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November 01, 2013 at 05:01 PM
You heard it here first: The latest launch of 10 new Fidelity sector ETFs won’t be a game changer.
Although Fidelity’s MSCI-linked sector ETFs are “nearly 80% below the industry average for passive sector ETFs,” according to the Boston-based fund giant, it still has a notoriously lackluster approach toward the ETF business.
If it doesn’t make drastic changes, it will lose one of its most significant battles yet.
To help them reverse the curse, I’ve come up with a bold and controversial roadmap for Fidelity that involves four key steps. I believe Fidelity can rediscover its mojo, but only if it makes a serious attempt at following them.
1. Commission-Free Trading on ALL ETFs
The ability to buy and sell ETFs online without paying any trading commissions is one of Wall Street’s boldest moves yet at gathering assets. The only problem is that Fidelity is competing against other major brokerage firms that each offer their own menus of commission-free ETF trading.
How can Fidelity blow away the competition? By expanding its commission-free platform to include all ETFs. (Yes, you read that correctly – all ETFs!)
Frankly, the only way to beat today’s hypercompetitive ETF landscape is with a hyper-radical solution.
2. Focus on Core Asset Classes
It’s puzzling why Fidelity has (mis)focused its attention on niche parts of the ETF market, like sector funds, when it should be aggressively expanding its Fidelity branded ETFs in asset categories.
Why aren’t there any Fidelity broad-market U.S. stock ETFs? Where are Fidelity’s self-branded international stock ETFs? What about Fidelity bond ETFs? What’s taking so long?
Investors need help today at building low-cost diversified ETF portfolios. And Fidelity – in its current state – can’t solve those needs, because it lacks self-branded ETFs across all major asset classes.
3. Introduce Fidelity ETF(k) Retirement Plans
Fidelity is already the nation’s largest 401(k) administrator.
