Whenever you hear recommendations for brokerages, they usually include Fidelity, Schwab, and Vanguard in a single breath, like the three financial behemoths are a single word. They have a lot in common, and you really can't go wrong with any of these brokerages. Let's take a look at some of the differences to help you choose which one is best for you.
Similarities Between the Brokerages
All three brokerages offer self-directed investing, robo-advisors, and human advisors. Their index funds and ETFs have low expense ratios, and their online interfaces are relatively easy to use. I have experience using Schwab and Vanguard, but after viewing some videos of Fidelity's platform, it looks pretty similar to Schwab as far as ease of use and features.
I will say that I find Vanguard's platform less user-friendly than Schwab's. However, rebalancing a portfolio is easier in Vanguard, because it allows you to sell a single holding and buy multiple holdings or vice versa in a single transaction. You cannot sell multiple holdings to buy multiple holdings. This exchange feature is only available on the desktop site and not the mobile app. At Schwab and Fidelity, you must do each transaction separately. Vanguard does not cater to active trading investors, so its technology does not have the analytical tools that the other brokerages include in their platforms.
Differences Between The Brokerages
One major difference between the brokerages is their company structure. Vanguard is a co-op, so you are a partial owner just by investing at Vanguard. There is no conflict of interest between what is good for you and what is good for Vanguard shareholders. This is why they have been the leader in keeping costs low for investors for decades. Fidelity is a privately held company and Schwab is a publicly traded company. This means there is always a slight conflict of interest for them to offer you low fees because their loyalty is always to shareholders or the private owners. Luckily for investors, there has been a race to the bottom recently to win over customers.
The minimum to start investing for must funds is slightly variable as well. Fidelity and Schwab let you get started with $0. Vanguard requires $1000-$3000 to start investing in mutual funds, but ETFs can be purchased for as little as $1.
If you are interested in purchasing fractional shares of stock or ETFs, there are some differences between the brokerages. Vanguard does not let you purchase fractional shares of stocks or non-Vanguard ETFs. You can buy fractional shares of Vanguard ETFs. Fidelity's Stock by the Slice lets you purchase fractional shares for as little as a dollar. You can choose from 7,000 stocks and ETFs. Schwab's Stock Slices lets you purchase any stock from the S&P 500 for as little as $5. They do not currently offer fractional ETF shares.
All three have reputations for excellent customer service. However, Vanguard's customer service is available 8 am-8 pm Eastern Time, Monday-Friday. Fidelity and Schwab's customer service is available 24/7.
Fees
All three brokerages have pretty great expense ratios. Each charges a fee to buy a competitor's mutual fund. You can avoid this by buying the equivalent fund offered by the brokerage or by buying ETFs. Let's take a look at some popular mutual funds and ETFs at each brokerage. Mutual funds are in a standard font and ETFs are italicized.
You'll notice that some of the investments only have one mutual fund or ETF listed. Some of the funds only listed growth or value-tilted options of the fund or ETF. Fidelity does not have ETFs available for many of these categories. There is usually no fee associated with investing in other companies' ETFs, so it should not be difficult to find alternative ETF investments.
Advisory Services
All three offer a variety of advising services with different fees and requirements to qualify.
Fidelity
Fidelity Go is a robo-advisor that requires $0 to get started. There are no advisory fees for balances less than $25,000. The advisory fee is 0.35% after $25,000.
Fidelity Wealth Management provides you with a dedicated advisor. It requires $250,000 to start and has advisory fees ranging from 0.5-1.5%.
Fidelity Private Wealth Management provides you with a dedicated team of advisors. It requires at least $2 million invested at Fidelity and $10 million or more in total investable assets. Advisory fees range from 0.2-1.04%.
Schwab
Schwab Intelligent Portfolios is a robo-advisor that requires $5,000 to start investing, with no maintenance fees.
Schwab Intelligent Portfolios Premium gives you access to Schwab Intelligent Portfolios and a Certified Financial Planner. It requires $25,000 to start, a $300 initial planning fee, and a $30 monthly advisory fee.
Schwab Wealth Advisory provides a dedicated advisor backed by a financial team. It is available for clients with at least $1 million. Decreasing advisory fees start at 0.80%.
Vanguard
Vanguard Digital Advisor is a robo-advisor that requires $3,000 to get started and has a 0.2% advisory fee.
Vanguard Personal Advisor Services gives you access to an advisor. It requires $50,000 to start and has a fee of 0.3%. You will be given a dedicated personal advisor if you have more than $500,000.
Vanguard Wealth Management provides a team of dedicated advisors. It requires $5 million to start and has decreasing advisory fees starting at 0.2%.
Which Brokerage Should You Choose?
As you can see, all of the brokerages are good choices. The best fit for you will depend on how much money you have to start investing, what you want to invest in, and how much advisory support you want. Make your selection and you'll be ready to start your investing journey!