Earlier this week, Fidelity Investments announced that it is overhauling what it charges affluent clients for financial advice. Some new customers will pay less than they would today and some will pay more, according to regulatory filings. Current Fidelity customers will pay the same or less because the firm will grant waivers to keep existing clients’ fees from rising.
Ahem..the new pricing structure is clear as mud. For example, new customers with less than $200,000 in assets who want portfolios comprised entirely of Fidelity funds will pay a lower gross advisory fee—1.5%—after the change than the 1.7% they would pay today. In other cases, new customers will pay more. New customers with $1 million that invested in model portfolios that included Fidelity and non-Fidelity funds would have paid a blended gross fee of 1.05%, but under the new system would pay 1.175%.
Why are these changes being made now? It is to abide by the new proposal from the SEC that called the “fiduciary rule” that requires advisors to disclose that whether the financial advisor is just a salesman or has duty of loyalty to the customer.
Future Wealth’s View
Whenever fat cats in Wall Street cut their fees, there is always some hidden reason. In this case, the reasons are obvious for everyone to see. Fidelity was ripping off clients and putting them in investments that were neither appropriate nor reasonable i.e. being a salesman, and as such, with the new rule, they expect clients to bail en masse. Unless, of course, they can call their fleeing clients and tell them they are cutting their fees. If only they would agree to invest in Fidelity products.
Can these firms ever stop belittling our intelligence? Fidelity is not alone in this scam. Schwab, Edward Jones, Morgan Stanley and Goldman Sachs etc. are all out to get their vulnerable clients in the most surreptitious way possible. On the other hand, Future Wealth was founded on the premise that investors should not have to ever pay more than 1% all in. For clients with more than $1 million, we charge only 0.7% of assets, putting the rest to work for our clients. And, we invest primarily in Vanguard ETFs that have the lowest fees and Future Wealth receives no “kickbacks”. We want our client to benefit from the growth of their investments and we choose not to be looking for ways to skim every single dollar out of our clients portfolios. What a novel idea!