MutualFundWire.com: Fidelity Gives Another Tool to MF Replicators

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Friday, January 31, 2020

Fidelity Gives Another Tool to MF Replicators

A retail investing giant has launched another retail investing upgrade that may be unwelcome news for worried fundsters from active stock fund firms.

Scott Steven Ignall
Fidelity Investments
Senior Vice President, Head of Retail Brokerage

On Wednesday, Scott Ignall, head of the retail brokerage business at Fidelity, revealed that the Boston Behemoth will now offer retail investors fractional trading (as small one thousandth of a share), in real-time, of stocks and ETFs, using Fidelity's mobile app. The new feature will work with Fidelity brokerage, HSA, and IRA accounts, as well as self-directed brokerage accounts in defined contribution retirement plans.

The move comes a few months after Fidelity (and a number of other big brokerages) eliminated trading commissions on stocks, options, and ETFs. Combine that feature with Fidelity's fractional trading and the public disclosures of mutual funds, and you have a recipe for do-it-yourself investors to replicate, at no cost, the portfolios of any stock mutual fund out there. When investors can do that, they might wonder, what does an active equity manager offer, especially one focused on long-term investing (not short-term trading)?

There's lag time, of course, as mutual funds (unlike traditional ETFs) don't disclose holdings every day. And the fractional trading update is only for individual investors, not RIAs (at least not yet).

Fundsters running fixed income funds and liquid alts may not have to worry for a while, though, since their funds' underlying holdings are harder for individual investors to replicate on their own.

Printed from: MFWire.com/story.asp?s=60829

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