Fidelity’s New No-Fee Funds Bring All Fees Into Sharp Focus
The no-fee index funds Fidelity rolled out earlier this month may prompt a pointed question for directors to ask of their own products, experts say: if a company can give these away for free, how can we justify charging anything?
Independent counsel and others say that’s the essential issue Fidelity’s funds raise. They say even if it amounts to little more than a thought experiment – nobody in the industry truly expects all companies to immediately start giving their products away – the move may still lead some funds to cut their fees, consolidate products, sell off suites of products, or a bit of all three.
“Basically what’s happened here is a very interesting trade war in these index mutual funds. Fidelity doesn’t want to get left out, so they’ve thrown down the gauntlet and said, ‘We’ll do it for free,’” says Thomas Westle, a partner at Blank Rome.
“You might see people saying, ‘Why does Vanguard charge 14 basis points for the same fund. Why does Schwab charge anything for the same fund?’” he says. “When boards meet next, they’ll say, ‘How do we justify having a fee on our product?’”
To read the full article, please click here.
"Fidelity’s New No-Fee Funds Bring All Fees Into Sharp Focus," by Whitney Curry Wimbish was published in BoardIQ on August 14, 2018.