Fidelity is changing its 529 plan offerings, in terms of both fees and investment lineup. On Tuesday the Boston-based mutual fund titan unveiled fee cuts across both its direct-sold and advisor-sold 529s, as well as new investment offerings for its 529s and allocation changes which mirror similar moves already made in its famous target date Freedom Funds.
"These fee cuts mean families with Fidelity-managed 529 accounts will now have their money working harder for them," stated Joe Ciccariello, vice president of college planning in the personal and workplace investing Fidelity arm (run by Abby Johnson herself). "We're making it easier for families and their advisors to make college savings decisions and achieve their savings goals."
Fidelity cut program management fees in its direct-sold 529s by 15 basis points (i.e. half) for index portfolios and by 10 bps (i.e. one-third) for actively-managed portfolios. Its direct-sold plans include: California's ScholarShare College Savings Plan, the Delaware College Investment Plan, the Fidelity Arizona College Savings Plan, Massachusetts' U.Fund College Investing Plan and New Hampshire's UNIQUE College Investing Plan.
On the advisor-sold 529 side, Fidelity cut program fees by one-third. Those plans include California's ScholarShare Advisor College Savings Plan and New Hampshire's Fidelity Advisor 529 Plan.
For the target date portfolios in the 529s, Fidelity plans to add Fidelity Advisor Emerging Markets, Fidelity Advisor High Income and Fidelity Emerging Markets over the next 12 months. And after increasing the international exposure targets for its Freedom funds from 20 percent to 30 percent in September, Fidelity also plans to up the international equity exposure to 30 percent in the target date offerings in its 529s (over the next 1.5 years).
Company Press Release
BOSTON, Dec. 1, 2009 - Fidelity Investments® today announced enhancements to its seven state-sponsored 529 College Savings Plans, including program management fee cuts ranging from one-third to one-half across all its direct- and advisor-sold plans. Additionally, Fidelity has announced investment product and design changes, including increased international equity allocations and the addition of new investment strategies to each plan's age-based portfolios.
These plan enhancements are part of Fidelity's ongoing commitment to help Americans reach their college savings goals. They are designed to provide investors using a Fidelity-managed 529 College Savings Plan with even greater value for their investments and broader and more global investment diversification.
For direct-sold plans (The UNIQUE College Investing Plan, offered by the State of New Hampshire, California's ScholarShare College Savings Plan, Massachusetts' U.Fund® College Investing Plan, the Delaware College Investment Plan and the Fidelity Arizona College Savings Plan), Fidelity has cut program management fees in half (15 basis points) for its index portfolios and by one-third (10 basis points) across the plans' active portfolios.
Total index portfolio fees now range from 0.25 percent to 0.35 percent of plan assets.
Total actively managed portfolio fees now range from 0.59 percent to 1.04 percent1 of plan assets.
All state-sponsored direct-sold plans continue to have no annual account fee.
For advisor-sold plans (the Fidelity Advisor 529 Plan offered by the State of New Hampshire and California's ScholarShare Advisor College Savings Plan), Fidelity has cut the program fee by one-third, with total fees now ranging from 0.84 percent to 1.48 percent2 of plan assets.
"In these challenging times, we understand that families need all the help they can get and are looking for greater value for their investments," said Joe Ciccariello, vice president of college planning, Fidelity Personal and Workplace Investing. "In addition to Fidelity's investment management expertise, customer-focused service, guidance and education, these fee cuts mean families with Fidelity-managed 529 accounts will now have their money working harder for them."
New Funds Provide Greater Portfolio Diversification
Over the next twelve months, Fidelity will also be adding new funds to its eight age-based portfolios. The Fidelity Emerging Markets and Fidelity Advisor Emerging Markets funds will be new additions to the direct- and advisor-sold plans' age-based portfolios, respectively. These two funds seek to tap the potential growth prospects of emerging markets. In addition, the Fidelity Advisor High Income Fund, a high yield fund, which seeks a high level of current income and may also seek capital appreciation, is being added to the advisor-sold plans' age-based portfolios.
"By providing diverse investment profiles and automatic reallocation through our age-based portfolios as well as a broad range of investment options, we're making it easier for families and their advisors to make college savings decisions and achieve their savings goals," said Jeff Troutman, vice president of college planning, Fidelity Investments Institutional Services Company.
529 Portfolios Gain Increased International Equity Exposure
Taking advantage of a progressively global economy, Fidelity-managed 529 Plans will also be increasing international equity exposure in both direct- and advisor-sold plans' age-based portfolios from a current range of 0 to 20 percent to 30 percent of the overall equity allocation. The increase in international equity exposure will take place incrementally over the next twelve to eighteen months and comes as part of a firm-wide enhancement across Fidelity's asset allocation portfolios and online guidance tools.
Fidelity believes for most investors, an international equity allocation of 30 percent of the overall stock allocation provides a reasonable trade-off between the shorter term possibilities of increased volatility and the long-term potential for increased returns3.
This firm-wide adoption of increased international exposure is highlighted by the October launch of broader international investing capabilities (http://content.members.fidelity.com/Inside_Fidelity/fullStory/1,,7780,00.html), which reinforces Fidelity's commitment to help its customers more easily achieve diversification in their portfolios.
For anyone who may need extra help figuring out college savings options, Fidelity provides phone access to representatives 24 hours a day, six days a week at 1-800-544-1914. Fidelity also offers access to online tools that help families compare college savings options.
Fidelity's College Planner (http://personal.fidelity.com/planning/college) provides tuition and expense information for thousands of private and public colleges and universities and helps investors determine how much they need to save for college education and calculate potential savings growth in a tax-advantaged 529 account.
In addition, Fidelity provides financial advisors with marketing and distribution support and online planning tools such as the 529 State Tax Deduction Calculator and the College Savings Planning tool. By incorporating college savings into a broader financial planning interaction, advisors can strengthen client relationships.
For more information about Fidelity's 529 resources, advisors can visit https://advisor.fidelity.com/529 or call Fidelity at 1-800-544-9999.
About Fidelity Investments
Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of nearly $3.1 trillion, including managed assets of more than $1.4 trillion as of Oct. 31, 2009. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to over 20 million individuals and institutions as well as through 5,000 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, the largest mutual fund supermarket, a leading online brokerage firm and one of the largest providers of custody and clearing services to financial professionals. For more information about Fidelity Investments, visit Fidelity.com.
About Fidelity Investments Institutional Services
Fidelity Investments Institutional Services Company provides investment management services through investment professionals at financial institutions nationwide, including wirehouses, regional and independent broker/dealers, banks, trust companies and insurance companies. The company offers Fidelity Advisor Funds®, Variable Insurance Product (VIP) Portfolios, institutional money market funds and a comprehensive line of retirement products and services, including the Fidelity Advisor 401(k). For more information, advisors may visit https://advisor.fidelity.com.
The UNIQUE College Investing Plan, the Fidelity Advisor 529 Plan, the ScholarShare College Savings Plan, the ScholarShare Advisor College Savings Plan, the U.Fund® College Investing Plan, the Delaware College Investment Plan and the Fidelity Arizona College Savings Plan are offered by the State of New Hampshire, the ScholarShare Investment Board, an agency of the state of California, MEFA, the State of Delaware, and the Arizona Commission for Postsecondary Education, respectively, and managed by Fidelity Investments. If you or the designated beneficiary are not a New Hampshire, California, Massachusetts, Delaware, or Arizona resident, you may want to consider, before investing, whether your state or the designated beneficiary's home state offers its residents a Plan with alternate state tax advantages or other benefits.
Units of the portfolios are municipal securities and may be subject to market volatility and fluctuation.
Fidelity, Fidelity Investments, Fidelity Advisor Funds and the Fidelity Investments & Pyramid Design logo are registered service marks of FMR LLC.
The third party marks appearing herein are the property of their respective owners.
Please carefully consider each Plan's investment objectives, risks, charges and expenses before investing. For this and other information, call or write to Fidelity or visit fidelity.com for a free Fact Kit or request a free Offering Statement from your advisor or through advisor.fidelity.com. Read it carefully before you invest or send money.
1For all plans, the fee cuts are being fully implemented as of 12/1/09.Expense ratios of underlying funds can fluctuate over time. The investment changes, which also have an impact on fees will be implemented over the next 12 to 18 months.
2Range based on Class A units. Expense ratios of underlying funds can fluctuate over time. The investment changes, which also have an impact on fees will be implemented over the next 12 to 18 months.
3Fidelity Investments Viewpoint, the company's customer e-newsletter delivering weekly market and economic commentary.