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Fidelity Introduces New Fixed-Income Tool For Advisors



Fidelity Financial Advisors Solutions has introduced a new tool for financial advisors looking to model fixed-income portfolios as interest rates rise with the scaling back of the Federal Reserve bond-buying program.

The Fidelity Yield Investigator calculator tool provides an “interactive format” for advisors to research bond sectors and test the portfolio models by entering hypothetical yields, spreads, time zones and risk-return data, Fidelity said.

Robert Litle, senior vice president, Fidelity Financial Advisor Solutions, said the tool was launched after receiving queries from advisors asking how best to adjust bond portfolios in a rising interest rate environment.

“This potential rising interest rate environment represents a new reality for many advisors, who have seen rates trending downward for years,” Litle said in a statement. “Financial advisors will have to think differently about a diversified portfolio, and the Fidelity Yield Investigator will help to simplify many of the complex calculations inherent in those portfolio construction decisions.”

Interest rates have been rising steadily since last spring, when the Federal Reserve hinted that the time had come to begin dialing back on its policy of quantitative easing. The policy saw the Federal Reserve buying $90 billion worth of bonds every month over the past four or five years.

Buying bonds keep interest rates low. Low interest rates make it cheaper for businesses and consumers to borrow.

With the recovery in the housing market and lower unemployment, the economy is showing signs of strength. Interest rates have gone up. The yield on the 10-year Treasury crested 3 percent in January, up from 1.66 percent in May.

The portfolio tool, developed by Fidelity’s Portfolio Construction Guidance Team, has advanced settings allowing advisors to modify the “currency translation effect,” Fidelity said. Advisors can also tinker with default and recovery rates, and fine-tune sector allocations, Fidelity also said.

Analytical tools “help financial advisors navigate a wide variety of market conditions to serve their clients’ evolving needs,” Litle said.

In the past few weeks advisors have been fielding calls from nervous stock market investors with the Dow Jones industrial average down nearly 7 percent from the start of the year. Rising interest rates and a volatile stock market have even caused some analysts recently to wonder if the market has entered a new phase.

The tool is the first interactive calculator featured in Fidelity Financial Advisor Solutions’ “Take Charge of the New Reality” campaign, Fidelity said.

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is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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