FIDO dropping costs again

[braumeister]

Got an email from Fidelity that as of next month they are converting all their funds to just one class (currently "Investor" and "Premium") and all will have the lowest ER.

Gotta give them credit for competing hard against Vanguard.

 

[samclem]

Gotta give them credit for competing hard against Vanguard.

This will be good news for a lot of customers.
My guess is that Fidelity will have a hard time competing with Vanguard to be the lowest-cost provider of mutual funds. Vanguard's customer-owned corporate structure and their lower overhead costs (no B&M stores, etc) give them a big advantage. But for those who want what Fido has (better hand-holding, wider array of in-house managed funds, slicker web site, etc), the low costs could be the icing on the cake.


It may turn into a Walmart (low cost, bare bones, well run) vs Target (slightly more expensive, more polished, well run) competition, and that's good for everybody. Fido is doing a good job of not becoming Sears (fat, irrelevant).


Full disclosure: I've got funds at both Fido and Vgd.

 

[braumeister]

Actually, I think Fido has quite a few (dozens) of index funds with lower costs than Vanguard. Probably not that competitive if you look at their whole fund universe, but they're obviously trying. Abigail still probably has a bigger yacht than her average customer though.

And I'm at both too.

 

[audreyh1]

Got an email from Fidelity that as of next month they are converting all their funds to just one class (currently "Investor" and "Premium") and all will have the lowest ER.

Gotta give them credit for competing hard against Vanguard.

They had already made the lowest ER change when they announced the new zero funds. So we've been enjoying the lowest ERs for a while.

Now they are in the process of merging the four index funds classes for each type, and I believe they will be using the Institutional Premium version ticker.

The Fidelity Index funds have ALL been lower ER than the Vanguard Admiral Index funds for a while now. They also require no minimum investment.

This will be good news for a lot of customers.
My guess is that Fidelity will have a hard time competing with Vanguard to be the lowest-cost provider of mutual funds.

https://www.fidelity.com/mutual-fun...WQ1IwZhjzVDB-dAq9NoaAolXEALw_wcB&gclsrc=aw.ds

 

[OldShooter]

I would like to see Vanguard collapse Admiral and Investor shares because I can't get Admiral shares at Schwab. But, really, when we are down to looking at 1 or two bps differences, it really doesn't matter as much any more. Not that I wouldn't like to pick up the odd $100 bill if it was lying there.

 

[samclem]

Actually, I think Fido has quite a few (dozens) of index funds with lower costs than Vanguard. Probably not that competitive if you look at their whole fund universe, but they're obviously trying.

Oh, yes. My dough at Fido is in those funds (formerly the Spartan series). It's a bit like an item on sale at Target, it can be cheaper than the regular Walmart price.


It will be interesting to see Vanguard's response. I'm betting on a "Super Admiral" class with a negative ER (they pay you). And a black & white web site reachable only by dial-up modem. And, they come to your house and kick your dog.

 

[Red Badger]

Oh, yes. My dough at Fido is in those funds (formerly the Spartan series). It's a bit like an item on sale at Target, it can be cheaper than the regular Walmart price.


It will be interesting to see Vanguard's response. I'm betting on a "Super Admiral" class with a negative ER (they pay you). And a black & white web site reachable only by dial-up modem. And, they come to your house and kick your dog.

When they kick my dog, I'm gonna share my metals portfolio with them.
Lead.
12 gauge.

 

[Beldar]

And a black & white web site reachable only by dial-up modem.

Make it 300 baud and text-only and I'm in! (Dying to use all that old gear gathering dust in the garage).

_B

 

[tulak]

Does anybody know how well the Fidelity funds perform when compared to Vanguard?

Ok, I checked for one of the funds: US Total Market.

fund	1-yr	3-yr	5-yr	10-yr
VTSAX	17.62%	17.07%	13.44%	12.08%
FSTVX	17.57%	17.05%	13.42%	12.01%

Looks like Vanguard is a winner.

 

[RobbieB]

Whatever.

 

[MrLoco]

Got an email from Fidelity that as of next month they are converting all their funds to just one class (currently "Investor" and "Premium") and all will have the lowest ER.

Gotta give them credit for competing hard against Vanguard.

Fidelity has to compete. As hard as they can. July 2018 stats show Vanguard with $ 5.1T AUM and Fidelity with $ 2.45T AUM. HAlf as much.


Also, Fidelity claims on their website they actually have $6.9T but this is misleading as this includes "Assets under Administration" and not strictly AUM ( Assets under Mgmt.). This is why you have seen recently the zero fee funds from Fidelity and Schwab claiming they beat Vanguard's index fund fees by 1 basis point!


Gee Fido. Gee Schwab. Where you guys been the past 30 years??

 

[tulak]

Whatever.

No doubt. I wanted to point out that you need to consider more than the fund’s ER. But at these %s it doesn’t matter. Just do whatever’s easiest.

 

[Scuba]

No doubt. I wanted to point out that you need to consider more than the fund’s ER. But at these %s it doesn’t matter. Just do whatever’s easiest.

Exactly. Best of both worlds is VG funds or ETF’s within a Fido account. All the perks of Fido’s superior service with the lower costs/marginally better performance of VG products.

 

[OldShooter]

... Looks like Vanguard is a winner.

Really? Looks to me like any actual difference is statistically and economically insignificant.

IMO this story is not over. All this price cutting and consolidation (primarily of stock pickers) has to play itself out before we will really know what we will be paying for various funds and services. The good news is that it will be less, probably much less, but this won't be the first price war where the warriors overshoot and have to raise prices somewhere in order to generate stockholder return or just to stay in business. As has been mentioned, VG is unique in not looking for stockholder return but if their actual costs are enough higher than, say, Fido's then Fido might end up the price winner. I'm expecting this opera to run for another couple of years before we see the denouement.

 

[Cobra9777]

...Best of both worlds is VG funds or ETF’s within a Fido account. All the perks of Fido’s superior service with the lower costs/marginally better performance of VG products.

+1

I've been saying this for years, although Fidelity's recent ER cutting might change things at some point. Our portfolio is all ETFs, about half Vanguard and half iShares, all housed at Fidelity. One note: VG mutual funds at Fidelity is probably not advisable because IIRC there is a commission of $49.95 per trade on non-Fidelity mutual funds. Most iShares ETFs trade free. I pay $4.95 to trade VG ETFs, but I only make 2-3 trades per year on average, so it's of no real consequence.

 

[Scuba]

+1



I've been saying this for years, although Fidelity's recent ER cutting might change things at some point. Our portfolio is all ETFs, about half Vanguard and half iShares, all housed at Fidelity. One note: VG mutual funds at Fidelity is probably not advisable because IIRC there is a commission of $49.95 per trade on non-Fidelity mutual funds. Most iShares ETFs trade free. I pay $4.95 to trade VG ETFs, but I only make 2-3 trades per year on average, so it's of no real consequence.

Agreed. I don’t do any VG mutual funds, only ETF’s.

 

[audreyh1]

Exactly. Best of both worlds is VG funds or ETF’s within a Fido account. All the perks of Fido’s superior service with the lower costs/marginally better performance of VG products.

High transaction fees messes that up.

 

[Scuba]

High transaction fees messes that up.

Huh? What transaction fees? I pay either nothing or $4.95/trade depending on what I’m trading. Transaction costs are a very small rounding error.

 

[audreyh1]

Huh? What transaction fees? I pay either nothing or $4.95/trade depending on what I’m trading. Transaction costs are a very small rounding error.

Vanguard funds have high transaction fees at Fido.

 

[MRG]

Vanguard funds have high transaction fees at Fido.

+1

It's a ripoff. There was valid a reason for it in 1993. Those physical packages were replaced with reusable bits long ago.

 

[audreyh1]

+1

It's a ripoff. There was valid a reason for it in 1993. Those physical packages were replaced with reusable bits long ago.

The transaction fee is due to Vanguard not having a No Transaction Fee arrangement with Fidelity as some other higher ER mutual fund companies have. Vanguard doesn't want to push the extra costs of dealing with external brokerages onto their direct clients. It's Vanguard's choice.

 

[MRG]

The transaction fee is due to Vanguard not having a No Transaction Fee arrangement with Fidelity as some other higher ER mutual fund companies have. Vanguard doesn't want to push the extra costs of dealing with external brokerages onto their direct clients. It's Vanguard's choice.

Indeed, it is a choice. At this point in time the cost is less than a rounding error, but it's a choice.

I understand the Vanguard mentality, they're easily the most cost effective fund organization I've ever been in. Perhaps they're not for everyone but they're the best at what they do for the 80% that fit their model.

 

[audreyh1]

Indeed, it is a choice. At this point in time the cost is less than a rounding error, but it's a choice.

I understand the Vanguard mentality, they're easily the most cost effective fund organization I've ever been in. Perhaps they're not for everyone but they're the best at what they do for the 80% that fit their model.

The transaction fee for buying a Vanguard Investor class fund through Fidelity is $75. No charge for selling. No access to Admiral class shares either.

That $75 fee is a little too large to consider it a rounding error in comparison to the ultra low ERs of index funds. Maybe if you bought all at once and never rebalanced - but that is not typically how people operate.

 

[UpAnchor]

Like several here, I have assets with both firms. Each offers certain advantages the other lacks. One disadvantage to Fido, for me anyway, is their ongoing lack of index balanced funds other than FFNOX (Fidelity Four-in-One, 85/15 AA the last I looked) and their target date funds (the index series, that is). Nothing along the lines of Vanguard's Life-Strategy family or Wellesley/Wellington for instance. (Ok, I realize W/W are managed.) And yes, I know...folks can "build" their own from Fido's index funds. But not everyone wants to for various reasons.

 

[MRG]

The transaction fee for buying a Vanguard Investor class fund through Fidelity is $75. No charge for selling. No access to Admiral class shares either.

That $75 fee is a little too large to consider it a rounding error in comparison to the ultra low ERs of index funds. Maybe if you bought all at once and never rebalanced - but that is not typically how people operate.

Sorry we're not talking about the same thing in regard to rounding. The fee that should be passed on is about .002 cents. The fact they charge $75 is a business decision on the part of the fund company.

At one time the fee made sense. After certain technology was developed, it is a ripoff(think I'm repeating myself).