Who would have known there were so many families involved in financial services technology? For our August issue, the staff of Wall Street & Technology thought it would bring you something a little on the lighter side, a more personal look at financial technology. As a result, the following feature examines families in financial technology; how they got to where they are, how they work together and, most importantly, their impact on the industry. After discussing the issue with many of our readers we found many more families in the industry--whether father/daughter, siblings or the whole clan, than we dreamed existed. We could not possibly profile all of the families, so we chose to feature three families that you will certainly recognize--three of the most influential family combinations in financial technology--the Madoffs, the Sculleys and the Johnsons. In addition, we have highlighted a few other families who haven't been in the limelight quite as much, but have interesting stories to tell.
Welcome to the Johnsons: Ned and Abigail
Edward Johnson III, or Ned as he is affectionately known, comes out of finance, as does his daughter Abigail. Before taking over the reigns of FMR Corp. from his father in 1972, Ned was an excellent stock picker and then fund manager. One of the financial innovations he is most well known for is creating the sector fund, yet he is admired throughout the industry for his commitment to technology.
The sector fund serves as a perfect example. While a market innovation, it was also a technological feat, requiring a more seamless meshing of real-time market data, accounting and performance measurement systems so that the funds could be priced on an hourly basis versus the industry norm daily measure. "Sector funds turned the industry on its head," recalls Robert Hegarty, an analyst at the TowerGroup who worked at Fidelity for eight years, most recently as head of technology for capital markets. "It required a bigger shift in technology than you would imagine."
As a direct result of this investment in technology, FMR Corp. has become in just over 50 years one of the largest financial powerhouses in the world. Fidelity was one of the first firms to effectively utilize automated call-center technology to better serve clients, while cutting costs on the service provided. When the Internet first emerged as a consumer tool in 1994, Ned called together the top IT executives from around the firm to figure out how it could be applied to foster customer interaction. One might be surprised that a decidedly business-oriented person would focus so much on IT, but that is just what he did, and his labor has borne amazing fruit. In 1972 Fidelity managed about $3.9 billion in assets. Today that number is just above $1 trillion.
"He sees five years ahead like nobody I've ever seen," says Hegarty. "What other firms view as a threat, he sees as an opportunity." Over his tenure, Hegarty recalls that he and the other IT heads for the various divisions would meet with Ned on a quarterly basis. These meetings were not about pomp and circumstance. "Innovation is just part of the way he operates on a day-to-day basis," Hegarty explains. "What was really interesting, at these meetings, he would talk to you in the present tense about things that weren't happening yet. He's always thinking in terms of the possibilities of technology."
Ted Laskaris, who left Fidelity last summer to head technology at Denver Investment Advisors, explains that Ned is not someone to invest in any new technology that comes along, but will take a risk on the "bleeding-edge" when potential rewards can be clearly articulated.
Interestingly, the group Laskaris worked for during his 12-year tenure at the firm was charged with conceiving, building and rolling out new applications in a matter of weeks, whereas the core systems group could take months, if not years, to roll out an application. "It was an investment systems group that worked completely outside the normal systems group," he explains. Where many of the largest financial firms have rolled out separate, start-up-like e-commerce divisions in the past two years to keep pace with the rapid development in Internet technologies, Fidelity already had a start-up like group. "Ned's support for this division, which was not looked at kindly by the main systems group, really shows this is the type of work he respects and values," Laskaris adds.
And like father like daughter. Abigail, or "Abby", Fidelity's single largest shareholder with a 24.4% voting stake, is being groomed to take over for her father when the still energetic and active 70 year-old leader retires. While her ascension to the thrown is not assured-a recent shake-up of Fidelity's top executives pointing to other potential once and future kings-Abby has gone above and beyond expectations. Like her father, she is well regarded by her peers and known to be "modest" and "unassuming." Also like her father, she began her tenure at Fidelity as an analyst and emerged to become a formidable fund manager before becoming manager of equity investment systems. Her move from finance into technology represents a learned commitment to technology.
"If Abby is going to take over for her father, she will have to focus on current and emerging technologies," says an industry insider. "If she's learned anything from Ned, it is that technology has made Fidelity possible." Ned and Abby declined to be interviewed for this piece. -Andrew Rafalaf