Fidelity slashes some investment fees to nothing in price battle

PROVIDENCE – Boston-based Fidelity Investments announced Wednesday that it is creating new index funds with a zero expense ratio, part of an ongoing price war with other major money managers.

Fidelity said it will offer the new index mutual funds to individual investors with a zero expense ratio, meaning investors will pay no fee regardless of how much they invest in either fund, while giving them exposure to nearly the entire global stock market.

Beginning Friday, the two new mutual funds – dubbed the “Fidelity Zero Total Market Index Fund” and the “Fidelity Zero International Index Fund” – will be available on the firm’s website and will require no minimum investment, the company said.

Fidelity directly compared the zero expense ratio funds with those of competing investment firms Vanguard Group and Charles Schwab Corp., calling it part of a series of “industry-changing moves” that the company announced Wednesday.

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In addition, Fidelity said it will cut fees on its existing stock and bond index mutual funds by an average of 35 percent.

“Fidelity is once again rewriting the rules of investing to deliver the unparalleled value and straightforward investing options that individuals need and deserve,” Kathleen Murphy, president of Fidelity’s personal investing business, said in a statement.

“The ground-breaking zero expense ratio index funds combined with [for retail brokerage accounts] industry-leading zero minimums for account opening, zero investment minimums, zero account fees, zero domestic money movement fees and significantly reduced index pricing are unmatched by any other financial services company,” Murphy said.

Fidelity also compared the reduction of fees and requirements for its retail brokerage accounts to those of major competitors. The company, with managed assets totaling $2.5 trillion as of June 30, maintains its center for brokerage and institutional services in Smithfield.

Wednesday’s moves are part of a price competition with Vanguard, Charles Schwab, Blackrock Inc., and other investment firms that have reduced fees dramatically on index mutual funds and exchange-traded funds, Bloomberg.com reported.

Vanguard views the changes by Fidelity as an example of “the Vanguard effect,” a term used to describe rivals competing with Vanguard on costs, Vanguard spokesman Freddy Martino told Bloomberg.

Martino said Vanguard, a longtime leader in low-cost investing, said the company will continue to lower costs on its index and investing funds.

Scott Blake is PBN staff writer. Email him at Blake@PBN.com.