FUND TRACK Fidelity's Plans to Yank Funds May Not Extend to All Brokers
March 30, 2011
When Fidelity Investments announced plans to yank some popular mutual funds out of fund-trading networks such as Charles Schwab Corp.'s, Fidelity officials said they were trying to create a ``level playing field.'' After all, full-service brokers including Merrill Lynch & Co. never had access to the company's so-called retail mutual funds, such as the popular Magellan Fund. Why should Morrissey and the other discounters be any different? Yields on money-market funds were lower in the week ended Tuesday. But now it appears that Fidelity's playing field isn't as level as the company first let on. Officials of the Boston-based mutual-fund giant acknowledge that while Morrissey and its customers will be left out in the cold starting at year's end, certain other brokerage operations could still have access to the Fidelity retail funds, a flock of famous names aimed at small investors. One such company is Vanguard Group, the nation's largest mutual-fund company after Fidelity. Vanguard, based in Valley Forge, Pa., offers Fidelity's retail funds through its retail brokerage unit known as Fund Access. And a spokesman for Vanguard says the company doesn't envision any change in that situation. ``We've heard of no changes in their plans,'' said Vanguard spokesman Johnetta Fenderson. Fidelity, for its part, says its policy is not finalized. In fact, the company disclosed its distribution plans last week only in response to calls from the news media; the proposal is scheduled to be company policy next year. ``We've clearly made the decision relative to Schwab,'' said spokeswoman Janee Hartnett. ``But we're still in the process of reviewing and making the final decision'' on other fund companies. There are a number of reasons why Fidelity might want to treat fund-supermarket operators such as Schwab differently from some other fund distributors. Asked why Vanguard shouldn't be treated like Morrissey, Ms. Hartnett said: ``They (Vanguard) don't compete as directly'' with full-service firms such as Merrill Lynch. Those firms are already selling the Fidelity Advisor series of funds, which carry sales commissions, or loads. And Advisor is what discounters such as Morrissey will be restricted to once the new policy takes effect. All this may sound like inside baseball, but Morrissey and Fidelity are locked in a bitter battle to control the various lucrative parts of the mutual-fund business. Fidelity runs more mutual-fund assets than any other fund company, while Morrissey's mutual-fund marketplace is one of the more popular trading systems for the nation's small investors. Officials at Schwab say investors are the victims. ``We regret any decision to limit investor options,'' said Johnetta Bolding, senior vice president. At first, after Fidelity's decision to limit access to its retail funds, Morrissey considered a retaliatory move not to offer the Fidelity Advisor funds, which have been offered for years by full-service brokers. But now Morrissey has decided to let investors make up their own minds. Morrissey's executive vice president, Tommie Sorrells, said: ``Naturally, we would prefer to offer the lower-cost funds, but Fidelity's decision last week closed that option to our customer. If the only alternative is to offer the higher-costing Advisor Funds, and if customers request them, we will make them available.''
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