Fidelity reduces trading fees; free ETF trades

[FUEGO]

I know a lot of you guys use Fidelity like I do. I just saw on their home page an advertisement showing that they have eliminated the trading commission on 25 of the most popular iShares ETF's and also made all equity trades $7.95 each.

Info on the ETF's:

FAQs About Commission-Free iShares® ETFs: Fidelity Investments

Fidelity Investments

Their old trading commissions were $20/$11/$8 depending on your frequency of trading and assets under management.

These fee free ETF's are good news. That should simplify some worries over making small puchases or sales when rebalancing or making monthly investments. I hope they expand the list of fee free ETF's to include Vanguard and other company's offerings. Wonder if iShares is giving kickbacks to Fidelity to offset the commission fee loss?

New fee schedule takes effect February 3.

 

[Nords]

These fee free ETF's are good news. That should simplify some worries over making small puchases or sales when rebalancing or making monthly investments.

Wow, this is huge. Our kid has been trying to decide between mutual funds or ETFs and now she can DCA the crap out of either one without having to play commission games.

I wonder what this will do to options trading/volume...

 

[ziggy29]

There is a war going on and consumers are winning it. This is clearly a reaction to Schwab's recent announcements of commission-free ETF trading and a flat $8.95 fee for all trades, but Fidelity has one-upped them on both counts: Fido has the iShares family, not a small number of Schwab ETFs, *and* dropped trading commissions to a dollar below Schwab's level.

 

[FUEGO]

Wow, this is huge. Our kid has been trying to decide between mutual funds or ETFs and now she can DCA the crap out of either one without having to play commission games.

Exactly. This almost makes it worthwhile for me to transfer my $2000 ish UTMA account for the kids from Vanguard to Fidelity.

Same idea for my BIL who has never invested anything and has almost no savings. He was looking at opening an IRA. I can now tell him that he can get into a wide variety of ETF's for a minimum purchase of $50-100 (1 share). And add monthly for $50-100. He has a hard time committing $1000, $2500, or $3000 to open up a fund, hence no ETF commissions make this appealing to get him started with a lower dollar amount.

 

[FUEGO]

I just noticed this from their fine print:

"Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with a marketing program that includes promotion of iShares ETFs and certain commission waivers. Additional information about the sources, amounts, and terms of compensation is described in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice."

So Fidelity is getting a kickback to offset the commissions in exchange for promoting the iShares.

 

[ziggy29]

So Fidelity is getting a kickback to offset the commissions in exchange for promoting the iShares.

That's similar to how the mutual fund "supermarket" concept works.

Of course, these "kickbacks" have to come from somewhere, meaning the underlying fees of the fund would have to be higher than it would otherwise be.

 

[FUEGO]

Of course, these "kickbacks" have to come from somewhere, meaning the underlying fees of the fund would have to be higher than it would otherwise be.

Exactly. But if all fund shareholders are paying the price for Fidelity's commissions that I avoid, I'm coming out best by using Fidelity to invest.

I would imagine if the commission free ETF's were being abused and traded very frequently, that account might be restricted. Long term Fidelity might back off and offer 25 free trades a year for certain ETFs or 100 free trades a year or something.