Ms. Abigail P. Johnson
Fidelity Management & Research Co.
82 Devonshire St.
Boston, Mass. 02109
Letters that start out "Dear Abby" usually end up asking for advice. If you don't mind, I'd like to turn that around and give you some advice, just as soon as I offer my congratulations on your recent promotion. To lead the company that runs $907 billion in Fidelity mutual funds is a giant opportunity to make tons of money, while brightening the futures of millions of investors.
As you take over, pay no mind to the mean spirits who, when you walk by, see nothing but nepotism. Sure, you have always had an edge. You're the top shareholder in a private company founded by your grandfather and still headed by your dad. But after 14 years as industry analyst, portfolio manager, and fund executive, you have invested plenty of yourself in Fidelity.
You announced the other day that everybody on your fund-management team shares "the same goal: to do the best job we can for our fund shareholders." But in at least one crucial way, Fidelity is letting shareholders down. In all of its educational efforts and marketing, Fidelity does little to explain the key legal fact of life for every investor in every mutual fund: When investors buy in, they become outright owners of the fund. The Fidelitys of the world exist to service the fund, investing assets and doing all kinds of grunt work, for fees. Overseeing you are the independent trustees who by law must sit on every mutual fund's board to guard investors' interests. And every penny they agree to send to Fidelity is one less penny for investors.
None of this is news to you, I know, and it's perfectly rational to want fund owners (your bosses) to keep lying like sleeping dogs. Yet I was surprised to find out just how nearly invisible your independent trustees remain. See for yourself at www.fidelity.com. Search and you will find no mention of them, beyond their names on the last page of the funds' annual reports.
NOT ALONE. There, investors can see a list of trustees, most with asterisks signifying their independence from Fidelity. A new name on the list is Marie L. Knowles. Who is she? What is her experience? How can she be contacted? Investors can get those answers only by knowing to ask for an obscure Securities & Exchange Commission filing called "Statement of Additional Information." It shows that Knowles is a retired chief financial officer of Atlantic Richfield. She also sits on three corporate boards, along with those of the Smithsonian and Brookings institutions. The address for her and other independent trustees is P.O. Box 9235, Boston, Mass., 02205-9235.
You're right, Fidelity is hardly alone. I found no mention of independent trustees at the Janus Funds site, and the barest description of their role at T. Rowe Price's. But Vanguard Group's materials spotlight the trustees' role, and even one of your affiliates, Fidelity Charitable Gift Fund, puts names, photos, and backgrounds of its trustees on page one of its annual report. By early next year, the SEC will force funds to include basic information on trustees in annual reports.
That's why now is the moment to steal a step on your rivals. You lead one of the best fund companies. Certainly the biggest. So, do the big thing. The open, strong, and confident thing. The thing that, as you've promised, aims at doing the best job for shareholders. Encourage your independent trustees to take a high profile. Highlight their watchdog role in your marketing materials and new-account applications. Make sure your clients know who looks out for them. Your reward? You will keep earning their trust. By Robert Barker