Fidelity Investments vs. Robinhood

These two brokers have some fundamental differences, one being among the most established discount online brokers while the other is a relative upstart. Fidelity continues to evolve as a major force in the online brokerage space. Fidelity’s brokerage service took our top spot overall in both our 2019 and 2020 Best Online Brokers Awards, as the firm has continued to enhance key pieces of its platform while also committing to lowering the cost of investing for investors. Robinhood’s claim to fame is that they do not charge commissions for stock, options, or cryptocurrency trading. Due to industry-wide changes, however, they’re no longer the only free game in town.  

Fidelity’s brokerage service took our top spot overall in both our 2019 and 2020 Best Online Brokers Awards and also ranked in best for advanced traders. Robinhood, once a low cost leader, no longer holds that distinction. We’ll look at how these two match up against each other overall.

Usability

Fidelity is quite friendly to use overall. The firm has addressed the challenge of having the tools for active traders while still having an easy experience for basic investors by essentially splitting its offering into two platforms. Initial account opening with Fidelity is simple, especially if you’re adding an account to an existing household. However, adding on account features such as options trading or margin involves filling out an additional application, and none of that data (such as your occupation) is copied from your profile, so you have to enter it again. Less active investors mainly looking to buy and hold will find Fidelity’s web-based platform more than sufficient for their needs, with quotes, charts, watchlists, and more packed into an interface that manages to avoid being overwhelming. Active Trader Pro, Fidelity’s downloadable trading interface, gives traders and more active investors a deeper feature set than is available through the website. Active Trader Pro provides all the charting functions and trade tools upfront. It is customizable, so you can set up your workspace to suit your needs. 

Robinhood is very easy to navigate and use, but this is related to its overall simplicity. Robinhood’s app and the website are similar in look and feel, which makes it easy to invest through either interface. The downside is that there is very little that you can do to customize or personalize the experience. Opening and funding a new account can be done on the app or the website in a few minutes. An order ticket pops open whenever you are looking at a particular stock, option, or crypto coin. All the asset classes available for your account can be traded on the mobile app as well as the website, and watchlists are identical across platforms. Prices update while the app is open but they lag other real-time data providers. 

Trade Experience

Desktop Experience

Fidelity’s workflow for analyzing or trading existing positions on the website is relatively easy—you’ll find links to news and research for tickers in your portfolio or on a watchlist. It’s when you’re searching for a new trading idea that it gets clumsy to sort through the various tabs and drop-down choices. Most investors will find what they are looking for in the News & Research tab where you can find stocks by market cap, dividend yield, top rating in sector, and so on. You can set a few defaults for trading on the web, such as whether you want a market or limit order, but most choices must be made at the time of the trade. 

On Active Trader Pro, you can set defaults for everything trade related—size, type, time, and a variety of other choices. You can also place a trade from a chart. Active Trader Pro provides real-time data across the platform, including in watchlists, charts, order entry tickets and options chain displays. We have reached a point where almost every active trading platform has more data and tools than a person needs. In addition to the filters, charting tools, defined alerts, and entry and exit tools that will meet the needs of most active traders, Active Trader Pro also provides a probability calculator, options analytics, measures of cross-account concentrations and much more. 

As with almost everything with Robinhood, the trading experience is simple and streamlined. Robinhood deals with a subsection of equities rather than the entirety of the market, but on every quote screen for the stocks and ETFs you can trade on Robinhood, there is a straightforward trade ticket. 

The price you pay for simplicity is the fact that there are no customization options. If you want to enter a limit order, you’ll have to override the market order default in the trade ticket. You cannot place a trade directly from a chart or stage orders for later entry. Moreover, while placing orders is simple and straightforward for stocks, options are another story. Placing options trades is clunky, complicated, and counterintuitive. Although Robinhood allows options trading, the platform seems geared entirely towards making market orders for assets rather than actually attempting to strategically use options to profit. This perception is reinforced by the fact that pricing refreshes every few seconds, but the actual pricing data lagged behind two other platforms we opened simultaneously by 3–10 seconds. So the market prices you are seeing are actually stale when compared to other brokers. This will not faze anyone looking to buy and hold a stock, but this data lag kills any idea of using Robinhood as a trading platform.

Mobile Experience

You can trade stocks, ETFs, options and mutual funds on Fidelity’s mobile app but not fixed income. Fidelity has enabled fractional share trading on its mobile apps; customers specify dollars rather than shares when entering an order. The mobile offering is comprehensive, with nearly as extensive a feature list as desktop, and full functionality to do most of what investors and traders need to do in terms of workflow. You can choose your own login page and buttons at the bottom of the device for your most frequently-used features, and define how you want your news presented. Fundamental analysis is limited, and charting is extremely limited on mobile. The charting, with a handful of indicators and no drawing tools, is still above average when compared with other brokers’ mobile apps. Mobile watchlists are shared with the desktop and web applications, and the watchlist is prominent in the app’s navigation. Most order types one can use on the web or desktop are also on the mobile app, with the exception of conditional orders. 

For Robinhood customers, all the asset classes available for your account can be traded on the mobile app as well as the website, and watchlists are identical across the platforms. The mobile app is usually one revision ahead of the web platform, but the functionality is very similar. 

Range of Offerings

Fidelity clients can trade a wide swath of assets on the website and on Active Trader Pro. Equities (including fractional shares), options and mutual funds can be traded on the mobile apps. One notable limitation is that Fidelity does not offer futures, futures options, or cryptocurrency trading. 

Robinhood allows you to trade cryptocurrencies in the same account that you use for equities and options, which is unique, but it’s missing quite a few asset classes, such as fixed income. Robinhood allows fractional share trading in nearly 7,000 stocks and ETFs.

Order Types

Fidelity allows you to enter a wide variety of orders on the website and Active Trader Pro, including conditional orders such as one-cancels-another and one-triggers-another. Conditional orders are not currently available on the mobile apps. Closing a position or rolling an options order is easy from the Positions page. With Fidelity’s basket trading services, you can select a group of up to 50 stocks, called a basket, that can be monitored, traded and managed as one entity. You can automatically allocate investments across multiple securities with an equal dollar amount or number of shares. This capability is not found at many online brokers.  

Robinhood has a limited set of order types. You can enter market or limit orders for all available assets. You cannot enter conditional orders. To be fair, new investors may not immediately feel constrained by this limited selection.

Trading Technology

Fidelity’s trade execution engine, Fidelity Dynamic Liquidity Management (FDLM), seeks the best available price and gives clients a high rate of price improvement. Fidelity says that its clients who execute a 1,000 share marketable order can expect to save on average, $16.66 on that transaction compared to the quote at order entry. That is $13.86 better than the industry average of $2.80, according to Fidelity’s internal statistics (data from January through Sept. 2019). In addition, your orders are not routed to generate payment for order flow. Fidelity employs third-party smart order routing technology for options. Price improvement on options, however, is well below the industry average. Backtesting of trading strategies can be done in Fidelity’s Wealth-Lab Pro, a premium feature available to investors in households that place 36+ stock, bond, or options trades in a rolling 12-month period, and have at least $25,000 in assets across their eligible Fidelity brokerage account. Customers can execute their strategy trading in Wealth-Lab Pro by qualifying for automated trading, which requires $100,000 in equity and 500 trades per year. 

Robinhood does not publish its trading statistics the way all other brokers do, so it’s hard to compare its payment for order flow statistics to anyone else. The industry standard is to report payment for order flow on a per-share basis but Robinhood reports on a per-dollar basis instead, claiming that it more accurately represents the arrangements it has made with market makers. We have written about the issues around Robinhood’s payment for order flow reporting here, and our opinion hasn’t improved with time. Robinhood does not disclose its price improvement statistics, which leads us to make negative assumptions about its order routing practices. The target customer is trading in very small quantities, so price improvement may not be a huge consideration. However, other brokers who also charge $0 for equity trades are offering their customers impressive price improvement, so Robinhood needs to get serious about execution quality in order to stay competitive.

Costs

Fidelity’s fees are in line with most industry participants, having joined in the race to zero fees in Oct. 2019. Fidelity charges no commissions for online equity, ETF or OTCBB trades. There is no per-leg commission on options trades. Per-contract commissions are $0.65. Margin interest rates are average compared to the rest of the industry. Fidelity charges $75 on the initial purchase of certain mutual fund families, including industry giant Vanguard Funds. International trades incur a wide range of fees, depending on the market, so take a careful look at those commissions before entering an order.

Robinhood’s trading fees are easy to describe: free. All equity trades (stocks and ETFs) are commission-free. Options trade for $0—no per-leg fee and no per-contract fee. Trading on margin requires a Robinhood Gold subscription at $5 per month, which includes $1,000 of margin. Margin usage over $1,000 is charged 5% interest, which is relatively low.

Fidelity clients are automatically enrolled in cash sweep programs that pay a much higher interest rate than most other brokers make available. Fidelity does make money from the difference between what you are paid on your idle cash and what they can earn on customer cash balances, but it is hard to begrudge them the money when they are already paying you an above-average rate. Robinhood clients, once they make it off the waitlist and design their own Mastercard debit card, can earn modest interest on their uninvested cash, which is swept to its network of FDIC-insured banks. Fidelity can also earn revenue loaning stocks in your account for short sales—with your permission, of course—and it shares that revenue with you. Fidelity tells us that for two months of lending certain hard to borrow securities, 38% of accounts earn $100 or less, another 37% earn between $100 and $1,000 and the remaining 25% earn over $1,000. Robinhood retains all the income it generates from loaning out customer stock and does not share it with the client.

Fidelity doesn’t engage in payment for order flow (PFOF). This is the practice where a broker accepts payment from a market maker for letting that market maker execute the order. Rather than focus on these payments, Fidelity looks for quality trade executions and ensures that your orders are achieving price improvement on almost every trade. This is a very important point of differentiation for Fidelity as many of its competitors have seen PFOF revenue grow – likely at the price of better execution for their customers. We discussed Robinhood’s lack of transparency around PFOF above, but it is worth repeating that this appears to be a major revenue stream for the broker. Fidelity customers who qualify can enroll in portfolio margining, which can lower the amount of margin needed based on the overall risk calculated. This service is not available to Robinhood customers. 

The largest differentiator between these two brokers when it comes to costs and how the brokers make money from and for you is price improvement. Fidelity clients enjoy a healthy rate of price improvement on their equity orders, but below average for options. On average, equity orders receive $0.0091 per share in price improvement and options orders receive $0.0342 per contract. Robinhood does not disclose its price improvement statistics, which we discussed above. It’s not a good look.  

Research Amenities

This is another area of major differences between these two brokers. 

Fidelity’s research offerings on the website include flexible screeners for stocks, ETFs, mutual funds and fixed income, plus a variety of tools and calculators. Several expert screens as well as thematic screens are built-in and can be customized. The ETF screener has a similar look and feel as the stock screener, but includes analyst ratings. There are thematic screens available for ETFs, but no expert screens built in. When researching ETFs, you can type in a ticker (or group of tickers) to find ETFs that contain that stock. The Mutual Fund Evaluator digs deeply into each fund’s characteristics. Though it tends to drive the user to Fidelity funds, that’s not unexpected given the platform. For options, there are scanners powered by LiveVol with some built-in scans, plus the ability to create a custom scan. Fixed-income investors can use the bond screener to winnow down the nearly 120,000 secondary market offerings available by a variety of criteria, and can build a bond ladder. Those looking for an options trading idea on the website can dive into the Strategy Pairing Tool, which lets clients who know what underlying and option strategy interests them to scan for trading ideas. The Strategy Evaluator evaluates and compares different strategies; results can automatically populate a trade ticket. The website features numerous news sources, which can be sorted by holdings and watchlists and updates in real-time. The news sources include global markets as well as the U.S. On Active Trader Pro, you can set up streaming news feeds and video from Bloomberg TV. Fidelity clients have access to integrated third-party research from sources such as Standard & Poors, Hightower Report, Ned Davis Research and Zacks. Fidelity’s web-based charting has integrated technical patterns and events provided by Recognia, and social sentiment score provided by Social Market Analytics. Charting is more flexible and customizable on Active Trader Pro. Though charting on the mobile app is relatively limited, it’s still better than that offered by most other brokers. 

In contrast, Robinhood offers its customers very little in the way of research and trading ideas, but this is an area that the firm is updating frequently. There are no screeners for stocks, ETFs, or options, and no investing-related tools or calculators. The trading idea generators are limited to stock groupings by sector. Once you click on a group, you can add a filter such as price range or market cap. News is available from The Wall Street Journal, Reuters, and Barron’s in addition to videos from CNN Business, Cheddar, and Reuters. Third-party research from Morningstar can be accessed by Robinhood Gold clients ($5/month subscription). The charting is extremely rudimentary and cannot be customized. Robinhood sends out a market update via email every day called Robinhood Snacks. 

Portfolio Analysis

Fidelity’s portfolio analysis program, FullView, lets you bring in external accounts to give you a picture of all of your assets, which also lets you give limited access to your investments to an advisor. FullView can be slow to load and a little difficult to customize once you’ve added several non-Fidelity accounts. The reports give you a good picture of your asset allocation and where the changes in asset value come from. The portfolio performance reports built into the website can be customized and compared to a variety of benchmarks. Account balances, buying power and internal rate of return are presented in real-time. Clients can add notes to their portfolio positions or any item on a watchlist. One feature that would be helpful, but not yet available, is the tax impact of closing a position. 

Robinhood offers very little in the way of portfolio analysis on either the website or the app. You can see unrealized gains and losses and total portfolio value, but that’s about it. The start screen shows a one-day graph of your portfolio value; you can click or tap a different time period at the bottom of the graph and mouse over it to see specific dates and values. There is no asset allocation analysis, internal rate of return, or way to estimate the tax impact of a planned trade. There is no trading journal. To perform any kind of portfolio analysis, you’ll have to import your transactions into another program or website. Account balances and buying power are updated in real time. 

Education

Fidelity’s Online Learning Center contains more than 600 pieces of content in areas including options, fixed income, fundamental and technical analysis, and retirement. The educational content is made up of articles, videos, webinars, infographics, and recorded webinars. The content is a mixture of Fidelity and third-party created content, which includes courses intended to guide the learner forward. Fidelity also offers weekly online coaching sessions, where clients can attend a small group (eight–10 attendees) online educational session to have in-depth discussions around the topics of options and technical analysis. The mobile apps feature what Fidelity calls Learning Programs that help beginning investors better understand market and investing concepts. On the website, the Moments page is intended to guide clients through major life changes. Topics include home purchases, getting married or divorced, losing a parent or spouse, having or adopting a child, sending a child to college, transitioning into retirement, and others. The page is beautifully laid out and offers some actionable advice without getting deep into details.

Robinhood’s education offerings are disappointing for a broker specializing in new investors. There’s a “Learn” page that has a list of articles, displayed in chronological order from most recent to oldest, but it is not organized by topic. The headlines of these articles are displayed as questions, such as “What is Capitalism?” or “What is Inventory?” There are no videos or webinars available, but the daily Robinhood Snacks three-minute podcast gives some market information. A page devoted to explaining market volatility was appropriately added in April 2020.

Customer Service

Fidelity offers a 24/7 phone line, online chat with a human agent on the website and in mobile apps. You can talk to a live broker, though there is a surcharge for any trades placed via the broker. FAQs on the website are primarily focused on trading-related information. Customer service appears to respond very quickly on Twitter to complaints sent to their account (@fidelity). The response to those in deep distress on Twitter typically reads, “I’m sorry for the frustration. This isn’t how we want you to feel, and we want to make sure your comments are forwarded to the right team. Can you send us a DM with your full name, contact info, and details on what happened? Thank you.”

Robinhood’s customer service is done via the app or the website. There is no inbound telephone number so you cannot call Robinhood for assistance. If you work your way through an extensive menu designed to narrow down your support issue, you can enter your own phone number for a callback. You can place a trade through a live broker for $10, but they are not there to offer help otherwise. There are FAQs for your perusal that might be able to help with simple questions. 

Security

Fidelity’s security is up to industry standards. Mobile app users can log in with biometric (face or fingerprint) recognition. Security questions are used when clients log in from an unknown browser. Higher risk transactions, such as wire transfers, require two-factor authentication. Fidelity carries excess Securities Investor Protection Corporation (SIPC) insurance which includes a $1.9 million limit on uninvested cash. According to Fidelity, this is the maximum excess SIPC protection currently available in the brokerage industry.

Robinhood’s technical security is up to standards, but it is missing a key piece of insurance. Mobile app users can log in with biometric (face or fingerprint) recognition or a custom pin. Robinhood encourages users to enable two-factor authentication. New logins from unrecognized devices also need to be verified with a six digit code that is sent via text message or email in case two-factor authentication is not enabled. However, Robinhood carries no excess Securities Investor Protection Corporation (SIPC) insurance.

Our Verdict

The choice between these two brokers should be fairly obvious by now. 

Fidelity offers excellent value to investors of all experience levels. Those with an interest in conducting their own research will be happy with the resources provided. Buy-and-hold investors and frequent equity traders are especially well served, which speaks to how large and well-rounded Fidelity is as an online broker. One consequence of this is that you can spend some time digging for the tool or feature you need to make a particular investment decision—it exists, but you may have to search for it. That is the trade-off for having such a deep feature set, however, and the separation of Active Trader Pro and the main platform helps to remove some potential clutter. Once you are set up and trading, Fidelity’s execution quality is terrific at most trade sizes and their focus on generating interest on your idle cash is admirable. 

If you’re brand new to investing and have a small balance to start with, Robinhood could be the place to help you get used to the idea of trading. The extremely simple app and website are not at all intimidating and provide a smooth on-ramp to the investing experience, especially for those exploring stocks and ETFs. While it’s true that you pay no commissions at Robinhood, its order routing practices are opaque and potentially troubling. Robinhood also has a habit of announcing new products and services every few months, but getting them into production and available to all clients takes a long, long time. If you’re a trader or an active investor who uses charts, screeners, and analyst research, you’re better off signing up for a broker that has those amenities. Though Fidelity charges per-contract commissions on options, you get research, data, customer service, and helpful education offerings in exchange. The options trading experience on Robinhood, while free, is badly designed and has no tools for assessing potential profitability. Even if you are a new investor only interested in buying and holding stocks, there are many zero-fee brokers to choose from now. They may not all have the flashy marketing that backs up Robinhood, but they have a lot more meat to their platform and much more transparent business models.