Former Fidelity CEO Edward ‘Ned’ Johnson III dies at 91

Edward C. Johnson III, longtime chairman and CEO of Fidelity Investments widely known as Ned, died at age 91 on the evening of March 23, 2022, at his home in Florida. “He could be counted on to have a contrary view on just about anything,” said his daughter and successor to Fidelity, Abigail Johnson.

Fidelity Management & Research (FMR) was founded in 1946 by Ned’s father, Edward C. Johnson II, but Ned transformed the Boston-based company into a global asset management colossus. From 1977 to 2014, during his tenure as CEO, Fidelity’s assets under management (AUM) skyrocketed from $3.9 billion to $5.7 trillion. “They were the undisputed industry leader,” commented the late John C. Bogle, founder and longtime head of major rival The Vanguard Group.

Key points to remember

  • Longtime Chairman and CEO of Fidelity Investments, Ned Johnson, died on March 23, 2022, at the age of 91.
  • He is credited with many innovations in the fund management industry.
  • From 1977 to 2014, when Johnson was CEO, Fidelity’s assets under management (AUM) skyrocketed from $3.9 billion to $5.7 trillion.

Ned Johnson, innovator

Born in Boston in 1930, Ned Johnson joined Fidelity as a junior equity analyst in 1957. He became chairman in 1972 and succeeded his father as chairman and CEO in 1977. His daughter Abigail succeeded him in as CEO in 2014 and as Chairman from 2016, when Ned was awarded Chairman Emeritus.

After Ned became a senior executive at Fidelity, Congress created two savings vehicles that would help fuel the meteoric growth of his company, the Individual Retirement Account (IRA) in 1974 and the 401(k) plan in 1978. Fidelity would create a huge division administering 401(k) plans and performing other record keeping services for businesses.

Ned Johnson began selling Fidelity mutual funds directly to the public, rather than through brokers. It also added discount brokerage services and made Fidelity a major player in institutional brokerage.

Other innovations attributed to Fidelity under Ned Johnson include:

  • In 1974, the first money market fund with check-issuing privileges
  • In 1974, offering retail customers the ability to transact over the phone toll-free
  • In 1979, a 24-hour voice-activated computerized telephone system for quotes
  • In 1981, National Financial Services (NFS) was established to provide clearing and execution services to brokers.
  • In 1983, voice-activated computerized telephone answering and routing
  • In 1983 walk-in investor centers
  • In 1986, the first hourly priced funds, Fidelity Select Portfolios
  • Relaunch and popularize the concept of sectoral funds
  • In 1991, the first donor-advised fund, Fidelity Charitable, now the largest public charity in the world
  • In 1995, the first fund company with a homepage on the World Wide Web
  • In 2008, Fidelity WealthCentral, the industry’s first web-based wealth management platform
  • In 2013, the first financial services app for Google Glass

Additionally, Ned Johnson made Fidelity active in real estate. He also bought a group of community weekly newspapers and even a limo and bus service, the latter business supposedly started after he was unable to hail a cab.

Fidelity remembers Ned Johnson

In the aftermath of his death, Fidelity posted a lengthy reminiscence of Ned Johnson on its website. highlights follow.

“From direct marketing of money market funds to pioneering use of the Internet to innovations in retirement accounts and charitable giving, he democratized investing by reshaping the industry into a more vibrant and more egalitarian.”

“As a boy, he would take clocks apart to see how they worked, and he would ask his family’s mechanic questions about auto parts. He believed that to build a better business, he needed to know how it all worked together. This curiosity drove him to connect with employees at all levels of the organization, and he dedicated himself to becoming a subject matter expert in almost every facet of the business.”

“Mr. Johnson realized that both technical and fundamental analysis were useful and that each had certain limitations.”

“As an analyst, Mr. Johnson has found that sometimes the best stock buys are those with a view contrary to the status quo. In taking over the leadership of Fidelity, he discovered that this same philosophy could also be applied to business decisions. , often with dramatic results. He would often say, ‘If everyone is doing it, I don’t want to do it.'”

A quote from Ned Johnson: “We only develop a new skill or start a new business if it’s good for our customers, good for the people who work at Fidelity, and good for the business.”

Ned Johnson, Kaizen enthusiast

Ned Johnson was a believer in the Japanese concept of kaizen, particularly the emphasis on constant incremental improvement, which made it a “mantra” in the business. He had found a book about it in a Tokyo hotel gift shop, hired the author to lecture to Fidelity executives, made a video about it for new employees, and wrote the foreword. from another book on the subject, which included Fidelity as a case. study.

Ned Johnson’s adherence to kaizen may explain the frequent personnel changes at Fidelity during his tenure. Among these was the removal of his daughter Abigail as head of the mutual fund division in 2005, when she was performing poorly. He also encouraged intense competition between fund managers and other staff, including giving two employees the same assignment to see who would perform better.

Fidelity made the Johnsons multi-billionaires

Fidelity remains a private company controlled by the Johnson family. In 2021, Forbes The magazine ranked Abigail Johnson and Ned Johnson as the 27th and 60th richest people in the United States, with estimated net worths of $25.2 billion and $11.5 billion, respectively.

As of December 31, 2021, Fidelity reported that it:

  • Served approximately 40 million individual investors
  • Management of employee benefit plans for nearly 23,000 companies
  • Support for over 3,600 consulting firms with back-office services
  • Had $11.8 trillion in assets under administration (AUA)
  • Had $4.5 trillion in discretionary assets
  • Processed 2.8 million average daily transactions across its retail and institutional brokerage units

In 2021, Fidelity also reported generating annual revenue of $24.0 billion and operating profit of $8.1 billion.

Relatively frugal lifestyle

While Ned Johnson built an art collection valued at “tens of millions”, he otherwise led a relatively modest lifestyle for someone of his great wealth. His frugality manifests itself in part in his refusal to build an impressive headquarters. Instead, he was content to house his business in a no-frills nine-story structure marked “Fidelity Building” by small bronze plaques.

Philanthropy

The Johnson family have Boston roots dating back to 1635 and made their fortune with the department store CF Hovey & Company. They were among New England’s leading philanthropists, often anonymously, particularly in the visual arts. In 1965, Ned and his father founded the Fidelity Foundation to work with nonprofit organizations to strengthen their management and technology, with the goal of making them better and more efficient.

Flee the limelight

Ned Johnson also avoided the limelight. Financial writer Joe Nocera observed, “Ned Johnson is an old-fashioned Boston Yankee who thinks you’re bragging and acting inappropriately if you get your name in the paper. When his advisers once told him that Fidelity should talk to the press, his response was ‘Okay, as long as it’s not me.'”

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