Case: Fidelity Investments
Section 3 (9am), Group 4
MI021 Computers in Management, Fall 2011
Group Members:
Michael Allen
William Estes
Eric Moyer
Christina Murray
Fidelity Investments is a privately held financial services firm headquartered in Boston, MA. At the end of 2010, Fidelity had a total of over $1.4 trillion in assets under management.[i] Today, Fidelity is the number one provider in the U.S. of 401Ks and other similar retirement planning options, providing services to over 16,000 employers.[ii] With 37,000 employees, Fidelity offers products such as mutual funds, stock and option trading, fixed income services, professional managed accounts, annuities, and life insurance.ii Fidelity offers online and telephone brokerage, active trader pro, cash management, and retirement services and planning. In 2009, Fidelity Investments turned a profit of $11.49 billion, which made it the most profitable private investment management firm in the United States.[iii] Fidelity, like many other online investment brokerages, offers investment advice and consultation to its users.
Fidelity Investments’ low cost brokerage business faces competition from firms like TD Ameritrade, Scottrade, and Etrade. Fidelity was recently found to be the number one firm as far as customer service, as well as for long term investing.[iv] Fidelity’s financial advice and management business is the fifth largest firm of its kind behind Black Rock, State Street, Allianz, and the Vanguard Group. There are over forty firms in the United States that offer services similar to Fidelity’s low cost online and telephone stock and investment trading services. Fidelity’s $7.95 per trade is among the lowest per trade commission available to Internet traders. The expansion of Internet availability and trust of online currency transfers has led to a price transparency for individuals who want to control their own finances, choosing not to be subjected to the high fees of brokerages. Fidelity Investments chief competition in their mutual fund business comes from two other mutual fund investment firms including the Vanguard Group and Capital Group Investments. In late 2010, Vanguard Group took the title of largest asset management firm from Fidelity, and currently has over $1.6 trillion under management. Fidelity also faces tough competition from Capital Group Investments, which ranks third in the industry with a net income of over $7.5 billion in 2009.[v]
Fidelity Investments has been redefining how investors use technology to maximize their investment potential for many years. By spending approximately 20 percent of its revenue on research and development, Fidelity makes sure it is on the cutting edge of investment technology. In the mid 1970’s, it became the first company to sell retail mutual funds directly through a toll-free 800 number, and again when it developed the award winning Fidelity Automated Service Telephone system (FAST) in 1983.[vi] In 1998, it introduced one of the financial industry’s most sophisticated natural-language speech recognition capability over Fidelity’s automated phone service. Instead of using touch-tone, customers could now speak their requests, allowing Fidelity to handle even greater amounts of calls without expending employees, thus enabling the firm to maintain their customer fee structure.
Fidelity’s commitment to technology not only allowed it to develop advanced phone technology, but also to become the first mutual fund company to establish a home page on the World Wide Web. In addition, Fidelity was one of the first companies to adopt mobile communications with the introduction of its wireless service in 1998 and wireless trading in 1999. In 2001, Fidelity became the first financial services company to offer in-vehicle investment services via OnStar’s hands free voice-enabled Virtual Advisor.
Fidelity has also developed myStreetscape Telephone, allowing broker dealers to give their customers automated access to their brokerage accounts and market data from any telephone in the U.S. using either voice commands or the telephone keypad. It offers some participants in defined contribution retirement plans access to their balances, fund quotes, or changes in positions via the phone. Additionally, the company now provides online tools and resources for nearly every financial service the company offers, whether the client is a retail customer, investment professional, plan sponsor or plan participant. Furthermore, new Fidelity investor centers are equipped with touch-screen kiosks that allow investors to research and invest on their own. Discovery kiosks allow customers to access selected portions of Fidelity.com where they can research investment strategies. As for the security of the customer, all kiosks have measures in place to erase the information from the screen when the customer steps away. Fidelity’s dedication to customer service has allowed it to become a leader in the financial services industry. By leveraging its various technological advancements, Fidelity has been able to reach even more customers.
On the management side, Fidelity has eased the responsibilities of human resource professionals through a suite of Web-based, self-service tools for employees and managers. These tools allow human resource managers to focus on their strategic functions by outsourcing the labor-intensive, time-consuming administrative tasks associated with traditional HR and payroll duties.
Perhaps the most unique action Fidelity has taken is its investment in the Fidelity Center for Applied Technology (FCAT). This center is dedicated to increasing customer and user satisfaction by serving as a catalyst for new ideas and a focal point for technology leadership across Fidelity's global organizations. Some FCAT research and development efforts include social networking, virtual environments, security and privacy technologies, behavioral economics and decision theory, collaboration tools and environments, and data visualization.[vii]
Fidelity is a firm that has long been associated with using technology to enhance its customer experience. From being the first mutual fund firm to introduce telephone and internet-based trading, to investing in the cutting edge FCAT research center, Fidelity has been an exemplary case study in how leveraging technology can improve the customer experience, thus establishing them as a firm geared for long-term success.
Many opportunities exist for Fidelity as it continues to do business in the financial sector. Fidelity is heavily involved in the mutual fund business and will be reopening many popular funds that are designed to stabilize cash flows. In addition, Fidelity Investments is launching the Fidelity WealthCentral, a web based integrated wealth management platform that will supersede its current trading and reporting system. In addition, Fidelity is preparing to accommodate even more customers as the consumer spending rebounds analysts project a boost in demand needed for financial services.ii Prospective growth in the financial services industry, as well as Fidelity more specifically, is probable, as this sector remains a large part of the American economy. As the United States population continues to enter retirement age, and as social security becomes less and less of a guarantee, employers and individuals will continue to seek out high yield mutual funds and investment strategies for 401(K)’s and other retirement planning options. Fidelity will need to continue to leverage their technological savvy to overcome the increased regulation that will affect this industry. Since the inaction of the 2001 Sarbanes-Oxley Act and the Dodd-Frank Act, the industry has become much more regulated, and thus tougher to maintain a lasting advantage.
In contrast to the opportunities and challenges that Fidelity has, the firm also faces a number of weaknesses and threats. Due to the nature of their mutual fund business, there is relatively high equity exposure resulting in potential asset losses and underperformance. Additionally, a proposal to revise foreign broker-dealer exemptions, and consolidation in the fund management industry, could threaten to intensify competition thus making the industry less profitable.ii
Overall, Fidelity’s commitment to developing and applying innovative technologies allows it to continue to provide excellent customer service and financial advice, but it will need to continue this commitment in order remain a dominant player in the financial services industry.
[i] Fidelity Website
[ii] Fidelity Investment, Inc. Rep. New York: Datamonitor, 2011. Business Source Complete. Web. 12 Oct. 2011.
[iii] Money; Oct2011, Vol. 40 Issue 9, p118-118, 1p, 5 Charts
[iv]Kiplinger's Personal Finance; Feb2011, Vol. 65 Issue 2, p34-37, 4p
[v] Kiplinger's Personal Finance; Sep2011, Vol. 65 Issue 9, p27-31, 5p
[vi] “Technology and Innovation at Fidelity Investments,” http://personal.fidelity.com/myfidelity/InsideFidelity/NewsCenter/mediadocs/techback.html
[vii] The FCAT home page, http://fcat.fidelity.com/
