors, and business leaders to show you the smartest ways to uncover value in the stock market. I'm your host, Jonathan Boyar. My guest today is Justin Bear, a veteran journalist and editor at the Wall Street Journal and author of House of Fidelity: The Rise of a Johnson Dynasty and the company that changed American Investing. Fidelity is one of the most important financial companies in America. Millions of people know it through their 401ks or their brokerage account or owns one of their mutual funds. Justin's book explains how Fidelity became what it is today, a private family controlled financial giant that helped popularize mutual funds produce legendary investors like Jerry Tsai, Peter Lynch and Will Danoff built itself into the infrastructure of American retirement and repeatedly adapted as the investment industry changed around it.

(01:53):

Justin, welcome to The World According to Boyar.

Justin Baer (01:56):

Thank you. It's great to be here.

Jonathan Boyar (01:58):

I'm really excited. I really enjoyed your book and I guess we get right into it. Everyone has heard of Fidelity or almost anyone involved in investing, but most don't know all of the businesses it's in. How would you describe what Fidelity actually is?

Justin Baer (02:12):

What Fidelity is, is also changed over the years. Right now, we want to look at their major businesses. They really have four. They have three essentially platforms where they are managing investment accounts for different sets of individual investors. One is a big retirement account business where people maybe get their retirement account through their employer in a 401 plan. A second one is a retail brokerage business where they'll have lots of branches around the country and an online brokerage. And the third is where there is a little bit of a role of an intermediary where they're serving as a custodian to independent financial advisors and smaller banks and broker dealers and providing a essential investment platform and the back office for those advisors. And in each of those cases, they serve and interact with individual investors directly. The other major business is the legacy business that they've had since day one, which is the asset management, the stock pickers and portfolio managers and analysts that are researching stocks and bonds and other investments.

Jonathan Boyar (03:25):

So anyone over 50, 55 when they think Fidelity would probably think that mutual fund arm, is that now a small part of the business or is it big or we just don't know?

Justin Baer (03:34):

We don't know. We don't have a ton of information on what their financials look like as they are, of course, still a private company. My understanding is that as far as an annual revenue basis, they're more or less similar in size these days. The asset management business is still very, very profitable. The profit margins on managing investment funds is much higher than it would be to serve as a record keeper for big companies 401 plan, for instance. But as far as the size goes, more or less evened out among the big three retail businesses, the other really big one. And then there's some key differences. The asset management business in terms of a number of employees is much, much smaller. On the big investment platforms, you have a lot more people working within those firms.

Jonathan Boyar (04:22):

Given your role at The Wall Street Journal, you pretty much could write about anything you wanted. You cover a lot of different financial institutions. Why Fidelity? Why Rare's book?

Justin Baer (04:33):

So I had started covering them about 2018, I think. I was just really interested in how they were different from a lot of the other big financial companies I've covered over the years. They're privately held and yet were still a giant and there was a family that controlled the place. They had been around at that point over 70 years and had been only run by three people in their entire history. There was a lot of private companies. They're harder not to crack as a reporter. I would reach out to a lot of people that had worked there over the years and asked them about the way things were and are. I would notice after having a bunch of those conversations that people would say something sometimes that I hadn't really heard of and would look it up to see if it had ever been reported before and sometimes I couldn't find anything.

(05:22):

And then I would go to someone else who might've worked at that same business at the same time and would say, "Hey, did this really happen?" And they would just kind of shrug their shoulders and say, "Well, of course it happened. Everyone knows that. " That had happened a few times for me to realize, no, I don't think everyone does know that. I think this is just one of these companies that there are a lot of people who work there and it's in this somewhat insular world up in Boston apart from a big chunk of the financial services industry. And there was a lot of really interesting stories or kind of hidden in plain sight. The other thing that made me think this was a good time to do it was that when I first started covering them, the outside world, even people who were senior people or competitors or maybe some of their business partners, they didn't really have much of a window inside what was going on at Fidelity.

(06:13):

There seemed to be a disconnect between what was happening inside Fidelity and what I was gathering from talking to people versus what the outside world understood about that. And they seemed to think they were at this point still kind of adrift that these big changes had happened to the investing world, maybe most notably the massive success of the index funds and ETFs. People would say, "Well, Fidelity isn't really talking about what they're doing and they seem to be going with this status quo the way things always happen and that's not working. And they just seem like they don't really have a lot going on. They don't really have a strategy." And I knew that was not really the case. Again, I had began to suspect that a lot of things had been happening and had been underway for some cases for a long time. So it just seemed like that was interesting to sort of not only pull together this history, but then also explain how this company was evolving and to a point where they were now...

(07:16):

And then post COVID, they really took off like a rocket in terms of their growth. And so that just seemed to be just really interesting story. There are elements of the family dynamic over career choices and succession and all those things that I knew I kind of scratched the surface a little bit on and I knew there was a more complete picture to share on some of those things. I never doubted there was a really interesting story. It just became a challenge, I think, for me to make sure I got it right

Jonathan Boyar (07:50):

The subtitle actually is bold and interesting. The company that changed American investing. So I mean, that says a lot there. How did it change American investing?

Justin Baer (08:00):

There are points where they were highly influential, both in terms of being first to do something or one to follow and maybe bring greater scale to something that was relatively new. One of the themes of Fidelity from the early days was they were one of those companies that were often looking for ways to bring financial services that had been once sort of limited to the elite or to the very wealthy to a broader audience that shows up in the early days, I would say their biggest contribution was giving their individual portfolio managers the opportunity to become stars, the star portfolio managers that still to a certain extent exist today that really comes out of Fidelity in the early days with Jerry Tsai in the 1960s. They kind of change the industry when the stock market was really, really struggling in the '70s and with it the stock funds industry, Fidelity introduced a few different things that were cutting edge.

(09:06):

So one was just as money market funds were coming out. They offered one with a bit of a new deal. They allowed people to write personal checks off of those accounts. That was new. And as a result of launching those funds directly to investors as opposed to through broker, the brokers didn't want to sell those funds. They end up becoming among the first to sell directly to ordinary Americans. And they do that initially with that money market fund. And so that means building a call center, a place where people can buy those funds and there were other what would become sort of real load funds. Vanguard was very early in that process as well.

Jonathan Boyar (09:49):

Let's start with the first of those, the rise of the star portfolio manager. Jerry Tsai is a fascinating figure and I think a lot of investors today may not fully appreciate how influential he was. Can you tell everyone who he was and why he mattered?

Justin Baer (10:03):

Fascinating for a lot of reasons, really one of the first people to become a star stockpicker, but someone whose celebrity at one point transcends even in that role. He's one of the few financial guys that is known by the general public when he gets on this hot streak. And he's also fascinating because he's had several different hacks in his career. Just when you think you've heard the last of them, he launches a new one. Jerry came to the United States, 17 years old to go to college. He lived in Shanghai. This was right in the aftermath of World War II and his mother was deeply concerned that he might get brought into military service. This was just as the Communist Party was starting to roll through with the mainland. She's desperate to get him to the States and into college here. She succeeds. So he comes here not knowing that really anyone ends up in Boston.

(10:58):

He goes initially to a different college and then transfers to BU. He was a young man, graduates, gravitates towards finance, works in the street in New York for a little bit, but is back in Boston looking for a job and he reaches out to someone who's a friend of Edward Johnson II, who's the guy who founds Fidelity. The guy is like, "Well, look, I can't help. This kid seems really smart. I don't really have any forum. If you're interested, you should definitely meet with him." And so he does and then within a few weeks, I think he gets hired.

Jonathan Boyar (11:30):

At that point, how big is Fidelity?

Justin Baer (11:32):

It's tiny even relative to their peers. Edward II is an interesting guy and he does have, at the time, a unique vision for how mutual funds should be managed. He is very much of the belief that managing money is a solitary pursuit and that every person that has a fund may be successful and may struggle, but there's a loan. It's a sort of a byproduct of their imagination and their ideas. He was a bit of a philosopher. He was in search of people who were interested in doing that and Jerry becomes the archetype for that. Not only was he very successful, his investment style was also very unusual for the time. He was sort of one of the early what we call today sort of momentum investors, but someone who was not looking long-term was looking just to see where the stock previously closed at and using that as a guide to determining what his next moves were.

(12:34):

What I learned in reporting out this book was really that a lot of his philosophies as an investor came from his mother who was the first woman to trade on the Shanghai Exchange. Her earnings from that was what paid for Jerry and his sister to come to the States to go to college. Jerry was very successful. He was famous for making these big, big trades at really lightning speed. So he would buy Ford and sell General Motors and he would do that in massive blocks.

Jonathan Boyar (13:05):

How good of a track record did he have?

Justin Baer (13:07):

He was quite good, although interestingly enough, even in his peak, he has outperformed by Ned Johnson, who's a character who comes along a little bit later in the story. He was very good. He had a phenomenal couple year run. His fund is the first growth stock fund that Fidelity offers and he hits the ground running, does incredibly well, then gets hammered in I think the second half of 1962. Takes a lot of win out of sales and he seems for a while that he's kind of toast. And then he played what looks like this extremely frightening moment in history with Kennedy and the situation in Cuba. He plays it masterfully, gets ahead of the big bull market that takes place after that and makes it all back. Very dynamic and aggressive investor and is wildly successful at Fidelity and ultimately on his own. He branches out a few years later.

Jonathan Boyar (14:13):

How important was he to Fidelity at the time?

Justin Baer (14:16):

He really put them on a map. Jerry Tsai was the biggest star in the industry in that stretch in those go- go years. Ned Johnson, the founder's son, was a phenomenal performer around the same time as well, but Ned did not have the cultural personality around him that Jerry had. I think what they realized early on with Jerry is that you could market these individuals as top performers and that would resonate with people and they would buy into the fund as a result of this person and not necessarily the system around them or the way in which they analyze stocks is that Jerry Tsai knows what to do. If he's buying Ford, I'm going to buy Ford. He had reached that level of appreciation from the big parts of the market.

Jonathan Boyar (15:04):

What's really interesting, if you read the Go-Go years, they didn't refer to Jerry Tsai like this. They would use, I'm not going to use the verbiage, but they would use very racist terms to describe, which is amazing that professionals and highly educated people at the time would do it. I just found that fascinating.

Justin Baer (15:23):

That was an unfortunate a little bit part of that. There was a lot of resentment against Jerry when he ended up launching his own firm and fund and raised tons and tons of money in doing so.

Jonathan Boyar (15:37):

Resented by who?

Justin Baer (15:39):

Resented by the industry, certainly by the media, the way that it was covered him. And then he ultimately ended up selling his business to an insurance company at the very, very top of the market. He was out and effectively his career as a mutual fund manager was over a relatively early age of his and yet there were all these investors that were still in his fund that were just getting crushed. This is going back until at this point, 68, 69, when he sells out. He times it perfectly, much like he did in the 63 rally. He times his exit perfectly. And there's people that said, "Well, he left everyone else holding the bag." His fund for as well as it did in his initial year was among the worst performers that year that he ends up selling. So there was always some bitterness by the public, but also Jerry had for that one year of bad performance carrying so much weight on his whole career, which at the time had been very spectacular and he would go on to have all these other interesting highlights as a deal maker and corporate executive.

Jonathan Boyar (16:52):

And the reason he started his own fund was basically Ted Johnson, the patriarch of the business, wouldn't let him become CEO. Is that correct?

Justin Baer (17:02):

That's right. Yeah. So Jerry was a juke star in Edward II and the board did issue him voting stocks. So he was a part owner of Fidelity and it was also known that Edward the second was getting up there in age, that his son, of course, was also working there. I think Jerry saw where things were headed. Ned and his father were very close, almost to serve best friends since Nick was a kid. Jerry also felt he deserved a shot given his contributions. And so I think at some point he asked him, "Am I ever going to be able to take over?" And the answer ultimately was, "No, this is a family business." And so that sets in motion Jerry's decision to sell his stock back to Fidelity and the Johnsons.

Jonathan Boyar (17:53):

Before we continue, if you're enjoying this conversation, I'd encourage you to subscribe to our Substack at boyarresearch.substack.com. That's where we share some of our research, all of our interviews and our thoughts on investing. Now back to the conversation. There were a lot of fascinating characters in the book. Ned was particularly interesting in my opinion. I don't think you cast him as a villain or a protagonist. It was this fact-based, but he really had an interesting, quirky personality. How would you describe him?

Justin Baer (18:29):

He was someone who had a very, I don't want to say unique, but just a very unusual way of looking at the world and his ability to look around the corner to solve three-dimensional problems that becomes so, so important for Fidelity. Not only does it make him a really good investor himself, but he takes over the place just as the one thing that they sell, which is mutual funds that invest in stocks. There's virtually no demand for them. He's got to do everything he can to keep this place around until they get to the other side. It is that creativity and willingness to take risk that ends up not only getting them through this, but then setting Fidelity up for future success and growth. He was someone who clearly had learning disabilities as a kid, dealt with them most of his life. He would tell people later, he was never diagnosed, but he was dyslexic, probably had ADHD growing up in the 40s.

(19:38):

No one had any idea what those things meant for the most part. And yet he figures it out. He kind of bounces around through school and college and the army and then gets to his father's company. They don't really know what to make of him. He's very difficult to have a conversation with someone who was always bringing in what seemed like non-sequiturs. Someone asks him a question, he'll answer with another... He's just one of those people that they have so many things racing through their heads and yet he figures it out and it turns out that he was also fascinated with machines and how things worked. And so naturally technology as a whole becomes something that for his whole life he's equally fascinated by. So again, it makes for what ends up being a fantastic investor and then he applies that to managing this company and then it's through his ideas and his thought at pursuing them and risk taking that they get into money market fund and they sell funds directly to customers, that they take all their record keeping and back office in - house, which then paves the way for them to later on becoming a discount broker to becoming a manager of IRAs and then ultimately become a record keeper and administrator for 401k plans, which are all massive, massive businesses now, but stem directly from Ned's willingness to take those things on at a time where it wasn't clear they were going to be successful.

Jonathan Boyar (21:15):

And at the same time, he could do some really strange and in some ways vindictive stuff. There was one part where I guess American Express got into the money management wealth management business and then he, I guess retribution decided, "Hey, I'm going to cancel all of the American Express cards at Fidelity."

Justin Baer (21:34):

He would have fallen out with people and want them gone. He was somewhat impulsive, I think, in those decisions. One thing didn't really want to make those decisions himself, didn't really want to be the hatchet man might sour on people or might get irritated or might get frustrated with someone getting more attention, that sort of stuff, which again is not unusual in high level corporate America.

Jonathan Boyar (22:02):

I think it was 2005 he wanted to demote or some of his colleagues wanted to demote his daughter and he decided, "Okay, that's fine." And he sent someone else to do that for him and maybe paint that scene a little bit.

Justin Baer (22:17):

So Abby, she had moved up the ranks. She started as an analyst and portfolio manager like her father had. And then as she moved into management, she had a very quick ascent to what essentially then, this is the late '90s, early 2000s, second most important job at Fidelity aside from Ned, who's the chairman, is running the asset management business, which is sort of the engine room, which where all the star stock pickers came out of Peter Lynch. At this point it's Will Danoff and Joel Tillinghast and that crew, it's sort of what makes Fidelity what it is. So she's running that business for a lot of reasons, some of which were things happening outside the company, some of them were happening inside. The business gets into a major funk. It's the early 2000s. So we're heading right into the end of the. Com era, Bubble Burst, nine eleven, recession.

(23:13):

You have all those scandals involving Enron, Worldcon, and others where confidence in corporate America is at a low point. So Fidelity funds aren't doing well, they aren't selling well. You have a couple things that are happening specific to Fidelity. For the first time really you had up and coming portfolio managers that are leaving for other places for the moment the hedge funds became a major thing where you could at a young age get paid a lot more than you might at a standard long only firm. That had been the case for a long time, but what started to happen in the early 2000s is that Fidelity would lose people to their sort of peer group, which was something that really rubbed people airing, especially Ned the wrong way. So that was that. Ned had not made any decisions yet on any succession plan.

Jonathan Boyar (24:03):

How old was he then?

Justin Baer (24:04):

Late 70s at that point. That was increasingly alarming. So this all comes to a head when there's some people inside and Fidelity and Ned's management team, but also the independent trustees that make the case that, well, Abby's been in this job for a few years, business is really struggling. We should move her out of there and move someone else. And her father postpones that and then ultimately agrees, but then says, yes, well fine, we'll move her out of that role, but you're going to have to tell her.

Jonathan Boyar (24:35):

So he didn't have the guts to moan his daughter?

Justin Baer (24:37):

He didn't want to do it himself. So she's offered a different role. Initially it's to run the foundation, which everyone would know instantly this is a massive, this is going from running the flagship business to running the foundation would be a massive downgrade. And Abby, of course, knows that immediately. And so she says, "Well, if you make her do that, I'm going to quit." Eventually her father's like, "No, no, no, no, no, forget that. " Don't worry about it, we'll figure something else out. And they ultimately do, and they give her what is ultimately ends up becoming really the best place for her to continue to build on her career, which is to run the 401k business. It's not only a different kind of business that would become a centerpiece in its own right and Fidelity, but it was an opportunity. The business needed to be fixed in some ways.

(25:24):

It had grown really rapidly through the '90s and was not really performing all that well. Customer service was not great. It not really achieved the kind of scale that you would've thought it might've just given its market share and the number of big companies they had signed up. So she moves over to that, but the Saga's not quite over yet because as this is happening, Ned is telling Abby that, "Well, I'm going to take these meetings, these bank CEOs, keeping my options open about possibly selling the company someday." This was new. He had Ned and his father had always been deeply opposed to doing that. For years and years as Fidelity became what it became, there had been a parade of senior bankers coming up to Boston saying, "Hey, would you ever consider doing this deal or doing that deal?" And Ed had always said, "Would you consider selling your company to me?

(26:25):

" So here he was after this whole dust up with his daughter now is openly thinking about it.

Jonathan Boyar (26:32):

Is it because he didn't think his daughter or someone in the family could run it or did he want to cash out? What was the reason?

Justin Baer (26:39):

I think there was a sense that if she was not going to do this, that he'd have to consider all of his options. He's not going to be there forever. So someone else from outside the family, likely they would have to run it. Talking to people who knew him really well, some would speculate to me that, well, maybe he was just doing that to sort of test her to see how she would react because the way she did react was over my dead body. She told them, "I don't agree with selling this. I think it's a mistake. This becomes another reason why she becomes distrustful of some of the people around her father and she comes to think that they're not really have company and a family and their best interest in mind in what they're doing. You can imagine the value of Fidelity, how much you might get if you sold at that point.

(27:36):

So all this is happening and it leads to this showdown at a board meeting where Abby signals that she's going to withhold her votes for members of the management team and board.

Jonathan Boyar (27:51):

And she's the largest shareholder at this

Justin Baer (27:52):

Point. She is the largest shareholder at this point. They come to understand that if she's able to align with her siblings, that they can vote the entire family block, which gets to 49% of the vote. And then the rest of voting stock was owned by individual employees because there were a certain number of people that had kind of grown up with her in the business, she was still very close to some of those voting shareholders. And so Ned and his deputy, Bob Reynolds, very quickly come to believe whatever she's got planned here, she has votes to do it. That sets up motion, a counterattack where when they hold a board meeting, they issue lots of stock, issue more stock to Ned, which effectively will change up the breakout of the family such that Ned has the biggest stake in whatever Abby had planned is toward it.

(28:48):

A few days before that board meeting, the family had gotten together, sorted it out, and so that when they do this board meeting, it's a little anticlimactic, but what they do decide after that through this family meeting is that Ned is going to set up a formal succession plan. One of the options is for Abby to take over. One

Jonathan Boyar (29:10):

Of the things that really struck me was how openly people were dismissive of her in the organization and really condescending. Am I misreading that?

Justin Baer (29:21):

No, it's crazy. When you think about it, say what you will about how bad the track record is in finance and a lot of industries in recruiting and promoting women over the years and even accounting for the fact this is the '90s, so this is a few decades ago. I was just surprised because normally just seems out of self-preservation, people would know not to dunk on the child or the chairman. It just seems like a bad move no matter what line of work you're in. They were both in closed doors. And I think as I mentioned earlier, Ned would go to PE People in the company and he would ask them, "Do you think she's ever going to do it? " And the way he asked it made me think when I heard that, well, is he doing that because he wanted affirmation from them that, "Oh yeah, she's going to be great.

(30:14):

Don't worry about it. " And I think a lot of people that were close to him knew that and would respond that way. But I think it did backfire a little bit in that it sort of gave people more room to be openly critical of her as well.

Jonathan Boyar (30:30):

I mean, in some ways hostile. I mean, it was not easy.

Justin Baer (30:33):

I mean, a lot of it was the whisper campaign around her. They would argue that she can't make decisions and she wouldn't be meetings and she wasn't someone who was command and control like, "Okay, this is the agenda. Let's do this, do that. " She would spend a lot of the meetings and things like that where she might ask questions. She wouldn't make any declarations then in the moment. I think she would say herself later in life that she did not project a lot of self-confidence. People can read that in a certain way. She had to fight through those questions about her willingness to make decisions. But yeah, part of it was also sexism saying like, "Well, she's not going to stick around. She's going to have kids and she's going to quit and stuff like that. " Very common to hear that in corporate America.

(31:26):

To me, it was just a little surprising.

Jonathan Boyar (31:28):

She ultimately proved her critics wrong. I mean, Fidelity is more profitable today than probably ever before, right?

Justin Baer (31:34):

Yeah. And I think some of the specific criticisms as well as just the vibes of them, I think she's also proved, even if there was this grain of truth in it. So she did have the reputation of having a small circle around her and she recognized that and tried to change it. There was a period where she had sort of a quasi-serve chief of staff person that was guarding her calendar and access and she ultimately got out of that. And nowadays as CEO, she's never appointed a chief operating officer or president so that all the business heads are still reporting directly to her. I think she's tried to sort of over-index in that and acknowledging where she needed to improve.

Jonathan Boyar (32:24):

How would you rate her tenure?

Justin Baer (32:26):

There were some ways in which Fidelity missed the boat, certainly in index funds and especially with ETFs that they were in position and be in early but just didn't go for it. But I think they've made up ground by just throwing a lot of investment in these massive platforms, particularly coming into and through COVID where you have this period where a new generation of Americans are discovering the markets and investing and they very aggressively hire through that period. Between 2020 and maybe 2023, their workforce increases by 50%, which for an 80-year-old company is pretty crazy. And so they capitalize on all that growth and you still see it in the numbers now with the number of accounts they've signed up. And even in the asset management business where classic mutual funds, you still see the money flow out of them. They've made up the difference.

(33:28):

They have launched a lot of ETFs, which have been done pretty well. And then they have the separately managed account business, which has been a big growth area for them. So the numbers speak for themselves in terms of how profitable they are, in terms of revenue, in terms of the number of accounts and customers they have. I would say it's been very successful. Now what we don't know is the period we've been in since 2020 and the interest among retail investing has really been on real long positive stretch. So how they'll contend if that goes away to a certain extent market conditions change, that remains to be seen, but they're definitely on a really good stretch. Historically, one of the fastest growth stretches in their history.

Jonathan Boyar (34:15):

Part of the history of Fidelity is really disruption. That's one of the things that I took away from your book. Could they have been as disruptive to their own business as they were if they were a public company?

Justin Baer (34:27):

I don't think so. That was a reason why they've stayed private is not only the willingness to invest in things that may not pay off in a very long time, but yeah, I mean the way they structured, it's a little bit different now, but certainly Ned Stay, they would just launch businesses and some of those businesses may compete directly with one another, not only for resources, but even for customers. And it seemed like this is the best way to incubate and nurture these businesses is to sort of give them their own space. And yes, maybe it's not efficient. I have eight different HR departments. Maybe they are chasing the same idea or the same problem three different ways, but I think that isn't instrumental in their growth. You couldn't, I don't think, get away with doing all that in a public company. It just would lead to too many overlap and inefficiency and mixed messages.

(35:24):

Imagine the conference calls and stuff and explaining all how that worked. But that's very much how Ned wanted to do things and he saw value in that. He was also a believer that you could have... There's a really good business that if it's embedded in a different business where managements may be focusing and is incentivized to focus on something else, that potential could sort of die on the vine. So lots of examples where for instance, 401 business used to be part of the trust management arm and was like, "Well, look, this could be really big, but it's not going to get enough attention being part of this other thing. So we're going to pull it out and we're going to set it up on its own and see what it can do.

Jonathan Boyar (36:06):

" So Abby now is, I think, 64 or so. Fidelity has now been huge for a long period of time, but what's next for Fidelity? Does it stay a private business? Is it at this point too big for anyone to buy? How does it work?

Justin Baer (36:20):

It's a great question. I think we're at a period now where it's hard to tell Abby has been CEO for 12 years since she's just kind of getting started. Her brother runs her commercial real estate business. He's in his early 60s as well. There's another generation of Johnsons. Some of the kids are working there between Ned Street children. Each of them have their own kids and so they're still early in their careers historically. It's similar to where Fidelity may have been in early 90s when Ned was just starting to do with all of his coursework on family businesses and all that to see where the future as far as where the next generation goes. I do feel the current generation Abby and her brother and sister feel committed to the status quo in terms of being a private company with them and having control. We just don't know how long they'll have and what's after that.

Jonathan Boyar (37:21):

I really want to thank you for your time. I enjoyed hearing about the Fidelity story about the Johnson family, all of the family dynamics there, how they really have changed American investing, which is what's in the subtitle of your book. What's the best way for people to learn more about the book, learn more about you?

Justin Baer (37:41):

Thank you. Great to be here. I have a website, justinbearbooks.com, but you can always check out my work at thejournal@wsj.com. The book publisher has a webpage that gives details on that.

Jonathan Boyar (37:57):

And we'll put a link in the show notes to purchase the book. I recommend you read it. It's really fascinating. Thank you.

(38:04):

I really enjoyed this conversation with Justin. To me, the Fidelity story is not just about mutual funds or on family control company. It's about how a private business over multiple generations help reshape American investing from the rise of the star portfolio manager to retirement accounts, 401ks, and the broader investment platform Fidelity has become today. It is also a reminder that ownership structure matters. Fidelity's ability to stay private gave it the freedom to make long-term investments, experiment, and disrupt its own business in ways that would have been much harder as a public company. I recommend Justin's book, House of Fidelity will include a link in the show notes. Until next time. This podcast is for informational and educational purposes only and should not be considered investment advice, a recommendation to buy or sell any security or an offer to provide investment advisory services. The views expressed by guests are their own and do not necessarily reflect the views of Boyar Research or its affiliates.

(39:11):

Boyar Research, its affiliates, employees, and accounts managed by its affiliates may own shares of companies mentioned in this episode. Our views are subject to change at any time and we are under no obligation to update listeners if our opinions or positions change. Investing involves risk, including the possible loss of principle. Listeners should do their own research and consult with their own financial tax or legal advisors before making any investment decisions.