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Fidelity is throwing its considerable weight and distribution capabilities behind ETF model portfolio catering to the wealth management. The Boston-based asset manager announced the news on Thursday.
The company’s exchange traded funds model portfolio is comprised of the Fidelity® Target Allocation ETF Model Portfolios and the Fidelity® Target Risk ETF Model Portfolios and arrives at a time of continued growth for model portfolios rooted in ETFs. As is the case with other ETF model portfolios, the aim of the Fidelity sleeves is to potentially improve client outcomes while helping advisors realize efficiencies.
“These new model portfolios offer advisors a streamlined way to execute an ETF strategy while also meeting the evolving needs of their clients,” said Amanda Robinson, vice president of Portfolio Solutions at Fidelity Institutional, in a statement. “Our goal is to help advisors better scale their practices so they can prioritize critical activities such as wealth planning, business development, and time with clients.”
Fidelity was a relative latecomer to the ETF industry, but enviable brand recognition and the aforementioned distribution prowess powered the firm to the top 10 among domestic ETF sponsors at the end of 2024. The firm has been offering model portfolios to the wealth management industry since 2018.
More Validation of Model Portfolios
Model portfolios are fast becoming growth drivers for companies such as validity, but there’s benefit in this form of asset allocation for advisors and wealth managers.
Importantly, research confirms that model portfolios don’t chase clients away. Actually, various surveys indicate clients will stick with advisors deploying model portfolios and prospects are apt to give advisors their business when model portfolios are on the table.
Further enhancing the allure of model portfolios are at least two more points. First, model portfolios aren’t deterrent to investment outcomes. If anything, they can be additive to client outcomes. Second, by deploying model portfolios, advisors can leverage the time they previously allocated to investment management and monitoring to other revenue-building endeavors, not the least of which are adding new and retaining existing clients. Those are among the reasons advisors are rapidly embracing model portfolios with data confirming that’s exactly what’s taking place.
“According to Fidelity’s Portfolio Construction Insights, advisors continue to increase their ETF allocations with 53% of advisors’ portfolios leveraging the vehicle as of Q4 2024, up from 44% in 2023,” notes Fidelity. “In fact, the number of investments in unique ETFs within Fidelity Custom Model Portfolios more than doubled1 between 2022 and 2024, further signaling amplified interest from advisors.”
Details on Fidelity Model Portfolios
For advisors that want to perform deeper dives on the Fidelity model portfolios, click the links in the second paragraph. An abridged version follows here.
The target allocation model portfolio blends nine asset classes with Fidelity ETFs and those of other issuers. This model portfolio’s average annual expense ratio ranges from 0.21% to 0.28%. It includes 20 ETFs spanning foreign and domestic stocks and intermediate-term and longer-dated bond funds. Fifteen of the products in this strategy are Fidelity ETFs.
The target risk model portfolio addresses five asset classes featuring 13 ETFs and has an expected average annual expense ratio of 0.32% to 0.35%. Eight of the ETFs featured in this model portfolio are Fidelity funds.
Related: Financial Infidelity May Be Getting Worse, Not Better