Fidelity charging extra fee for Vanguard funds in 401k?

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Dinosaur Dad
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Fidelity charging extra fee for Vanguard funds in 401k?

Post by Dinosaur Dad » Thu Jan 25, 2018 9:30 am

Yet another watch-out when it comes to 401k fee structures. Excerpt from the full article (link below):


Fidelity is the largest retirement-plan record keeper, administering more than $1.6 trillion in assets, or roughly 23% of the overall DC market. On Monday, InvestmentNews​ reported that the firm will begin charging employers a 0.05% fee on all assets held in Vanguard funds. The fee applies to smaller plans — those with less than $20 million in assets.

Vanguard, the largest money manager in the DC market, is a retirement-plan titan in its own right. It manages more than $900 billion and enjoys a coveted spot as the largest manager of target-date mutual funds, which have skyrocketed to popularity in 401(k) plans.

More than 45% of 401(k) plans use a Vanguard fund, according to BrightScope Inc., which tracks a database of more than 53,000 plans. The most popular is the Vanguard Institutional Index fund, with more than $107 billion in 401(k) assets.

Observers say the 0.05% asset-based fee is the first of its kind among record keepers, and could amount to several thousand extra dollars each year for employers, depending on the size of their retirement plan.

Vanguard is in retirement plan advisers' top tier of preferred asset managers for several different 401(k) asset classes, according to Sway Research, which studies asset-management distribution. In 2016, it was the No. 1 preferred manager of target-date funds, and No. 2 in U.S. equity, U.S. fixed income, and emerging-market stocks and bonds.

full link:

http://www.investmentnews.com/article/2 ... stmentnews
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Whakamole
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Whakamole » Thu Jan 25, 2018 11:35 am

At first I thought Fidelity just wanted to guide plans towards using their own index funds instead of Vanguard funds - which is fine, since Fidelity has equivalent funds for most of the popular Boglehead index funds.

But I also look at my Fidelity 401k account, and the only pure index funds offered are Vanguard funds. Fidelity funds are managed (Contrafund, Growth.) The only exception are the target date funds which are index-based but offered by BlackRock which is partnered with Fidelity.

So I wonder how pure Fidelity's motives are. I could care less if they move me to a Fidelity fund with equivalent expense ratios. But if they are trying to manage small plans out of index funds entirely, that's another matter.

Zithron
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Zithron » Thu Jan 25, 2018 11:41 am

Whakamole wrote:
Thu Jan 25, 2018 11:35 am
At first I thought Fidelity just wanted to guide plans towards using their own index funds instead of Vanguard funds - which is fine, since Fidelity has equivalent funds for most of the popular Boglehead index funds.

But I also look at my Fidelity 401k account, and the only pure index funds offered are Vanguard funds. Fidelity funds are managed (Contrafund, Growth.) The only exception are the target date funds which are index-based but offered by BlackRock which is partnered with Fidelity.

So I wonder how pure Fidelity's motives are. I could care less if they move me to a Fidelity fund with equivalent expense ratios. But if they are trying to manage small plans out of index funds entirely, that's another matter.
You may want to bring this issue up with your employer and see if they can get Fidelity index funds included in your 401k plan. I had a 401k through Fidelity for several years, and we had several Fidelity index fund options, including target date index funds.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Whakamole » Thu Jan 25, 2018 11:48 am

Zithron wrote:
Thu Jan 25, 2018 11:41 am
Whakamole wrote:
Thu Jan 25, 2018 11:35 am
At first I thought Fidelity just wanted to guide plans towards using their own index funds instead of Vanguard funds - which is fine, since Fidelity has equivalent funds for most of the popular Boglehead index funds.

But I also look at my Fidelity 401k account, and the only pure index funds offered are Vanguard funds. Fidelity funds are managed (Contrafund, Growth.) The only exception are the target date funds which are index-based but offered by BlackRock which is partnered with Fidelity.

So I wonder how pure Fidelity's motives are. I could care less if they move me to a Fidelity fund with equivalent expense ratios. But if they are trying to manage small plans out of index funds entirely, that's another matter.
You may want to bring this issue up with your employer and see if they can get Fidelity index funds included in your 401k plan. I had a 401k through Fidelity for several years, and we had several Fidelity index fund options, including target date index funds.
No real need - we have a very low cost Vanguard S&P 500 fund which I use, and some other index funds which I don't use (Russell 1000 Value/Growth, a short-term bond index fund.) I do wish we had a proper Total Bond Fund but one nice thing about Fidelity is access to BrokerageLink so I can just buy the Fidelity index fund tracking it, FSITX.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by adptnt » Thu Jan 25, 2018 12:37 pm

Whakamole wrote:
Thu Jan 25, 2018 11:35 am
At first I thought Fidelity just wanted to guide plans towards using their own index funds instead of Vanguard funds - which is fine, since Fidelity has equivalent funds for most of the popular Boglehead index funds.

But I also look at my Fidelity 401k account, and the only pure index funds offered are Vanguard funds. Fidelity funds are managed (Contrafund, Growth.) The only exception are the target date funds which are index-based but offered by BlackRock which is partnered with Fidelity.

So I wonder how pure Fidelity's motives are. I could care less if they move me to a Fidelity fund with equivalent expense ratios. But if they are trying to manage small plans out of index funds entirely, that's another matter.
I couldn't agree more. Not cool if these are the motives.

Admittedly, I am not very knowledgeable as to how these plans/fund options are negotiated by Fidelity or Vanguard and respective Employers. I've seen 2 different companies, both with Fidelity as their 401K provider, but only one plan offered the Fidelity low expense index fund options, while the other plan did not. :?: :?:

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by IlliniDave » Thu Jan 25, 2018 12:56 pm

On the surface looks like a blatant money grab to me. That's nearly equal to the ER of some Vanguard index funds. I guess times are tough for the Johnsons. :D

My employer's 401 is administered by fidelity, but the plan's assets I'm sure are >> $20M so hopefully this won't apply to us.
Last edited by IlliniDave on Thu Jan 25, 2018 12:59 pm, edited 1 time in total.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by CnC » Thu Jan 25, 2018 12:59 pm

I'm not really sure what the issue is...


If your plan is hosted by Fidelity yet all your money is invested in vanguard funds they are presumably out to make some money on it.

If vanguard is better why don't 401k plans host through vanguard?

Every one has to make money. That's how businesses work. I personally would kill for Fidelity or vanguard plans through my 457 as our fees are terrible and very limited.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by IlliniDave » Thu Jan 25, 2018 1:04 pm

CnC wrote:
Thu Jan 25, 2018 12:59 pm
I'm not really sure what the issue is...


If your plan is hosted by Fidelity yet all your money is invested in vanguard funds they are presumably out to make some money on it.

It doesn't matter where the money gets invested, Fidelity is already making money off the plans--they don't administer 401(k) plans out of the goodness of their hearts. They do it for a profit which is built into the fees they were already charging the plans. At the end of it all I think Fidelity just hates Vanguard and this is a dig at them. I'm sure Vanguard has cost the Johnson family billions, and continues to on an ongoing basis.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Bendee » Thu Jan 25, 2018 1:06 pm

This is why I push those with a total "set it and forget it" attitude towards Vanguard rather than Fidelity/Schwab/etc. Sure, the ERs may be competitive at the moment, but who knows if that attitude will stay consistent over the next several decades, or if those companies will start sneaking in additional fees or bumping up the ER if they are told the outflows would be significantly lower than the additional revenue an ER bump would bring*? Someone who isn't paying attention could end up wasting quite a bit of money.

*"If we triple our index fund's ER, we estimate we'll lose 25% of the fund's assets but our total expense revenue would more than double!" -Hypothetical fund manager at for profit company

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by CnC » Thu Jan 25, 2018 1:21 pm

IlliniDave wrote:
Thu Jan 25, 2018 1:04 pm
CnC wrote:
Thu Jan 25, 2018 12:59 pm
I'm not really sure what the issue is...


If your plan is hosted by Fidelity yet all your money is invested in vanguard funds they are presumably out to make some money on it.

It doesn't matter where the money gets invested, Fidelity is already making money off the plans--they don't administer 401(k) plans out of the goodness of their hearts. They do it for a profit which is built into the fees they were already charging the plans. At the end of it all I think Fidelity just hates Vanguard and this is a dig at them. I'm sure Vanguard has cost the Johnson family billions, and continues to on an ongoing basis.
Still not seeing an issue, if they are losing money to competition and they can not match their prices yet have control over access to the competition why wouldn't a business make up some lost profit? It's better than cutting access.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Whakamole » Thu Jan 25, 2018 1:50 pm

CnC wrote:
Thu Jan 25, 2018 1:21 pm
IlliniDave wrote:
Thu Jan 25, 2018 1:04 pm
CnC wrote:
Thu Jan 25, 2018 12:59 pm
I'm not really sure what the issue is...


If your plan is hosted by Fidelity yet all your money is invested in vanguard funds they are presumably out to make some money on it.

It doesn't matter where the money gets invested, Fidelity is already making money off the plans--they don't administer 401(k) plans out of the goodness of their hearts. They do it for a profit which is built into the fees they were already charging the plans. At the end of it all I think Fidelity just hates Vanguard and this is a dig at them. I'm sure Vanguard has cost the Johnson family billions, and continues to on an ongoing basis.
Still not seeing an issue, if they are losing money to competition and they can not match their prices yet have control over access to the competition why wouldn't a business make up some lost profit? It's better than cutting access.
Or just offer Fidelity's index funds (which are perfectly fine!) at competitive rates. Fidelity already does this for retail investors. I assume any plan with under $20M in assets is not going to be using collective investment trusts and instead will just have access to something like admiral/premium shares. Sure, Fidelity index funds are more likely to pay out capital gains but that doesn't matter in a 401k.

Most investors won't care. My HSA's S&P 500 offering is by Schwab. I've never felt the need to write a letter asking about access to the Vanguard version because it doesn't matter all that much.

Fidelity would have done much better with a carrot approach. If I was a corporate executive setting up a 401k plan with Fidelity and they offered a discount on plan fees if I went with Fidelity index funds instead of Vanguard, I'd probably take them up on the offer.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Spirit Rider » Thu Jan 25, 2018 1:59 pm

I find the reaction of the Vanguard fans hilarious.

Fidelity is not the one selecting the funds in your 401k. Your employer and/or a TPA are the ones selecting the funds. The custodian/record keeper is paid via some combination employer/employee/AUM fees and/or fund revenue sharing.

It no coincidence that TD Ameritrade removed most Vanguard ETFs from their commission free list and Fidelity is instituting this fee. Vanguard is the only major fund company that does not pay other companies to carry their products. Vanguard funds have had a free ride and effectively subsidized in 401k plans by other fund companies.

Vanguard has no problem accepting revenue sharing from other fund companies the their 401k plans. They also give increasing administrative fee credits as you go from Institutional -> Admiral -> Investor Share classes to keep their funds competitive. They have been having their cake and eating it.

It is about time that the rest of the industry should stop subsidizing Vanguard funds and follow TD Ameritrade and Fidelity's lead. Hopefully, many others will follow suit.

None of this is anything against John Bogle, Vanguard or Vanguard index funds. It is just that on this issue Vanguard funds in 401k plans are effectively parasites.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by sc9182 » Thu Jan 25, 2018 2:32 pm

Possibly additional problems related to "securities lending" (or the lack there of), especially for vanguard's funds in 401k/retirement accounts .. other record-keepers may be "being" prevented from such practices by Vanguard (due to them imposing 'extra' steps of reporting etc) - thus lessening the meager profit such lending may come from such activity.

Not only Vanguard not paying any amount of revenue-sharing fees, in-addition., potentially preventing (or highly limiting) securities lending -- causing further drop in revenue/profit for record-holders. Could this be a reason too .. ?

Hoping this "extra 0.05%" fee trend doesn't spread to all/other 401K providers, worse-yet, to regular brokerage accounts!

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Jack FFR1846 » Thu Jan 25, 2018 2:51 pm

I guess if this is a new unilateral decision, then ok....yet yawn. My wife had a 401k left at an old employer through Fidelity completely invested in a Vanguard Bond index. Last January (2017), I did my normal hawk-like checking and found that the fund now had a 0.5% management fee attached. Initiate rollover and it went into her IRA and into an equivalent Fidelity bond index fund. In the 401k, there was no Fidelity bond fund available. As others have mentioned, the company has say in what funds will be available. It's quite possible that the company had covered the management fee in the past and just decided to pass it to employees.....I don't know.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by jhfenton » Thu Jan 25, 2018 3:07 pm

Jack FFR1846 wrote:
Thu Jan 25, 2018 2:51 pm
Always keep track of costs. They can change without notice.
Actually, they can't change plan fees without notice, it's just easy to miss if you don't pay attention.

My employer-sponsored HSA sent out a notice last spring with new investment options and an increase in the quarterly investment fee from 2.5 bp to 5.0 bp. As a trade-off for the increase they would be rebating 12(b)-1 fees. In some cases, participants would be seeing a net credit. In my case, with the Vanguard fund I used, I would have been looking at 20 bp per year ($100 on $50K). So I moved the money to Lively and do quarterly transfers now.

Our Fidelity 401(k) is well into 9 figures, so it doesn't sound like the new fee will affect our Vanguard funds.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by daveydoo » Thu Jan 25, 2018 3:35 pm

Spirit Rider wrote:
Thu Jan 25, 2018 1:59 pm
I find the reaction of the Vanguard fans hilarious.

Fidelity is not the one selecting the funds in your 401k. Your employer and/or a TPA are the ones selecting the funds. The custodian/record keeper is paid via some combination employer/employee/AUM fees and/or fund revenue sharing.
No, but this is a simple money-grab; they are capitalizing on the high inertia, especially among smaller plans, in terms of revising an investment-option menu. My institution will be unaffected, based upon the size of the plan; plus, it's proven to be pretty nimble at reacting to random external pressures like this.

Custodians don't manage plans for free -- they charge. Even if all plan assets were held at VG, a Fidelity-sponsored plan makes a lot of money for Fidelity. Of course if all plan assets are also in Fidelity vehicles, they'd make a lot more money. A handful of Fidelity index funds have undercut VG ER by 0.01 or 0.02 percentage points. This new announcement is just additional incentive. But make no mistake, it's a simple money-grab.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by CnC » Thu Jan 25, 2018 3:43 pm

daveydoo wrote:
Thu Jan 25, 2018 3:35 pm
Spirit Rider wrote:
Thu Jan 25, 2018 1:59 pm
I find the reaction of the Vanguard fans hilarious.

Fidelity is not the one selecting the funds in your 401k. Your employer and/or a TPA are the ones selecting the funds. The custodian/record keeper is paid via some combination employer/employee/AUM fees and/or fund revenue sharing.
No, but this is a simple money-grab; they are capitalizing on the high inertia, especially among smaller plans, in terms of revising an investment-option menu. My institution will be unaffected, based upon the size of the plan; plus, it's proven to be pretty nimble at reacting to random external pressures like this.

Custodians don't manage plans for free -- they charge. Even if all plan assets were held at VG, a Fidelity-sponsored plan makes a lot of money for Fidelity. Of course if all plan assets are also in Fidelity vehicles, they'd make a lot more money. A handful of Fidelity index funds have undercut VG ER by 0.01 or 0.02 percentage points. This new announcement is just additional incentive. But make no mistake, it's a simple money-grab.
With all do respect, we here invest in the STOCK MARKET everything to do with it is a money grab. That's what for profit businesses do. I'm not saying it's nice or I'm happy about it but do you really expect a company to cut their competition a break and let themselves be undercut when they have the ability and tools to stop it?

Vanguard's response should be to make themselves more attractive to companies and convince them to ditch Fidelity as their plan custodian.

Like I said if I were a share holder of Fidelity I would think this is a wise move. How many people here would be happy owning stock that willingly turned away profits so their competition could thrive?

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by daveydoo » Thu Jan 25, 2018 8:09 pm

CnC wrote:
Thu Jan 25, 2018 3:43 pm

With all do respect, we here invest in the STOCK MARKET everything to do with it is a money grab. That's what for profit businesses do.
There is a difference between profit-making and profiteering. If you create a revolutionary new cell phone, but it costs $700 -- I get it. If you sell cable and conclude that I have no viable other options in my market and raise my rates 40% while providing the same atrocious customer service, that's different.

If you create a new cure for a terrible cancer and charge $100,000, I get it. If you buy the patent for an important but little-used medication that had been available for a hundred dollars and then raise the price to $10,000 (real-world example), I find that less palatable.

Raising the cost to the consumer (in excess of inflation and raw-materials cost, etc.) simply because you can and not because you have added any real value -- that's a money-grab. That's what Fidelity did.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Engineer250 » Thu Jan 25, 2018 8:35 pm

I have Vanguard for a plan administrator and most of the funds are total crap. They have great target date funds and VG Russell 1000 and 2000 but everything else is non-VG and expensive. I sent an email to the HR person that handles it suggesting VG Total International, VG Emerging and VG Total Bond would save everyone in the plan a bunch of money. I got a canned response back that some third party who apparently "consults" with my company is the one that decides what the funds are based on a variety of criteria. I'm surprised because we are not a small company. I hope that silly finance company gets some kickbacks from the awful funds they picked. I pay VG $50 a year to invest my 401k outside my plan and it pays for itself in fees so far.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Dottie57 » Thu Jan 25, 2018 8:54 pm

My employer is a megacorp. Raising the expenses on Vanguard funds in he fidelity 401k will not be liked. Not sure it will be Tolerated.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Pigeye Brewster » Thu Jan 25, 2018 9:30 pm

Dottie57 wrote:
Thu Jan 25, 2018 8:54 pm
My employer is a megacorp. Raising the expenses on Vanguard funds in he fidelity 401k will not be liked. Not sure it will be Tolerated.
From the OP:

The fee applies to smaller plans — those with less than $20 million in assets.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Dottie57 » Thu Jan 25, 2018 9:35 pm

Pigeye Brewster wrote:
Thu Jan 25, 2018 9:30 pm
Dottie57 wrote:
Thu Jan 25, 2018 8:54 pm
My employer is a megacorp. Raising the expenses on Vanguard funds in he fidelity 401k will not be liked. Not sure it will be Tolerated.
From the OP:

The fee applies to smaller plans — those with less than $20 million in assets.

Sorry. Missed that. Simetimes posting after a work happy hour is not a good idea.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by TheDDC » Thu Jan 25, 2018 9:51 pm

For once the Fidelity 403(b) seems better than the 401(k)... I have access to FSIVX and FSTVX without any investment minimums, making it a great way to start out with a low cost fund option.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by IlliniDave » Fri Jan 26, 2018 1:06 pm

CnC wrote:
Thu Jan 25, 2018 1:21 pm
IlliniDave wrote:
Thu Jan 25, 2018 1:04 pm
CnC wrote:
Thu Jan 25, 2018 12:59 pm
I'm not really sure what the issue is...


If your plan is hosted by Fidelity yet all your money is invested in vanguard funds they are presumably out to make some money on it.

It doesn't matter where the money gets invested, Fidelity is already making money off the plans--they don't administer 401(k) plans out of the goodness of their hearts. They do it for a profit which is built into the fees they were already charging the plans. At the end of it all I think Fidelity just hates Vanguard and this is a dig at them. I'm sure Vanguard has cost the Johnson family billions, and continues to on an ongoing basis.
Still not seeing an issue, if they are losing money to competition and they can not match their prices yet have control over access to the competition why wouldn't a business make up some lost profit? It's better than cutting access.
It would only be an issue for those 401k savers affected, and for many not a big issue. I personally just find it highly amusing that the one-time titans of the wealth management/mutual fund industry have resorted to nipping at Vanguards heels (really the heels of employees of small companies who opt to buy a Vanguard fund in their 401k).
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Portfolio7 » Fri Jan 26, 2018 2:09 pm

Engineer250 wrote:
Thu Jan 25, 2018 8:35 pm
I have Vanguard for a plan administrator and most of the funds are total crap. They have great target date funds and VG Russell 1000 and 2000 but everything else is non-VG and expensive. I sent an email to the HR person that handles it suggesting VG Total International, VG Emerging and VG Total Bond would save everyone in the plan a bunch of money. I got a canned response back that some third party who apparently "consults" with my company is the one that decides what the funds are based on a variety of criteria. I'm surprised because we are not a small company. I hope that silly finance company gets some kickbacks from the awful funds they picked. I pay VG $50 a year to invest my 401k outside my plan and it pays for itself in fees so far.
That's actually pretty surprising to me. As I understand it (very much a layman's understanding, but I've had to do a little digging on this topic in the recent past) under current law (not even the new fiduciary dtandards) I thought 401K plan fund selection needed to be appropriate (I forget the exact word or words used). I have read that most of the successful lawsuits against employers over their 401K plans have hinged on the very large fund fees. I expect there are plenty of nuances I don't understand, or maybe some of these firms still think it's 1995, I dunno, but I appreciate any other views on this.
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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by chambers136 » Fri Jan 26, 2018 3:01 pm

Jack FFR1846 wrote:
Thu Jan 25, 2018 2:51 pm
Last January (2017), I did my normal hawk-like checking and found that the fund now had a 0.5% management fee attached.
Always keep track of costs. They can change without notice.
Do you remember where you found this fee listed? I click around Fidelity and don't see anything other than the fund ER. Maybe mine doesn't have extra fees, but I'd like to know where to look to be sure

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by KSActuary » Fri Jan 26, 2018 3:39 pm

Spirit Rider wrote:
Thu Jan 25, 2018 1:59 pm
Vanguard is the only major fund company that does not pay other companies to carry their products. Vanguard funds have had a free ride and effectively subsidized in 401k plans by other fund companies. I don't see it this way. Vanguard doesn't use revenue sharing which is a big advantage to employers and participants. Revenue sharing and asset-based fees in general are what is wrong with the 401k industry.

Vanguard has no problem accepting revenue sharing from other fund companies the their 401k plans. They also, like most recordkeepers, give credit towards the overall fees. They also give increasing administrative fee credits as you go from Institutional -> Admiral -> Investor Share classes to keep their funds competitive. They have been having their cake and eating it.There is no cake to eat except for hidden high fees which Vanguard won't participate in.

It is about time that the rest of the industry should stop subsidizing Vanguard funds and follow TD Ameritrade and Fidelity's lead. Hopefully, many others will follow suit.

None of this is anything against John Bogle, Vanguard or Vanguard index funds. It is just that on this issue Vanguard funds in 401k plans are effectively parasites.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by KSActuary » Fri Jan 26, 2018 3:41 pm

Engineer250 wrote:
Thu Jan 25, 2018 8:35 pm
I have Vanguard for a plan administrator and most of the funds are total crap. They have great target date funds and VG Russell 1000 and 2000 but everything else is non-VG and expensive. I sent an email to the HR person that handles it suggesting VG Total International, VG Emerging and VG Total Bond would save everyone in the plan a bunch of money. I got a canned response back that some third party who apparently "consults" with my company is the one that decides what the funds are based on a variety of criteria. I'm surprised because we are not a small company. I hope that silly finance company gets some kickbacks from the awful funds they picked. I pay VG $50 a year to invest my 401k outside my plan and it pays for itself in fees so far.
Crap funds are due to the fiduciary who selects the funds, not Vanguard. Vanguard provides a total universe of funds to pick from. Sounds like the FA wants to hide the revenue sharing he/she receives. Go fixed fee.

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Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by CnC » Fri Jan 26, 2018 4:39 pm

daveydoo wrote:
Thu Jan 25, 2018 8:09 pm
CnC wrote:
Thu Jan 25, 2018 3:43 pm

With all do respect, we here invest in the STOCK MARKET everything to do with it is a money grab. That's what for profit businesses do.
There is a difference between profit-making and profiteering. If you create a revolutionary new cell phone, but it costs $700 -- I get it. If you sell cable and conclude that I have no viable other options in my market and raise my rates 40% while providing the same atrocious customer service, that's different.

If you create a new cure for a terrible cancer and charge $100,000, I get it. If you buy the patent for an important but little-used medication that had been available for a hundred dollars and then raise the price to $10,000 (real-world example), I find that less palatable.

Raising the cost to the consumer (in excess of inflation and raw-materials cost, etc.) simply because you can and not because you have added any real value -- that's a money-grab. That's what Fidelity did.
It's profiteering to allow your competition to make money off of your infastructure? Please explain that?

Let's say Walmart sell Walmart brand beans and Kroger sells Kroger Brand beans. Walmart makes a flat 10% off everything they sell in their store. They also make an additional 10% on btheir own brand products They happen to carry Kroger Brand beans which also happen to be more popular and cheaper than Walmart beans.

Walmart notices that more people buy Kroger beans than their brand. They have 4 choices.

Cut their profits on their products to keep up with Kroger beans. Means loss of profit.
Stop selling Kroger beans and force people to buy theirs. Means upset customers.
Ignore the issue. Means consciously give up market share and profit.
Or finally
Tack an additional mark up on Kroger beans to bring them closer in line with Walmart beans. Gives the consumer the choice to pay a bit more for their favorite beans yet gives Walmart enough profit to make up for any lost bean sales.

If people don't like it they can still drive to Kroger for their beans.


Please explain how this is profiteering? Pretty sure it's capitalism.

Engineer250
Posts: 1078
Joined: Wed Jun 22, 2016 1:41 pm

Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Engineer250 » Fri Jan 26, 2018 9:00 pm

KSActuary wrote:
Fri Jan 26, 2018 3:41 pm
Engineer250 wrote:
Thu Jan 25, 2018 8:35 pm
I have Vanguard for a plan administrator and most of the funds are total crap. They have great target date funds and VG Russell 1000 and 2000 but everything else is non-VG and expensive. I sent an email to the HR person that handles it suggesting VG Total International, VG Emerging and VG Total Bond would save everyone in the plan a bunch of money. I got a canned response back that some third party who apparently "consults" with my company is the one that decides what the funds are based on a variety of criteria. I'm surprised because we are not a small company. I hope that silly finance company gets some kickbacks from the awful funds they picked. I pay VG $50 a year to invest my 401k outside my plan and it pays for itself in fees so far.
Crap funds are due to the fiduciary who selects the funds, not Vanguard. Vanguard provides a total universe of funds to pick from. Sounds like the FA wants to hide the revenue sharing he/she receives. Go fixed fee.
Yes I know the fund choices aren’t Vanguards. I blame my employer and whomever at my employer decided to pay this third party to pick funds for us. It’s actually a lot of the same funds we had when the 401k used to be administered by Schwab. Actually just saw an announcement this week they are switching the international from an Artisan International to an American Funds International. Going from .95% fee to .5% fee so that’s something, hope it doesn’t have some hidden load. Like I stated above, I pay VG $50 a year for their 401k brokerage option that lets me invest in whatever I want (including Vanguard funds). My employer also recently changed it so you can only have 90% of your money in this option so I’m using the VG Russel 2000/1000 funds within the plan, and getting my international through the brokerage option (I also have TSP so I’m trying to hold emerging and international small cap which makes my portfolio a bit more complicated than I’d like, once the I Fund changes I’ll be able to just hold “Total International” in the brokerage and be done with it).
Where the tides of fortune take us, no man can know.

Larry2623
Posts: 63
Joined: Sat Jul 15, 2017 9:23 pm

Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Larry2623 » Fri Jan 26, 2018 11:10 pm

Problem is Vanguard is not paying Fidelity the fee other fund families pay

Pigeye Brewster
Posts: 399
Joined: Thu Oct 05, 2017 7:33 pm

Re: Fidelity charging extra fee for Vanguard funds in 401k?

Post by Pigeye Brewster » Fri Jan 26, 2018 11:47 pm

Dottie57 wrote:
Thu Jan 25, 2018 9:35 pm
Pigeye Brewster wrote:
Thu Jan 25, 2018 9:30 pm
Dottie57 wrote:
Thu Jan 25, 2018 8:54 pm
My employer is a megacorp. Raising the expenses on Vanguard funds in he fidelity 401k will not be liked. Not sure it will be Tolerated.
From the OP:

The fee applies to smaller plans — those with less than $20 million in assets.

Sorry. Missed that. Simetimes posting after a work happy hour is not a good idea.
Posting, maybe. But after work happy hour is always a good idea. :beer

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