Remember all the frenzied trading around GameStop and other hot stocks last year? Turns out that was good for Fidelity Investments.
We don’t actually know how good: The Boston financial services giant doesn’t publicly break out how much revenue it received from retail investors via its trading platform, or from any of its divisions for that matter.
But Fidelity chief executive Abigail Johnson, in the company’s annual shareholder letter on Wednesday, cited market volatility and the phenomenon known as “meme-stock trading” as reasons why Fidelity’s revenue jumped 15 percent last year. The company recorded $24 billion in revenue in 2021, up from just under $21 billion in 2020 and in 2019. Other key factors Johnson pointed to: a surge in interest from customers seeking help with financial planning, and the overall rise in stock-market values, which helps drive the fees for the funds that Fidelity manages directly or holds in custody and clearing accounts. (The Standard & Poor’s 500 stock index, for example, rose by nearly 27 percent last year.)
In 2021, Fidelity reported $15.9 billion in expenses and $8.1 billion in operating income. Johnson, one of the privately held company’s biggest shareholders, said Fidelity invested its income back into its businesses to “improve the customer experience and enhance our technology capabilities.” She also said Fidelity developed new products to meet customer demand, including those involving cryptocurrency and sustainable investing. And she said Fidelity plans to continue to invest in a robust “live channel” experience because “the personal touch of a one-on-one interaction is an essential element of what differentiates Fidelity.”
Fidelity saw record trading volumes last year, and Johnson conceded there were times when a dramatic increase in customer calls hurt the company’s service level targets. As a result, Fidelity raced to add 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 workforce reached 57,400 at the end of the year, up from 49,000 at the end of 2020.
Fidelity long ago branched beyond the mutual fund management business for which it became famous.
Among its various arms, Fidelity’s personal investing division stands out in the shareholder letter for its sheer growth, adding nearly 10 million retail accounts from 2019 to the end of 2021, to 32.4 million. Many of these new customers are relatively young: About 2.3 million new customers between 18 and 35 years of age opened retail accounts with the company last year. The company boasted that it was the first major financial services company to provide customer service through the social media site Reddit; its Reddit page had more than 32,000 members as of the end of the year.
Reddit, of course, was a key venue for meme-stock activity, in which online discussions can fuel a surge in trading of individual stocks. The phenomenon took off in early 2021 around shares in GameStop, AMC, and a few others. On the one-year anniversary of the GameStop mania, Fidelity posted an article quoting Andy Reed, vice president of behavioral economics research at the company, with some tips for evaluating whether or not to get swept up in the next hot stock of the day. One of them: You don’t have to go all in, as there’s no shame in “riding the roller coaster with just one share.”