The Invisible Heir

Billionaire Abigail Johnson may be the most powerful woman in finance. She’s poised to take over Fidelity, her family’s empire. Who is she?

By Suzanna Andrews

Abby Johnson


Those who know her describe Abigail Johnson as steely and extremely serious, qualities that come across in photographs: Whippet-thin, she’s almost always wearing glasses, her fine features and blue eyes rarely revealing more than a slight smile. An heiress to a Boston family fortune — with a personal net worth estimated by the Bloomberg Billionaires index at $10 billion — she’s one of the world’s richest women. She’s also one of the most driven and hardworking. In her 24 years at Fidelity Investments, the mutual fund company founded by her grandfather, Johnson worked through two pregnancies and, according to press reports, a serious illness in 2007 that she never discussed with her colleagues.

Through a spokesman, Johnson declined to comment for this piece. Silence has been her mode for years. She even said little when she was named president of Fidelity Investments Financial Services in August, making her second in command at the $3.8 trillion mutual fund company, the nation’s second largest. She reports to her father, Fidelity Chairman and Chief Executive Officer Edward “Ned” Johnson III, and her elevation to the No.2 position arguably makes Abby — nobody calls her Abigail — the most powerful woman in finance.

With her ascension, Johnson, 51, has become the leading member of what today is still a very small club. In the financial world, only a handful of women have reached the top ranks. They include Sallie Krawchek, former president of Bank of America’s investment management division, who has been discussed as a possible candidate for the chair of the SEC; Ina Drew, JPMorgan Chase’s former chief investment officer, who resigned in May after the bank suffered a $6.2 billion trading loss; and Mellody Hobson, president of Ariel Investments, the $3 billion Chicago-based money management firm.

Johnson joins this group as Fidelity faces some of the biggest threats in its 66-year history. Fidelity still churns out big profits; it racked up operating income of $3.3 billion in 2011 on revenue of $12.8 billion, primarily from brokerage commissions and fees in its asset management, investment advisory, and record-keeping businesses. But Fidelity is no longer the largest mutual fund company in the country based on assets under management. It lost that position to Vanguard in 2010. And its target customers are increasingly moving away from actively managed stock funds — long Fidelity’s signature product — and into passive stock funds and more conservative fixed-income funds.

To fix the family business, Johnson can rely on input and guidance from a large team of executives, including her formidable father, now 82, who took the small Boston investment firm founded in 1946 by his father, Edward Johnson II, and turned it into a colossus. On at least one issue, though, she’ll likely be operating alone. Financial firms, particularly in wealth management, often prosper with a personal touch. Think Charles Schwab or John Bogle at Vanguard. A woman atop the company — guiding strategy in the boardroom and delivering the message on TV — could attract a raft of new customers. The question is: Does Abby Johnson want to be that woman? Born in 1961, Johnson is the eldest of Ned and Elizabeth “Lillie” Johnson’s three children. Raised on Boston’s North Shore, she had a classic Boston Brahmin upbringing, attending the tony Buckingham Browne & Nichols school in Cambridge, summering at the family estate in Maine, and majoring in art history at Hobart and William Smith Colleges. Despite the family’s fortune, estimated at about $22 billion today, she grew up with a flinty distaste for public displays of wealth, working as a waitress one summer, answering customer service calls at Fidelity during another.

The Johnsons were rarely in the newspapers; even today, Ned can walk down the street in Boston unrecognized, says John Bonnanzio, the editor of Fidelity Monitor & Insight, an investment newsletter.

After graduating from college in 1984, Johnson went to work not at Fidelity, but as an associate at the management consultant Booz Allen Hamilton. She went to Harvard to get her MBA, graduated in 1988, and was married that summer to Christopher McKown, a health-care entrepreneur she’d met when they both worked at Booz. They moved into the home they live in today with their two teenage daughters in the Boston suburb of Milton. The seven-bedroom house on a wooded 5.6-acre estate belonged to her grandfather.

Abby went to work for Fidelity shortly after her marriage, beginning a rigorous and long-running apprenticeship. She started as a stock analyst and then became a portfolio manager. From 1988 to 1997, she worked at six different funds and clocked in as one of Fidelity’s top managers in the first six months of 1995, with 25.2 percent returns on Fidelity’s $1.9 billion OTC Portfolio.

Johnson moved out of portfolio management in 1997 and into Fidelity’s middle-executive ranks. During the next 14 years, she worked in virtually every key area of the company, running its equity information technology systems, the equity division, and its immense, now $1.5 trillion mutual fund operation. She also ran Fidelity’s vast retirement and benefits administration business, the area that includes Fidelity’s 401(k) division.

In the process, Johnson gained respect for her mastery of technology and management processes, says Ronald O’Hanley, Fidelity Investments’ president of Asset Management and Corporate Services, who adds that “she is really driven by things that others might find exhausting or even uninteresting.” And by an almost obsessive focus on the needs of Fidelity’s customers, “even if it’s not the best thing, from the point of view of our bottom line,” he says.

Soft-spoken and understated, she became known as a manager with a collaborative style, more in the mold of her collegial grandfather than her brusque father. “She is very much a person who encourages debate and discussion,” says O’Hanley. “She doesn’t lead by fiat or by raising her voice or by asserting that she is the smartest person in the room.”

By 2007, Johnson had climbed to the senior-most executive ranks. In August of that year, Fortune reported she had lost weight and that so much of her hair had fallen out that she was wearing a wig. Inside Fidelity and in the media there was speculation that she had cancer; it was never openly discussed at the company, which refused to comment publicly. Throughout this period, Johnson rarely missed a day of work.

Over the years, other executives who might have run the company have left one by one. Robert Pozen, the mutual fund chief, departed in 2001. In 2007, Ellyn McColgan, who’d helped build Fidelity’s brokerage system and who was a rival for the top job, left, as did Robert Reynolds, the company’s chief operating officer and now president and CEO of Putnam Investments.

Among her biggest challenges, according to analysts, is repairing the hit Fidelity has taken to its market share. Since the end of 2008, Vanguard’s stock and bond mutual funds have attracted $274 billion from investors, according to Lipper Analytical Services, compared with $52 billion for Fidelity. The company was particularly bruised by the huge market drops from the dot-com bust and the 2008 meltdown, which sent investors fleeing managed funds for such lower-cost vehicles as index and exchange-traded funds.

Fidelity almost completely dropped the ball in developing ETFs, fearing they would cannibalize its managed funds. Despite the thin profit margins on ETFs for fund companies, says Bonnanzio, Fidelity’s decision not to move aggressively into the $1.8 trillion market “was a mistake.”

Fidelity’s O’Hanley questions the emphasis on market share. The company, he says, does not just focus on assets under management, now at $1.6 trillion, but also on its assets under administration — funds it holds for its customers but does not direct — which account for another $2.2 trillion. This includes non-Fidelity products like mutual funds and ETFs of other firms, such as BlackRock, which Fidelity sells on its “open architecture” platform. Still, Fidelity may be playing catch-up. This month it filed an application with the SEC for permission to introduce ETFs that would be run by Fidelity’s active stockpickers.

The issue is not that Fidelity lacks good products, it’s that the firm hasn’t done as well as it needs to in marketing itself, says James Lowell III, chief investment officer of Adviser Investments and editor of Fidelity Investor, an independent newsletter. “Where they have failed utterly is to attract inflows,” says Lowell. “That’s where they’re getting smoked by literally inferior products, even high-priced products. Fidelity’s indexed funds are lower priced than Vanguard’s, and yet Vanguard continues to be able to convince investors that it’s got the low-priced product,” he says. Fidelity has “the product. They have excellent service, they have an excellent platform, they have an excellent understanding of their business. They just need to let people know about it.” With Abby Johnson at the helm, he says, it’s the perfect moment for Fidelity to revitalize its image.

Here Johnson, who possesses many of the qualities of a public leader, could step in. Lowell is betting that, like Schwab and Bogle, Johnson will rise to the challenge. She has started to be comfortable making speeches and appearing at large events. “She has got to do a better job of being a little bit more public,” he says. “Replacing one CEO with a very dynamic, committed CEO — and in this case gender matters — that is your moment to rebrand. And she knows it.”

Fidelity has said Ned Johnson has no plans to retire, making it hard to predict how long his lion-in-winter phase will last. It won’t last forever. In April, the Greater Boston Chamber of Commerce dinner honored the Johnson family for their contribution to the city. It was a rare public appearance for Ned Johnson, who looked frail. Abby, dressed in a simply tailored silvery blue suit, stepped to the podium, adjusted her glasses, and began to speak on behalf of her family. “On some level, the curtain was closing,” says Bonnanzio.

“I think it’s been difficult to give Abigail her due,” he says, “difficult for her to really make her mark, given that she has always been in the shadows of her father. It’s going to be fascinating when her father leaves the stage.”


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