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Fidelity Aligns with Advisers, Lowers Fees for Small 401(k)s

Fidelity Investments expects sales of its 401(k)s to continue to increase through third-party financial advisers to small and midsized companies-and the company plans to reduce fees to gain additional share. In August, Fidelity plans to switch its Advisor 401(k) platform to a system where the adviser receives a flat fee from Fidelity instead of several different fees in the form of 12b-1 fees.

Analysts said that Fidelity is trying to keep pace as other broker/dealers are flattening their fee structure.

Last year, Fidelity's Advisor 401(k) program platform sold 533 plans, bringing its total number of adviser-sold 401(k) plans under administration to 3,655. This increased adviser-sold 401(k) assets under administration 30% to $23.2 billion as the Boston-based company increased its participant base 8% to 640,000.

The business has grown at an annual rate of 15% over the past years, according to Rich Linton, head of Fidelity Advisor 401(k) and an executive vice president of retirement for Fidelity Investments Institutional Services.

He said the unit continues to see strong growth this year as more small and mid-sized businesses continue to turn to advisers as they establish retirement plans. "We expect continued growth in this space over the next three years," Linton said. "Our success combined with the success of advisers will lead a lot of assets our way."

According to 401kExchange, nearly three-quarters of 401(k) plans under $50 million are sold through advisers, up from 52% in 2003.

Fidelity will face stiff competition from other providers, including Vanguard and Charles Schwab, that offer retirement products and services to advisers.

Linton said Fidelity has a "healthy respect for all of the competition in the market," but he thinks Fidelity has an opportunity to gather additional share.

"Honestly, for us, it is just a matter of getting out and telling our story with as many advisers as we can," he said.

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