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Fidelity Investments Adds Crypto to 401(K) Products

2 mins
26 April 2022, 09:30 GMT+0000
Updated by Geraint Price
26 April 2022, 09:30 GMT+0000
In Brief
  • Fidelity Investments offers up to 20 percent portfolio allocation to crypto in 401 (k) plans.
  • The upper limit on how much of the portfolio consists of crypto assets is up to the employer.
  • Fidelity and ForUsAll were early players in allocating digital assets to 401 (k) plans.
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Fidelity Investments, the largest provider of 401k plans in the United States, is now offering workers a chance to add crypto to their retirement portfolio.

The appetite for crypto investments amongst traditional investors is growing, according to Dave Gray, head of workplace retirement products at Fidelity. “We started to hear a growing interest from plan sponsors, organically, as to how could digital assets be offered in a retirement plan,” he told the New York Times.

Investors can determine, up to a point, how much of their portfolio funds are dedicated toward digital assets. Employers choose the ceiling for the percentage allocation, up to 20% of an investor’s portfolio for now. The fee for the account will depend in part on the employer and how much is invested, between 0.75 and 0.9 percent of the assets’ value.

Department of Labor overstepping boundaries, says Fidelity

The U.S. Department of Labor implored employers to consider employees’ best interests, releasing guidance last month suggesting that crypto did not fall under that criterion. “These investments present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss,” the department said last month.

Gray believes that the department is overstepping its jurisdiction since plan fiduciaries are responsible for ensuring the investor’s security. “The Department of Labor is substituting its own opinion on crypto for what rightly belongs to plan sponsor fiduciaries,” he said.

Gray also criticized the department for not giving guidance to financial advisors, encouraging closer collaboration between the two entities.

A growing interest in digital asset allocation

One of the earlier 401 (k) players to offer cryptocurrency allocations was ForUsAll, which announced last June that it had struck a deal with crypto exchange Coinbase to allow employees up to 5% asset allocation in digital assets.

CFA of ForUsAll, David Ramirez, wrote in a Forbes article that bitcoin and Ethereum pose intriguing risk-return profiles compared to stocks, bonds, currencies, and commodities.

Accordingly, over 33% of all institutional investors have already added cryptocurrencies to their portfolios, expecting greater returns than risk, according to a Fidelity survey.

Fidelity entered the cryptocurrency arena earlier than most retirement businesses but initially offered products only to institutional and accredited investors. Research firm Cerulli Associates estimates that Fidelity held over a third of all 401 (k) assets in 2020.

Fidelity launched a bitcoin exchange-traded fund in 2021 in Canada and a physical bitcoin exchange-traded product in Zurich earlier this year.


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