How Does Fidelity Make Money?
You might have seen Fidelity’s fees and wondered how the broker makes money. Brokers have historically made a good portion of their income from trade commissions, and Fidelity was no different—until it removed commissions for most trades.
Since ditching trade commissions, Fidelity now relies on other methods of generating income. Some might seem familiar, while others may be new to you.
Keep reading to find out how Fidelity remains profitable.
How Fidelity Makes Money
Fidelity doesn’t charge commissions on trades, account services, or banking. Transactions such as depositing, transferring, and using ATMs are all free. How does Fidelity keep itself running? Here are its main income sources.
One way is through margin interest rates on trades and loans. Fidelity also earns interest from money market funds and cash sweep programs. On top of that, Fidelity charges fees for automated investment advice, personal advisory services, and professional portfolio management. There are also commissions on certain securities like bonds, mutual funds, and a few international stocks.
Here’s a summary of how Fidelity makes money.
Selling Order Flow
Many commission-free brokers generate income by selling order flow to high-frequency trading firms, who pay for real-time order details so they can profit from bid-ask spreads. Some consider this practice harmful to investors, while others are less concerned.
If the idea of selling order flow troubles you, you’ll be happy to know Fidelity does not do it to offset no commissions.
Margin Interest Rates
Fidelity earns money from margin interest, which is one of its revenue channels.
If you want to short stocks, borrow cash to boost positions, or use margin in other ways, you will pay interest on the borrowed amount. Fidelity’s margin rates depend on your account’s size, so bigger accounts see lower rates.
Note that margin rates can fluctuate for various reasons. At this moment,
Fidelity’s margin rates range from 12.575% to 8.575% for account balances spanning $0 to over $1 million.
Fidelity Makes Money With Loan Programs
Aside from margin interest on trades, Fidelity also provides margin loans based on those same rates. These margin loans bring in steady revenue because they can be large and might not be repaid quickly, unlike borrowing funds for short sales or margin-based stock purchases.
The margin rates remain the same for loans, though exact numbers differ based on loan size and other factors.
Cash Sweep Program
Fidelity profits from its cash sweep feature, and account holders can benefit as well.
Fidelity uses two main methods for uninvested funds.
The first is to place your uninvested cash into a money market fund as the “core position” for a Fidelity brokerage account. By default, SPAXX or FZFXX is chosen for you, which can be helpful for both Fidelity and its customers.
Fidelity also partners with different banks for its cash sweep arrangement. If you open a cash management account, your uninvested money is moved to these program banks and earns interest. Fidelity pays a very low rate (0.01%) at these banks because it keeps some of the interest for itself.
Managed Portfolios, Planning, and Advice
Being a full-service broker, Fidelity also presents managed portfolios, advice, and planning services to its clients.
Fidelity Go
Fidelity Go is Fidelity’s robo-advisor. It charges $3 per month for accounts between $10,000 and $49,999. For balances of $50,000 or more, there’s a 0.35% yearly fee.
Fidelity Personalized Planning and Advice
Fidelity offers a hybrid robo advisor called “personalized planning and advice,” costing 0.50% annually. You need at least $25,000 in the account to sign up.
Find a Financial Advisor
If you are looking for a professional money management service in your area, you can
find a Financial Advisor on the Wiser Advisor
(or read
Wiser Advisor review).
Visit Wiser Advisor
Fidelity Wealth Management
Fidelity Wealth Management is for larger investors. It charges between 0.50% and 1.50% each year, with a minimum of $250k to join.
Fidelity Private Wealth Management
Another service is Fidelity’s private wealth management, which costs from 0.20% to 1.04%. Investors must maintain more than $2M to unlock the best rates.
Account Management
Many brokers charge fees for account actions like deposits, withdrawals, transfers, closures, and overdrafts. Fidelity, however, does not.
You pay nothing for those services at Fidelity. Here’s a comparison directly from Fidelity’s site:
Fees Related to Options, International Securities, Mutual Funds, and Bonds
Even though Fidelity is a commission-free broker, it does charge fees for options, some overseas stocks, some mutual funds, and certain bonds. Although Fidelity tries to keep costs low, they do exist. Below is a quick look at the fees for these products.
Fidelity Makes Money With Options
Options trades have no commission, but there is a 65¢ fee per contract.
Fidelity Makes Money With Bonds
Newly issued bonds don’t cost anything at Fidelity, but buying bonds on the secondary market costs $1.
New U.S. Treasury issues are free, although secondary ones have a $19.95 charge.
Fidelity Makes Money With Mutual Funds
Fidelity’s own mutual funds are free. NTF (no transaction fee) funds from other providers are free to buy, but if you sell them in under two months, Fidelity charges $49.95.
Transaction-fee funds that aren’t from Fidelity come with a one-time $49.95 purchase cost. As a comparison,
Firstrade
charges $0.
Foreign Stock
Some foreign stocks that are DTC (Depository Foreign Trust Company) eligible can be traded at Fidelity for free. If a foreign company’s shares aren’t DTC, you pay $50 to trade them.
Fidelity Charitable ‘Giving Account’ Fees
Fidelity’s Charitable ‘Giving Account’ lets donors invest their charitable money. The fees are an annual 0.60% or $100 (whichever is larger), plus investment fees between 0.015% and 0.99%.
Which Fees and Payments are Passed on to Customers?
Fidelity also forwards certain fees from organizations like the OCC (Options Clearing Corp), FINRA (Financial Industry Regulatory Authority), and the SEC (Securities and Exchange Commission). These fees are tiny, usually fractions of a penny each, but can become big for Fidelity when large numbers of shares are traded.
Fidelity Review
Read detailed Fidelity review.
Updated on 3/23/2025.
I work in investment analytics and have been investing in the market since I was in high school. I enjoy anything that involves lots of strategy (i.e. a good game of chess), which is why I was naturally drawn to investing and researching companies. Outside of investing, I’m a big fan of the outdoors. In summer, you’re most likely to find me kayaking, camping, and hiking in the mountains.
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