Fidelity boosted by market gains and retail investor activity

Fidelity made a record operating profit in 2020 as the Boston-based financial group benefited from strong gains across global markets and a retail investor boom.

Assets under management rose to a peak of $3.8tn at the end of last year, up 19 per cent from the end of 2019, the company said in its annual report released on Tuesday.

Fidelity’s business encompasses a retail brokerage, asset management and the administration of workplace retirement schemes. It ended 2020 with $9.8tn of investor assets under administration, an increase of 17.9 per cent over the prior year.

Asset managers in general across the industry saw strong growth last year and also experienced higher client activity as retail investors became a bigger force in markets. Fidelity said it enjoyed a strong year of customer engagement with its personal investing business experiencing record high levels of assets and client accounts.

“Fidelity, like many other financial services companies, experienced dramatic increases in call volumes, digital engagement, and daily trading volume,” Abigail Johnson, Fidelity’s chief executive, wrote in her annual letter. “Additionally, many of our existing customers who had never engaged with us before called for help or used our digital tools in record numbers.”

Against the backdrop of record-setting equity markets and the surge in retail trading, Fidelity said that its equity team executed a record total of 574.3m trades last year, representing a 100 per cent increase from 2019.

“The increases in customer volumes pushed us to move faster in areas that were already long-term priorities, including digitisation of service, streamlining and upgrading our legacy technology infrastructure, and launching new products and services to align with evolving customer preferences,” said Johnson.

Fidelity said revenue edged up to a high of $21bn in 2020, surpassing the prior year’s revenue of $20.9bn, while operating income was up 4.6 per cent to a record $7.2bn, compared with $6.9bn in 2019. Operating expenses were $13.8bn, down 2.1 per cent on the previous year.

Gross flows into its retirement savings business totalled $147bn, up 22 per cent year over year, while gross new advisory flows rose $89bn, a gain of one-fifth. Fidelity gained 5.3m new retail accounts over the year, up nearly 50 per cent from the end of 2019.

Referring to its asset management business, Fidelity said “overall investment performance continued to be strong across asset classes in 2020”. Its actively managed mutual funds and exchange traded funds beat about three-quarters of their rivals when judged over a performance period of one, three and five years, it said.