Fidelity Investments is overhauling the fee structure at its wealth management unit by simplifying how financial advisory fees are charged, according to a Wall Street Journal report.
The changes, which begin in July, will see Fidelity switch from a ‘a la carte’ model to a ‘prix fixe model’ when it comes to charging clients for financial advice, according to the Journal.
The pricing changes will affect clients of Fidelity's 7,000 advisors, who oversee some $324.9 billion discretionary assets, in firm’s retail wealth management unit.
The current model charges fees based on a mix of clients’ investment preferences, degree of involvement with Fidelity and their overall assets managed by the firm, the ‘prix fixe’ model will charge fees based strictly on clients’ assets at Fidelity.
A Fidelity spokesman who confirmed the planned changes said the overhaul was part of a broader effort to offer ‘unified services’ and bring together Fidelity's expertise in financial planning, advisory relationships and investment solutions.
'Our experience has shown that working with a financial advisor to plan and manage a client’s full financial picture can help make it easier to deal with complex investment decisions. Unified services and simplified pricing should provide a better overall experience as well as better position clients to help them achieve their financial goals,' he said.
As a result of the repricing, some new clients will pay less than they would have based on the fee rate today but others will pay more, according to ADV filings.
Meanwhile, current Fidelity clients will pay the same or less due to fee waivers that will be granted by Fidelity to keep existing clients’ fees from rising.
The net advisory fees ultimately depend on factors such as fund management and servicing fees associated with clients' investments.
According to the Journal, new clients with less than $200,000 in assets who want model portfolios entirely comprised of Fidelity funds, will pay a lower gross fee of 1.5% compared to the 1.7% today.
In contrast, new customers with $1 million that invest in model portfolios with both Fidelity and non-Fidelity funds will have to pay 1.175%, compared to the current rate of 1.05% today.
The repricing also represents part of a broader price shake-up at Fidelity, which is also cutting costs for its robo-advisor Fidelity Go. Starting this month, Fidelity Go will now charge a flat 0.35% annual fee instead of charging both management fees and underlying fund fees.
Fidelity had $6.8 trillion in total customer assets under administration at the end of last year.