The Daily Brief
Fidelity Investments.

What Fidelity’s Free Funds Mean for Financial Advisors

The move is the latest in the commoditization of investing, pushing advisors to prove their worth and earn their fees in areas other than portfolio management.

Robin Powell, writing on his site Adviser 2.0, has a round-up of reactions from financial advisors and industry pundits around the world on Fidelity’s recent announcement it was launching two zero-fee equity funds, and what that means for professional financial advisors.

Most of the responses reiterate the idea that advisors will now have an even harder time convincing their clients and prospects that portfolio management is what they should be paying for; instead, advisors who want to grow their businesses need to prove their value and earn their fees via financial planning, emotional support and lifetime budgeting.

Many of the sentiments echo this, from Collaborative Funds’ Morgan Housel: “When an investing product costs nothing, it reiterates the point that there is no value in the specific stock-selection and investment acumen side of the business, where advisers used to claim their value.”

And this, from Morningstar’s Jeff Ptak: “The good news is advisors can implement their advice for clients even more cheaply than before using low-cost or free funds. The bad news is that the trend toward unbundling and lower cost will not stop at investment products. Advice fees will come under further scrutiny, with enabling technologies like robo advice and increasing transparency catalyzing this trend.”

Read more industry reactions at Powell’s blog.

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TAGS: Industry
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