Small, medium or large investor? Either way, one of these platforms will work for you. Will it be Vanguard or Fidelity? Find out which one is your best match.
Table of Contents
Vanguard and Fidelity are two of the largest investment services in the world. Fidelity has nearly $2.5 trillion in client assets, while Vanguard has well over $5 trillion. The two are also among the best-known investment platforms. Vanguard is the world’s largest provider of mutual funds, and the second largest provider of exchange traded funds (ETFs). Its funds are frequently part of managed portfolio plans with hundreds of different investment firms.
Fidelity is also well known for its mutual funds. But it’s also the second largest trading platform in the world, after Charles Schwab. It’s one of the most commonly used investment platforms for taxable brokerage accounts, IRAs, and even employer sponsored retirement plans.
Vanguard might be best described as a fund company that also offers brokerage services. Fidelity started out primarily as a mutual fund company as well. But over the decades, it’s grown to be a comprehensive brokerage firm. Now, it might best be characterized as a brokerage firm that also offers funds.
There’s significant crossover in services and products provided by each platform, but they depart radically when it comes to the details.
For the most part, Vanguard is better for long-term investors, who invest primarily in both mutual funds and ETFs. On the other hand, Fidelity is better suited for active investors. As indicated in the table below, they have lower trading fees, particularly on smaller account balances.
Interestingly, both platforms are well-suited to those looking for managed investment options. Each has its own robo advisor, for those who prefer hands-off investing. But Vanguard offers managed options through its emphasis on funds. Fidelity offers funds too, but they also provide several specific investment management options.
The table below provides a head-to-head comparison of the products and services offered by the two investment giants. But we’ll go deeper into detail as we move through this analysis.
|Investments Offered||Stocks, options, ETFs, mutual funds, CDs, bonds, annuities and target date funds. Vanguard funds and non-Vanguard funds.||Stocks, options, ETFs, mutual funds, CDs, bonds and annuities. Fidelity funds and non-Fidelity funds.|
|Available Accounts||Individual and joint taxable accounts; traditional, Roth, SEP, SIMPLE and rollover IRAs; Solo 401(k), trusts & 529 plans||Individual and joint taxable accounts; traditional, Roth, SEP, SIMPLE and rollover IRAs; Solo 401(k), trusts & 529 plans|
|Checking Account Access||No||Yes|
|Annual Fee||$20, but waived with at least $10,000 in Vanguard funds||None|
|Trading Fees: Stocks||Under $50,000: $7 for the first 25 trades, then $20;
$50k to $500k: $7;
$500k to $1 million: $2;
$1 million to $5 million: $0 on first 25 trades, then $2;
Over $5 million: $0 on first 100 trades, then $2
|Trading Fees: Options||Similar to stocks fee (but no $20 rate on accounts < $50k) plus $1 per contract||$4.95 + $0.65 per contract|
|Trading Fees: ETFs||No fees||$4.95, but four Fidelity ZERO Index Funds offered + 92 commission free ETFs|
|Trading Fees: Mutual funds||140 Vanguard mutual funds and over 3,000 non-Vanguard mutual funds free; 6,000+ non-Vanguard funds <$500k, $20 per trade; $500k to $1 million, $8 per trade; $1 million to $5 million, $0 for the first 25 trades (then $8 per trade thereafter); >$5 million, $0 for the first 100 trades (then $8 per trade thereafter)||Fidelity Funds, free; No Transaction Fee (NTF) non-Fidelity funds, free; Non-Fidelity funds, $49.95 on purchase, $0 on redemption|
|Robo-advisor||Yes – Vanguard Personal Advisor||Yes – Fidelity Go|
|Mobile App||Android & iOS devices||Android & iOS devices|
|Customer Support||Monday thru Friday, 8:00 am to 10:00 pm, Eastern Time||24/7 by phone and live chat; 140 branch offices|
|Financial Advice||Yes, with account balance greater than $50,000||Only on managed accounts|
We’ve covered all the basics in the table above, so let’s look at more specific features offered by Vanguard.
Vanguard classifies clients according to the size of their accounts. The designations are as follows:
- Voyager clients – $50,000 to $500,000
- Voyager Select clients – $500,000 to $1 million
- Flagship clients – $1 million to $5 million
- Flagship Select clients – over $5 million
The larger your account size, the more access you have to live financial advisors. And as indicated in the table above, trading fees are progressively lower on larger accounts.
Personal advisors: With a minimum account balance of $50,000, you can take advantage of the services of a personal advisor. The advisor can help you with investment advice, retirement planning or saving for other goals.
Mutual Fund and ETF Screener: Vanguard is all about funds, and this screener can be used to identify the funds you want to invest in. You can even set the criteria you want for specific types of funds, such as sector funds, or funds with low expense ratios.
Portfolio Analysis: View your current asset allocation against your target allocation. This will help you to know exactly where you need your portfolio to go.
Vanguard Tax Center: Continuously track your taxable dividends and capital gains distributions on a year-to-date basis. Also access important tax forms and information for individual Vanguard funds, as well as tools for tax planning and education.
Target Date Funds: Often referred to as a “fund of funds,” these funds are specifically for retirement. The asset allocation is automatically adjusted based on your age. Early in life, the fund will invest primarily in equities. But as you get closer to retirement, the emphasis will shift to fixed income investments.
The Vanguard Robo Advisor – Vanguard Personal Advisor
Like most major brokerage firms today, Vanguard also offers a robo advisor, Vanguard Personal Advisor. In fact, Vanguard Personal Advisor is the largest robo advisor, with $112 billion in assets under management. That’s many times larger than Betterment, which has only $14.5 billion under management.
Here are the details of Vanguard Personal Advisor:
Minimum initial investment: $50,000
Annual advisory fee: Based on portfolio size, as follows:
- Account balances under $5 million – 0.30%
- $5 million to $10 million – 0.20%
- $10 million to $25 million – 0.10%
- Greater than $25 million – 0.05%
The extremely low fee structure on very large accounts probably helps to explain why this is the largest robo advisor in the world. That kind of fee structure would naturally attract large investors.
Available accounts: Individual and joint taxable accounts, traditional, Roth, SEP, SIMPLE and rollover IRAs, as well as trusts.
Investment composition: Vanguard Personal Advisor uses only Vanguard funds. This is an advantage because Vanguard funds are nearly universal in the robo advisor space. It’s ETFs have some of the lowest expense ratios in the industry, averaging just 0.12%. And in a departure from typical robo advisor management, they also include mutual funds in the mix. That can be important because, unlike ETFs which only attempt to match the market, mutual funds try to outperform it.
The asset classes include U.S. and international stocks and bonds, intermediate and short-term investment grade bonds, and for taxable accounts, intermediate term tax-exempt funds. Your portfolio is rebalanced on a quarterly basis, or when it deviates from the target allocation by more than 5% in any asset class.
Individual Investment Advisor: For accounts with at least $500,000, a personal advisor will be appointed. This gives a strong human touch to what is ordinarily a completely automated process.
Tax strategies: Unlike many other robo advisors, Vanguard Personal Advisor does not typically use tax-loss harvesting. However, they do use tax allocation. Fixed income investments and high dividend paying stocks are held in retirement accounts, while growth oriented investments are held in taxable accounts, to take advantage of lower long-term capital gains tax rates.
Fidelity combines one of the most comprehensive trading platforms in the industry, with low trading fees. Once again, the basic features are detailed in the table above. But here are the features and benefits of the Fidelity investment platform:
Fidelity Cash Management Account: This is the basic Fidelity investment account. It comes with check writing, ATM access, mobile deposits, and Fidelity BillPay. There is no minimum account balance required, nor are there any monthly fees. ATM fees are reimbursed nationwide.
Active Market Pro: This is Fidelity’s fully customizable trading platform. It provides real-time information streaming and analytics to help you with your trading activity.
Security & Stock Screeners: With this tool you can create lists of stocks you want to follow, using more than 40 criteria. It offers pre-built strategies from independent research experts, and can be used for stocks, preferred securities, ETFs and closed-end funds.
Stock Research Center: Here you will find everything you need to know about any stock or fund you want to invest in. It will show you the top-rated sectors and major market movers. It can help keep you aware of where the market action is.
Fidelity’s Robo Advisor – Fidelity Go
Fidelity has its own robo advisor option, in Fidelity Go. Specific features of the service include:
Minimum initial investment: No funds needed to open an account, but a minimum of $10 is required to begin investing.
Available accounts: Individual and joint taxable accounts, as well as traditional, Roth and rollover IRAs.
Fidelity Go customer service: By phone and live chat, Monday to Friday, from 8:00 AM to 8:00 PM Eastern time.
Account advisory fee: 0.35%
Fidelity Go investment methodology: Portfolio construction includes U.S. and foreign stocks, U.S. and foreign bonds, and short-term investments. Like Vanguard Managed Portfolio, Fidelity Go is also invested in proprietary funds. They are held in Fidelity Flex funds, that come with no management fees and zero expense ratios. The funds can be either active (mutual funds) or passive (ETFs).
And again, like Vanguard Managed Portfolio, Fidelity Go doesn’t offer tax-loss harvesting.
Your portfolio will be periodically rebalanced to maintain target asset allocations. But the robo adviser also comes with manual asset adjustments. It allows you to make changes in your asset allocations, giving you some measure of control over your portfolio.
There are two unique features to the Fidelity Go service:
Annual Strategic Review: Fidelity Go reviews your investment profile each year. They may revise your investment allocations based on any significant changes in your personal profile.
Target Tracking: With this feature you can choose target balances to reach by certain dates. The tracker will estimate the likelihood you’ll reach the target amount, and give you recommendations if it looks like you won’t.
Other Fidelity Managed Investment Options
Fidelity offers four other different managed investment options:
Fidelity Portfolio Advisory Service
This is a professional money management service, in which Fidelity will learn your goals–retirement, tax management, or saving for a major purchase–then create an investment strategy to help you reach the goal. You’ll have a dedicated team that monitors and manages the plan and offers exclusive investments typically not available to individual investors.
The service includes investment selection, ongoing management, and rebalancing. Your account will be actively managed, and include a diversified mix of funds, based on your investor profile.
The minimum initial investment is $50,000, and the fee ranges between 0.60% and 1.70%, based on the size of your account. However, there are no trading fees.
Fidelity Personalized Portfolios
Managed by Fidelity affiliate, Strategic Advisors, Inc, you’ll have an actively managed, personalized portfolio. Investments are in stocks, bonds, mutual funds and ETFs. Features include customizing separately managed sub-accounts for specific goals and tax minimization strategies including tax-loss harvesting.
The minimum investment is $200,000, and the annual advisory fee ranges between 0.55% and 1.50%, based on account size.
Fidelity Separately Managed Accounts
This service is just what the name implies. Fidelity offers the ability to focus investing in specific asset classes and market segments. Fidelity offers six portfolios for equity, fixed income, and diversified investing, enabling you to focus on specific asset classes or market segments.
The six portfolios include:
- Fidelity Tax Managed U.S. Equity Index Strategy (equities)
- Fidelity Equity Income Strategy (equities)
- Breckinridge Intermediate Municipal Strategy (fixed income)
- Fidelity Core Bond Strategy (fixed income)
- Fidelity Intermediate Municipal Strategy (fixed income)
- BlackRock Diversified Income Portfolio (diversified)
The minimum investment is between $200,000 and $500,000, depending upon the specific portfolio. The annual advisor fee ranges between 0.20% and 1.10%, based on the size of your account.
Fidelity Wealth Management Advisory
This is a customized investment service, designed specifically for high net worth investors. You’ll have a dedicated financial advisor to help you create a personalized strategy for your entire financial life.
You’ll meet regularly with your advisor to make ongoing decisions, as well as to coordinate services with attorneys and CPAs. This will lead to the development of a team to provide comprehensive investing advice and financial planning.
Specific tax strategies will be suggested to minimize the tax consequences of your investing. Specific focus will be on your investments, retirement, protecting your income and your assets, and protecting your family.
The minimum initial investment is $2 million, but you need to have at least $10 million in total investable assets to be eligible to participate, as the advisory is designed for high net worth individuals. The annual advisory fee ranges between 0.40% and 1.15%, based on the size of your account.
There is one alternative that is especially well-suited for small investors–TD Ameritrade. There’s a $0 minimum to invest and you’ll have access to features like overnight trading (trade 24 hours a day on regular business days) and investor educational tools. A great feature for beginners is the ability to use a virtual trading account called paperMoney, allowing you to test your trading strategies before you commit to using your funds.
Another benefit is being able to bank where you invest. As an investor, you’re able to access TD Bank products and services. While trading fees are a bit higher with TD Ameritrade, you’ll find valuable features that may be worth the extra expense. Interested in learning more? Check out our TD Ameritrade Review.
Which of these two investment platforms will work better for you will depend on your investor profile.
Where Vanguard Shines
Vanguard works better for long-term investors, and those who prefer to invest in funds. Their trading fees are higher, so it doesn’t work as a trading platform. But it offers no trading fees on thousands of mutual funds, and none at all on ETFs.
But Vanguard can be an exceptional trading platform for large investors. For investors with $500,000 or more, they offer trading fees of $2. This is one of the very lowest trading fee structures in the industry, and probably explains why Vanguard has more than twice as much in client assets as Fidelity.
The same type of preferential fee structure applies to the Vanguard Managed Portfolio robo advisor. The advisory fee gradually falls toward almost zero at a portfolio level of $25 million. But for smaller investors, the fee is 0.30%, putting it at no better than the middle of the robo advisor range.
Where Fidelity Shines
Fidelity is also strong with fund investing, though not as much as Vanguard. But its real strength is as a trading platform. Its trading fees are much lower than Vanguard’s for most investors. They are also much stronger in customer service, with 24/7 availability, and 140 local branches.
They’re also the winner when it comes to managed investment services. The Fidelity Go robo advisor looks to be a shade below Vanguard Managed Portfolio. But it’s four other investment management services provide hands-on management for investors with portfolios as small as $50,000.
Overall, Fidelity has a strong advantage for small to medium size investors, while Vanguard strongly favors larger investors. Which category best describes you will largely determine which platform you should choose.Topics: Investing