Abigail Johnson Interviewed By David Rubenstein


I really enjoy the David Rubenstein show. It is Rubenstein – one of the founders of the private equity firm Carlyle Group interviewing people. Usually investors, CEOs or politicians.

DAVID: Did you always know that you wanted to run Fidelity and did you feel any pressure to go and run Fidelity when you were younger?

ABIGAIL: I never felt any pressure to, and I certainly never knew that I would actually get to the position that I’ve gotten to now. I was always interested in the business. It was impossible not to learn about it, between my grandfather and my father. They were both passionate investors and they both loved the idea of building a business that focused on taking care of its customers and I always wanted to be involved with it, but of course when you’re young you don’t really know where life is going to take you.

DAVID: Your grandfather started the company in 1946.

ABIGAIL: He began life as a lawyer and the family [word] is, he was frustrated and bored being a lawyer, and he got interested in investing and he loved the stock market. And he gradually drifted away from his practice of law. And this would have been in the 40s shortly after the securities act of 1940, which was the foundation that enabled mutual funds to come into existence. And he purchased a small legal entity called the Fidelity Fund, that had one employee and began using that legal entity to run money for friends, extended family, networks of people. And that was how the business began.

DAVID: Your father most of his career was at Fidelity?

ABIGAIL: The organization was small when he joined, basically an investment boutique. And his father, yes was President and CEO, and there were probably several hundred employees at that time and he was one of them.

DAVID: So what did Fidelity do or your father do, to make Fidelity become so large and so successful?

ABIGAIL: So the key ingredient was, he had that passion that my grandfather had for investing, but he also had a passion for building a business and that was something I think that my grandfather probably didn’t have, because he was completely focused on being a great investor. And my father had a vision to do more than just have a great investment capability. He wanted to build a business that would extend and expand and be sustainable beyond any market cycle.

DAVID: So, you’re growing up in Boston, your father’s building a company that is becoming one of the biggest mutual fund complexes in the world. Was it complicated growing up with your father and family being so famous or where you relatively anonymous as a young child?

ABIGAIL: We were not famous at all. I mean this was the equity market in the 1970s David. Nobody in the equity markets in the seventies was famous. People thought the equity markets were dying back then. I mean people were asking my father, why are you still doing this?

DAVID: So you grew up relatively modestly, you would say?

ABIGAIL: We were comfortable, but not any lifestyle that anybody would be wanting to show on TV or be particularly impressed with.

DAVID: You knew you wanted to go into business and go to Harvard Business School or not?

ABIGAIL: I was definitely thinking about business school, but I wouldn’t say I had the confidence to be sure that I could actually make it there and be successful. After I finished in college, I wanted to go in to business and get a good business experience, I had worked at Fidelity during the summers. So I came here to New York and I worked as a strategy practice for management consulting firm Booz Allen Hamilton, you know well and that was a great experience. I had been a liberal arts undergrad, so being immersed in business analytic challenges was a terrific experience.

DAVID: Did your father say, okay now you have an obligation to come into the family business?

ABIGAIL: He never said I had an obligation to come in to the family business. And it’s interesting, because both of my parents always encouraged me and my siblings to do what we wanted to do. Do the things that we were most passionate about with our lives. And my father in particular, his family, his father’s family—before his father had become a lawyer, they had a dry goods store. And they had run it in their family for a couple of generations and his uncle had been pressured by his family to go work in the dry goods store, and he hated it. He didn’t enjoy the work, he did it because he was pressured by his family to follow this tradition and go into the family business. And it made a real impression on my father and he said I never want to pressure any of my kids, because I wouldn’t ever want my kids to have this life that his uncle had.

DAVID: So on your own you chose to go into the business and did your father say, if you work hard in 20 or 30 years you will be the CEO or he never promised that.

ABIGAIL: No, he never—he was not a guy who made promises to anybody.

DAVID: So when you’re working in a family business and your father is the CEO, is it awkward at times, because people presume that you’re going to rise up because of your family connections?

ABIGAIL: It can be awkward particularly when people don’t know you. If people don’t know you, they tend to presume something about you and it tends to be one extreme or the other. But as with any work environment everybody has to show up for work and do their best job that they can, to produce the best work product that they can and make their contribution to the business. And overtime people get to know you and they appreciate you for what you do and don’t forget, I after the—after my very early days of summer intern, the part of business that I went into, was the asset management, the equity management part. And as an equity analyst, you’re given responsibility for a group of stocks and you have to make recommendations as to whether the fund managers should buy, sell or hold the stocks. And you are judged by how well you do on your recommendations. So if you tell all the fund managers to buy stocks that go down, then you don’t do so well and that no one can really excuse that.

DAVID: Let’s talk about Fidelity now. How big is it? How much money do you manage at Fidelity?

ABIGAIL: So we have almost six trillion dollars under administration. So that includes money that we manage and money that we record keep that other people manage. We manage over 2 trillion dollars about 2 and a half trillion dollars in equities, fixed income, money market and other assets.

DAVID: So your company has privately owned, so it’s owned by the people that work there and your family.


DAVID: So any investment bankers ever come along and say you should take this public? That ever happened?

ABIGAIL: It’s happened for sure.

DAVID: The chance of that is zero, I assume?

ABIGAIL: I haven’t been—I think they—by the time I came along all the investment bankers had given up on making that pitch, because they make it to my father so many times and it never went anywhere.

DAVID: What is the reason why you don’t want to take the company public?

ABIGAIL: As with lots of things, there are tradeoffs, so I would say the first thing that my father always said is, we don’t need the capital that going public would bring us. So if we don’t need the money, why would we go ask for it? I would say beyond that it’s nice to have the flexibility of having the financial accountability being a little tighter. So for example, we don’t have to go through the practice of reporting publicly our quarterly earnings. That’s, and explaining the earnings to a broad audience—that we do watch our earnings very carefully, because it is all of our money that is the capital base of the company. So don’t be confused returns matter, they matter a lot. But the consistency of the returns probably matters less, because everybody is in for the long-term. People are not trading in and out. We don’t have the benefit of having a public currency to be acquisitive, which is one reason why we generally haven’t done acquisitions of other companies. Most companies are acquisitive, do it using their publicly traded securities.

DAVID: The Company is privately owned but it’s not owned only by your family, is that right?


DAVID: So about half of it is owned by the people that work there, is that right?


DAVID: So, your father decided to do that obviously for some reason because he owned a hundred percent—the family did, so why did he decide to let the employees own roughly half of the company?

ABIGAIL: He always thought it was important to have partners and it’s—this is a very competitive business, where we’re trying to attract and retain the best talent. And the decisions that you have to grapple with, are often complicated decisions. So it’s important to have partners, so that’s how you have partners is make them shareholders with you.

DAVID: Fidelity is famous for actively managed funds—actively managed means you have people picking stocks and so forth as Peter lynch did with Fidelity Magellan. In recent years index funds have come along ETFs and so forth. Do you provide those, and are they competitive with you or you don’t care whether somebody wants to go ETF fund or an actively managed fund?

ABIGAIL: We want to bring products and services to people that help them meet their investment objectives. So any reasonable product is something that we’re interested in. We have a very robust line of index funds right now and we’re doing great in that business. We’ve got the lowest fees, we’ve got great service, we also have a partnership to have a full range of ETF, some of them are proprietary ETF, some of them are not. So our goal is to have everything that someone could reasonably want on our platform and make it available to them in a way that is the most value added.

DAVID: Well you mentioned you have low fees and good service, but what do you think investors mostly want, low fees, good service or high returns?

ABIGAIL: Everything. They want all three of those and you better be doing more of every single one of those every year or you will find yourself behind. Because every year—I tell everybody, because it’s what I hear from my customers, give me more and give it to me for less money.

DAVID: Well, who manages your money? Does Fidelity manage your money? Does that person get nervous if your stock is down, because you are the CEO and they don’t get nervous or?

ABIGAIL: I think part of my role as a CEO is to also experience the company as a customer. So I do have a couple of our reps who work as a team, who call me several times a year and take me through the portfolio and we talk about what’s going on, with the different funds that I’m invested in. And of course I know through other avenues, but I want to hear from them how they explain it. And it also gives me a chance to ask them questions too.

DAVID: Now you are on many lists as being one of the wealthiest people in the United States. Does that upset you when you see these Forbes list or Bloomberg list that say, you’re one of the wealthiest people and do you feel particularly wealthy and how does that affect your life when you see these numbers attached to your name.

ABIGAIL: I just assume not to see a lot of numbers attached to my name, but I think it’s probably inevitable that’s what happens in the world today. People want to speculate about things and people seem to like putting numbers next to people’s names, but I don’t think that really reflects anything about who you are and how you live your life and what you do. And I certainly lead a comfortable life, but I was raised by parents who—father who was an equity manager in the 1970s. My mother’s is a real New Englander, who likes to live frugally and she doesn’t like a lot of access.

DAVID: Let’s talk about your role as CEO. 45,000 employees, do you have to travel the world to see them?

ABIGAIL: I spend a lot of time traveling, because we have major campuses all around the country. We also have our international company with different locations all around the world. So I try to make sure that I get a balance between being in front of employees, being in front of customers, almost every time I visit a major location around the US, I do a town hall meeting. I hit as many of our client events as I can, because that’s a great opportunity go and see a group of clients in a very efficient way.

DAVID: And you have a preference for flying commercial you’ve told me?

ABIGAIL: I’m traipsing through airports and getting on planes all the time and it works fine.

DAVID: Do people recognize you? Come up and say give me some money advice or?

ABIGAIL: Usually the people who recognize me are employees. So if I’m in a city where we have a big base of employees then I’m more likely to be recognized. Occasionally clients recognize me, but not general.

DAVID: After this show they certainly will recognize you.

ABIGAIL: Yes, absolutely.

DAVID: Do you feel pressured to recruit other women, to be a role model for women?

ABIGAIL: So, I think this is a terrific business for women. Asset management in particular, I think is a great career for women. The idea that you come in and you’re responsible for covering a bunch of securities and making recommendations, it’s your responsibility to do that work, you get to structure your time and ultimately build your own personal franchise being good at that. And that’s a great opportunity for women I believe. And in our organization we have some very senior women in addition to myself, and we have a real need in our business right now to recruit more women, because when women, customers come into our branches, very often the first thing they say, when we’re trying to get them paired up with a rep is, I’d like to work with a woman. And we don’t have enough woman, who are customer facing reps to serve all the women customers who come in and ask for women.

DAVID: They say that because they presume women are better money managers I assume, right? You would agree with that, I assume?

ABIGAIL: They might be thinking that, but they might be thinking, I’m just more comfortable talking to a woman. And we’ve studied women as customers compared to men as customers and they’re really quite different. Women tend to underrate their abilities as investors and be financial stewards of their own financial situation. They tend to describe themselves as beginners even though they actually really know more than they give themselves credit for. They tend to be more methodical studiers and learners of financial information. And very often they believe that a woman would be easier to talk to about something that is as personal and potentially complicated as their financial situation.

DAVID: So talk about the difference between building a company and going into one which somebody else has built. What’s the different types of pressure? You built the company, you can say I did this on my own. On the other hand you can flop and you have nothing. You got a very good company, you can make it even better but if you flop, people would say she wasn’t really qualified for it. How do you measure the differences?

ABIGAIL: Those are the two really different things. Certainly I watched my father taking Fidelity from a boutique to a broad financial services company. Also my husband has been through three startups now, so I certainly experienced vicariously the startup world through him. And then versus my own experience, which was by the time I started at Fidelity full time, when I got out of business school 1988 we were probably up to at least 20,000 employees something like that. With the big company you’ve got that big thing up and going, you’ve got the machine in motion. But there’s a different kind of need to—first of all make sure that you appropriately find and manage small problems, so they don’t become big problems, that could potentially really mess things up for you. Also, with that perpetual motion of a legacy business, sometimes it’s hard to get people to think about what’s the next new thing. I talk to people often about looking at the horizon. What’s on the horizon? What’s beyond the horizon? And when everybody’s running the machine and because it’s all in place and it’s all working, there is a tendency to look at the short term and focus on incremental opportunities and not look ahead to the really big opportunities.

DAVID: As you look at what your future is going to be, how many years would you like to consider doing this?

ABIGAIL: I’m really excited about what I have the opportunity to be doing right now. It’s taken me a lot of years to get here. I’ve had a lot of different jobs around the organization and I’ve been with the company almost 30 years now and I think this is the moment that I’ve been waiting for and it’s an opportunity to really run hard and run fast for I think as long as I can and I’ve got a lot of energy right now and my goal is to bring my full energy to what I’m doing and I don’t have an endpoint. I really want to build a business that can grow and sustain itself beyond me. And I think that’s really something I got from my father, because that’s what he always wanted to do. He wanted to build a business that would grow and thrive beyond his time. And he focused on planting the seeds to make that happen.

DAVID: And your children, two daughters. Would they ever like to go into your business or you have no ambitions in that direction for them?

ABIGAIL: I would like to see them be successful, passionate adults that make a difference in the world. And whether it’s in the world of Fidelity or in the world of something else is up to them.

DAVID: So you’ve talked about some of the pleasures of the job you have. What are some of the not so pleasurable things? What do you not like other than interview like this perhaps or something like this, but what do you not like?

ABIGAIL: There’s certainly frustration, but I like to think of frustration as a motivating force. Often with a big company, the most frustrating thing is trying to get things to move quickly enough, particularly in financial services, where a lot of your operations are geared around safety and security, that builds in a natural resistance to change.

DAVID: How do you deal with philanthropy and the expectation you’re going to give away fair amount of money?

ABIGAIL: So we have a family foundation and we’ve got a terrific staff at our family foundation and I work informally with them. Other members of my family, my mother, my siblings and of course my father, who is the main driver of it for so many years, are all engaged and working with a very competent staff to make sure that we’re giving away lots of money.

DAVID: Do people bother you when you go out to dinner, they don’t recognize you or they do recognize you?

ABIGAIL: No they mostly don’t recognize me. Sometimes I can’t get a table—I often can’t get a table, so I don’t eat out that much.

DAVID: But do you ever tell them who you are, maybe you’ll get a table or you don’t do that? You don’t like to do that, not your style?

ABIGAIL: Doesn’t happen.