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Fidelity Go Vs. Pokemon Go: Be A Low-Cost Investor Or AR Zombie

Fidelity has started its own robo-advisory service and has a second one on the drawing board. (Grk1011)

If you want to get in on the latest cyber-reality mobile-device game, download Pokemon Go. If you want to get in on the latest low-cost automated financial advice -- robo-advice -- check out Fidelity Go.

Fidelity sees its newly launched Fidelity Go robo-advisory service as an aid to investment management and retirement planning.

Fidelity Go caters to relatively young investors with fairly few assets, who are comfortable using online and mobile platforms to manage their portfolios and who might appreciate Fidelity's low-cost offering.

"We are looking at emerging customers who are digital savvy, who are about 25 to 45 years old," said Rich Compson, head of managed accounts at Fidelity. "If they are saving for retirement, they've got a long time horizon, so they can take more risk. Their lives are less complicated. They don't have to build (a retirement) income plan or handle complex goal planning. They have $60,000 to $200,000 in assets (on average). And they are comfortable using digital technology to manage their financial lives."

Clients can enter the program with an initial investment of at least $5,000.

Only hours into its robo-advice's debut, Fidelity says it is too soon to say how many customers it has attracted. "But we've seen some feedback that it is an appealing interface," said spokesman Rob Beauregard. "It reinforces what we heard during the pilot (test program), that people like the ease of going through questions (to describe things like their risk tolerance and goals), how and what type of information is displayed. It's not cluttered. It's easy to recognize how your portfolio is doing, how it's invested, that sort of thing."

You can check out the robo service at Fidelity.com by typing "Fidelity Go" in the search box in the upper right corner, or by clicking the Investment Products tab and clicking on managed accounts.

Retirement and taxable portfolios in Fidelity Go will consist mainly of Fidelity index mutual funds, subadvised by Geode Capital Management. Geode has been a Fidelity subadvisor since 2003. It runs 33 Fidelity funds. It will also help Fidelity monitor client portfolios.

Taxable accounts can also include BlackRock iShares ETFs and tax-advantaged municipal-bond mutual funds.

Fidelity says its fees will be among the lowest in the robo space. All-in customer costs range from 0.35% of assets for retirement accounts to 0.40% for taxable accounts. Those fees include advisory fees and fees on underlying funds. On a $5,000 account balance, that amounts to an annual levy of $17.50 to $20.

In comparison, independent robo-advisor Wealthfront provides free service on accounts up to $10,000 in size, and a management fee of 0.25% on any balance exceeding that, plus annual fund expenses that average 0.12%, according to personal finance site NerdWallet.com. Schwab Intelligent Portfolio levies no management fee. Its fund expenses range from 0.04% to 0.48%.

At the high end of charges, robo Personal Capital assesses management fees of 0.49% to 0.89%, plus fund fees that average 0.10%.

Customers initially visit Go's Fidelity web page to answer questions about their goals, finances and risk tolerance. Investment strategy and portfolio construction are based on those needs and preferences.

As Go's customers get older and wealthier, they may shift to less-automated Fidelity services and asset management, Compson says.

Customers will also have phone access to Fidelity's investment service representatives for basic advice. "If a customer is looking for broader, more in-depth financial information, we would refer him to other services like Fidelity's Portfolio Advisory Services, where he can have access to certified financial planners and other types of advisors," Compson said.

Fidelity is also still developing a robo-advice service that it plans to offer to independent financial advisors who use Fidelity for custodial and other services, Compson says.


IBD'S TAKE: Some big asset managers offer independent financial advisors access to their robo-advisors as a way to grow their practices and meet the new Department of Labor (DOL) fiduciary standard, which is due to take effect in April.


Typically, each customer will have seven or eight funds in his or her portfolio, Compson says. Geode will be able to choose from the entire universe of funds, Compson adds. Their job is to aim for low-cost funds, using largely passive asset allocation. They can find those among Fidelity index funds, iShares ETFs and Fidelity muni-bond mutual funds, he says, but they are allowed to use others.

Busy Month For Robos

Fidelity's startup comes amid a flurry of moves in the robo space. Another big player in the mutual fund industry, Legg Mason (LM), entered the robo-advisor field just this month with its acquisition of an 82% stake in Financial Guard, which has $454 million in client assets under management.

Wells Fargo (WFC), the world's largest bank by market cap, said that it plans to start a robo-advisory service in 2017. And Qplum, an independent robo-advisor, said it's now taking on investor clients, offering them institutional-style quantitative strategies.