Fidelity may not be the only asset manager to benefit from its new no-fee index funds and lowered fees for other index funds. The surprise move, announced last week, is expected to help Fidelity increase market share but could also benefit its low-cost competitors such as BlackRock, Schwab and Vanguard.
Those firms, like Fidelity, have the “scale and/or more diversified business models with revenue streams other than base management fees such as securities lending or wealth management” to also offer zero rates, according to Fitch Ratings.
(Related: Fidelity Unleashes No-Fee Index Funds)
Moody’s Investors Service agrees that BlackRock and Vanguard — “significant competitors” to Fidelity — will benefit as the industry shifts even more “toward a model that anchors client relationships with commoditized, cheap or free passive products provided at the lowest end of a spectrum of advisory services.”
On Aug. 1, Fidelity announced the launch of two zero-fee funds — a total market index fund and international index fund — plus lower fees for 21 other index funds and elimination of account fees and investment minimums.
BlackRock heralded the move as one that will provide “greater access to iShares ETFs” on the Fidelity platform.
A Vanguard spokesman told ThinkAdvisor that the mutual fund giant “will continue to lower the cost of investing on our index and active funds, as we have for the past 40 years,” and Schwab similarly noted that it remains “laser focused on delivering straightforward, transparent and low-cost products” to investors. “Anytime costs go down, investors win.”
None of the three, however, lowered fees in response, as some have in the past.