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fidelity vs wealthfront

Fidelity and Wealthfront offer significantly different approaches to investing. With Fidelity, users get a traditional online trading platform that allows them to execute their own trades and access financial advisors for an additional fee. With Wealthfront, users get a robo-advisory that offers a number of automatically managed portfolios designed around long-term, passive investment. For more help with planning and managing your investments, consider working with a financial advisor.

Overview of Fidelity vs. Wealthfront

Fidelity is one of the biggest brands when it comes to personal investing. The firm offers a comprehensive range of services, from brick-and-mortar financial centers to its online advising and brokerage. Their online trading platform is one of the best known in the industry. It allows users to trade most mainstream financial products for few, if any fees. The online brokerage also gives you access to the firm’s financial advisors and in-person brokers, with prices that range based on the specific services.

Wealthfront offers an entirely different product. This is one of a relatively new category of online brokerages built around “robo-advising.” This means that the firm has a series of portfolios that you can invest in based on your objectives and risk/growth preferences. For example, you might balance your portfolio around aggressive growth or long-term savings. The portfolio’s assets are managed and balanced according to a series of algorithms that the brokerage has developed to help it meet these metrics over a long period of time.

Fidelity vs. Wealthfront: Fees

As with most online brokerages, Fidelity has switched to a no-fee model in recent years. This means that individual investors can open a portfolio without paying any up-front costs and can trade most individual assets, such as stocks and bonds, free of charge.

In addition to individual assets, Fidelity offers a wide range of no-fee mutual funds. At time of writing you could invest in around 3,700 individual funds for free. Funds that are outside of Fidelity’s specific no-fee network cost $49.95 to trade. Options contracts also incur a per-trade cost of $0.65 per option traded.

You can access financial advice from Fidelity’s advisors for an additional fee. The exact cost depends on the range of advice that you’re looking for, but it generally starts at $32.95 per broker-assisted trade.

Wealthfront operates on a different fee structure. This is a portfolio-based brokerage that emphasizes long-term, passive investing. As such you do not pay for any individual transactions. Instead, the service has a $500 minimum balance and charges you an annual fee of 0.25% of assets under management.

Fidelity vs. Wealthfront: Services and Features

fidelity vs wealthfront

Most online brokerages are struggling to distinguish themselves as the big services increasingly converge in terms of pricing and products. Fidelity is no different. Fidelity’s online brokerage emphasizes individual management. You build your own portfolio and can buy or sell most mainstream financial products including stocks, bonds, ETFs, mutual funds and options contracts. The major exception is that you cannot trade futures contracts, which some brokerages offer.

The main area in which Fidelity does distinguish itself is through its education and advising services. In addition to its nationwide range of retail locations, Fidelity also offers a wide range of educational tools and market watch resources through its site. This is particularly useful for less experienced investors, as it gives them a chance to learn the market as they invest.

Wealthfront, on the other hand, is built entirely around passive investing. As a result, the service offers very little in the way of financial counseling or educational tools. In particular, unlike Fidelity, there is no option for connecting with a human advisor.

Instead, Wealthfront offers a series of pre-built and automatically managed portfolios that you can invest in. When you sign up for an account the service asks you a series of questions about your investing goals and risk tolerance. Based on your answers it recommends both taxable and retirement accounts. You can then adjust the specific balance of assets in your portfolio by changing your risk preferences at any given time.

However, it is worth noting that in preparing this article, this writer looked into the returns claimed by Wealthfront and similar robo-advisor services. Without exception, the 10-year-average returns on even the most aggressive portfolios underperformed the S&P 500 between the years 2012 and 2022. For example, on their website Wealthfront claims an average annual return of 6.69% between the years of 2013 and 2022. While this reflects returns across portfolios, including low-risk bonds, nevertheless the S&P 500 generated an average annual return of 14.7% over that same period, with a historic average annual return of 10.7%.

Fidelity vs. Wealthfront: Online and Mobile Experience

One of Wealthfront’s best features is its ease of use. This is an extremely well-designed service, and its streamlined website and app reflect that. You can quickly and easily find information about your current account, your asset balance and portfolio settings, and your long term goals. Adjusting any of these settings is similarly easy, letting you manage your money without having to understand the potentially dense world of investing.

Fidelity, like all full-service brokerages, works best on its website. This is how the service was designed to be used, and the physical space of a desktop is by some measures necessary to communicate all of the information necessary when it comes to mainstream investing. Fidelity’s website is well designed, and strikes a good balance of offering investors a broad range of information and technical indicators without burying the user in details. While this can come at the expense of more sophisticated information, anything that Fidelity omits is likely of interest only to professional investors.

The Fidelity app is also well-regarded, but the service suffers for its smaller screen. Users have less information available and, while they can certainly access and manage their money, it’s a more difficult experience than on the website.

Who Should Use Fidelity vs. Wealthfront?

fidelity vs wealthfront

Fidelity is a good option for people who want to manage their own money. If you understand investing and want to make your own decisions, this is a very good full-service brokerage with industry standard pricing. It’s a particularly good choice, though, for people relatively new to the world of investing. Fidelity is particularly well known for its educational resources, and the firm’s retail locations are a good option for people who want to seek financial advice.

Wealthfront is a good option for investors who would like to take a hands-off approach to investing. Their service is based on long-term and mixed-asset portfolios. This form of passive investment usually generates better returns than active trading, but is also a good option for people who would like to invest while staying out of the complex world of trading.

The Bottom Line

Fidelity and Wealthfront are two online brokerages that have very different approaches to investing. With Fidelity you make your own trades and manage your own portfolios. With Wealthfront you invest in pre-built portfolios that are managed by Wealthfront’s algorithms according to your risk tolerance.

Financial Planning Tips

  • When it comes to robo-advisors, this is a big and growing industry. And a surprising new competitor seems to have come out swinging…
  • Robo-advisors can offer a great service, but they’re no substitute for a human being who can answer your questions. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/tdub303, ©iStock.com/AsiaVision, ©iStock.com/PeopleImages

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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