- Fidelity Investments has announced it now offers zero commission trading and that it defaults cash to higher-yielding options for new accounts
Fidelity Investments — the largest online brokerage firm with 28.1 million accounts — announced it is now the only firm to offer zero commissions for online U.S. stocks, exchange-traded funds (ETFs) and option trades that automatically direct retail investors’ cash into higher-yielding alternatives available for new brokerage and retirement accounts, and provides industry-leading best execution practices with zero payment for order flow for stock and ETF trades.
These commission changes went into effect yesterday for individual investors and will be available on November 4, 2019, for registered investment advisors.
Some of the other brokerage firms that dropped the commissions to zero within the last couple of weeks include TD Ameritrade, E*Trade, and Charles Schwab.
“With this decision, Fidelity is taking a different path from the industry. We are providing customers unmatched value while challenging industry practices that appear to give value in one place when they are actually having customers pay in other ways,” said Kathleen Murphy, President, Personal Investing at Fidelity Investments. “This is why – in addition to offering zero commissions for online trading – we will continue to automatically offer retail investors choice for their cash at account opening and default them into the higher-yielding option, as well as provide customers with the industry-leading trade execution that does not sacrifice customer interests. This combination is something that no other firm offers.”
Fidelity also announced that its brokerage leadership and size advantage allows the firm to attract nearly 10,000 new brokerage accounts each trading day year to date.
Some of the other benefits that Fidelity offers include:
1.) Challenging Industry Practices on Investor Cash: Fidelity pointed out that it is the only online brokerage firm to take a customer-first approach by automatically directing investors’ cash into higher-yielding alternatives available for new retail brokerage and retirement accounts as well as providing product choice without any minimum requirements. And cash investments at Fidelity could earn 158x more than TD Ameritrade and E*Trade, and 13x more than Charles Schwab cash sweeps.
2.) Leading Trade Execution Practices: Fidelity’s buy and sell order execution practices provide leading price improvement of $17.20 on average for a 1,000-share equity order while the industry average is just $2.89 — for a total of over $635 million of savings for its clients in last year. And Fidelity does not receive payment for equity order flow from market makers — which allows them to provide better execution quality for customers.
3.) Price Improvement Transparency: Fidelity is considered the only brokerage firm voluntarily to report quarterly price improvement savings and other execution statistics using the Financial Information Forum (FIF) Rule 605/606 Working Group standards. Plus Fidelity displays pricing summary for how much a customer has saved on each trade and provides a dedicated website that displays order execution and price improvement statistics along with offering a simple two-step tool where investors can calculate their potential price improvement savings.
4.) Zeros Add Up: Fidelity is considered the only leading brokerage firm to offer zero expense ratio index mutual funds, zero minimums for account opening, zero investment minimums on Fidelity retail and advisor mutual funds and 529 plans, zero account fees, and zero domestic money movement fees.
5.) Low-Cost Index Mutual Fund Provider: Fidelity is one of the largest index mutual fund providers with $529.4 billion and the company has systematically reduced pricing for the funds by nearly 50% to provide greater value to investors. And all of the Fidelity stock and bond index funds and sector ETFs have total net expenses lower than all of Vanguard’s comparable funds.
“We made this decision after careful consideration to our clients and ensuring we are satisfying their full needs,” Murphy added. “We will continually revisit the products and services we provide to customers in the evolving competitive environment.”
Fidelity’s assets under administration of $7.7 trillion, including managed assets of $2.8 trillion as of August 31, 2019. And Fidelity helped more than 30 million people invest their own life savings, 22,000 businesses manage employee benefit programs as well as providing more than 13,500 financial advisory firms with solutions to invest their own clients’ money.
