March 13, 2013

Fidelity, BlackRock-iShares Join in Commission-Free ETFs Deal

Fidelity will more than double its current online commission-free ETF offerings and create new ETF portfolio strategies using iShares

Fidelity Investments and BlackRock are hopping on the commission-free ETF bandwagon in a big way.

The two firms announced Wednesday that they were joining in a long-term strategic alliance that provides “extensive collaboration” between Fidelity’s distribution and asset management organizations and BlackRock’s leading exchange-traded fund (ETF) provider, iShares.

Under the new deal, Fidelity will more than double its online commission-free ETF offerings and create ETF portfolio strategies using iShares as components within its managed account offering, Portfolio Advisory Services. PAS offers professional money management and access to proprietary research through model portfolios of mutual funds and personalized portfolios using mutual funds, ETFs and separate accounts. Customer investments have increased in Fidelity managed accounts products by 73% in the past three years.

The partnership is expected to increase and improve millions of customers’ access to a broad selection of passive ETFs provided by iShares, the world’s largest ETF manufacturer. Fidelity is increasing the number of iShares ETFs that can be traded commission-free on Fidelity.com to 65 from 30. The new list includes all 10 iShares Core ETFs plus international, domestic and specialized equity, fixed income and commodities ETFs.

“Through this groundbreaking alliance between two financial services leaders, we will leverage our complementary strengths to deliver leading ETF products and research that are unmatched to more than 10 million Fidelity customers,” said Kathleen Murphy, president of personal investing at Fidelity Investments, in a statement.

Fidelity and BlackRock’s move adds to a recent phenomenon in the ETF space. Buying and selling funds without paying any brokerage commissions is one of the biggest ETF trends going on right now, according to Ron DeLegge, editor of ETFguide. The trend was given a huge boost in February when Charles Schwab made the game-changing announcement that it would offer commission-free access to 105 ETFs from six big ETF providers. BlackRock’s iShares is not one of the six.

“Not only is [the trend] drastically reducing the cost of ETF investing, but it’s directly influencing ETF asset flows,” wrote DeLegge in a comment for AdvisorOne that lists Charles Schwab, Fidelity, TD Ameritrade and Vanguard as the top four commission-free ETF platforms.

In an email on Wednesday, DeLegge said that the new Fidelity-BlackRock deal is “a good start,” but that Fidelity brokerage executives have more to do. But for RIAs and investors that are clients of Fidelity Brokerage Services, the deal is a positive step, he added. 

“Fidelity hasn't been aggressive enough in the ETF space and this deal is more of the same,” DeLegge wrote. “Although the number of commission-free eligible ETFs on their menu will double to around 65, this deal still lacks the breadth of other commission-free platforms that offer multiple ETF families along with 100-plus funds that can be bought and sold online without a brokerage commission.”

The full list of 65 commission-free ETFs is available at Fidelty.com/etfvalue.  Fidelity customers can also access more than 1,100 other ETFs for a commission of $7.95 per trade.

As part of Fidelity’s growing sector-based business strategy, the company has established a strategic relationship with BlackRock where the firm will support Fidelity’s future passive sector investment management efforts.

“We are thrilled to be joining with Fidelity to create an ETF manufacturing and distribution powerhouse,” said Mark Wiedman, global head of iShares at BlackRock, in a statement. “This long-term partnership will enable millions of investors to maximize the value of ETF investing.”

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Read Ron DeLegge’s Top 4 Commission-Free ETF Platforms at AdvisorOne.

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