Fidelity Investments: A Brokerage Firm In Turmoil?

Fidelity Investments is a well-known brokerage firm and one of the largest asset managers in the world. With trillions of dollars in assets under management, the company offers a wide range of investment options, including stocks, ETFs, bonds, mutual funds, and options. It has a strong reputation for its mutual funds, providing a large selection of no-transaction-fee funds and zero-expense-ratio index funds. The brokerage firm also stands out for its extensive research capabilities, educational resources, and user-friendly trading platforms. However, Fidelity has been criticized for high fees associated with some mutual funds and margin trading, as well as slow account verification. While it offers commission-free stock and ETF trading, international stock trade fees are relatively high. Overall, Fidelity is a trusted and reputable brokerage firm, but is it a failed brokerage firm? Let's explore further.

Fidelity's fees and commissions

Fidelity Investments offers a range of fee structures and commissions for its products and services. Here is a detailed overview:

Commissions and Fees:

• $0 Commissions for Online US Stock, ETF, and Option Trades: Fidelity offers commission-free trades for online US stocks, ETFs, and options. This means you can buy and sell these securities without paying any brokerage fees.
• $0.65 per Contract for Options Trades: While options trades have no base commission, there is an additional fee of $0.65 for each contract included in the trade.
• No Minimums to Open an Account: Fidelity does not require a minimum deposit or balance to open a new account, making it accessible to a wide range of investors.
• Margin Rates: Margin rates refer to the interest rate charged on borrowed funds for trading. Fidelity offers competitive margin rates, with the rate depending on the outstanding margin balance. The higher the balance, the lower the margin rate charged. As of December 20, 2024, the base margin rate was 11.325%.
• No Transaction Fee (NTF) Non-Fidelity Funds: When purchasing NTF non-Fidelity funds, there is no fee at the time of purchase. However, a redemption fee of $49.95 applies if the fund is held for less than 60 days.
• Transaction Fee for Non-Fidelity Funds: For non-fidelity funds that are not designated as NTF, there is a transaction fee of $49.95 per purchase. There is no fee charged on redemption.
• Representative-Assisted Trades: Trading with the assistance of a Fidelity representative may incur additional fees. For example, there is a $19.95 transaction fee for representative-assisted treasury auction orders.
• Mutual Funds: Fidelity offers a range of mutual funds, including zero expense ratio index funds, which have no expense ratio and no minimum investment requirement. There may be other fees associated with mutual funds, such as early IRA withdrawal fees or mutual fund annual low balance fees.
• Electronic Funds Transfer (EFT): There may be a fee for transferring funds electronically, depending on the currency and location.
• Foreign Exchange Wire: For converting USD to a foreign currency, there is typically a fee charged as a percentage of the principal amount.
• Streaming Level II Quotes: There may be a subscription fee for accessing real-time streaming quotes and market data.
• Account Transfer Out: There is a fee for transferring your account to another institution, which can vary depending on whether it is done online or via paper forms.

Pricing and Value:

Fidelity is known for its competitive pricing and value proposition, offering industry-leading delivery on value. Here are some key points:

• Zero Expense Ratio Index Funds: Fidelity offers the industry's first zero expense ratio index mutual funds directly to investors, providing additional value to cost-conscious investors.
• No Account Fees and No Minimums: Fidelity does not charge account fees for retail brokerage accounts, and there are no minimum balance requirements. This makes it accessible to a wide range of investors.
• Low Trading Fees: Fidelity offers $0 trading fees for online US stock, ETF, and options trades, making it an attractive option for frequent traders.
• Low Bond Trading Fees: Fidelity charges $1 per bond or CD in secondary trading, which is significantly lower than competitors, offering potential savings.
• No Transaction Fee (NTF) for Fidelity Funds: Buying or selling Fidelity mutual funds does not incur a transaction fee, making it more cost-effective for investors.
• Low Margin Rates: Fidelity's margin rates are competitive in the industry, with rates as low as 8.25% for debit balances over $1,000,000.
• Free Research and Tools: Fidelity provides extensive research and analysis tools at no additional cost. This includes third-party research reports, screeners, calculators, and educational resources.
• Cash Management Services: Fidelity offers a range of free cash management services, including bill pay, returned check, stop payment, cashier's checks, and domestic wire transfers.

Other Considerations:

While not strictly commissions or fees, it's important to consider other ways in which Fidelity makes money from its clients:

• Interest on Cash: Fidelity earns money on the difference between what it pays customers for idle cash and what it earns by investing that cash.
• Stock Loan Programs: With customer permission, Fidelity loans stocks in customer accounts for short sales and shares the revenue generated.
• Margin Interest: Fidelity benefits from the interest charged on margin lending, which can be a significant source of revenue.
• Wealth Management Fees: Fidelity offers wealth management services for a fee, typically a percentage of assets under management (AUM). This fee varies based on the account value and the specific services provided.

Fidelity's investment selection

Fidelity offers a wide range of investment options to its customers. The company provides commission-free stock and ETF trades, allowing customers to buy US stocks and ETFs for as little as $1 with fractional shares. Fidelity also offers three cryptocurrencies: Bitcoin, Ethereum, and Litecoin.

Fidelity also supports trading in American depository receipts (ADRs), which allow investors to purchase stock in overseas companies. The company also offers a substantial selection of bonds, including FDIC-insured CDs and bond funds, as well as over 100,000 individual bonds, including corporate, municipal, and government bonds.

Fidelity's mutual fund selection is also impressive. The company was the first broker to introduce index funds with no expense ratio, and its mutual fund selection stacks up against any other broker. Fidelity offers more than 3,300 mutual funds with no transaction fees and nearly 950 funds with expense ratios of 0.50% or less. These funds come from Fidelity and other mutual fund companies.

Fidelity also allows investors to buy gold, silver, platinum, and palladium to help diversify their portfolios. The company's investment options are well-suited to both beginner and active investors, providing a range of choices to match different investment styles and goals.

Fidelity's trading platforms

Fidelity offers a range of trading platforms to cater to the needs of different investors. Here is an overview of the platforms available:

Fidelity.com

Fidelity's website provides users with an award-winning research experience, in-depth analytics, and idea generation tools integrated with an easy-to-use trading ticket. It is recommended for intermediate to advanced investors. The website also offers real-time market data, research ideas, and trade execution capabilities on a single screen, which works on any browser.

Active Trader Pro

Active Trader Pro is a downloadable advanced trading platform offering real-time insights, dynamic visual analytics, and powerful trading tools. It includes features such as real-time insights, visual snapshots to monitor investments, advanced charting indicators, multi-leg options trading, and industry-leading order execution. It is recommended for advanced investors.

Fidelity Mobile App

The Fidelity mobile app is an award-winning, easy-to-use app that puts all investment activity in one place, allowing users to view, manage, and take action on their portfolio 24/7. The app includes real-time quotes, multi-leg options trading, a consolidated version of research offerings, and a notebook to save ideas and articles. It is recommended for beginner to advanced investors.

Trading Dashboard

The Trading Dashboard is a single-screen trade station that allows users to tackle all their trading needs in one place. It provides real-time market data, research ideas, and the ability to execute trades instantly. The Trading Dashboard works on any browser or tablet.

Fidelity's range of trading platforms offers features and tools catering to investors of all experience levels, from beginners to advanced active traders. With its user-friendly interfaces, comprehensive research capabilities, and customizable options, Fidelity's trading platforms provide a robust foundation for investors to make informed decisions and execute their trades efficiently.

Fidelity's customer service

Fidelity's online learning centre provides a customised experience, using machine learning to surface educational materials that match the customer's investing behaviour. The company's virtual assistant has been criticised as "unsatisfactory", but it is supplemented by live help, which is described as "easy to access".

Fidelity's customer support has been described as "responsive", "accurate" and "intuitive". One review states that "if [the virtual assistant] does not know an answer, [Fidelity] will get back to you". Another says that "the customer representatives are always on point with answers".

Fidelity's reputation and safety

Fidelity is one of the largest stockbrokers in the US, and its reputation is that of an industry leader with a stellar reputation. It has excellent reviews from multiple sources, including NerdWallet, Investopedia, BrokerChooser, Bankrate, and StockBrokers.com.

Fidelity has been recognised for its low fees, excellent trading platforms, research capabilities, and customer service. It has won numerous awards, including NerdWallet's 2024 winner for Best Broker for Beginning Investors, Best Online Broker for IRA Investors, Best App for Investing, Best Online Broker for Bond Investors, and 5 stars for Best Accounts for Stock Trading. It was also named Investopedia's Best Overall online broker, Best Broker for ETFs, and Best Broker for Low Costs in 2023.

Fidelity is regulated by top-tier financial authorities and has a high level of investor protection. It is regulated by the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It is also a member of the Securities Investor Protection Corp (SIPC), which protects investors' assets in the event of the brokerage firm's closure.

Fidelity offers commission-free trading on US stocks and ETFs, and low options commissions. It also provides extensive research tools and educational resources for investors of all levels.

The company has a long track record, having been established in 1946. It serves millions of clients, including individuals, businesses, and wealth management firms.

Fidelity's account verification process is reportedly slower compared to some competitors, but it offers many different account types to cater to various investor needs.

Overall, Fidelity has a strong reputation for being a safe and reliable brokerage firm with a wide range of features and tools to support investors.

Frequently asked questions