Fidelity® Study: Despite Being Cost-Conscious, Many Self-Directed Investors Aren't Making the Most of Their Brokerage Firm

Generational differences exist: Millennial investors are the most informed about what they pay for brokerage services and 9 in 10 would consider moving to a firm that provides more trading value

  • Investing Strategies
  • Investing for Income
  • Investing in ETFs
  • Investing in Mutual Funds
  • Investing in Stocks
  • Starting Out
  • Trading
  • Bonds
  • Brokerage
  • Domestic Stocks
  • Exchange-Traded Funds
  • Fixed Income
  • Mobile
  • Mutual Funds
  • Options
  • Stocks
  • Investing Strategies
  • Investing for Income
  • Investing in ETFs
  • Investing in Mutual Funds
  • Investing in Stocks
  • Starting Out
  • Trading
  • Bonds
  • Brokerage
  • Domestic Stocks
  • Exchange-Traded Funds
  • Fixed Income
  • Mobile
  • Mutual Funds
  • Options
  • Stocks
  • Investing Strategies
  • Investing for Income
  • Investing in ETFs
  • Investing in Mutual Funds
  • Investing in Stocks
  • Starting Out
  • Trading
  • Bonds
  • Brokerage
  • Domestic Stocks
  • Exchange-Traded Funds
  • Fixed Income
  • Mobile
  • Mutual Funds
  • Options
  • Stocks

BOSTON — In Fidelity Investments®' second Brokerage Value Study, 1,000 U.S. self-directed investors say they chose their primary brokerage firm for table stake reasons such as "trusted brand/financial strength" (38 percent) and a "wide selection of investments" (34 percent). However, they also cite more specific value components, such as "low commissions and fees" (37 percent) and "high quality trade executions" (31 percent).i Although price is a top reason why investors choose a brokerage firm, many don't know the cost of their investment choices:ii

  Millennial Gen X Baby Boomer
Don't know the price of online stock trades 39% 50% 41%
Are unsure of the cost for mutual fund transactions 38% 53% 55%
Don't know option trading fees 33% 45% 30%

Do High Quality Trade Executions Matter?

Investors say high quality trade executions are a top priority, but a full 92 percent don't know or misidentified how firms execute trades.

After poll respondents were given details on order execution practices, three in four (76 percent) overall say they would consider changing to a firm that delivers superior price improvement.iii Remarkably, 92 percent of Millennial-aged respondents say they would seek out a brokerage firm that delivers superior price improvement vs. 82 percent of Gen X and 60 percent of Boomers.

"It's reasonable to assume investors will follow through on the notion they'll seek out a new firm for better trade executions when you consider that almost half (47 percent) of all respondents changed brokerage firms at one time, with 63 percent doing it in the past five years," said Ram Subramaniam, president of Fidelity's retail brokerage business. Investors may find meaningful savings through price improvement—for example, at Fidelity, customers placing eligible online equity orders of 1,000 shares or more often receive price improvement that can exceed the $4.95 online commission.iv

Value Over Price

"Investors can benefit not only from low costs, but also being with a firm that provides strong overall value to its clients through extensive resources such as award-winning research, customer service, education and trading tools to help them navigate today's often complicated markets," said Subramaniam.

In fact, when asked what they care more about in today's often confusing and complex markets, three quarters (74 percent) say a firm's resources are more important than cost.

Additionally, the following reasons why investors chose their primary brokerage firm received double-digit support in the study,v demonstrating that beyond costs, investors are looking for broader value, including:

  • Ability to consolidate all investments (20 percent)
  • Ability to meet my changing investment needs as they evolve and grow (19 percent)
  • Access to online banking options (17 percent)
  • Access to 24-hour customer service (17 percent)
  • Ability to visit local branches (12 percent)

Bond Trading Is Fertile Ground To Find Significant Savings

Another critical area investors should clearly understand is how their brokerage firm charges for bond trades. While some firms have "hidden" markup fees for bonds, others provide transparency by charging only an up-front fee. A Corporate Insight studyvi found online bond prices from brokers who bundled their markups and fees into a single online bond price were on average $13.65 higher per bond than Fidelity, which charges a fully disclosed online bond trading fee of $1 per bond and zero concession for U.S. Treasury bonds.

How to Evaluate a Brokerage Firm

To help customers make informed decisions and get the most value for their money, Fidelity suggests investors ask the following questions across six categories that encompass a total value assessment including the right mix of price, service, tools and investments:

  1. What are the commissions and fees for stock, mutual fund, options, bond and ETF trades?
  2. Is the firm in good financial standing and a trusted brand? Can it meet my evolving needs through every life stage?
  3. What criteria are used to route my stock trades, and what level of price improvement does it provide?
  4. Does the firm offer the selection of investments I need to achieve my investing and cash management goals?
  5. Does it have robust education and research offerings that fit my needs and experience level to help me be a better investor?
  6. What options do I have for customer service (e.g. phone, chat, email, in person) and is it available when I need it?

Fidelity Viewpoints® recently launched a web page dedicated to helping investors find the best value from their brokerage firm, including a primer on how to choose a brokerage firm, focusing on total value, including low costs and the right services: "How to Pick Your Brokerage Firm." To research Fidelity's brokerage offering and fees, visit www.fidelity.com/trading/overview, or see a comparison table based on price, execution and analysis benchmarks.

About the Survey

ORC International conducted interviews with a total of 1,000 investors. To qualify, investors had to be 25 years old or older, have investable assets of at least $10,000, trade stocks, mutual funds, ETFs, options or bonds, be the sole or primary investment decision-maker, and not delegate all decisions to an investment professional. Interviewing took place May 1-10, 2017. Fidelity and ORC International are not affiliated.

About Fidelity Investments

Fidelity's mission is to inspire better futures and deliver better outcomes for the customers and businesses we serve. With assets under administration of $6.2 trillion, including managed assets of $2.3 trillion as of June 30, 2017, we focus on meeting the unique needs of a diverse set of customers: helping more than 26 million people invest their own life savings, 23,000 businesses manage employee benefit programs, as well as providing more than 12,500 financial advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for 70 years, Fidelity employs more than 40,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

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