Fidelity Go: new robo-platform targets end investors not RIAs
Further details have emerged about Fidelity’s plans to launch its own robo-platform, contrary to what we and others reported on Friday, Fidelity’s platform will target end investors, not RIAs. The firm has confirmed that it is testing Fidelity Go with a few hundred employees with plans to invite some customers to test it early next year before rolling it out to the public. Similar to platforms offered by competing firms such as Betterment and Wealthfront, the digital system will suggest low-cost portfolios based on results from online questionnaires about investment goals and risk tolerance. The portfolios will be comprised of ETFs and its own mutual funds. According to documents filed with the SEC, the program will initially be free and will eventually charge a lower than average fee, however a spokesman from Fidelity said it was still deciding what to charge. The firm also stated that it plans to refund the majority of fees earned on investments from its own mutual funds to Fidelity Go customers. The service does not appear to include optional interaction with a human thereby differing from services offered by other traditional financial services companies such as Schwab and Vanguard. 

Investment costs are where the rubber often meets the road in investing success, and Fidelity, in its filing, promised that the portfolio costs would be “lower than average.” While a “significant” portion of the portfolios, which will invest in stocks, bonds and presumably safer short-term investments, will be in investments that track market indexes, some money will go into Fidelity’s own actively managed mutual funds. That provides an advantage to customers only when those mutual funds outperform the index fund in its market segment over time. Most actively managed funds don’t accomplish that. Mr. Beauregard said that Fidelity would refund a majority of fees it earned from its own funds to Fidelity Go customers who invested in them.

These services have proved attractive to investors who say they believe that trying to beat the market is foolish and do not want the hassle of finding the best index funds and remembering to buy and sell them at the right times to make sure their portfolios are not getting too risky or too safe.

Over the last several years, Betterment and Wealthfront have each gathered about $3 billion in assets. Schwab’s Intelligent Portfolios offering, which it introduced in March, had collected $4.1 billion as of Sept. 30.

Vanguard reports $26 billion in its service, $16 billion of which it says is new to the firm, with the rest coming from existing accounts. It offers financial planning with people, in addition to automated investment management, for its 0.3 percent annual fee.