In an inverted twist on an old saying, it appears that Fidelity has decided that “If you can’t join them, beat them!” In this case, the “them” to which I’m referring is Zenefits. Before I provide color on the above commentary, let me first take you on a quick trip down short-term memory lane: – May 2015: Fidelity is a key investor in Zenefits’ historic summer capital raise — where their valuation was set at $4.5 Billion; – November 2015: Only a few quarters removed from that valuation and investment, Fidelity announced that they were slashing the value of their Zenefits holdings by 48%; – January 2016: Fidelity announces that they are entering the health broker business by establishing a Private Exchange to be initially sold in NYC and Boston. Here is one man’s opinion on how this played out. Fidelity has long seen the value of healthcare consulting and broker services, as they have been directly providing those types of services to the large end of the market for over a decade. They also obviously saw a great deal of value in the benefits broker business within the SMB market as evidenced by their sizeable investment in Zenefits. However, they more recently saw the shortcomings of the Zenefits model and wanted to ensure they were able to capitalize on the opportunity within the SMB market. So, in their mind, they saw a familiar and fertile market being underserved (by Zenefits) and decided to jump into the deep end of the pool and make a rather large splash. Fidelity does pose an interesting threat to the employee benefits broker industry. They know this space fairly well and have a track record of success on the financial side. They are currently renting/leasing a 3rd party technology for their exchange, which I find interesting. My sense is that this will not remain the case for long, but is the path they chose so that they could quickly enter the market. They have depth of both pockets and technology expertise to build proprietary benefits/private exchange technology and I would anticipate that they’ll do so at some point in the near future. At this point, I’m not entirely sure how this will play out, but Fidelity doesn’t do anything halfway. So, I would expect them to go broader and deeper within the next year or so. One thing is clear to me about how they view this industry – If you can’t join Zenefits (and be happy with your investment), beat them!