Alright, you’re probably asking – just how has Fidelity gained has such a large customer base, all while offering $0 stock trades, top of the line research, efficient tools, user-friendly platforms, and a varied selection of products?
During this assessment of Fidelity I’ll show you exactly why (and why not) traders choose this broker for their Mutual Funds, Retirement & IRAs, Trading, Stocks, Fixed Income, Bonds, CDs, ETFs, Options, Sector Investing, Cash Management & Credit Cards, 529 College Savings, Annuities, Life Insurance & Long Term Care, and even Charitable Giving.
Firstly, did you know that Fidelity Management & Research Company was founded in 1946 By Edward C. Johnson II in Boston ? I was actually surprised to read that, together with his son, Edward C. Johnson III, they established the Fidelity Daily Income Trust (FDIT) as the first ever money market fund offering a check writing option. The very next year, they launched their Individual Retirement Account. Now that’s a heck of long time ago that they started offering brokerage services.
In my opinion, what made them so successful during the early years, was they always found new ways to meet both their client and potential investors’ needs. By 1983, they actually opened their first street-level center in Boston allowing customers direct access to free information and personal guidance with all their products. Not long after, they launched Fidelity Select Portfolios, offering hourly pricing instead of the usual end of the day pricing which all of their competitors still applied. By 1995, Fidelity became the first mutual fund company to have an online homepage. Thirteen years later, they launched Fidelity WealthCentral – keep in mind this was the industry’s first web-based platform focused on wealth management.
I just love how, even to this day, the Johnson family has passed down the privately owned company from generation to generation with Abigail P. Johnson now holding position as chairman and chief executive officer.
Both you and I can see that Fidelity has gone above and beyond in terms of building trust, innovation, continually offering above industry standard since its inception. But surely not everything has been perfect, right? Let’s take a look.
Advantages of Fidelity
- No trading fees on stock trades.
- No Minimum Opening Deposit. Offers both new and experienced investors the chance to start investing with a much lower risk. A great advantage, especially compared to Charles Schwab’s $1,000 minimum investment.
- No account fees or inactivity fees.
- Over 145 Locations. Clients may opt to meet with Fidelity representatives in over 145 locations within the United States. This creates much trust, in contrast to popular brokerage app Robinhood which does not offer to meet representatives.
- Zero Expense Ratio. Fidelity offers zero expense ratio index for mutual funds.
- Lowest Margin Rates. Fidelity offers the lowest published margin rates at 5%, compared to TD Ameritrade at 8.25%.
- Awesome stock Dashboard. The Stock Dashboard shows research reports, price action in charts, and fundamental analysis. I also love seeing social media trends thanks to the Social Sentiment Score.
- Stock & ETF Screeners. The Stock & ETF screeners are super helpful. Especially to help filter thru over 6,000 securities using top of the line strategies and specific criteria.
- Equity Summary Score. This feature is in partnership with StarMine from Refinitiv. It’s an overall stock rating from top analysts and they combine it into a final score. This helps clients save time by forgoing the need to research multiple reports. The scorecard shows how stocks performed over a period time between how Bullish and Bearish they have been.
- Customer Service. Unlike Merrill Lynch, Fidelity’s representatives are available 24/7 and have a reputation for excellent service. They also offer a reimbursement for unauthorized activity on the account.
Disadvantages of Fidelity
- No Forex and Futures. Not great – compared Interactive Brokers, which offers all types of investment products.
- Risky Retirement Strategy. By 2016, nearly $16 Billion in net withdrawals have been made mainly due to clients’ uneasiness with the way Fidelity has ramped up risk in their investment strategy. Their 2014 strategy overhaul had them increasing exposure to stocks – volatile emerging markets included. Though the new strategy worked favorably at the time, this exposes investors to greater loss should the fund’s assets go down.
- Secret 401(k) Fee Lawsuit. A 401(k) plan participant filed a lawsuit against Fidelity Investment’s parent company claiming it secretly charged mutual fund companies a fee to include be listed on their platform. Mutual funds should be selected by quality – not by who’s willing to pay the most.
- Document Retention Fines. In 2004, the U.S Securities and Exchange Commission accused Fidelity Brokerage of altering and destroying potentially improper documents retained at 21 of their branch offices.
Trustworthiness of Fidelity
If there’s one important thing during this review of Fidelity, it’s trust. How to gauge if a broker may be trustworthy? Simply look at how long they have been in the industry. Fidelity has been around since 1946, making it one of the oldest American brokers. This shows how strong their foundation is and how efficiently they have overcome the ups and downs of the market. Fidelity has generations of experience and trust, especially compared to relatively newer institutions such as Tastyworks or Robinhood, which were established in 2017 and 2013 respectively.
Fidelity is regulated in the United States by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Knowing that it has been regulated in the world’s most powerful nation can put some hesitations at ease.
Fidelity is part of the Securities Investor Protection Corporation (SIPC). Because of this, stocks and options are protected up to US$ 500,000 and cash is protected up to US$250,000. The broker possesses a banking license, which means that the company retains a stable economic standing and can sustain itself in cases of major dips in the market. This also gives better access to liquidity during financial crashes. However, they are not listed on the stock exchange, indicating less reporting requirements, and therefore less transparency to its investors.
Trading products available
The variety of trading products available through Fidelity covers much more than most of the company’s competitors. Here is a list of instruments available:
- US Equities
- EU Equities
- Japan Equities
- Hong Kong Equities
- Mutual Funds
Fidelity charges low trading fees at only $4.95 per trade for both stocks and options, very similar to CharlesSchwab. Its advantage over some competitors is the zero fee mutual funds – with over 3500 to choose from.
I just love that the broker does not charge an account fee or an inactivity fee. Its borrowing fee is at approximately 5%, which is slightly lower than TD Ameritrade.
Opening an account with Fidelity is done entirely online and requires the investor’s passport details. Approval of the account is rather slow because of the initial deposit time, taking an average of approximately one week to process. There is no minimum balance, which is beneficial to many traders that are just starting out. Deposit and withdraws are only available through bank transfer.
- Support: 8/10. Fidelity clients generally reported positively regarding their customer service. They are known to have knowledgeable representatives who are very responsive to any type of concern. They offer call and chat support 24/7 – a vital feature that competitors such as Robinhood unfortunately do not offer.
- Research: 8/10. Fidelity, just like TD Ameritrade, has great research tools. They over informative and interactive charts, trading ideas, and wide data on asset fundamentals. Their variety of options greatly assists investors in strategy building, and even gives access to more than twenty analyst’s opinions on a certain stock.
- Web: 9/10. Fidelity’s website offers excellent User Experience. The features offered are far superior to Vanguard. A two-step login provides extra security for non-IT expert investors. The only downside is its limited customizability for charts and workspace.
- App: 8/10. Fidelity’s mobile app has also received good feedback from its clients. It is user-friendly, well designed, and is packed with all necessary trading features, especially compared to simplified apps like SaxoGo. It is available for both iOS and Android. Unlike its web counterpart, the app does not offer a two-step login, but it has an awesome biometric fingerprint test instead. Alerts and notifications are easy to set up.
According to Similarweb, fidelity.com currently receives about 62.67 million visitors per month. 97.86% of visits come from users located within the United States, with Canada and India following in second and third, respectively. Fidelity’s traffic is significantly higher than Charles Schwab’s 25.79 Million visits.
Comparison to other brokers
- A great alternative to Fidelity is another US based stockbroker, TD Ameritrade. It is one of the top ranking brokers with amazing research tools, over a hundred branches across the United States, and a wide range of investment products to choose from. It has also been around since 1971, sharing a similar long lasting foundation with Fidelity.
- Another company worth looking into is You Invest by J.P Morgan. Though the app itself was launched only in 2018, its parent company, J.P Morgan has been around since 1871, making it one of the oldest institutions thus far. With its strong foundation and evident financial markets experience, this brokerage is a good one to take into consideration especially for millennial investors.