Fidelity is no doubt a popular broker and investment service, and for good reason too. However, depending on what exactly you are looking for from a broker or investment service, Fidelity might not be the right choice for you. This is why it is important to highlight the flaws in Fidelity’s services. So, why is Fidelity bad?
Fidelity can be bad for those who want to have broker-assisted trades and access to mutual funds. On top of that, they do not offer any crypto for you to trade, nor do they give you access to futures contracts and Forex.
In this article, I will go into more detail, covering all the reasons why Fidelity might not be the best option considering your goals.
However, before I do that, I will first of all highlight some impressive features of Fidelity for the sake of being just…
Why Fidelity Is Generally Good
Fidelity is, of course, still a better broker than most but they still have some shortcomings. So, what makes the service somewhat impressive?
First of all, Fidelity is great for both active traders and retirement investors. The platform provides a great way to actively trade in stocks, options, and ETFs while retirement investors could easily enjoy one of Fidelity’s over 3,400 no-transaction-fee mutual funds. With these mutual funds, there’s no account minimum and the expense ratios are very low.
Beyond that, Fidelity is great at providing research for its customers. They work with 20 research providers including Thomson Reuters, Ned Davis Research, Recognia, and McLean Capital Management. The broker also provides great market insight through various tools.
Finally, Fidelity allows customers to purchase fractional shares. This is quite a benefit since a significant number of its competitors do not offer this option.
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
6 Reasons Why Fidelity Is Bad
So, why might Fidelity not be the right choice for you?
Fidelity’s high fees can be divided into three aspects.
First of all, there are high commission fees on non-Fidelity funds. For the No Transaction Fee non-Fidelity funds, customers do not pay on purchase but pay $49.95 on redemption if they hold for less than 60 days. The Transaction fee non-Fidelity funds cost $49.95 per purchase and nothing for redemption. No doubt, Fidelity has some mutual funds which perform well, but charging customers this much to buy other mutual funds is not the way to go.
Secondly, Fidelity’s charges on representative-assisted trades are substantially higher than those of some of its competitors.
And finally, Fidelity charges higher margin interest rates on borrowed cash. For instance, depending on how much you borrow, Fidelity’s margin rates range between 4% and 8.325% where you get a lesser rate based on how much you borrow.
On the other hand, with a broker like M1 Finance, the margin rate is just 3.5% (and 2% for the plus subscription).
Depending on what you intend to do with your brokerage account, Fidelity could overall prove to be a more expensive option than some of its competitors.
No Cryptocurrency Trading
Unlike a lot of its competitors, Fidelity does not allow its retail brokerage customers to buy or sell any cryptocurrencies. This should, of course, be a huge determining factor when selecting a broker to make use of if you’re into crypto trading.
With Fidelity, the most you can do is be able to view your Coinbase account balance.
Furthermore, Fidelity has no plans to offer cryptocurrency services anytime soon, so if you want to invest in cryptocurrency, and have all your investments done on the same platform, Fidelity should not be your first-choice broker.
No Futures and Forex Trading
Once again, Fidelity falls short when it comes to the tradable assets they offer to their customers. Considering this, your investment options with Fidelity are limited to stocks, mutual funds, bonds, fractional shares, options, and OTC stocks.
Considering that the Foreign Exchange market sees trillions moving around every day, making it the most active market in the world, anyone looking to trade foreign exchange will have to go for another broker.
Fidelity itself recommends some other brokers for those who want to trade Forex. However, this does not change the fact that when compared to its competitors, Fidelity’s tradable assets do not look impressive.
Fidelity’s trading platform is not the best around. As a matter of fact, there are multiple issues with Fidelity’s trading platforms.
First of all, to utilize or combine different tools, customers will most likely need to use different platforms.
Also, when compared to other brokers, Fidelity offers fewer criteria to use when searching for mutual funds. With this drawback, customers will have to spend more time manually going through and having to select a mutual fund.
Another issue with Fidelity’s trading platforms is that they mostly do not auto-update. To get the latest prices or information, customers will need to manually refresh their trading platforms. This is not good enough for active traders
Poor Customer Service
What makes good customer service is not just the different ways through which customers can contact a broker. One must also consider how long a customer has to wait before speaking to someone.
On top of that, good customer service is determined by a representative you can speak to who is knowledgeable enough to provide a solution and how quickly that solution can be implemented.
Unfortunately, although Fidelity provides different means through which customer care service could be reached, a lot of customers have reported having to wait several hours before speaking to a representative over the phone, and even then, solutions are not immediate if they ever come.
Only for U.S. Residents
Finally, Fidelity’s services are limited to only people who reside in the United States. So, for intending customers outside the U.S., you definitely have to select another broker.
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Overall, Fidelity is a pretty solid broker. They provide great research for their customers, allow the purchase of fractional shares, and even provide some amazing mutual funds which customers can buy at no cost.
However, one must not blindly select Fidelity to be their broker. They have some shortcomings like poor customer service, issues with their trading platform, and intending customers outside the U.S. cannot get a Fidelity account.
I hope this post answered your question. If it did, please share it with others! If not, leave a comment below and I’ll get back to you as soon as I can.
Thanks for reading and I’ll see you the next time…
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