Remember all the frenzied discussion around GameStop and other hot stocks last year? Turns out it was good for Fidelity Investments.
We’re not sure how much: the Boston-based financial services giant doesn’t publicly disclose how much revenue it has received from retail investors through its trading platform, or any of its divisions for that matter.
But Fidelity chief executive Abigail Johnson, in the company’s annual letter to shareholders on Wednesday, cited market volatility and the phenomenon known as “meme-stock trading” as reasons why Fidelity’s earnings have fallen. jumped 15% last year. The company posted revenue of $24 billion in 2021, compared to just under $21 billion in both 2020 and 2019. Johnson pointed to other key factors: renewed interest from clients seeking assistance with financial planning and overall rising stock market values. , which contributes to higher fees for funds that Fidelity manages directly or holds in custodial and clearing accounts. (The Standard & Poor’s 500 stock index, for example, rose almost 27% Last year.)
In 2021, Fidelity reported $15.9 billion in expenses and $8.1 billion in operating income. Johnson, a major shareholder in the private company, said Fidelity is reinvesting its earnings into its business to “enhance the customer experience and strengthen our technology capabilities.” She also said Fidelity has developed new products to meet customer demand, including those involving cryptocurrency and sustainable investing. And she said Fidelity plans to continue investing in a strong “live channel” experience because “the personal touch of one-on-one interaction is a key part of what sets Fidelity apart.”
Fidelity saw record transaction volumes last year, and Johnson conceded there were times when a dramatic increase in customer calls hurt the company’s service level goals. As a result, Fidelity rushed to hire more people, onboarding more than 16,000 new employees in 2021, doubling the pace of hiring in 2020. As a result, the company’s total headcount reached 57,400. at the end of the year, compared to 49,000 at the end of the year. end of 2020.
Fidelity has long diversified beyond the mutual fund management business for which it became famous.
Among its various branches, Fidelity’s personal investing division stands out in the shareholder letter for its sheer growth, adding nearly 10 million retail accounts from 2019 through the end of 2021, to 32.4 million. Many of these new customers are relatively young: About 2.3 million new customers between the ages of 18 and 35 opened retail accounts with the company last year. The company boasted of being the first major financial services company to provide customer service through social media site Reddit; his Reddit page had over 32,000 members by the end of the year.
Reddit, of course, was a key venue for meme stock activity, where online discussions can fuel increased trade in individual stocks. The phenomenon took off in early 2021 around actions in GameStop, AMC and a few others. On the first anniversary of GameStop mania, Fidelity posted an article quoting Andy Reed, vice president of behavioral economics research at the firm, with some tips for evaluating whether or not to get carried away with the next hot stock of the day. One of them: you don’t have to go all out, because there’s no shame in “going the roller coaster with one action.”