Fidelity Investments is crashing the free-trading party, challenging rivals in a gambit to lure assets by ending commissions.
The company will offer not only zero commissions for online buying and selling of U.S. stocks, exchange-traded funds and options, but also provide higher yields for cash balances and better trade execution, according to
an announcement Thursday.
The move is the latest leg in the
price-chopping frenzy engulfing retail brokerages. Fidelity is the fifth major industry player since last month to roll out some form of zero-commission online stock and ETF trading as companies duel to win investors gravitating toward the cheapest products.
Fidelity and its rivals have also been slashing other trading commissions and fees.
The company, the largest online brokerage with almost 22 million accounts, boasts in a new ad that retail customers will earn 1.58% on their cash balances automatically swept into a money-market fund, based on yields as of Tuesday. That tops rates at rivals, the company said, asserting that customers also save by using Fidelity's trade execution.
"This combination is something that no other firm offers," Kathleen Murphy, president of the closely held company's personal investing business, said in the statement.
[Recommended video: Michael Kitces: Efficiencies become crucial for advice firms when they grow]
Competitors' moves
The competition among banks, brokerages and money managers has been intensifying. The investing industry crossed a milestone in August as assets in index mutual funds and ETFs surpassed those in actively run vehicles for the first time, and heavyweights like
Charles Schwab Corp., Vanguard Group and
BlackRock Inc. have stepped up the battle for market share.
Interactive Brokers Group Inc. announced commission-free trading of U.S.-exchange listed stocks and ETFs in late September.
Schwab,
TD Ameritrade Holding Corp. and
ETrade Financial Corp. rolled out similar offerings the following week. The announcements of the free service, which threatens the revenue of the brokerages,
spurred share declines for the publicly traded companies.
Schwab, with more than 12 million brokerage accounts, dropped its commissions from $4.95 per trade, starting Monday. The company had previously matched cuts by Fidelity, reducing its retail trading commissions to $4.95 from $6.95 in February 2017.
Index funds
Fidelity's latest move is part of an ongoing shuffle at the firm, which had $2.8 trillion of managed assets as of Aug. 31.
The company that built an empire on the prowess of its stock pickers startled the industry last year by offering several zero-fee index mutual funds and has since expanded its slate of commission-free ETFs, giving investors more options with smart beta and active products.
Abigail Johnson, the company's chief executive officer, said in
an interview last November that offering a series of zero-fee funds and eliminating investment minimums were aimed at allowing the firm to "find other ways for people to give us a try."
