Schwab vs. Fidelity – Which Is Better?
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.
How did we compare Charles Schwab and Fidelity?
Schwab vs. Fidelity — The Basics
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.
Schwab 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.
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 cash back 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.
Fidelity ZERO Index Funds. With these index funds, investors will pay ZERO fees no matter how much they invest. The two new funds are the ZERO Total Market Index Fund, which was created to mirror the total return of a large range of exchange-listed U.S. companies, and the ZERO International Index Fund, which corresponds to the total return of foreign developed and emerging stocks. Neither of these funds requires a minimum investment, either. Compared to competing funds, these ZERO products could save you a ton of money.
Schwab vs. Fidelity Feature Comparison
Compare & Alternatives
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 — $4.95 per trade
- Preferred stocks and REITs — $4.95 per trade
- Options — $4.95 + $0.65 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 — $4.95 per trade
- Options — $4.95 per trade + $0.65 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 Initial Deposit
Schwab requires 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 now requires no minimum investment. The answer here is a no-brainer.
Which Is Better?
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 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. Plus, there are no longer any required minimums. 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.
I recently moved from ETrade to Schwab. I started with the Intelligent portfolio which had too much cash not invested. I ask for a conservative allocation. If you want a Intelligent portfolio start with an aggressive allocation.
In order to take the robots off it was necessary to create and move the positions and cash to a new account. Making all the trades to re-allocate, I was frustrated with the lack of the total in the view of trades. It gives the price per share and the number of shares. Why not put the total dollars of the trade? Tired of using a calculator for the simple piece of information while viewing open, filled and all trades.
Everyone is different so the same broker is not right for everyone, particularly at different times in their investing life. My investing profile is experienced and sophisticated and I have worked as a retail NYSE broker. I have been with Fidelity for many years mainly because when I do have an account issue I can always talk to a relatively smart person. However, I am considering a change to Schwab since Fidelity does not allow my full access to ETNs. Granted, these are risky for many investors but it is not fair to limit my exposure to these. Everything else with them is satisfactory.
Schwab does now have a feature where you can add external accounts to have a whole overview of your financial picture.
That, Fidelity offers a bank is a lot different than Fidelity is a bank. Fidelity will tell you in no uncertain terms they are not a bank. That means things banks can do Fidelity may not be able to do as the banking services it offers are very limited (ATM, Bill Pay, checking). Anything else is Fidelity acting on your behalf with the bank. Which means the bank won’t talk to you when something goes wrong and no one at Fidelity knows (perhaps cares) because “we are not a bank”. This was/is Fidelity’s choice. They could start/own a bank. But they don’t want to be regulated.
More important and along the lines of Shane’s comment. This article is one of hundreds on the web where the only criteria is cheap. If that’s your only criteria, Vanguard, index funds. On-the-other-hand, if you are an investor and understand that investing has 2 sides to it, upfront cost and downstream returns, then, are you capable of making investment decisions? If yes, I’d again recommend Vanguard. Fidelity’s back office leaves a lot to be desired. Once you stray from the norm, mistakes happen and no one stays on top of things. The departments are all run like little fiefdoms and there’s little to no communications flow between them. It’s family and employee owned. That’s who’s benefit it’s being run for.
If you do not feel comfortable making investment decisions, get over cheap, look at traditional brokers. In my circle of friends there’s a very distinct difference in the returns those with accounts at the Merrill’s enjoy and those that chase “value”.
The only thing I would add to comparisons like these is execution quality. A dollar or two here or there on commission is one thing, but it’s so easy to give that and more back depending upon the quality of the executions. I know both Fidelity and Schwab are said to have good executions, but it’s something I often don’t notice with a broker until I’ve already gone to trouble of opening an account and than I notice executions are notably different depending upon the broker, and that difference with each trade can end up being more frustrating than anything else about a broker.
Exactly what I am noticing! Was with OptionsXpress, which did not change what I would pay for my puts or what I would get for calls – or they did it rarely. Schwab is changing this on me 3 times or more per transaction and I am making 1/3 to 1/2 less than what I expected. Have you found a trading platform that has good executions? Thanks!
But… you are wrong, Fidelity DOES offer a “bank” account! In your review you say ” Fidelity doesn’t offer a bank account”, while that might be technically true since they aren’t a bank you would have a hard time distinguishing between a bank checking account and the Fidelity® Cash Management Account. It is a separate account, outside of your brokerage account. I have used it for years and it works just like a regular interest bearing checking account but better.
Deposits are FDIC insured, you have free checks, an ATM card that can be used at any ATM FEE FREE, you get a refund for any ATM fees paid! It even has mobile app check deposits. Features listed on the Fidelity website include:
– Free ATM access. Use your free Fidelity® Visa® Gold Check Card anywhere in the world and we will automatically reimburse all ATM fees.
– Free mobile check deposit. Scan and deposit checks with your iPhone®, iPad®, or Android™ with Fidelity Mobile®.
– Free checkwriting. Get free checks, deposit slips, and online images of your cleared checks.
– Free Fidelity BillPay®. Receive and pay your bills on the web or on your mobile device.
– Online Account management dashboard.
– FDIC insurance
– Earn interest
– Alerts & self-funded overdraft protection
Check it out here: https://www.fidelity.com/cash-management/faqs-cash-management-account
It’s an awesome account. Only thing you don’t get is a brick-and-mortar bank in your town. But that’s not something that I’m willing to pay $10-$12 a month extra for in fees.