Fidelity Investments announced Wednesday the launch of its retail robo-advice offering Fidelity Go, which the Boston-based firm says was developed in collaboration with younger, digitally savvy investors.
Fidelity Go, which was in a pilot phase since late last year, offers a combination of a professionally managed portfolio, a digital dashboard, integration with Fidelity’s broader investment tools and services, as well as “an all-in cost” that Fidelity argues is “among the lowest in the industry.”
Rich Compson, head of managed accounts at Fidelity, said in announcing the launch that Fidelity Go “makes professionally managed portfolios broadly accessible by helping people move from saving to investing quickly and efficiently, with costs starting at approximately $20 a year.” Fidelity’s “goal is to help people meet their lifetime financial needs, and Fidelity Go is a new way for Fidelity to help digital-first investors and those just getting started.”
Fidelity Clearing & Custody told its RIA clients last November that it would wind down its relationship with Betterment by the end of 2015 and set up its own robo-type platform for advisors. The two entities now compete for advisors’ business.
A Fidelity spokesman told ThinkAdvisor on Wednesday that details about the robo-service Fidelity is developing for financial advisors will be available by year-end. “The goal is to offer an advisor-centric solution that is integrated into Fidelity’s technology platform for registered investment advisors, broker-dealers and banks.”
Fidelity Go touts features such as portfolios constructed, monitored and rebalanced over time by investment professionals — not simply by an automated “robo” algorithm — available at a minimum investment of $5,000.
Investors get a “transparent advisory fee” and underlying investment portfolios that include Fidelity Index Funds Premium Class and Institutional Class — which Fidelity argues are “some of the lowest cost funds” in the industry — as well as Blackrock iShares ETFs and muni bond funds for taxable accounts.
Current all-in costs, including the advisory fee and underlying fund fees, range from 0.35% to 0.40%, which Fidelity says “may vary over time” depending on the account type and portfolio chosen.
Kyle Ramsay, head of investing and retirement at NerdWallet, said that “with its all-in pricing around 0.35% – 0.40%, Fidelity Go is in line with the pricing of competitors.”
Here’s a sample page we generated for a taxable account to be opened with $50,000; the investor plans to add $250 a month and retire in five years. The Fidelity Go fee on the account, which could change if the investing strategy does, is $1.77 a month, or 4 basis points annually. Fund fees are extra.
While competitors like Betterment and Wealthfront “may have a lower sticker price, … that does not include the underlying fund expenses, which could be between 0.05% to 0.25%+, which make them almost equivalent” to Fidelity Go, says Ramsay.
Betterment has no account minimum and charges a management fee of 0.15% to 0.35%, depending on account balance, and investment expenses range from 0.09% to 0.17%; Wealthfront has a $500 account minimum and the first $10,000 is managed free, then 0.25%, with an average investment expense of 0.12%.
Joe Ziemer, Betterment’s director of communications, said that “it’s not surprising” that the Fidelity Go portfolios primarily consist of Fidelity products. “One thing that we know our customers love about us is that we are not affiliated with any of the products in our portfolios. We are completely independent and select the funds solely on the basis that we believe they are the best for our customers.”
Fidelity Go’s “$5,000 minimum sets a bit higher hurdle to get started,” Ramsay adds, but “pricing and minimums aren’t the only thing to consider when choosing an advisor … Fidelity’s positioning certainly makes it a competitive option.” To get started, investors log on to Fidelity.com/Go and are asked to answer at least seven questions about their goals, current financial situation and risk tolerance. Fidelity uses a proprietary profiling methodology developed by Strategic Advisers Inc. that has been informed by its experience with Fidelity’s suite of financial planning tools.
Fidelity Go suggests an investment strategy based on the investor’s needs and preferences; investors can accept or change the suggestion, then open the account.
Fidelity Go users can access their accounts via smartphone, tablet and desktop to deposit and withdraw funds, monitor progress to goal, and receive updates and Apple Watch alerts. Investors are also given the option of directing the unlimited 2% cash back from the new Fidelity Rewards Visa Signature Card into their Fidelity Go accounts.
While account service is primarily web-based, Fidelity says customers can also use the “click to chat” option to get help with their account or call specialized Fidelity Go representatives that hold Series 7, 66 and 63 licenses.
Goode Capital Management, which has served as the subadvisor to the Fidelity equity index funds and other Fidelity products since 2003, invests, monitors and manages the portfolios on a discretionary basis, offering rebalancing, commission-free trading and automatic investment of dividends and new contributions, but not loss tax harvesting, as other digital advice platforms provide.
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