Discussion Case: Fidelity Investments’ Partnership with Citizen Schools

Roy Fralin stood in front of a roomful of active sixth and seventh graders in an inner-city public school in Roxbury, Massachusetts. The classroom walls were covered with flip chart paper, which were packed with diagrams, numbers, and terms like “savings,” “budget,” and “investment.” A student stood at the front of the classroom. Fralin handed him a baseball cap to illustrate a loan with interest. “OK, when you give it back, you’ll owe me how much?” Another student shouted out the answer. “Great!” exclaimed Fralin. They exchanged high fives. “Now, how much are we putting away for your 401(k)?” The students punched their handheld calculators.

Fralin was not a public school teacher, and teaching personal finance to middle schoolers was not his regular job. He was a vice president and investment advisor at Fidelity Investments, where he worked mostly with high net-worth clients. But here he was, every Wednesday afternoon for 10 weeks, teaching a curriculum that Fidelity employees had developed called “How to Invest Like a Millionaire.” The program was part of a partnership between an innovative nonprofit called Citizen Schools and Fidelity Investments, one of its corporate partners. “I just don’t see any downside,” Fralin later reflected in a clip posted to YouTube about his experience as a citizen teacher. “I think this is going to be a success.”

In June 2015, Fidelity Investments was one of the leading providers of financial services in the world, administering $5.2 trillion in assets for 24 million individual and institutional clients. The company, which was privately owned, offered investment management, retirement planning, portfolio guidance, brokerage, and benefits outsourcing services. It also operated its own family of mutual funds. Fidelity maintained its headquarters in Boston, Page 415but had 10 regional operating centers and about 180 retail locations. In 2015, the firm employed 41,000 associates.

In 2009, Fidelity set about rethinking its approach to community relations. For many years, the firm had been philanthropically active, giving to a wide range of charities in its home community and elsewhere. But the company had come to believe that it could have a greater impact by focusing on partnerships with a small number of what it called “best in class” nonprofit organizations. An issue of particular concern to Fidelity was education, especially the shocking dropout rates in many of the communities it served; nationally, 1.2 million students dropped out of high school every year, many of them as early as ninth grade. In researching various options for making a difference, the company learned that the middle school years were critical in determining whether or not students would go on to graduate from high school.

To focus its resources on this issue, Fidelity chose to partner with Citizen Schools (CS). Social entrepreneur Eric Schwarz had founded CS in 1995 in Boston to operate after-school programs for middle school students, aged 11 to 14, in disadvantaged communities. The nonprofit recruited volunteer professionals—“citizen teachers”—to offer after-school apprenticeships in subjects they were passionate about in schools in the CS network. As a culminating experience, students would present what they had learned to friends, family, and teachers at what CS called “WOW!” events. In 2015, Citizen Schools had active partnerships with 29 schools in low-income communities in seven states, serving more than 4,800 students.

Fidelity had contributed money to Citizen Schools since 1998, but in 2009 it significantly stepped up its commitment and the company went beyond charity, encouraging its employees, like Roy Fralin, to teach in Citizen School programs. By 2015, Fidelity volunteers had taught more than 180 apprenticeships in such wide-ranging topics as robotics, law, and financial literacy in 34 middle schools. More than 1,500 associates had volunteered over 20,000 hours of volunteer service. Several executives served on various advisory boards. The company also donated meeting space and equipment. For example, students who had learned about web design from a Fidelity employee were invited to use the Fidelity Center for Applied Technology for their WOW! event, presenting their work in a state-of-the-art facility.

An external evaluation commissioned by Citizen Schools showed that its programs had “successfully moved a group of low-income, educationally at-risk students toward high school graduation and advancement to college, and [had] set them up for full participation in the civic and economic life of their communities.” Seventy-one percent of Citizen Schools alumni completed high school in four years, compared with 59 percent of matched peers. Sixty-one percent of students who had participated in their 8GA (8th Grade Academy) program five or more years earlier had enrolled in college, compared with 41 percent of low-income students nationally.

Fidelity indicated that in an internal survey, 89 percent of the company’s employees who had participated in the Citizen Schools partnership reported feeling more connected to their colleagues, 78 percent reported improved team-building skills, and over three-quarters reported having improved communication skills. Most importantly though, Heidi Siegal, Fidelity’s vice president for community relations, noted, “Our employees and our company enthusiastically support Citizen Schools because we know that they make a unique and significant impact on the lives of students in need.”

Sources: Corporate Voices for Working Families, “Fidelity Investments” (case study), 2012, at http://employmentpathwaysproject.org/wp-content/uploads/2014/04/Fidelity-and-Citizen-Schools-5.9.12.pdf; “Fidelity Investments,” at www.citizenschools.org/investors/current-investors/fidelity-investments; “Teaching Kids to Invest Like Millionaires,” [Roy Fralin], at www.youtube.com; “Guest Blog: At Citizen Schools, Volunteers Make STEM Relevant through Web design,” at www.educationnation.com; and private correspondence with representatives of Fidelity Investments and Citizen Schools. The website of Citizen Schools is at www.citizenschools.org. The website of Fidelity Investments is at www.fidelity.com.

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Discussion Questions

1. What evidence do you see in this case of the three kinds of corporate philanthropy discussed in this chapter: contributions of cash, in-kind products or services, and employee time?

2. What are the benefits and risks to Fidelity Investments of its partnership with Citizen Schools?

3. Do you consider Fidelity Investment’s partnership with Citizen Schools to be an example of strategic philanthropy, as defined in this chapter? Why or why not?

4. If you were a community relations manager for Fidelity Investments, how would you evaluate the impact of this partnership? What kinds of impacts would you attempt to measure, and why?

Marcetta, Wong & Palmirotto Investment Company, a corporation dedicated to brokerage, has as General Manager Sherry Faye Stull, in addition to being the principal officer the which is in charge of the portfolios of rich and famous clients.

The General Manager disagrees with the system proposed by Financial Investment
Decision Support System Group because it does not think it's right for the needs of the
company.

In the investment firm there is a variety of portfolio managers, some of the Portfolio managers were hired by their clients to be the managers from the sale and purchase of bonds and shares, these are subject to individual and lucrative arrangements both for them and for the investment house others are employees of the firm and are assigned to cases as required. Some clients delegated to their administrators all the decisions that had to do with their portfolios, others gave them freedom of partial decision, that is, they imposed restrictions of investment in the type of investment and the amount of investment where they do not have to be consulted, Any investment outside these parameters must 
be consulted with the client.

The house investment rate is 2.3% of the first million dollars in investments and .72%
in excess of the first million. At least once a year portfolio managers are meet with their clients to review the contracts, and specifications on the types of investments and investment strategies.

There are clients who are aggressive about their investment strategies and they like the
risky investments that pay higher profits, while others are more conservatives and prefer a lower risk, greater confidence in the investment and that leaves a gain although less, stable.

Portfolio managers try to vary the type of investment between bonds, shares and
other instruments, in fact, the most aggressive have more investments in stocks, while

the most conservative have a high proportion in government bonds. Once established the strategy and chosen the main investments the managers are dedicated to buy or sell when the prices of the instruments are outside the regular price or when They look lucrative, or when their client needs more cash.

They take care not to make many transactions if they are not necessary since each transaction It costs a commission to your client With the advent of Internet portals that are dedicated to taking investments, such as Ameritrade, Charles Schwab Online Investment, and others, the Board of Directors entrusted a project that will implement an information system that will automate most of the decisions on portfolios. Will use mathematical-financial procedures to examine each portfolio daily to find better and more advantageous ways to distribute the investments, as long as they are consistent with the strategies discussed with their clients.

Since portfolio managers were busy in meetings with their clients, the most outside the city, the system could have the advantage of making time transactions short taking departure of the fluctuations of the market, for this it would be given to the system that the maximum of the portfolio tied to these short-term investments would be 10% of any portfolio Of the remaining 90% the portfolio manager together with his client would have the power of decisions.

General Manager, Sherry Faye Stull understands that you have to compete with the house of investments online, using a system that is online, since the proposed one although it takes advantage of the market when portfolio managers are busy, the investor who invests in line does not want to know about intermediary, what he wants is to make his investment, benefit from the reports from the investment house and any global advice on "hot" investments of the moment.

Furthermore, she understands that this system benefits only rich investors, but she
understands that in the market there are groups of investors who are willing to invest but not They have large amounts that can be paid by an individual portfolio manager.

Questions.

1. Harmonize the ideas of the General Manager and the Financial Investment Automated Decision Support System Group in such a way that both the Board of Directors and the General Manager are pleased and can draw up a strategic plan based on the system to be implanted.

2. Of your opinion on investments through the Internet and if the house of established investor like Smith Barney, UBS Paine Webber, Merrill Lynch among others, they should look at this possibility as an option or as a necessity. Justify your answer based on factors such as investment in systems of
information Vs. strategic advantage, market movement and any other Valid approach to strengthen your position.

3. How can you include the strategy of using the Cloud as part of a resource for virtual storage? How would it alter the technology of Data Banks? (Database) necessary for Marcetta, Wong & Palmirotto Investment Company. see this as an alignment of business with the strategies of information technology.

4. Describe an information protection system that you would recommend for this
situation. It can be one or more than one. Be as specific as possible in the identification of security processes and how they would be used to project the information. Justify your answer.

5. With the advent of electronic commerce and corporations with a presence virtual that are made public like Amazon among others. The offering of shares and bonuses can also be in a non-classical way, since you have to rely on the solidity of a corporation that "does not exist physically".

Like you I would recommend that the offer, purchase and administration of these instruments of these companies? What would be your recommendation to modify the system to manage the administration of the portfolios with instruments of virtual companies? Within your explanation, include critical points of the system, strategic planning of information technology.

There is a multi-cuisine restaurant which offers fast food along with Indian, Mexican, and Chinese food which mainly focuses on students and communities from these countries. There are international student chefs from these communities who will prepare cuisines from these respective countries on a weekly basis.
Firstly, as a business what will be the 3 problems you will try to solve via these services? Essentially, why does this company exist?
Secondly, what are the Unique value proposition – What makes this product/service unique? Your philosophy and/or purpose. This guides your actions, spells out your overall goal, and guides decision-making. Also, describe your product/service in detail, focusing on customer benefits.

Assignment One: Description of Your Individual Entrepreneurial Project

Please describe your own individual project which may be unique or you had been thinking about since it has invented or innovative ideas.

Need to include description of the product, service, or idea you intend to do. The competitive advantage of your output and what make you think it is sustainable? The estimated cost of your project and some financial expectations. You may include any other details that you think it is appropriate and help in clarifying your ideas and expectations.

The Following transactions in this Question pertain to Nishat Electronic Repair Services, our imaginary small sole proprietorship business.
1. January 1, 2019, Mr. Ali Nishat started Nishat Electronic Repair Services by investing $10,000.
2. January 5, Nishat Electronic Repair Services paid registration and licensing fees for the business, $370.
3. January 6, the company acquired tables, chairs, shelves, and other fixtures for a total of $3,000. The entire amount was paid in cash.
4. January 7, the company acquired service equipment for $16,000. The company paid a 50% down payment and the balance will be paid after 60 days.
5. Also January 7, Nishat Electronic Repair Services purchased service supplies on account amounting to $1,500.
6. January 9, the company received $1,900 for services rendered. We will then record an increase in cash (debit the cash account) and increase in income (credit the income account).
7. January 12, the company rendered services on account, $4,250.00. As per agreement with the customer, the amount is to be collected after 10 days. Under the accrual basis of accounting, income is recorded when earned.
8. January 14, Mr. Nishat invested an additional $3,200.00 into the business. The entry would be similar to what we did in transaction #1.
9. January Rendered services to a big corporation on December 15. As per agreement, the $3,400 amount due will be collected after 30 days.
10. January On December 22, the company collected from the customer in transaction #7.
Required:
1. Prepare Journal entries in the books of Mr. Ali.
2. Prepare ledger

Requirement

General Journal

General Ledger

Trial Balance

Income Statement

St Owners Equity

Balance Sheet

Impact on Income

General Journal tab -For each transaction, review the unadjusted balance and prepare the adjusting entry necessary to correctly report the revenue earned or the expense incurred. After adjusting the accounts, review the general ledger and trial balance for accuracy.

General Ledger tab - Each journal entry is posted automatically to the general ledger. Use the drop-down button to view the unadjusted or adjusted balances.

Trial Balance tab - You may view either the unadjusted or adjusted trial balance by choosing from the dropdown box below. Your choice will determine the reported values on the financial statement tabs.

Income Statement tab - Use the drop-downs to select the accounts properly included on the income statement. The unadjusted or adjusted balances will appear for each account, based on your selection.

Statement of Owner's Equity tab - The unadjusted or adjusted balances will appear for each account, based on your selection.

Balance Sheet tab - Use the drop-downs to select the accounts properly included on the balance sheet. The unadjusted or adjusted balances will appear for each account, based on your selection.

Impact on Income tab -For each adjustment, indicate the income statement and balance sheet account affected, and the impact on net income. If an adjustment caused net income to decrease, enter the amount as a negative value. Net income before adjustments can be found on the income statement tab. (Hint: Select unadjusted on the dropdown.)

Relay Health is a company that has operated in the health care environment for several years. This organization has developed a platform whereby patients are able to communicate with their doctors online for consultations (www.relayhealth.com). The adoption of this service has been slowly growing for many years but has not received widespread acceptance in the marketplace by physician groups, although there are many benefits that can be discerned from the platform for patients or employers who might have employees who have doctors who are on such a platform. And, insurers such as Blue Cross and Cigna have also begun to accept that online visits are acceptable and are moving increasingly to reimbursing this approach. In spite of this growing trend, less than 3% of the family physicians in the American Academy of Family Practice report doing e-visits.

Recently, a company called Sophrona Solutions (https://sophrona.com/) has developed a platform that initially was for ophthalmology practices. One of the larger developers is American Well (https://amwell.com/cm/?test=true&gclid=CI7Zw4Xdp8oCFUUTHwodqssEhw), the producer of online care. They have announced that they are expanding their online portal nationally.

The CEO of Relay Health has called you in as a consultant to analyze this rapidly changing market.

There are several growth strategy alternatives available. Explain each alternative and then consider/apply each alternative for Relay Health. Which one did American Well employ? Which alternatives might be available to Relay Health? How might they be implemented?

Question: What is the annual difference in cash spent on publishing work if Horizon Insurance outsources to G-Art? Do not consider the gain or loss from the sale of special materials or equipment in this calculation.

Use the following case to help determine the answer to this question:

Horizon Insurance (HI) was a full-service regional insurance agency that has done all the printing and publishing of its own promotional brochures, newsletters, informational pamphlets, and required regulatory reports. Linda Wolfe, the business manager of the agency, had for some time thought that the firm might save money and get equally good services by contracting the publishing work G-Art Inc. She asked G-Art Inc. to give her a quote at the same time she asked Bob Myer her controller to prepare an up-to-date statement of the cost of operating Horizon’s publishing department.

Within a few days, the quote from G-Art Inc. arrived. The firm was prepared to provide all the required publications work for $ 410,000 a year with the contract running a guaranteed term of 4 years with annual renewals thereafter. If the estimated number or assumed mix of publications changed in any given year beyond the baseline planning estimates, the contract price would be adjusted accordingly. Wolfe compared G-Art’s quote with the internal cost figures prepared by Myer:

Table 1; Annual cost of operating HI’s publications department: Myer’s figures.

Materials                                                                                                             $40,000

Labor                                                                                                                 $290,000

Department overhead

Manager’s salary                                                                                            $48,000                                  

Allocated cost of office space                                  $10,000

Depreciation of equipment                                       $32,500

Other expenses (travel, education, ect.)               $25,000

                                                                                                                             $115,500

                                                                                                                            $445,500

Share of company administrative overhead                                         $30,000

Total cost of department for year                                                          $475,000

Wolfe’s initial conclusion was to close Horizon’s publications department and immediately sign the contact offered by G-Art. However, she felt it prudent to give the manager of the department, George Richards, an opportunity to question that tentative conclusion. She called him in and put the facts before him, while at the same time making it clear that Richards’ own job at the agency was not in jeopardy.

Richard came up with the following to keep in mind before his department was closed:

For instance, what will you do with the customed graphic design and printing equipment? It cost $260,000 four years ago, but you’d be lucky if you got $80,000 for it now, even though we had planned on using it for another four years at least. Andthen there is the sizable supply of print materials that includes a lot of specialized ink, specialty card stock, paper, envelopes ect. We bought the custom supplies a year ago when we were pretty flush with cash. At that time it cost us about 125,000 and at the rate we are using it now, it will last us another four years. We used up about one-fifth of it last year. As best as I an tell, Myer’s figure of $40,000 for materials includes about $25,000 for these customized sipplies and $15,000 for generic supplies we use on a regular basis. If we were to buy these custom supplies today it would probably cost us 110% of what we paid for it. But if we try to sell it, we would probably get only 60% of what we paid for it.

Wolf thought that Myer ought to be present during this discussion. She called him in and put Richard’s points to him. Myer said:

If we are going to have all of this talk about “what will happen if” don’t forget the problem of space we’re faced with. We’re paying 12,000 a year in outside office space. If we close Richard’s department we could use of the freed-up space as office space and not need to rent it on the outside.

Wolfe replied:

That’s a good point, though I must say I’m a bit worried about the people if we close the publications department. I don’t think we can find room for any of them elsewhere in the firm. I could see whether G-rt can take any of them, but some of them are getting odler. There’s Walters and Hines, for example. They’ve been with us since they left school 40 years ago, and I think their contract requires us to give them a total severance payoff of about $60,000 each, payable in equal amounts over four years.

Richards showed some relief at this. “ But I still don’t like Myer’s figures” he said. “What about the $30,000 for general administrative overhead. You surely don’t expect to fire anyone in the corporate office if Im closed, do you?

“Probably not” said Myer, but someone has to pay for those costs. We can’t ignore them when we look at an individual department, because fi we do that with each department in turn, we will convince ourselves that accountants, laywers, vice presidents, and the like don’t’ have to be paid for. And they do, believe me”

Clarification: In the fact set, Custom Supplies are expected to sell for 60% of what the company paid for them. Assume (to make numbers cleaner), that this is 60% of their 'current' book value of $100,000 (derived from the fact set), not the original cost..