Fidelity cuts MPF fees to defend market share: scale pays for the cut

Fidelity International said in November 2011 it would cut fees on 15 MPF funds from Saturday 12 November — down 7% to 20%, with management fees falling to between 1.08% and 1.45%. All 300,000 existing clients would benefit.

The logic of Fidelity’s MPF fee cut

陸劍平, Fidelity’s head of institutional business, said the growing scale of assets under management left room to lower costs — and the firm hoped the cut would consolidate its market position. Classic economies of scale: 11 years of asset accumulation had cheapened administration, so the cut returned scale benefits to members rather than serving as mere promotion.

Placing the cut in the November 2011 price war

The timing sharpened its meaning: HSBC had led with cuts in February, AIA followed in August, BCT and Fidelity moved on the same November day, and Principal joined in December. Fee cuts had evolved from isolated moves into an industry cycle — every trustee’s explanation reduced to the same arithmetic: bigger assets plus cheaper administration equals fee room.

Can cuts defend market share?

Fidelity held 4.5% of the market, ranking seventh, and 陸劍平 had admitted cuts would do little to grow share — fund performance, not fees, wins clients. But defending differs from expanding: on the eve of the Employee Choice Arrangement, a cut at least kept the existing 300,000 clients from being poached by cheaper rivals. Sometimes defence is the best offence.

What members can do

Trustees cut fees to defend market share; members should use fee cuts to defend their own bargaining power — compare fund expense ratios regularly and use choice fully in the ECA era. Market share is the trustees’ business; returns are yours. The MPF education hub shows how to compare.