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Disclosure

Government’s Fidelity Probe Looks to be a Non-Starter: Part II

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By Alex Paul @ Shutterstock.com

Yesterday I wrote to you about the government probe into Fidelity. My view continues to be that this looks to be a non-starter. But unfortunately, when you’re in the headlines, questions are always going to be asked. The thrust of the probe is related to an infrastructure fee Fidelity negotiates with other mutual fund companies for the privilege of listing their funds for sale on Fidelity’s FundsNetwork.

The infrastructure rate is agreed upon between the two parties and is listed in the fund prospectus or plan document. A plan document is used by retirement plans such as 401(k)s to make disclosures, much like a mutual fund prospectus. Since a retirement plan is governed by ERISA laws, it falls under the jurisdiction of the Department of Labor which is leading the probe.

For a while now I’ve voiced concerns with the mutual fund model here, here, and here. This probe has nothing to do with investing in mutual funds. It has more to do with the network in which they are purchased.

Please note: If you have an account at Fidelity and invest in stocks and bonds, then you are not affected by this fee. Also note: If you own Vanguard funds at Fidelity, you are not affected by this fee.

My takeaway is that it’s important to pay attention to all fees, and to understand that you can look them up yourself. And if you ever feel like you’re in the dark, talk to someone in the business who you trust will give you the information you deserve.

Originally posted on Your Survival Guy. 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.

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