Zero-Commission Trades: Fee Cut Wars | Adviser Investments

Zero-Commission Trades: New Front in Fee Wars

We always love sharing good news for investors. Which is lucky, because otherwise we’d sound like a broken record when it comes to covering the fee-cutting wars among giant investment firms.

Charles Schwab led the latest charge early this month, announcing that from now on, security transactions would be zero-commission trades for non-professional investors on its online brokerage platform. Other big brokerages soon matched the move, with Fidelity announcing its own plan to zero commissions on stock trades a week after Schwab. (It had already lifted fees on more than 500 ETFs earlier this year.)

What caused the shift? Schwab CFO Peter Crawford admitted to The New York Times that the firm’s leaders felt it was a matter of when, not if, the industry and competitors would move to zero fees on trades, so they opted to lead not follow. (Robinhood Financial, a seven-year-old Silicon Valley start-up, claims to have six million users on its fee-free stock trading app.)

Other industry-watchers point to Vanguard’s announcement last summer that it was cutting fees on 1,800 ETFs as the true instigator of the shift.

Either way, it’s a savings for investors—both Schwab and Fidelity had charged $4.95 per trade on most securities, and with Ally Invest, E*Trade and others following their lead, investors will soon be hard-pressed to find a big firm that dares charge for a simple buy order.

There are some caveats to note for Fidelity clients before the switch to zero-commission trades kicks in on November 4. (Trades made before that deadline may still be charged fees.)

The commission elimination only applies for customers who execute their trades online—if you still receive paper trade confirmations or account statements, fees will still apply. Some options trades and international trades may also incur fees. Please contact your portfolio executive if you have any questions about whether fees will apply to your Fidelity account—we’re happy to help. If you’re not a client of Adviser Investments, we suggest you contact your Fidelity rep with any questions.

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