Fidelity Go Review: Robo-Advisor With Low Management Fees

Brought to you by the well-known firm, Fidelity Investments, Fidelity Go is a robo-advisor that offers a clear pricing structure that is somewhat different to its rivals, giving you an all-inclusive fee that impressively covers all investment expenses too.  This is one of its most significant benefits as it gives you access to all of the services offered by Fidelity.  However, at the time of this review, it is a little lacking in additional features that are already provided by some of the more established robo-advisor services in the marketplace, such as Betterment and Wealthfront.

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The vision for Fidelity Go is to help transition those who save money, to those who invest money.  They are trying to target millennials with this service in a bid to change their somewhat conservative company perception that has so far failed to attract people who are below 35 years old. They have labeled their target market as “Emerging Investors.”

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Their goal is to be viewed as a one-stop investment shop.  By enticing a new, younger demographic of clients with Fidelity Go, they then imagine being able to offer them credit cards, banking and other advisory related products.  As a whole, they do offer a great range of products in their portfolio which could give them the edge in this respect.  However, there is still some work to do in terms of bringing this robo-advisor service up to the levels of others who have been at it for some time already.

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How Does Fidelity Go Work?

Primarily, it uses its own index funds to create portfolios. They also utilize iShares, that are a group of ETFs managed by BlackRock, who then track a stock market index. The idea behind this approach means you don’t have to pay the active management fees, but still get a return in line with that of the market.

Fund-tracking figures released by Morningstar Inc, show that around 80% of the core ETFs through Blackrock have actually outperformed mutual funds.

These portfolios are managed by people within an investment management team who periodically rebalance them.  The portfolios are created by Geode Capital Management who perform sub-advisory duties on a range of funds that Fidelity offers.

Who Is Fidelity Go Suitable For?

• Existing Fidelity Customers as it serves as a one-stop-shop for their suite of products
• Investors that prefer a hands-off approach
• Investment Management that has a fairly low entry level of investment
• Those who wish to negate or reduce human oversight
• People who want to try out robo-advisor services with an established and trusted broker
• Investors who are looking for competitive fees

Pros and Cons of Fidelity Go

• Human Involvement. This two-pronged approach of blending complex algorithms with professional financial advisors is a real plus for Fidelity Go.  Although this approach is not uncommon with the latest players to the robo-advisor market, Fidelity Go has a slightly different twist which makes it stand out above and beyond the competition.  Advisors from the institutional investment advisor Geode Capital Management, both create and monitor the portfolios, and rebalance them when necessary. For those who are a little hesitant to jump into the robo-advisor space, this gives the added assurance that not all control is being handed to a computer.  If needed, you can talk to an advisor at Fidelity any time of the day as they offer 24/7 customer support.
• Understanding of Your Goals. Ok, so this is fairly standard in the robo-advisor space. However, it is important to recognize the fact that they take a goal orientated approach.  This allows them to understand your individual needs and gives you a tailored plan that fits your individual requirements. There is a short questionnaire to complete with the purpose of ascertaining tolerance to risk, financial standing, and any goals you may have.  This will then match you to a suitable portfolio.  Before you go ahead and sign-up, you will have visibility of your recommended portfolio along with a clear and concise estimation for the future value of the portfolio that is being recommended.
• Low-Cost Robo-Advisor Service. For retirement accounts, an account with Fidelity Go will set you back just 0.35%. For taxable accounts, it will be 0.40%; this also includes exchange traded funds and Fidelity index funds. Fidelity Go offers an all-inclusive fee which is a fairly new concept from online advisors.  They are one of the first to market with this idea.  It’s a real plus point for the service and something which I believe is going to bring them a lot of new business.  You know exactly what the fees are going to be when you sign-up for Fidelity Go. Unlike others in the robo-advisor space who will charge advertised management fees and investment expenses, it is refreshing to see this option. A large segment of revenue from the BlackRock funds, along with all of the revenue from the Fidelity funds are returned to customers via a variable fee credit which is how it achieves the all-inclusive cost of investment expenses.
• Competitive Account Minimum. When compared to other online robo-services, Fidelity Go’s account minimum requirement of $5000 stacks up well against the competition.  There are many other notable options such as *E-Trade Adaptive which has a minimum input of $10,000 and Vanguard PA that needs at least $50,000.  Of course, there are options out there which have a $500 or $1,000 minimum investment option. Betterment and WiseBanyan have a zero investment requirement. However, I feel that $5000 is a very competitive account minimum.
• Existing Fidelity Customers. With almost half a million customers already, this service could appeal not only to existing Fidelity clients but also to new acquisitions for Fidelity who are looking for an easy way to view and manage their entire portfolio in one place.  Moreover, if you sign up to Fidelity Go you will not only get access to their wide array of financial planning tools, you also get to take advantage of their educational and customer support resources.

• Planning Functionality Falls Short. When compared to other players in the robo-advisor niche, Fidelity Go falls a little short on the planning side.  Sure, at the start when you sign-up there is a questionnaire that asks you about your goals. However, regarding retirement planning and achievement of goals, there is a lot left to be desired.  Both Wealthfront and Betterment do a much better job in this respect.
• Lack of Tax-Loss Harvesting. Quite simply put, in terms of having a tax strategy, there just isn’t one with Fidelity Go. Although Fidelity uses tax-advantaged municipal bond funds that can aid to reduce taxes, they do not specifically undertake tax-loss harvesting. Compared to its rivals like Wealthfront, Betterment, and Charles Schwab, it falls short here. The reason why tax-loss harvesting is such an appealing option to those who hold taxable accounts is due to the ability to reduce capital gains taxes.  Essentially, they sell or “harvest” investments which are losing, then, from any winning investment the gains are offset against them.
• No Transfers of Securities. Fidelity Go will not permit any transfers of securities of any kind.  Even as a current Fidelity client, who may already hold funds that are utilized in the Fidelity Go portfolio, cash funding only is a strict policy that is enforced by Fidelity Go.  If you plan to sign-up to the Fidelity Go service, then it needs to be done with cash as there is no option to transfer assets from within Fidelity or from other providers.
• Unpredictable Rebalancing. The management at Fidelity Go will decide when portfolios are rebalanced so this is completely out of your hands and outside of your control.  For those investors who prefer to be a bit more hands-on, this aspect of Fidelity Go’s service can be somewhat frustrating.
• Customer Support. If you choose to look through the frequently asked questions section, you might be left somewhat confused at some of the responses.  One in particular that I feel is crucial is the explanation of the pricing. It is not entirely clear and can cause quite a bit of confusion with the average or emerging investor.  Their live chat is also a bit clunky and certainly not something their target “millennial” will have the patience to endure for longer than a few minutes.

Final Thoughts

Fidelity has been in business since the mid-1940s. They are a trusted and established broker with more than two trillion dollars in managed assets.  While they are the biggest retirement provider, they are fairly new to the robo-advisor scene, entering this realm in the second half of 2016.

One of the biggest drawbacks to the service is the very basic functionality regarding setting goals.  You type in how much you want to have when you retire or how much you want to save, and it will only tell you if you are on or off track.  There is very little in terms of educational tools or features that help you realize what your goals should be. Giving investors terms such as “target not likely” is not all that useful.  Other robo-advisors such as Schwab, Wealthfront, and Betterment all outperform Fidelity in this respect. I believe they will enhance this as their product matures and catches up to others, but right now, this is a major drawback.  I also feel that their explanation of fees needs to be defined more clearly which would enhance the overall customer experience.

With that said, one of the most significant benefits of Fidelity Go is the access-all-areas you get to other Fidelity services.  Knowing that your important assets are in the hands of the foremost retirement provider in the US at such a low cost is something that is more than enough of a compelling reason to trust your hard earned cash with this institution.  If you are an existing customer with Fidelity, then it is probably the best robo-advisor service to choose.  Their low all-inclusive fees are also a great reason to choose Fidelity Go.

A final point to note about Fidelity Go is that unlike other robo-advisors, Fidelity Go will not allow you to invest in assets that are considered to be overly risky based on your overall profile.  If you do not have a huge amount to invest, this is a good element of their service.  For others who, for example, have cash in other accounts, they might consider this approach a little too conservative.

We, therefore, believe that this offering is good, but with much room for improvement. The added functionality that you get from other robo-advisors certainly leaves Fidelity Go a little short. The saying “you only get what you pay for” certainly applies here; you don’t have to pay a lot for the service, but then, you don’t get a whole lot in return in terms of service and features.

I don’t feel at this point that Fidelity is better than Wealthfront or Betterment.  Mostly, this is because of the lack of a tax-loss harvesting feature and the in-depth goal setting functionality that these two specific robo-advisors offer.

However, the two other firms mentioned above do not offer the same one-stop-shop approach that you get with Fidelity, and the added assurance you are dealing with a firmly established business.   If you are already a Fidelity customer or you are attracted to low annual fees, this could be the ideal solution if you want to enter the robo-advisor market.

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