Fidelity fee match spells relief for investors, says Morgan Stanley

Fidelity Investments chooses to match rivals rather than escalate price war
OCT 10, 2019
Investors can "breathe a sigh of relief" as Fidelity Investments matched rivals instead of escalating a recent price war, according to Morgan Stanley. [More: Fidelity eliminates commissions on online trades] Shares of TD Ameritrade Holding Corp. rose as much as 2.8% in Thursday morning trading, while Charles Schwab Corp. gained 2.3% and ETrade Financial Corp. climbed 3.4%. TD Ameritrade has plunged 29% in the past month, while Schwab and ETrade have both tumbled 13%, as brokers gave up on commissions. "Product pricing is now in-line across e-brokers and Fidelity and removes a near-term overhang," Morgan Stanley analyst Michael Cyprys wrote in a note. He flagged Fidelity leaving its contract fee on options at 65 cents per contract, and said, "fears around margin lending going to zero are well overdone." Mr. Cyprys added that Fidelity highlighting its money fund sweep option, which pays a higher yield on customer cash balances than bank sweep offerings at Schwab, TD Ameritrade and ETrade isn't new. "They've been touting this for a while now, and concerns around this are already reflected in the price for Schwab," he said. [More: Zero commission fight could pressure wirehouse earnings] Fidelity said Thursday it will offer zero commissions for online buying and selling of U.S. stocks, exchange-traded funds and options, and also provide higher yields for cash balances and better trade execution. The move came after four major industry players rolled out commission-free stock and ETF trading: Interactive Brokers Group Inc. announced commission-free stock and ETF trading in late September Schwab and TD Ameritrade then slashed trading fees to zero on Oct. 1 ETrade joined its rivals and cut commissions to zero the next day Fidelity's price cut may have other impacts as well, according to Bloomberg Intelligence analyst David Ritter: [Recommended video: Financial planning wasn't even a thing 50 years ago] "Fidelity's move to free online trades may spur Schwab to cease accepting payments for order flow (1% of net revenue), likely improving prices received by clients and enhancing its appeal. We think the company is also likely to default to higher interest-bearing options for customers' cash balances." Last week, Mr. Cyprys said that he saw a higher probability Fidelity would reduce prices after E*Trade, TD Ameritrade and Schwab slashed commissions to zero. Investing in profitability, performance and people:​ Register for our Top Advisory Firm Summit.

Latest News

Cerulli: Advisors struggle to turn 401(k) savers into wealth clients
Cerulli: Advisors struggle to turn 401(k) savers into wealth clients

Just over 10% of advisors' wealth clients come from defined contribution plans, as capacity, data and technology gaps block the bridge to wealth

Alto to buy Forge Trust from Schwab in self-directed IRA push
Alto to buy Forge Trust from Schwab in self-directed IRA push

Deal creates a $20B-plus custody platform for private market investing in IRAs, months after Schwab closed its Forge Global purchase

Wall Street bonanza! The Street on track to hit a record $90 billion in profits: Report
Wall Street bonanza! The Street on track to hit a record $90 billion in profits: Report

Despite the good times, advisors should tread carefully, said one veteran industry executive.

Aspen Standard Wealth buys $1B Louisiana RIA Cullen Investment Group
Aspen Standard Wealth buys $1B Louisiana RIA Cullen Investment Group

Cullen marks the fourth firm the New York-based RIA aggregator has bought in 2026 as deal volume heads for a record year.

Strategy before technology: Establishing the foundation for measurable AI value
Strategy before technology: Establishing the foundation for measurable AI value

The quality of AI ROI measurement depends on pre-deployment decisions around business outcomes, leadership alignment, and establishing trusted information, among other factors.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor