There are dozens of investment brokerage firms available to investors, but two of the giants in the industry are Schwab and Fidelity. In a comparison of Schwab and Fidelity, we’re going to take a look at both brokers and attempt to declare a winner.
Schwab vs. Fidelity — The Basics
Founded in 1971 and headquartered in San Francisco, Charles Schwab & Company is the original investment discount brokerage firm. The company essentially introduced low-cost stock trading back in the 1970s, which the entire industry has since adopted. Schwab continues to be an industry leader.
The company caters to more than 9 million clients, with more than $2.6 trillion in assets under management. It operates through 300 branches throughout the US, providing clients with in-person contact with the company, in addition to its extensive online presence and phone access.
Although Schwab is the original discount investment broker, Fidelity has actually been around longer. The company started in 1946, primarily offering mutual funds. It is best known for its wide and highly popular selection of mutual funds but has since joined the ranks of discount brokers, offering virtually every investment option available.
In addition to investment services, the company also provides retirement services and life insurance. It serves more than 23 million accounts for both its retail and institutional investors. It has more than 140 retail locations around the country and has $2.1 trillion in assets under management.
But the company is perhaps still best known for its mutual funds. It offers more than 400 different funds and is the second-largest mutual fund company after The Vanguard Group.
Like Schwab, Fidelity offers individual and joint brokerage accounts, custodial accounts, Coverdell and 529 college accounts, trust and estate accounts, 401(k)s, and traditional, Roth, Simple and SEP IRAs.
Features Both Schwab and Fidelity Offer
Both Schwab and Fidelity are full-service, discount brokerage platforms that offer the full range of investment options and do so at discount commission rates. While neither offers the lowest trading fees in the industry, they both offer services and investment options that are among the best available, as well as customer service that exceeds industry standards.
Features Unique to Schwab
Personal Portfolio Review. Schwab offers a portfolio consultation
if you have at least $25,000 in your account. The review will discuss your goals, evaluate your current investments relative to those goals and provide specific recommendations and “next steps.” Apart from the review, Schwab offers 24/7 customer service to help you with your day-to-day investment needs.
Portfolio management services. If you would like help in managing your investments, Schwab has several services available for you. For example, they provide Diversified Managed Accounts and Schwab Managed Portfolios. They offer fully managed accounts and also more specialized programs, such as their Thomas Partners dividend growth strategy and their Windhaven Strategies, which specializes in global diversification.
Schwab Intelligent Portfolios. With as little as $5,000, you can participate in Schwab Intelligent Portfolios. It uses an advanced algorithm, as well as the management services of Charles Schwab Investment Advisory, Inc., to create a portfolio of low-cost ETFs extending across as many as 20 different asset classes, including real estate and commodities.
Tax-loss harvesting. If you have at least $50,000 with Schwab, they’ll provide tax-loss harvesting, which is an investment strategy that minimizes capital gains tax, enabling you to keep more of your investment earnings. Not only do they provide this valuable service, but there are no additional commissions, account fees or advisory fees required.
Charles Schwab Bank. This is Schwab’s banking arm, and it can meet your full-service banking needs, enabling you to bank where you invest. It provides checking through its Schwab Bank High Yield Investor Checking Account, which not only pays interest but also requires no minimum account balance and no account fees. Even better, the account provides unlimited fee rebates from ATMs worldwide. It also works with the Schwab mobile app, providing mobile deposits, and can be linked to Apple Pay.
Features Unique to Fidelity
Fidelity Investment Rewards Visa Card. Fidelity doesn’t offer a bank account, but they do offer the Rewards Visa Card, which enables you to deposit the cashback rewards directly into your brokerage account, through their Credit Options Plus Cashback feature. This is something like microsavings accounts, which make small deposits based on spending, slowly, steadily and automatically increasing your savings through regular activity.
Fidelity Full View. This works much like Mint.com in that you can include third party accounts within Fidelity. Fidelity Full View enables you to include more than 9,000 accounts. It provides you with a view of your entire financial situation, and not just your Fidelity account.
Fidelity Active Trader Pro. This platform provides real-time streaming market data, advanced charting and real-time profit-and-loss estimates on hypothetical transactions, in one-click trading. It is an excellent platform for the do-it-yourself investor who just needs the right tools in order to improve his or her investment results.
Fidelity Portfolio Advisory Service. With a minimum investment of $50,000, you can choose to take advantage of this advisory service to help manage your portfolio. Fidelity’s registered investment adviser, Strategic Advisers, Inc., will make ongoing investment decisions on your behalf and continually look for appropriate investments for the portfolio you select. This is a managed account designed to help you meet your long-term investing goals through a model portfolio of mutual funds and ETFs.
Schwab vs. Fidelity Feature Comparison
|Minimum Deposit||$1,000 (IRAs $0)||$2,500 (IRAs $0)|
|Options Trades||$8.95 + $0.75/contract||$7.95 + $0.75/contract|
|Mutual Funds||$76||$0 – $79.95|
|Apple iOS App||Yes||Yes|
|Google Android App||Yes||Yes|
Schwab. They offer just about every investment security available, including stocks, bonds, exchange traded funds (ETFs), options and real estate investment trusts (REITs). They offer more than 3,000 no-load/no transaction fee mutual funds, which is perfect for the investor who invests most or all of his or her portfolio in funds.
Fidelity. They also offer stocks, bonds, ETFs and options, as well as more than 4,700 mutual funds offered by both Fidelity and non-Fidelity sponsors.
Annual Fees and Commissions
No account fees or inactivity fees
- Stocks and ETFs — $8.95 per trade
- Preferred stocks and REITs — $8.95 per trade
- Options — $8.95 + $0.75 per contract
- Mutual funds — $76 to buy, but no fee to sell
- Schwab OneSource Funds — No fee
- US Treasury Securities — No fee
- Other fixed income securities — $1.00 per bond, with $10 minimum and $250 maximum
Schwab also offers more than 200 ETFs at $0 commission.
No account fees or inactivity fees
- Stock and ETFs — $7.95 per trade
- Options — $7.95 per trade + $0.75 per contract
- Mutual funds — $0 – $49.95 per trade
- Bonds and CDs — No fee on new issues, $1.00 per bond on secondary issue
Fidelity also offers 91 commission-free ETFs.
Mobile App Accessibility
Both Schwab and Fidelity offer their own Mobile Apps. Schwab offers Apple iOS and Google Android and is also available on Apple Watch.
Fidelity also offers Apple iOS and Google Android. The Apple iPad seems to work particularly well, offering more functionality than the iPhone.
Minimum Deposit to Open an Account
Schwab features a minimum initial deposit of $1,000. You can open an IRA with no money if you enroll with Schwab’s Automatic Investment Plan for at least $100 per month.
Fidelity features a minimum initial deposit of $2,500, but $0 for IRA accounts.
And the Overall Winner Is…
Schwab… and Fidelity! It really depends on your investment preferences.
Schwab is better for investors who want help in managing their portfolios. They offer more investment management services for all investment levels, with plenty of free services. Their commission fees are a bit higher than Fidelity’s, which means Schwab is also better suited to investors who do very little trading. It’s the better of the two platforms for the passive investor. Although it probably isn’t a necessity, the Charles Schwab Bank connection isn’t a bad service to have.
Fidelity is the better platform for the self-directed investor, particularly if you trade frequently. Fidelity’s fees are lower than Schwab by $1 per trade, and that can add up over a year’s worth of frequent trading. Fidelity’s 400 mutual funds will also be a good place to park that portion of your stock portfolio you want to maintain for some added diversification or to invest in sectors where you’re not completely comfortable going with the DIY route.
These are two excellent platforms, and you can’t go wrong with either. Just pick the one that will work better with your own personal investment style, and you can be completely comfortable with your choice.