Fidelity relaunches open funds platform for retail

Regulatory change, investor uncertainty and the ease of using new technology for distribution are the key drivers behind Fidelity Worldwide Investment building an open funds platform for retail clients.

The UK house is relaunching its FundsNetwork scheme to provide mass-affluent customers in Hong Kong and Taiwan -- the two Asia ex-Japan locales where Fidelity offers personal investment business -- with access to a range of in-house and third-party funds.

Further Asia expansion is a possibility, although only once the proposition is up and running in the two markets, confirms Bruno Lee, whom Fidelity re-hired from HSBC this January expressly for the purpose of bolstering its direct retail business to clients.

"Geographically we have been looking at the future development opportunity, but at this stage we are relaunching it in these two existing markets first," he tells AsianInvestor. "We are not looking at a concrete plan to expand into others until it is launched properly in Hong Kong and Taiwan."

Yesterday Fidelity noted it had added five asset managers* to a list of third-party providers whose funds it houses on FundsNetwork -- taking the total to 10. Including in-house product as well, which Lee says makes up two-thirds of the platform range at present, it offers 337 funds and counting.

Fidelity introduced a funds network in Taiwan in 2002 (when Lee was working at the firm) and in Hong Kong in 2009, but Lee has been brought in to revamp the offering and give it fresh impetus.

Essentially Fidelity is striving to compete with all retail fund distributors with this offering, albeit one that is strictly restricted to a funds universe (and mostly vanilla funds at that).

Lee says the firm wants to position itself as a funds expert offering a specialised service to provide guidance to clients based on their investing experience and profile.

It is targeting what it calls Fidelity wealth customers, those with at least HK$1 million invested with the firm, although it caters to a broader wealth spectrum.

The fee schedule would see a HK$1 million client pay an initial subscription payment of 1.5% for access to an equity fund and 0.75% for a bond fund. A customer with HK$5 million, for example, is charged 0.9% and 0.45%, respectively.

Clients can switch around between funds on the platform, also for a fee: 0.25% for HK$1 million to HK$2.5 million clients, and 0.15% for HK$5 million clients and above.

Lee adds that Fidelity takes total relationship balance into account, meaning a client's personal investment account and retirement scheme with Fidelity all count towards the tally.

When AsianInvestor noted that a number of independent financial advisors offer funds switching for free, Lee responds: "Our proposition is not being the lowest cost provider, it is that we are an expert and provide guidance backed up by our experience in fund investing.

"We are building a process where we combine our views of the markets with fund screening tools, while understanding a customer's profile to help them make a better informed decision."

Lee says the market environment is conducive to relaunching this offering due to a number of factors, including regulatory change and investor uncertainty.

"Regulators have become more demanding in terms of suitability requirements and asking distributors to be more transparent and to take care of the guidance process," he notes.

"At the same time what we have seen in the past year is more market volatility and customers looking for guidance from a specialist company that can give them more frequent updates and a high-quality service to enable them to make better-informed decisions."

As another plus, he adds that the adoption of mobile technology, including smart phones and tablet computers, has reduced the cost of distributing information to the end-user considerably. 

"We believe it is becoming easier for those [distributors] without bricks and mortar to reach out to the customer and deliver the information in a more timely manner and build up a process to help them access information more easily."

In terms of fund selection, Fidelity is using a quantitative screening process at present in Asia based on historical three-year performance in local currency (its global team offers something similar but uses a combined quantitative and qualitative method).

It ranks them by returns and also displays fund volatility, but only includes those that are at least $100 million in size, while removing all single-country funds except for home-country choices.

Lee stresses that despite the proliferation of Fidelity funds on the platform, the team is product agnostic and points to the quant process as proof. He adds that he expects there to be hiring implications as the proposition picks up pace.

"It has taken us 11 months to build up the whole proposition to where it is now," he says. "As we acquire customers, we will certainly need to increase our staff to service them. We do not have a lot of customers to start with, that is why we are launching our new proposition to try and attract the mass-affluent to join."

* The managers Fidelity has just added are Axa Investment Managers, Franklin Templeton Investments, Janus Capital Group, Pimco and Robeco Group.

It already offers products from BNP Paribas Investment Partners, Henderson Global Investors, Martin Currie, Schroders IM (Hong Kong) and Skandia Investment Group.