William Kay: Fidelity's blind date may not be such a sweetheart

When Fidelity Investments, the US-owned group which is Britain's biggest fund manager, produces a new type of product it is worth paying attention. It may be setting a trend that will effectively create a new market, but at the very least its thinking will show where there are weaknesses or opportunities in investment vehicles.

This week, Fidelity launched the Wealthbuilder Target funds, the British roll-out of a template which has attracted $15bn (£9.2bn) in the US. What is new is that investors pick the year when they want their money back: 2010, 2015 or 2020 to start with, but they can switch or withdraw their money at any time. The point of the target is that, broadly, Fidelity will put most of the cash into a range of equity funds at the outset, but gradually move into cash and bonds as the deadline approaches.

Fidelity claims these funds are the first of their kind, other than an outright pension scheme, which will continuously manage asset allocation on an investor's behalf. "Sit back, relax and let the experts do the rest," says the accompanying effusive publicity.

But the idea is not new. It has been used in with-profits and other funds designed to shield the customer from the worst vagaries of the stock market. It has the disadvantage of doing something an intelligent investor should be able to do, cutting risk as an important date approaches. To that extent, these Fidelity funds may be redundant to some potential users but raise hopes too high in the minds of more simple souls.

As Richard Skelt, the manager in charge of these funds, rightly stresses, these are not guaranteed or protected products. They are simply being run with more discretion and tactical nous than the manager of an equity growth fund who stays doggedly invested in growth shares through the pit of a bear market because that's what his brief says he must do.

Fidelity has over-egged the virtues of these funds, selling them as suitable for everything from retirement planning to paying for a child's education. Different goals require different investment strategies, even if they share a target date. This is an off-the-peg approach to problems which will often need bespoke solutions.

And Mr Skelt is beginning with one hand tied behind his back, because these funds are to be, in the jargon, fettered. This means Mr Skelt will be able only to invest in other Fidelity funds, rather than the whole universe of funds, rivals' included. He says Fidelity has a wide enough range of in-house funds to cover most eventualities, and going outside involves extra risk because it is difficult to keep tabs on what other funds are up to.

Those are fair points, but if Fidelity is going to offer its customers the best service it should not be denying them the chance of benefiting from someone else's expertise.

Fidelity seems to have missed a huge marketing opportunity. How much better it would have been if, as well as investors naming a target date, they could have nominated a target size of fund. Mr Skelt feels that would be a hostage to fortune, especially with such long time-spans, and might have been interpreted as a guarantee. On the other hand, it would have concentrated his mind wonderfully.

* The Which? investigation into banks, is a salutary warning to the public to be on its guard. It shows British banks have progressed only timidly towards the notion of acting in their customers' interests.

I found it revealing that Royal Bank of Scotland's spokesman should defend lousy interest rates for savings and loans with the parrot cry that there was little evidence that people were rate-sensitive. The idea does not seem to have crossed the managements' minds of giving customers a good deal whether they ask for it or not. This is the sort of unexpected nice surprise that the best retailers in other sectors, such as John Lewis or Tesco, offer all the time, and benefit accordingly.

It is more than 30 years since a senior Barclays executive told me his colleagues were aware Marks & Spencer could sell financial services but banks couldn't sell socks.

Socks? Most banks couldn't sell a glass of water to someone dying of thirst.

w.kay@independent.co.uk