NEW YORK – Fidelity Investments CEO Abigail Johnson said the firm’s decision to launch a series of no-fee mutual funds had a simple rationale: bring in new customers.
“The objective was to lower the friction and get more people to try Fidelity,” Johnson said in a brief interview. “The hope is they will like it and want to do more business with us.” She spoke Friday after an event at Fidelity’s Boston headquarters about technology in finance.
Fidelity in August introduced two zero-expense index funds and this week announced two more, the latest round in a price war that has steadily driven down the cost of investing. The first two funds attracted nearly $1 billion last month. The firm also cut fees on its existing index mutual funds in August and said investors could open accounts with no minimum balance required.
Asked how Fidelity would make money on the no-fee products Johnson said, “You don’t make money on every customer in financial services. The way you make money is by building relationships and doing a great job.”
Fidelity manages about $2.6 trillion.
Charles Stein is a reporter for Bloomberg News.