In an effort to keep up with competitors, Fidelity Investments has reduced commissions for online U.S. equity trades made by retail investors and financial advisors.
The Boston-based fund company announced Tuesday that it planned to cut commissions to $7.95 per trade as of March 15. Currently, Fidelity charges investors with more than $1 million in trades $8.00, plus one cent a share for every share over 3,000 shares. For investors with less than $1 million, it charges $17.95 for trades, plus $0.015 per share for every share over 1,000.
The company also said it would eliminate fees for online trades of 26 exchange-traded funds, including one proprietary Fidelity fund and 25 iShares funds that are offered by BlackRock Inc. [BLK]
Ron Fiske, an executive vice president for Fidelity Institutional Wealth Services, said that pricing “varied” at Fidelity and it was critical to align commission more closely.
“I think it is important to know that many end investors have relationships that span Fidelity,” he said. “We want to make sure that price is not a barrier to decide where our customers should do business.”
Fidelity’s decision to cut fees comes less than a month after Charles Schwab Corp. [SCHW] announced plans to reduce its online-trading commissions by 31% to $8.95.
Bill Doyle, an analyst at Forrester Research, said he thinks online trading commissions will continue to decline.
“They’ve been falling since 1998 when Schwab cut the cost of online trades from $60 to $30 in an aggressive move online,” he said. “A handful of minor players now offer free trades. But for the big firms, ‘free trades’ will only be part of relationship pricing, offered to customers who, for example, have significant assets at the firm.”
Fiske said Fidelity is “cognizant” of the fact that competitors have reduced trading commission, but “at the end of the day we make decisions for the maximum benefit of our investors.”
Over the past five months, Fiske said, Fidelity has been making adjustments to be more attractive to retail investors and registered investment advisors. In September, it eliminated fees and commission for RIAs that open new accounts. Since then, it has launched its WealthCentral platform and enhanced products and services for RIAs.
“Price is just one thing to attract advisors,” Fiske said. “We have done a lot around tech, service and product capabilities to help make ourselves as competitive as possible in this market.”
Fidelity has 12.4 million brokerage accounts with retail investors and services 4,000 registered investment advisors, a spokesman said.