Anil Vazirani states Fidelity Investments is under investigation by the Department of Labor, that according to an article in the Wall Street Journal, Fidelity Investments is under investigation by the Department of Labor with regard to a fee it imposes on some mutual funds.
This “infrastructure fee”, or annual charge, is aimed at other companies selling their own funds on Fidelity’s platform. The fee is “designed to ensure that each Fund Firm meets a minimum required payment to Fidelity,” according to an internal Fidelity document reviewed by the Journal.
Fidelity said it “fully complies with all disclosure requirements in connection with the fees that it charges,” according to an email message from a company spokesman. “The infrastructure fee has been fully disclosed to 401(k) plans and their sponsors via a disclosure that Fidelity sent to over 20,000 401(k) plans, pursuant to Section 408(b)(2) of ERISA,” the email said. It also said that this fee is paid by mutual fund companies, not retirement plans.
“Reducing expense ratios and eliminating trading commissions have cut the explicit costs that investors pay, but the game of fee whack-a-mole means that lost revenue may well pop up somewhere else” Greg McBride, chief financial analyst at Bankrate.com, told Financial Planning for their article dated February 27, 2019.
Characterizing this as an example of “one hand giveth while the other taketh away,” he said it’s another lesson of the need to pay close attention.
“Investors, their advisors, and fiduciaries such as 401k plan committees, need to keep a keen eye toward the total investment expenses … Seeing a reduction in one area may result in an increase somewhere else. The need for financial firms to generate revenue hasn’t gone away.”
Read more here: https://www.financial-planning.com/news/idelity-reportedly-under-scrutiny-by-feds
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