Following the lead of its insurance partner, Fidelity Investments this week cut the cost of its proprietary variable annuity.
Fidelity Advisory Generations, introduced Monday, charges insurance fees of 95 basis points of account value. That compares with 1.4% for its first proprietary variable annuity, Select, introduced in 1995.
Both annuities are insured by Nationwide Financial Services, Columbus, Ohio, which recently reduced the fee on its own variable annuity, called Future.
"We're actually just piggybacking on some of the work that they've done," said Michael W. Kellogg, executive vice president of the bank services group at Fidelity Investments Institutional Services Co.
"You've seen some indication-Nationwide was the first-to go below 1%. We're one of the first ones to follow that lead," he added.
Boston-based Fidelity brought in about $500 million to its Select annuity last year. It expects the Generations product to do even better, thanks to the price cut, said Mr. Kellogg. He declined to disclose budgeted sales.
Fidelity's proprietary variable annuities are sold by intermediaries, including banks, brokerages, and insurance companies. Eighteen wholesalers serve banks in Mr. Kellogg's group.
The underlying investments for Generations are the Fidelity Variable Insurance Product Funds, which had $26.2 billion of assets under management at Dec. 31. Management fees range from 13 basis points for an index fund to 76 basis points for an overseas fund.
Several insurance companies in addition to Nationwide include these funds in their variable annuities, Mr. Kellogg said.
"Nationwide and Fidelity have enjoyed a very strong relationship, and this is just a continuation of that," he said.
