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Fidelity thinks about how it charges you for financial advice



Fidelity Investments is surpassing what wealthy financial consultants demand, one of the biggest price hurdles for a company managing hundreds of billions of dollars worth of assets.

The changes that will begin in July is the recent attempt by a large asset manager to simplify its charges.

The cost is strictly tied to the proportion that a customer invests in Fidelity. This Prix Fixe approach will replace the current a la carte model, where prices are sorted according to a mix of investment preferences, degree of interaction with Fidelity, and total assets.

Some new customers are paying less than today and some will pay more, according to previously unreported regulatory filings. Current Fidelity customers will pay the same or less, as the company will grant exemptions in order not to increase existing customers' fees.

"I call this cleanup," said Denise Valentine, senior analyst at Aite Group. "Everyone did something like that."

Big and small money managers have made changes to their fee structures in recent years, in part because of a Labor Ministry mandate requiring brokers to work on retirement accounts to further their clients' interests, industry advisors say. In many cases, these fee changes have been applied across the enterprise, not just pension accounts.

The future of this rule is uncertain. Last month, a US district court beat it down and said the Ministry of Labor was over-represented. president

Donald Trump

Last year, the Ministry of Labor ordered a new economic analysis of the Pension Savings Ordinance, which seeks repeal or revision.

Even if the scheme does not survive, the change in fee structures consulting firms has said it is unlikely that the advisory industry will be reversed.

A spokesman for Fidelity said the price changes would be based on customer demand. They will lead to a "single offer and a single fee plan", the spokesman said. "Instead of telling customers which product they are best for, we now welcome them to this personal meeting," he adds.

Financial advice ranges from simple recommendations to buy funds based on a client's goals and risk appetite for tax optimization, long-term wealth planning, and regular check-ins. The industry's average fee for this advice was 1

.3% for customers at $ 100,000 and 1.08% for customers with $ 750,000 in assets, according to information from advisors to the research and consulting firm Cerulli Associates.

Fidelity is not the first transformation of asset management fees. End of 2016,

Bank of America
Corp.

The Merrill Lynch unit has made several changes to its investment advisory program, which includes the revision of bank statements to clarify what customers are paying. This department has also lowered fees for customers with smaller budgets.

The changes made by Fidelity, founded in 1946 by the Johnson family, are significant for their size and influence. The Company closed 2017 with $ 6.8 trillion of assets under management and $ 324.8 billion in client assets under its Retail wealth management business. Business areas include Asset Management, Brokerage, Technology Services, Wealth Management and Workplace Benefits.

In some cases, new Fidelity customers will pay less than today. For example, new customers with assets under $ 200,000 made up exclusively of Fidelity funds will pay a lower gross advisory fee of 1.5% after the change than the 1.7% they would pay today.

Such a $ 100,000 customer Investments made in this way are now being paid $ 1,500 a year for advice or $ 200 less a year than before the change.

In other cases, new customers pay more. New $ 1 million customers who had invested in model portfolios that included Fidelity and non-fidelity funds would have paid a mixed gross fee of 1.05% but under the new system would pay 1.175%.

on loans granted by Fidelity. Among other things, these may depend on the fund management and administration fees associated with their investments.

The new fees at Fidelity are part of a broader revaluation within their asset management unit. For example, it has also cut the cost of its so-called robotic advisory service, Fidelity Go. Such digital advisory services provide clients with ready-made portfolios of financial resources and serve as a way to engage clients who could build assets over time.

The average customer of this service at Fidelity is in the early 40s, during The average customer base of a managed account is 62.

The company this month will change the customers of Fidelity Go into royalty-free funds, leaving them only pay a flat fee of 0.35% per annum for service. You have previously paid both the management and underlying fund fees.

Write to Sarah Krouse at [email protected]


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