Move over, Robinhood — Fidelity democratizes investing for teens

Teens will be able to trade U.S.-listed stocks, Fidelity mutual funds and most exchange-traded funds, with no account fees or commissions.

Fidelity Investments Co. is launching a new type of account for teenagers to save and invest their money, according to an announcement Tuesday. 

Meet Fidelity Youth Account, the platform where teens will be able to trade U.S.-listed stocks, Fidelity mutual funds and most exchange-traded funds, with no account fees or commissions. The platform also lets 13- to 17-year-olds open savings accounts and debit cards with no account fees or minimums, according to the company’s website. 

The only requirement is that the teen’s parent or guardian must have an existing Fidelity account. Parents can monitor their teen’s account activity online, and through monthly statements, trade confirmations, and by viewing debit card transactions and can also set up alerts to notify them of trades, transactions and cash management activity.

Once the teen crosses over to adulthood at age 18, their account will be transitioned to a retail brokerage account for free.

The announcement comes on the heels of a wave of young retail investors in the U.S. that are exploring trading for the first time. This new generation of investors sparked the GameStop trading frenzy earlier this year, drawing new attention to the financial literacy threat America has faced for years.

A critical factor for Fidelity’s youth accounts is going to be gamifying knowledge instead of actions, said Nikhil Sharma, managing principal at Capco. 

“The user experience of this initiative is going to be key, so that they don’t gamify it too much,” Sharma said. “ It can look like a game to younger adults but a bit heavier on literacy side so a younger population understands the risks of investing, even before committing to an action.” 

Gamification strategies have come under fire since the GameStop stock surge, generating harsh criticism at the time from lawmakers.

“Fidelity is committed to responsibly supporting young investors,” said Jennifer Samalis, senior vice president of acquisition and loyalty at Fidelity in a statement. “Our goal for the Fidelity Youth Account is to encourage young Americans to learn through action and foster meaningful family conversations around financial topics.”

With Fidelity Youth Account, the teen will be able to manage a spending and savings account, along with a debit card with all domestic ATM fees reimbursed, and having a choice among cash sweep options for any uninvested cash.

Teens will also have access to the option to buy and sell domestic stocks, most ETFs, and Fidelity mutual funds such as Fidelity ZERO expense ratio mutual funds and Fidelity’s Stocks by the Slice where teens can learn the basics of investing with fractional shares for $1.

Fidelity’s platform also has in-app education modules that includes a library of jargon-free, 101-level educational content that explains complicated financial concepts in simple ways. 

Fidelity began piloting Fidelity Youth Account in mid-2020 with Fidelity employees who volunteered and had teen children aged 13 to 17. The pilot included 759 total accounts by the end April 2021. 

After the pilot, nearly three in four teens (73%) are now more confident in achieving financial success, and the account has increased their knowledge level for trading stocks as well as for researching investments by more than double.

In addition, Fidelity offers the free online game Five Money Musts for individuals who want to learn about how to manage their money to prepare for the “real world,” according to the announcement. Open to everyone, Five Money Musts allows users to explore the basics of budgeting, credit cards, debt, investing and retirement. The game tracks progress and grants points based on the decisions users choose for different financial choices.

The new youth accounts is just the latest move by Fidelity to capture the influx of young investors that are now seeking out financial services, largely fueled by the pandemic. In March, Fidelity offered free and unlimited trading via Fidelity Investments’ mobile app, Fidelity Spire

Fidelity Spire trading, which the firm teased since Fidelity Spire’s launch last summer, lets users buy and sell stocks, exchange traded funds and mutual funds with no minimum on how many times a user can trade per day. The app is free for any user and does not require users to be Fidelity customers. 

The introduction to free trading launched about a month after Fidelity hosted a Reddit “AMA” or “Ask me Anything” board to engage with customers and answer live questions regarding retail trading. More than 1,300 comments from Redditors flooded the discussion, yet trading education was largely outshined by comments comparing Fidelity’s mobile app interface to Robinhood’s.

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