How a lockdown opportunity put mutual fund manager Fidelity on the growth fast track

Author: Clare O'Hara

Source: The Globe And Mail

Over the last 20 years, Fidelity Investments Canada ULC president Rob Strickland has been quietly building one of the country’s largest independent mutual fund managers.

It has been no easy feat for a fund company that does not run its own large in-house network of financial advisers to distribute the 180 investment funds it manages for more than two million Canadians.

Mr. Strickland and his 69 wholesaler teams have had to build relationships with the advisers who work at some of Fidelity’s biggest competitors, such as Canada’s largest banks and the wealth management arms of independently run investment giants, including CI Financial Corp. and IGM Financial.

During the first 15 years of Mr. Strickland’s tenure, the company’s market share progressed gradually. Then in 2020, the pandemic forced the company to quickly pivot to remote work and online video calls in an attempt to maintain existing adviser relationships.

At the same time, regulators introduced tougher rules around product knowledge and conflicts of interest.

It was the perfect opportunity for Fidelity.

As lockdown days turned into weeks, Mr. Strickland discovered that the weekly webcast he had started just a year earlier was now attracting thousands of investment advisers who were desperate for economic updates, regulatory advice and back-to-office protocols. It immediately turned into a daily show.

“Before COVID, maybe you could attract a 1,000 advisers to attend a digital meeting for half an hour on a Monday,” Mr. Strickland said during a recent interview in his Toronto office. “But now, we have 5,000 advisers logging online to hear some our most well-known portfolio managers.”

Much like the U.S chief executive officer of Fidelity ULC, Abby Johnson, Mr. Strickland says he prefers to stay under the radar, leaving the public commentary and limelight to his portfolio managers.

He rarely does media interviews to discuss corporate strategy. Yet, he is animated as he recalls how the company’s pandemic pivot unknowingly began during a 2018 trip to Silicon Valley. It was there he met with Blue Jeans Network – a video conferencing company that would change Fidelity’s business plan entirely. The partnership that followed that year allowed Fidelity to move away from holding expensive telephone conference calls and expand the reach of its portfolio managers through video meetings. (Blue Jeans was acquired in 2024 and Fidelity’s webcast now operates on Zoom.)

“It was life-changing for me,” Mr. Strickland said. “We normalized portfolio manager access not only for advisers, but for retail investors who also want firsthand information.”

While “Zoom-like” calls don’t sound that innovative in today’s remote world, Fidelity’s use of the technology has gone well beyond internal staff meetings. It hosts a daily webcast of industry, regulatory and news related topics.

Guests include investment regulators, politicians, notable economists and tax experts as well the company’s own roster of star portfolio managers.

“I think we have done a much better job of capitalizing on that opportunity than our competitors have,” Mr. Strickland said.

Since then, Fidelity’s sales have taken off.

Today, Canadians hold about $2.29-trillion in mutual fund assets, according to data provided by Securities and Investment Management Association (SIMA). When Mr. Strickland first stepped into the role of president in early 2005, the company was Canada’s seventh largest fund company.

In March, 2020, Fidelity managed $116-billion in assets. At the end of that year, Fidelity’s assets had grown to more than $171-billion, giving it an 8.2-per-cent market share of Canada’s mutual fund industry.

By July, 2023, Fidelity says it surpassed Toronto-Dominion Bank to become Canada’s second-largest mutual fund manager, with 10.8 per cent of mutual fund market share, next to only Royal Bank of Canada. Today, the company manages over $307-billion in assets under management.

Unlike many of its competitors that are publicly traded companies, Fidelity is a privately held joint venture of U.S giant Fidelity ULC. and Fidelity Ltd.

The company launched in Canada on Oct. 19, 1987 – a day better known as Black Monday, when the Dow Jones stock market index crashed nearly 23 per cent.

It was an unfortunate launch date, but also an opportune time to pitch mutual fund products to disgruntled stock pickers. One of those traders was Mr. Strickland, who was a 24-year-old rookie stockbroker working for Nesbitt Burns, a Torontobased full service investment firm that would later be acquired by Bank of Montreal.

“No word of a lie, I quit being a stock jock that day,” he said. He began selling Fidelity funds to his clients and built his career around the product.

In 1994, he joined TD Evergreen, Toronto Dominion Bank’s brokerage business. Four years later, TD appointed him as president of TD Evergreen, where he worked until joining Fidelity in 2003 as a national sales manager.

During the late 1980s, independent asset managers were booming in mutual fund sales. Canada’s banks were late to get in on the fast-paced growth, but by the early 1990s all six big banks had launched asset management divisions with their own proprietary mutual fund families.

In 2008, independent fund companies still dominated the market with 57 per cent of the net assets in the fund industry, while the banks and credit unions accounted for 31 per cent, according to research conducted by Strategic Insight. (Insurers and other third-party sellers account for the remaining 12 per cent.)

By 2021, the independents’ market share had fallen to just 36.1 per cent as banks and credit unions’ grew to 53.8 per cent of mutual fund assets, according to SIMA.

Today, independent fund companies have seen a slight uptick in their position, managing 38.1 per cent of the market.

Mr. Strickland says the digital world has been the biggest game-changer for the company, allowing it to significantly connect with more financial advisers. Prior to COVID, the company would set up an event at Roy Thompson Hall in Toronto for 1,000 people to hear their portfolio managers talk about the market and products. The company’s first all-day hybrid conference had close to 6,000 attendees.

While Fidelity Canada’s growth is still largely around mutual funds, it also manages about $18-billion in exchange-traded funds. It is a slice of the industry Fidelity did not join until 2017, which Mr. Strickland admits was much later than its peers.

“But we are never first out of the gate,” he says. “We like to sit back and be more cautious.”

The company has taken a similar approach with Fidelity Wealth, a new advisory business that received regulatory approval last year. The company has no plans to acquire an existing advisory firm or be heavy recruiters of individual advisers. Rather, Fidelity aims to slowly hire a group of planners who can take over books of businesses from the 16,000 advisers in Canada who are set to retire in the next decade.

“We taught a whole generation of advisers to like our product and now they are retiring,” he adds. “So we need to make sure there is new blood who can manage those clients. 

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