The price wars are heating up in the online investment space. More than a week after Charles Schwab Corporation (NYSE: SCHW) announced it would eliminate commissions on online trades, Fidelity Investments adopted the same strategy for its 21.8 million accounts.
Fidelity will no longer charge its retail investors fees for e-trades of U.S. stocks, options or ETFs, and it will cut commissions for investment advisers Nov. 4. The announcement expands Fidelity’s slate of commission-free offerings from some 500 ETFs already available at a discount.
Why It’s Important
The move is made possible by new efficiencies in the market brought on by digitalization. It's the latest scrap in an ongoing price competition between online investment platforms.
The decision by Charles Shwab to go commission-free triggered quick emulation by TD Ameritrade Holding Corp. (NASDAQ: AMTD), E*TRADE Financial Corp (NASDAQ: ETFC) and Ally Financial Inc (NYSE: ALLY). Fidelity was the last holdout.
See Also: How And Why Are Online Brokers Offering Commission-Free Trades?
“We prioritized where we could provide the most value to investors,” Kathleen Murphy, president of Fidelity’s personal-investing business, told the Wall Street Journal. “It’s much more important to have industry-leading practices on cash and trade execution.”
Fidelity expects its zero-fee strategy to compound the appeal of its policy to automatically direct new accounts to higher yielding cash options.
"With this decision, Fidelity is taking a different path from the industry," Murphy said in a press release. "...This combination is something that no other firm offers."
Fidelity said it would continue to monitor its products and make adjustments where necessary.
At time of publication, Charles Schwab traded up 1.4%, TD Ameritrade 2.5% and E*TRADE 3.1%.
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