Fidelity joins the ranks of other online advisors
Fidelity Go, Fidelity's version of a robo-advisor, is the financial firm's effort to attract young, tech-savvy investors. Here's how the service compares with other online financial advice services.
Fidelity Go, Fidelity's version of a robo-advisor, is the financial firm's effort to attract young, tech-savvy investors. Here's how the service compares with other online financial advice services.
One more traditional broker is throwing its hat into the robo-advisor ring:聽Fidelity聽has announced the launch of Fidelity Go, a new digital advice offering. The company has been quietly testing the service for聽the last six months with聽a group of 1,000 investors.
The service聽uses Fidelity index funds to build portfolios that are managed by a team of investment managers, not computers. The digital component comes in when investors are matched with portfolios: Similar to other online advisors, Fidelity Go makes recommendations聽based on investors鈥� answers to a series of questions designed to take the pulse of their risk tolerance, financial situation and goals.
鈥淭his is not an algorithm,鈥� says John Danahy, Fidelity鈥檚 head of digital managed account solutions. 鈥淥ur size and our scale enables this to be managed by a portfolio manager.鈥� That manager is Geode Capital Management, which also serves as the sub-advisor for 33 Fidelity index funds.
Investors will be able to review聽their suggested portfolios 鈥� and make adjustments聽鈥� before opening an account.
The company says Fidelity Go聽is aimed at younger, digitally savvy investors, as is typical of聽robo-advisors. Danahy says Fidelity worked to 鈥渃o-develop鈥� the service with that demographic, inviting users into the company鈥檚 lab.
Fidelity Go鈥檚 single all-in fee came out of these conversations. Most robo-advisors charge a management fee plus fund expenses. Investors will pay between 0.35% and聽0.40% of assets under management, Danahy says. The portfolios聽require聽a minimum balance of $5,000.
The service includes聽portfolio rebalancing聽and will automatically invest new contributions and dividends without a聽commission, but it doesn鈥檛聽offer tax-loss harvesting. Taxable accounts incorporate BlackRock iShares ETFs and tax-advantaged municipal bond funds to minimize taxes.
Fidelity no doubt hopes to mimic the success of other incumbent brokers that have聽gone the way of the robo-advisor, namely Vanguard. Investors have flocked to its聽Vanguard Personal Advisor Services,聽which聽pairs robo-advisor algorithms with dedicated financial advisors and currently has $41 billion in assets under management. It charges a 0.30% management fee聽on top of fund expenses, and it requires a $50,000 minimum.
Other brokers that have added digital advice to their menus include Charles Schwab, with聽Schwab Intelligent Portfolios, and E-Trade, with聽E-Trade Adaptive Portfolio. Schwab鈥檚 service doesn鈥檛 charge聽management fees, but uses Schwab funds to build portfolios with weighted average expense ratios between聽0.12% and聽0.25%. It currently has $8.2 billion in assets under management. The E-Trade advisor launched in June 2016.
Danahy says he expects Fidelity Go to attract both current Fidelity clients 鈥� the company has 2聽million in the 25-to-45 age group 鈥� and new customers who aren鈥檛 currently receiving advice. Existing Fidelity customers can roll their accounts into Fidelity Go, though the service will not extend to 401(k) management.
Fidelity Go compared to聽other聽online advisors
Advisor |
Management fee |
Investment expenses |
Account minimum |
|---|---|---|---|
Fidelity Go |
All-in fee of 0.35% to 0.40% |
Included in all-in fee |
$5,000 |
Betterment |
0.15% to 0.35%, depending on account balance |
0.09% to 0.17% |
$0 |
Wealthfront |
First $10,000 is managed free, then 0.25% |
Average 0.12% |
$500 |
Personal Capital |
0.49% to 0.89%, depending on account balance |
Average 0.10% |
$25,000 |
Vanguard Personal Advisor Services |
0.30% |
0.05% to 0.19% |
$50,000 |
Schwab Intelligent Portfolios |
None |
0.04% to 0.48% |
$5,000 |
E-Trade Adaptive Portfolio |
0.30% |
0.20% to 0.45% for hybrid mutual fund/ETF portfolio; all-ETF portfolio averages 0.20% |
$10,000 |
Arielle O鈥橲hea is a staff writer at NerdWallet, a personal finance website. Email:aoshea@nerdwallet.com.聽Twitter:聽@arioshea.
This article first appeared at NerdWallet.