PLANSPONSOR - August/September 2018 - 17

Fee Cuts
Reflect New
Industry
Reality
FIDELITY has launched a series of
Fidelity ZERO Index Funds, which it
bills as " self-indexed, zero expense ratio
mutual funds. " Coinciding with the
launch of these funds, Fidelity says it is
implementing " across-the-board zero
minimums to open accounts, zero account
fees, zero domestic money movement
fees, and zero investment minimums on
Fidelity retail and adviser mutual funds
and 529 plans. "
According to a Fidelity spokesman,
the significantly reduced and simplified
pricing on the new and existing Fidelity
index mutual funds " [is] meant to deliver
unparalleled value, simplicity and choice
for clients. "
" Right now, these funds are available
only to our retail customers, " the
spokesman says. " However, we're always
reviewing and evaluating our product
lineup, and we do currently offer a broad
selection of low-cost index funds that are
currently available to plan sponsors for
their defined contribution [DC] lineups.
These [new index] funds are available for
IRAs [individual retirement accounts]. "
According to the firm, the Fidelity
ZERO Total Market Index Fund and the
Fidelity ZERO International Index Fund
are among the industry's first self-indexed
mutual funds with a zero expense ratio
available directly to individual investors.
" This means investors will pay a
0.00% fee, regardless of how much they
invest in either fund, " Fidelity suggests.
The funds became available on August 3.
The news is important for the retirement
plan market insofar as it includes
the broad pricing cuts on index funds and
the new availability of zero expense ratio
mutual funds for IRAs. But these are not
the only reasons that retirement industry
practitioners should take note. As highlighted
in the July issue of " The Cerulli
Edge - U.S. Asset and Wealth Management
Edition, " there are multiple causes of fee
compression in the asset management
industry today, and the distinct causes are
compounding upon each other to prompt
dramatic industry change.
At a very high level, the increasing
TALKING POINTS
Clueless About Decumulation
Defined contribution plan participants ages 45
and older were asked: " When you retire, what
do you plan to do with your plan savings? "
The findings: Participants are " generally
clueless. " One-quarter of respondents answered,
" I don't know what I'll do with my 401(k) account
savings. " Another quarter said, " I will ask my
existing financial adviser for advice. "
Source: " The Cerulli Edge - U.S. Retirement Edition, Second Quarter, 2018 "
HSAs: Investing for Growth
The investment menu offered in health savings
accounts (HSAs) should include equities, multiasset
classes and fixed income, according to
research from Devenir. Also good to include
are emerging market equities, target-date
funds, alternatives, international bonds and
specialty bonds, the research found. " Quality
... is an aspect of HSA investments that is highly
relevant to investor success, " Devenir says.
Source: Devenir, " Best Practices: HSA Investments and Menu Design "
PLANSPONSOR.com August-September 2018 17
importance of asset-allocation advice,
both within retirement plans and for
individual wealth management clients,
is perhaps the strongest driver fueling
a decline in asset management fees and
margins for providers. Bing Waldert,
director at Cerulli and lead author of the
report, observes that managers " are in
many cases actually dropping fees on
asset management products to near zero. "
Fidelity's new product launch is a
perfect example. -John Manganaro
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