Fidelity Ups The Ante In ETF, Index Fund Fee War

Fidelity, one of the largest providers of index funds and mutual funds, said Wednesday it's introducing two equity-based index funds that will not have expense ratios.

The Fidelity ZERO Total Market Index Fund (FZROX) and Fidelity ZERO International Index Fund (FZILX), which are expected to debut Friday, will have annual expense ratios of 0.00 percent.

What Happened

Fidelity's move to introduce no-fee index funds is the latest move by a major fund giant to compress fees in a bid to gain more assets from advisors and investors. Boston-based Fidelity, which is also a major player in the actively managed mutual fund and exchange-traded funds spaces, competes directly with firms such as Charles Schwab SCHW and Vanguard, two firms known for low-fee ETFs and index funds as well as low trading commissions.

Recently, Pennsylvania-based Vanguard said it would cease charging trading commissions on nearly 1,800 ETFs.

Fidelity said it will now offer zero minimums to open accounts, zero account fees and zero domestic money transfer fees. The company is also eliminating investment minimums on mutual funds and 529 college savings plans.

“In addition to offering the industry’s first self-indexed mutual funds with a zero expense ratio, Fidelity is reducing the pricing on its existing stock and bond index mutual funds,” said Fidelity in a statement. “Fidelity will provide investors the lowest priced share class available, ensuring every investor, regardless of how much they invest, will benefit from the lowest possible fees.”

Why It's Important

Fidelity is also significantly expanding its lineup of commission-free ETFs via its longstanding partnership with BlackRock Inc.'s BLK iShares unit, the world's largest ETF sponsor.

Fidelity is increasing the number of iShares ETFs available to clients on a commission-free basis to 240.

“As a long standing partner with Fidelity on ETFs, we are pleased that Fidelity has expanded the number of commission-free iShares funds on its platform to 240,” said BlackRock. “Investors and advisors will now have even greater access to iShares ETFs as key building blocks for their investment portfolios. This, and the other actions Fidelity has taken, mean that it will be even easier for investors to access iShares ETFs.”

What's Next

Among the iShares ETFs now available to Fidelity clients without commissions are heavyweights, including the iShares Core S&P 500 ETF IVV and the iShares Core S&P SmallCap ETF IJR as well as a slew of sector and single-country funds. A full list of the iShares ETFs available commission-free on Fidelity can be seen here.

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