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Fidelity Launches Robo-Advisor

July 27, 2016

Fidelity’s robo-advisor is out of its pilot phase and available to clients with at least $5,000 in investable assets nationwide, the Wall Street Journal reports.

Fidelity Go, the company’s automated advice platform available across multiple devices including mobile phones and tablets, charges 0.35% on tax-deferred accounts and 0.40% on taxable accounts, according to the newspaper. That covers both the advice fees and fees on the products it offers through the robo, including Fidelity’s own index mutual funds as well as BlackRock’s exchange-traded funds, the Journal writes. Fidelity claims it will keep the fees at that level regardless of the underlying fund fees, so if fund fees increase, the advice fee would be lowered accordingly, writes the Journal.

When using the robo, investors answer a short questionnaire and get a recommendation of one of 14 portfolios, evenly split between those designed for tax-deferred and for taxable accounts, the newspaper reports. Clients can still get further assistance via online chat or a toll-free number, the Journal writes. And unlike some other robo offerings, Fidelity says human portfolio managers — rather than algorithms — rebalance investments to the client’s preferred asset allocation, according to the paper; that’s to prevent accounts from getting “whipsawed” during heightened volatility, Rich Compson, head of Fidelity’s retail managed accounts business, tells the paper.

The firm expects the service to bring it a younger clientele — investors between 25 and 45 years of age, according to Compson. The hope is that as the wealth of these clients increases, they will transition to Fidelity’s more hands-on advice services, he says to Investor’s Business Daily.

While Fidelity is late to the game — lagging far behind robo-advice pioneers Betterment and Wealthfront, as well as robo platforms launched by traditional financial services companies such as Vanguard Group and Charles Schwab — its brand name and competitive pricing means Fidelity Go will likely succeed, Tom O’Shea, associate director at Cerulli Associates, tells the Journal.

Vanguard’s Personal Advisor Services, for example, charges an advice fee of 0.3% and fund fees averaging 0.14%, and comes with a minimum investment requirement of $50,000, the Journal writes. But O’Shea says it’s possible that Fidelity’s robo will also compete with its own more expensive products, such as the Fidelity Portfolio Advisory Service, which charges an advice fee for managed accounts between 0.6% and 1.7%, the paper writes.

In the robo space, Fidelity tried the partnership route before going it alone. Last year it ended a “strategic alliance” with Betterment, InvestmentNews writes. The company then embarked on its own pilot program in March, with plans to sign up around 500 existing customers, as reported previously. Since then, that number has grown to about 1,000 customers as well as Fidelity employees, who now have $14 million in assets on the platform, the Journal reports. Vanguard’s robo, meanwhile, had $41 billion in assets as of the end of June, while Schwab’s Intelligent Portfolios platform and a related platform for financial advisors had grown to $8.2 billion by the end of June, according to the paper.

Fidelity will also face competition from UBS Group and LPL Financial, both of which said recently that they plan to offer hybrid advice services combining automated advice with human advisors, the Journal writes.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.
  • To read the Investor's Business Daily article cited in this story, click here.
  • To read the Wall Street Journal article cited in this story, click here.