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Rating:In Annual Report, Fidelity Wannabes May Find that Fido's Feat is Tough to Mimic Not Rated 5.0 Email Routing List Email & Route  Print Print
Tuesday, February 24, 2009

In Annual Report, Fidelity Wannabes May Find that Fido's Feat is Tough to Mimic

by: Armie Margaret Lee

Fundsters looking to apply lessons from Fidelity's 2008 annual report to their respective companies may find that Fidelity's moves are tough to replicate.

Like many of its peers, Fidelity's numbers are down from 2007: AUM fell 22 percent to $1.24 trillion, revenue went down 3.8 percent to $12.93 billion and operating income dropped 18 percent to $2.36 billion.

What's more interesting, however, is that when compared to 2006, the company actually increased revenues by 11.8 percent and operating income by 5.5 percent even as AUM fell 9.9 percent.

How did Fidelity pull this off?

For one, Fidelity reduced IT expenses by $100 million in 2008. According to the annual report, that was the first year-over-year reduction in IT spending since 2003.

"During the course of the past 12 to 15 months, we have put a terrific effort into containing expenses, focusing on those areas that will really give us a return, cutting out waste and increasing speed to market," wrote Fidelity president Rodger Lawson.

Apart from expense reductions, Fidelity executives also pointed to strong results in the firm's brokerage business and continued growth in its retirement plan business.

The market volatility drove trading to record levels, averaging more than 454,000 commissionable trades per day in 2008, a 22 percent rise from 2007.

Meanwhile, the personal and workplace investing (PWI) unit, of which the firm's retirement plan business is a part, saw total net flows of $108.2 billion, up 71 percent from the year before.

"The earning power of PWI and the brokerage area was one of the brighter spots among the various operations by the company in 2008, with these non-investment operations beginning to play an important part in the economic viability of our business," Fidelity chairman and CEO Ned Johnson wrote. 

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