The Markets June 22, 2011

Fidelity Releases Defined Maturity Funds

Fidelity Investments has launched the Fidelity Defined Maturity Funds, a series of actively managed national municipal income funds, each with a set maturity date.
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The series consists of four funds with different maturity dates: the Fidelity Municipal Income 2015 Fund, Fidelity Municipal Income 2017 Fund, Fidelity Municipal Income 2019 Fund, and Fidelity Municipal Income 2021 Fund.  

Fidelity reports that these are the first actively managed municipal bond defined-maturity funds in the market. The funds will be managed by Fidelity’s municipal bond team, and seek to bridge the gap between individual bonds and bond funds.  

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The Fidelity Defined Maturity Funds are open-end mutual funds that seek to incorporate some of the attributes of individual bonds. They are professionally managed, diversified portfolios of municipal securities with defined end dates that invest primarily in investment-grade municipal bonds that are generally clustered around the funds’ defined end dates and seek as high a level of current income, exempt from federal income tax, as is consistent with the preservation of capital. 

To protect existing shareholders and to ensure orderly liquidation of the funds, the Defined Maturity Funds will close to purchases for new and existing investors approximately 12 months prior to their maturity date. Each fund is expected to liquidate and distribute its net assets to investors shortly after its defined end date.  

“These funds may be appropriate for income-seeking investors who are interested in combining the defined-maturity feature of individual bonds with the many features of bond funds, including diversification and professional management, thus removing much of the legwork of individual bond investing,” said Mark Sommer, co-manager of the Fidelity Defined Maturity Funds.

The new funds are available directly to investors, as well as through advisers at banks, insurance companies and broker-dealers via Fidelity Advisor Defined Maturity Funds (Classes A and Institutional). Each Defined Maturity Fund’s retail class is sold without a load and has a total expense ratio of 0.40%. The Adviser share classes have traditional Fidelity Adviser short-term bond fund pricing with a total expense ratio of 0.65% for Class A and 0.40% for the Institutional Class. 

Products June 22, 2011

Schwab Offers RIAs Help with Segmentation

Schwab Advisor Services is introducing a consultative program, “Managing Client Profitability,” designed to help advisers grow their business through effective client segmentation.
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The program is part of Schwab’s Business Consulting Services, a comprehensive practice management offering for independent registered investment advisers (RIAs). Through an eight-week program, advisers are guided through developing, evaluating and preparing to implement customized segmentation strategies for their firms.

“We have found that advisers who take a strategic and proactive approach to client segmentation are often the best poised for future growth,” said Nick Georgis, vice president at Schwab Advisor Services.

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The program also includes an introductory Webcast, in-person workshop and follow-up. Schwab relationship managers, along with a consultant, work one-on-one with individuals from each firm to:

  • Help pinpoint which clients drive a firm’s profits and to better align resources to serve a range of clients effectively.
  • Explore ways to segment their client base and tailor services to those segments with an eye toward aligning revenue and cost to serve while maintaining great client service.
  • Leverage tools and ongoing consultation from Schwab to help them reach their goals.

Schwab’s proprietary Client Profitability Modeling Tool helps to determine client-level profitability and provides advisers with visibility into their firm’s economics and revenue mix.

According to Schwab’s 2010 RIA Benchmarking Study, a small minority of an RIA firm’s clients account for a significant share of revenue: 7% of firms’ clients account for 38% of firm revenue on average (see “RIAs Expect More Growth in Next Five Years“). 

The program has been rolled out to a target group of RIAs in Chicago, St. Louis, Minneapolis, Dallas, Newport Beach, and Seattle and will include several other regions across the U.S. throughout the course of the year, Schwab said.

 

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