Fidelity Investments: Ethical Or Unethical?

Fidelity Investments is one of the largest financial services corporations, offering a wide range of investment opportunities. With a comprehensive code of ethics, Fidelity has a long history of trustworthiness and security. However, the company has faced recent lawsuits regarding data security and fund management. This raises the question: Is Fidelity Investments ethical?

Fidelity's ethical code for employees

Fidelity Investments has a comprehensive Code of Ethics that its employees must follow. This code outlines the rules and principles that guide the company's and its employees' actions and decisions.

The Code of Ethics covers various topics, including personal investing, inside information, broker-dealer employees, and compliance with federal securities laws. Employees are required to acknowledge their understanding of the rules and comply with them. They must also authorise Fidelity to access their covered accounts and report any violations to the Ethics Office.

The Code of Ethics also includes additional rules for specific groups within the company, such as fund-advisory employees, traders, research analysts, and portfolio managers. These rules aim to prevent conflicts of interest and ensure ethical behaviour in personal investing situations.

Fidelity's Code of Ethics emphasises the importance of trust and ethical behaviour in maintaining the company's reputation and customer trust. Employees are encouraged to use sound judgment and analyse situations to ensure their decisions align with the company's ethical standards.

The company also has rules for employee investing, which cover owning and trading securities for personal benefit. These rules apply to officers, directors, and employees involved in the management and operations of Fidelity's funds.

Overall, Fidelity's ethical code for employees is detailed and comprehensive, aiming to ensure ethical behaviour, compliance with regulations, and the maintenance of customer trust.

Fidelity's trustworthiness and security

Fidelity is a secure brokerage firm with a long history of trustworthiness. It offers a Fidelity Customer Protection Guarantee, which reimburses customers for unauthorised activity in their accounts.

Fidelity also provides additional protection features, including encryption software, intrusion protection systems, proxy servers, firewalls, 24/7 system surveillance, advanced anti-malware, and security alerts via text or email. The company encourages users to increase security by enabling multi-factor authentication, money transfer lockdown, and biometrics.

Fidelity ensures its security protocols are up to date by regularly training associates on the latest security policies and data protection to ensure awareness and compliance.

However, it is important to note that two pending lawsuits have been filed against Fidelity. As of October 2024, the company received a proposed class-action lawsuit claiming that customers were charged unnecessarily high expenses for holding the fund's retail share class when they were eligible for lower expenses. This was alleged to be a breach of fiduciary duty. Fidelity denies these claims.

Additionally, in November 2023, a cyber-security attack breached the financial data of over 77,000 clients. This case is still pending, and Stueve Sigel Hanson is investigating the company for allegations of inadequate security measures and negligence with customer data.

Fidelity's sustainable investing strategies

• Investment Performance: Fidelity maintains a focus on seeking consistent investment performance across all its portfolios, including those with sustainable investing strategies.
• Proprietary Research: Fidelity conducts in-depth research to identify financially material sustainability factors. This research is collaborative and covers multiple asset classes.
• Cross-Asset Class Collaboration: Fidelity's sustainable investing process is supported by cross-asset class collaboration, ensuring a comprehensive approach to sustainable investing.
• Engagement with Issuers: As part of its sustainable investment research and stewardship initiatives, Fidelity engages with issuers to gather insights and assess their commitment to sustainability.
• Active and Passive Investment Options: Fidelity offers both active and passive broad sustainable and thematic investment options across asset classes. This allows investors to create diversified portfolios that align with their values.
• Thematic Investing: Fidelity's sustainable thematic mutual funds and ETFs offer exposure to environmental and social investment themes. This includes investing in companies that prioritize sustainable practices, promote equitable relationships, and demonstrate transparent and diverse governance.
• Sustainability-Linked Investment Trends: Fidelity's sustainable investing strategies aim to identify and invest in companies that are driving innovation and change in areas such as clean energy, water sustainability, environmental bonds, and women's leadership.
• Risk Management: Fidelity recognizes the subjective nature of sustainable investing and acknowledges that ESG criteria may not reflect the beliefs or values of all clients. They rely on third-party ESG-related information, which may be incomplete or inaccurate. Therefore, Fidelity carefully evaluates issuers' practices and integrates ESG factors into their investment process while also considering other financial factors.

• Fidelity Advisor Climate Action Fund: Invests in companies addressing climate change.
• Fidelity Advisor Environmental Bond Fund: Invests in the debt of companies and projects that recognize, disclose, and reduce environmental risks.
• Fidelity Advisor Women's Leadership Fund: Invests in companies that prioritize and advance women's leadership and development.
• Fidelity Water Sustainability Fund: Invests in companies working to deliver safe, reliable, and accessible water solutions.
• Fidelity Clean Energy ETF: Invests in companies supporting the production of energy from renewable sources.

Fidelity's customer service

Fidelity offers a wide range of customer services, with many of them being available online.

For example, on the Fidelity website, you can log in to your account to update your mailing address, change your email address, update your phone number, change account ownership, update or change beneficiaries, manage bank accounts, order checks, view tax forms, manage email preferences, and set up security text alerts.

You can also access your workplace accounts, including retirement and health savings accounts (HSAs), online through NetBenefits or through the Fidelity NetBenefits mobile app.

Fidelity also offers a Virtual Assistant, an automated natural language search engine to help you find information on the Fidelity.com site. However, it is important to note that you should not input personal or account information, as the information you input is not stored or reviewed.

Additionally, Fidelity provides customer support for various investment and trading-related queries. These include placing a trade, setting up an automatic investment, viewing tax forms, accessing the Stock Research Center, using the watch list, understanding initial public offerings (IPOs), and utilizing advanced investing features.

Fidelity also assists customers with finding their account number, granting someone else access to trade in their account, and reinvesting dividends and capital gains.

Furthermore, Fidelity offers educational resources to help customers make informed investing decisions, including lessons on decoding investment terminology, maximizing their money, understanding risk, and creating a trading strategy.

For those navigating life's big moments, such as celebrating a milestone or adjusting to unexpected changes, Fidelity provides resources, guides, and tools to help plan for these important events.

Fidelity also offers a range of planning and advisory services, whether customers are new to investing or experienced traders, to help them define and work towards their financial goals. These services include digital investment management, unlimited access to 1-on-1 coaching with Fidelity advisors, and customized planning and investment management led by a dedicated advisor.

Fidelity provides information on various account and investment types, such as brokerage accounts, cash management accounts, health savings accounts (HSAs), 529 college savings plans, and investment types like stocks, options, ETFs, and fractional shares.

Finally, Fidelity offers support for stopping automatic contributions, where customers can change or delete an automatic contribution at any time by visiting the automatic transfers and investments page and editing their retirement account settings.

Fidelity's fees and charges

Fidelity Investments offers a range of pricing options for its customers, with some services being free of cost. For instance, there are $0 commission trades for online U.S. equity trades, exchange-traded funds (ETFs), and options, with an additional $0.65 per contract fee for the latter. Similarly, there are no account fees and no minimum balance requirements to open a retail brokerage account, including IRAs. Trading fees are $0 per stock or options trade, plus $0.65 per contract on options, and $0 per trade for ETFs. For bonds, there is a charge of $1 per bond or CD in secondary trading, but U.S. Treasuries traded online are free.

Fidelity also offers zero expense ratio index funds, with no transaction fees, and the potential to save an average of $15 per bond. There are also no trading fees for mutual funds, and hundreds of other funds with no transaction fees. However, there is a minimum initial investment of $1000-$3000 for Investor Shares and $3000-$100,000 for Admiral Shares.

Additionally, there are some charges for specific services, such as an account transfer out, which costs $15 online and $25 for paper. There is also a minimum markup or markdown of $19.95 for trades with a Fidelity representative, and a flat charge of $19.95 per trade for U.S. Treasury purchases.

For digital managed accounts, there is a gross advisory fee of $0 for under $25,000 and 0.35%/year for amounts of $25,000 and above. There are also other advisory services with varying gross advisory fees, such as Fidelity® Wealth Management, Fidelity Private Wealth Management®, and Fidelity® Personalized Planning & Advice, which are dependent on the amount being managed through Fidelity and the specific service.

It is worth noting that there is a regulatory fee on sell orders, known as an activity assessment fee, which ranges from $0.01 to $0.03 per $1,000 of principal.

Frequently asked questions