Fidelity Investments this week mirrored a recent move by Vanguard in announcing that effective January 19, 2021, it lowered the investment minimum for the Institutional Premium Class of the Fidelity Freedom Index Funds by 95%: from $100 million to $5 million.
By expanding access to the low-cost share class, Fidelity said the move enables “retirement plan sponsors and other fiduciaries to offer their plan participants even greater value.”
Fidelity said in its statement that with this action, “all Fidelity Freedom Index Funds will have total net expenses equal to or lower than comparable Vanguard index target date funds, regardless of investment level. In addition, 100% of Fidelity’s stock and bond index mutual funds and sector ETFs continue to have lower expenses than comparable funds at Vanguard.”
Daniel Terio, Vice President, Target Date Products, Fidelity Investments noted Fidelity’s “long history of providing investors with a wide array of high-quality products at exceptional value” to help them meet their investment goals. “This 95% reduction in the investment minimum for the Institutional Premium Class of Fidelity Freedom Index Funds builds on that legacy, providing millions of customers—individual investors, workplace retirement plan sponsors and participants, and financial advisors—an even more compelling value proposition.”
Back on Dec. 11, Vanguard broadened access to Vanguard Institutional Target Retirement Funds (TRFs) by reducing the plan-level minimum investment requirement to $5 million from $100 million, saying the move enables “more 401k and 403b plan sponsors to offer these low-cost, broadly diversified options to their retirement plan participants.”
John James, managing director and head of Vanguard Institutional Investor Group, said at the time, “When it comes to people’s hard-earned retirement savings, Vanguard is dedicated to continuing to lower the cost and complexity of investing to best steward the financial well-being of the millions of retirement plan participants we serve.”
Four out of five participants in 401k plans recordkept at Vanguard are now invested in a target-date fund. The company says TDFs have dramatically improved participants’ portfolio diversification, ensuring more retirement savers are invested in long-term, risk-appropriate investment solutions.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
