Archives for December 2009

On December 1st, Fidelity Investments made significant reductions to the management fees on the 529 college savings plans that they manage. From this AP article:

Fees on indexed plans will be cut in half, while fees on actively managed and advisor-sold plans will be cut by a third, the firm said. Fidelity manages plans sold in Arizona, California, Delaware, Massachusetts and New Hampshire.

The changes mean a family with $50,000 in an indexed portfolio might now pay $125 a year in fees, instead of $250, assuming the amount in the plan remained unchanged. […]

Fidelity, which is based in Boston, said total fees for its direct-sold indexed portfolios will now range from 0.25 percent to 0.35 percent of assets. Total fees for actively managed plans will now range from 0.59 percent to 1.04 percent of assets.

Here is a PDF of their current expense ratios for their active and passive investment options.

According to this WSJ article, they’ll also be changing up their age-based asset allocations a bit:

Fidelity also said it plans to increase the international equity exposure in both its direct- and advisor-sold plans’ age-based portfolios to 30% of the overall equity allocation from a current range of 0 to 20%, and plans to add an emerging-markets fund to its age-based portfolios.

Both changes will be phased in over the next 12 to 18 months.

The reason for this is hardly altruistic, as Fidelity is a privately-held for-profit company. They needed to do this in order to stay competitive. The only reason I have 529 fund at Fidelity is that I have had it connected to their 2% back credit card. I’m still happy with the change though, which follows their recent addition of index fund options back in August 2009.

Despite these improvements, I still plan on shifting everything eventually to my account at the Ohio CollegeAdvantage 529 Plan, which offers inflation-protected bonds (TIPS) at a very low expense which I think are a great “safe” option for saving up for college. (They also offer a variety of low-priced index options from Vanguard.) Fidelity has no such TIPS option.

Also, until December 15th (soon!), they are still running a promotion where you can get $25 for signing up, $50 for referring others, and $25 for starting up automatic deposits. (A couple could earn $150 free for their kid’s education this way.) If you need it, my CollegeAdvantage referral code is 2439350.