AJ: Asset management is the most profitable business. I think that would be true if you looked at outside companies. Asset managers are generally more profitable than broker-dealers and certainly more than workplace administration providers.
Over five years out, it’s very market-dependent, because in asset management you charge basis points. If the market goes up, then you get more revenue. You can usually get the benefit of some economies of scale. When the market goes the other way, you get that leverage on the downside as well.
I try not to have an opinion about the market. I often feel like people expect that I’m going to have some strong view on the market. I think as a leader of the organization that has to find a way to keep going no matter what the market environment is, that’s actually not a good headset to be putting yourself in.
One of the things that’s fun, that I really like about our business, is that we’re not just in that asset management box. We’re doing a bunch of other things, too. So much market share has shifted to index funds, and we were late to that game. I like to think that we’ve caught up now.
BM: The name change to Fidelity Index Funds in 2016 helped, getting rid of the Spartan brand used since the 1990s.
KM: That was a bit of a self-inflicted wound.
AJ: That was definitely a self-inflicted wound.
KM: Once we called it Fidelity, we got a lot more assets.
BM: Was the original thinking that they didn’t want the new funds to be confused with Fidelity?
AJ: I don’t really know. I think the idea was that somebody thought it was like this New England Yankee thing and that people would say, “Spartan, it’s spare.” I’m speculating a little here, but I’ve got some insight. I think there was a little bit [of thinking] that it would be more Vanguard-esque to have that really explicit commitment to being bare-bones.