Practical Money: Fidelity vs. Vanguard vs. Charles Schwab
Comparing the largest investing platforms
Introduction
Over the years I’ve had accounts with many of the largest banks and brokerages, including Fidelity, Charles Schwab, Vanguard, Empower, and SoFi for investing. In this newsletter, I’ll discuss some of my experiences with the top 3 brokerages in Fidelity, Charles Schwab, and Vanguard, including why I closed all my accounts with one of those platforms.
A quick reminder that this is not financial advice, just myself sharing my strategies, investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different. No financial decisions should be made solely on this newsletter, which is for informational and entertainment purposes only and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.
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Background
I’ve never felt comfortable having all of my money in one place, so over the years I’ve had accounts with various brokerages for different investment strategies. I’ll provide my current breakdown at the end of this newsletter, but to start, here is what my brokerage breakdown looked like at this time last year (this is just brokerage accounts and does not include high-yield savings accounts, UTMAs, 529s, etc.):
Fidelity:
IRA accounts (ROTH, SEP, and Traditional), Taxable Brokerage (index funds), Checking
Vanguard:
Fixed Income (Bonds, CDs, Money Market)
Charles Schwab:
Taxable Brokerage (stocks), Charitable Donor Advised Fund, High-Yield Money Market
Empower:
401K
SoFi:
ETFs (automatic weekly investments)
Below I’ll compare Fidelity, Vanguard, and Charles Schwab based on several criteria and also discuss why I got rid of one completely.
Technology
Both Charles Schwab and Fidelity are loaded with features on their website and the mobile app. You can easily view your accounts, transfer money, and make trades. Vanguard is way behind, their website feels stuck in 2001. Their mobile app also leaves a lot to be desired.
All three platforms allow you to connect outside accounts, so you can view all your investment accounts in one place. Fidelity also has their “Full View” tool which allows you to view all of your accounts, as well as track income and expenses. I personally don’t use it since I find it to be a little clunky (I use Simplifi instead), but it is a good tool if you don’t currently use a budgeting app.
Between Fidelity and Schwab, they’re both great. Because they both have all the features I’m looking for, it’s a toss-up. I’ll give Fidelity a slight advantage because they have the “Full View” tool, even though I don’t use it.
Winner (by a hair): Fidelity
Investment Options
All three platforms have all the investment options I use for regular trading. They all provide no-commission stock and ETF trades and the ability to purchase fixed-income products like treasury bonds and CDs. All three provide traditional IRAs, ROTH IRAs, SEP IRAs, and charitable Donor-Advised Funds. Fidelity also offers no-fee HSA accounts, while Vanguard and Schwab do not have their own HSA accounts, giving Fidelity a slight edge.
Winner (by a hair): Fidelity
Automatic Investments
All three offer the ability to invest in their respective index and mutual funds automatically. For instance, with Vanguard, you can automatically invest in their S&P 500 index fund - Vanguard 500 Index Fund Admiral Shares (VFIAX) - every week, every two weeks, twice a month, every month, or every year.
Only Fidelity allows you to set up automatic investments into stocks and ETFs, a feature they recently added. For instance, you can set up an automatic purchase to buy Apple stock each week with Fidelity, while you can’t with Schwab or Vanguard. With Fidelity, you can also automatically purchase ETFs like the Vanguard S&P 500 ETF (VOO) every week, month, etc. My Schwab representative told me that they are looking to implement this in the future, however as of now, Fidelity is the only brokerage of the three that provides this feature.
Winner: Fidelity
Purchasing Fractional Shares of ETFs and Stocks
The one feature that none of the three platforms provided last year was the ability to buy fractional shares of stocks. For instance, if you had $500 and wanted to buy stock XYZ that was $1000, you would not be able to. Some investment platforms like Robinhood and SoFi allow you to buy a portion of a share, so you could buy 1/2 share of XYZ with your $500.
That changed recently, and Fidelity now allows you to buy fractional shares of most stocks. Schwab also now offers some fractional shares (only companies in the S&P 500), however, you cannot currently set up a recurring investment in those. Vanguard does not offer fractional share investing of stocks at all.
As for ETFs, Vanguard only allows fractional share investing in Vanguard ETFs (like VOO, VTI, etc.). So for example with Vanguard, you can automatically purchase $5 of VOO shares weekly however you could not purchase a fraction of a share for an ETF like JEPI. Charles Schwab currently does not have fractional share investing for ETFs. Fidelity recently added fractional share investing of most major ETFs in addition to stocks.
With both fractional shares and automatic investments now offered by Fidelity, for stock XYZ, you can set it up to buy $500 shares weekly, every two weeks, or monthly. Once Fidelity added these features, I no longer needed my SoFi account so I closed that and now use Fidelity for my automatic weekly ETF investments. This feature alone makes Fidelity the clear winner for me.
Winner: Fidelity
Credit Cards
Both Fidelity and Charles Schwab offer credit cards, while Vanguard does not. Schwab has the Schwab Investor Card from American Express which has no annual fee and an unlimited 1.5% cash back automatically deposited into an eligible Schwab account. However, Fidelity’s Rewards Visa Signature Credit Card has an unlimited 2% cash back into any eligible Fidelity account. Because of the slightly higher cash-back rate, Fidelity takes this round.
Winner: Fidelity
Customer Service
This is where Vanguard falls far behind. I have had great experiences with Fidelity and Charles Schwab. With both Fidelity and Schwab, I have a dedicated customer service representative so anytime I have a question or concern, I can email or call them and get a quick response. They also organize regular in-person meetings and video calls.
Schwab also has numerous events throughout the year depending on your investment level, including customer appreciation events and dinners to introduce different products and services. I have attended over a half-dozen Schwab events, including the March Madness last year with some of their other clients in their box suite. In my decades with Fidelity, I’ve only been to one customer service appreciation event which was held last year. Schwab takes the cake here.
Winner: Charles Schwab
Closing Vanguard
While on the subject of customer service, I had a bad experience with Vanguard that caused me to close my account completely. One month I noticed that one of the interest payments from a CD I owned didn’t appear to be accurate. Since Vanguard doesn’t have dedicated representatives, I called their customer support and got transferred several times before someone told me I would receive a callback. I never did.
I called again, and after spending a lot of time on the phone with a customer service representative, they told me they couldn’t figure it out and someone would call me back. No one did. I finally called again and this time a rep was able to determine that my interest payment was combined with another transaction and it was appearing as one transaction in my reports instead of two. I had spent hours to finally get that explanation, which was valid. But why waste my time with Vanguard if there is another issue down the road when Schwab and Fidelity have such great customer service? So I moved all my fixed-income investments into a separate account at Fidelity.
I still own Vanguard index funds like VOO and VTI in Fidelity, but as far as having an account with Vanguard as a brokerage, I’m done.
My current brokerage breakdown
As noted, I closed my SoFi and Vanguard accounts over the past year. I also moved our adult IRA accounts to Robinhood (Robinhood doesn’t offer youth IRAs so our children’s IRA accounts are still with Fidelity). I’ll discuss why we moved our IRAs to Robinhood in a future newsletter. With those changes, here is the breakdown of the brokerages I currently use:
Fidelity:
Taxable Brokerage (index funds), Fixed Income (Bonds, CDs, Money Market), ETFs (automatic weekly investments)
Charles Schwab:
Taxable Brokerage (stocks), Charitable Donor Advised Fund, High-Yield Money Market
Empower:
401K
Robinhood:
IRAs (Traditional and ROTH)
Conclusion
This might seem like a knockout victory for Fidelity, however, I’ve found both Fidelity and Schwab to be excellent platforms. If Schwab started offering automatic investments into stocks and ETFs, extended their fractional share investing to ETFs and more stocks, and upped their cash back on their credit card to 2%, then Fidelity vs. Schwab would be a coin flip.
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Did you ever have a chance to see if anything is better than Simplifi for a Mint alternative? It is pretty good but doesn't work with my 401k.