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Fidelity fulcrum fee - HL comment

Laith Khalaf | 29 November 2017 | A A A

You’re about to read press releases, which we’ve written for media use only. They’re not intended for individual investors. They’re not personal advice and don’t include any recommendations.

No recommendation

You’re about to read press releases, which we’ve written for media use only. They’re not intended for individual investors. They’re not personal advice and don’t include any recommendations.

Media contact:

Laith Khalaf

Senior Analyst

Direct Line: 0117 980 9866

Mobile: 07977570820

Email: laith.khalaf@hl.co.uk

Fidelity has released more details of the new charging structure it is launching next year. Known as a ‘fulcrum fee’, the new structure will employ a baseline fee which is reduced or increased depending on whether the fund in question produces underperformance or outperformance for investors.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown:

"We appreciate that Fidelity is trying to do something innovative with active fund fees here, but we don’t think this new structure is going to deliver for investors. The major problem with Fidelity’s new fee model is how complicated it makes things for investors trying to choose an active fund.

Investors will understandably find it very hard to get their heads around the new charging structure, and it will be challenging to compare the potential cost of these new share classes with the current share classes, and indeed with competitor funds charging a more traditional fixed percentage charge.

We think investors would prefer to know what they are paying as a simple annual charge, rather than having to resort to a spreadsheet to model the possibilities. If this variable fee structure were to proliferate across the fund management industry, with different caps, floors and variable charges applied by different fund groups, it would make life extremely difficult for UK investors.

What’s more, investors choosing active funds, including ourselves, expect outperformance from the fixed percentage fees they already pay. No-one wants to invest in an underperforming active fund, no matter how cheap it is.

To that end, investors will naturally question why they should pay 0.45% for significant underperformance, when they can pick up an index tracker for as little as 0.06%. They will also question why they should pay more for outperformance, when that is what they expect as standard from an active fund manager.

Overall we want the fund management industry to deliver simple, lower fund charges for investors. We will continue to exert pressure on fund groups to offer lower prices to our clients, and to date as a result of this approach, HL investors get a 22% discount on the fund charges for the average active fund on the Wealth 150 Plus."


You’re about to read press releases, which we’ve written for media use only. They’re not intended for individual investors. They’re not personal advice and don’t include any recommendations.