Fidelity is perhaps best known as one of the largest mutual fund managers in the world, but it also offers discounted online brokerage accounts through their Fidelity Brokerage Services affiliate. In recent years, Fidelity's online brokerage capabilities have drawn praise from publications such as Barron's, Investor's Business Daily and Kiplinger's.
With any online broker, defining what is the best array of services depends on what you are looking for and how you plan to use your account. In Fidelity's case, it seems to aim down the middle between the cheapest, no-frills solutions and those with more expensive, higher-rated research resources.
Who is a good fit for Fidelity?
Online brokers appear to be having a price war that has resulted in several of them matching each other on flat-fee commissions for standard trades. With their commission of $4.95, Fidelity is part of a crowded field of high-profile online brokers offering commissions at this level. While a few online brokers offer even cheaper commissions, Fidelity's is over a dollar per trade cheaper than the industry average identified by a recent MoneyRates.com study of online brokers.
As for other costs, Fidelity does not charge monthly maintenance or inactivity fees. Margin investors will be interested to know that the MoneyRates.com study found Fidelity's margin interest rates to be right in the middle of the pack, though with most firms, these rates vary depending on your margin balance.
Investment research resources
Fidelity touts the fact that it makes available research reports from over 20 different sources. However, reviewers rated several brokers as having better research resources, so here again Fidelity landed near the middle of the field.
If these consistently middling ratings don't sound particularly distinguished, keep in mind that this consistency might represent the kind of trade-off some investors desire.
One important consideration for mutual fund investors is that while Fidelity manages its own extensive family of funds, its online platform also makes available funds from other providers as well. This gives investors the freedom to research a broader field to find the best solutions. Often different mutual fund companies excel in different areas, so it is important not to be restricted to a single fund family.
Roughly half the online brokers MoneyRates.com analyzed had no minimum account size requirement, but Fidelity does require a minimum of $2,500. While this may rule out very small investors, that threshold should not be an obstacle to most people interested in online trading.
It should be noted that Fidelity's disclosure record does have some bad marks on it. Historically, its brokerage firm has had the third-highest frequency of regulatory events and arbitration cases out of the 19 firms MoneyRates evaluated. Arbitration cases indicate disputes with clients that could not be taken care of through normal customer service procedures.
Aside these disclosure issues, in many ways, Fidelity's costs and capabilities represent industry norms. This makes them a good basis for comparison when searching for the online broker that best meets your needs. Fidelity is neither the cheapest option nor the one with the most robust research capabilities, but for consumers looking for an all-round solution that is reasonably good in both areas, Fidelity qualifies.