Fidelity's parent company, FMR, revealed a variety of financial and operational metrics in its annual report, which is the main window of its operations. Fidelity makes money by charging its customers commissions for account management and other services. Despite being one of the largest commission-free brokers, Fidelity doesn't use the pay-per-order flow model used by many of its peers, such as Charles Schwab, TD Ameritrade, and Robinhood. Both brokers make money from cash accrued interest, margin interest, portfolio margins, stock lending programs and order flow payment.
However, Fidelity is much more transparent in its pay-per-order flow activity. The broker does not accept PFOF for stock trading. Although the costs of working with these brokers are relatively similar, we believe that Fidelity has the best offer and greater cost transparency. Fidelity collects short-term interest on its stock loan programs and divides it with customers who lend it shares that are difficult to borrow.
Fidelity prides itself on order execution and clients get a good rate of price improvement on stock orders. The results were favored by diversity in Fidelity's business, as the firm made big moves to add product and service offerings in retail brokerage, workplace benefits and institutional investment, said Fidelity President and CEO Abigail Johnson in a letter to shareholders. Fidelity Charitable, called “one of the first adopters” in the field of philanthropy and digital assets, as it starts accepting bitcoin donations in response to donor preferences. However, Fidelity offers excellent order execution and continues to evolve as a leader in the brokerage space.
On the Fidelity mobile app, you can trade stocks (including fractional stocks), ETFs, options, and mutual funds, but not on fixed income. Although both Robinhood and Fidelity provide educational resources for their clients, Robinhood's educational offerings are not as strong as they should be, as they are a broker whose target client is new to investing. For the asset management business, the turmoil of the fourth quarter was a significant detractor to Fidelity's equity performance during the year, Stephen Neff, president of Fidelity Asset Management, said in the letter. Beyond that, Robinhood has a very limited range of offers compared to Fidelity, so Fidelity has the upper hand in this category.
Although both Fidelity and Robinhood are popular options for investors and casual traders, we will look at some of the key differences between the two brokers to help you determine which one is best suited for you and your investment needs. The company uses patented intelligent order routing technology, Fidelity Dynamic Liquidity Management (FDLM), which seeks the best available price. Although two-factor authentication is optional for Robinhood users, it is required for high-risk transactions on Fidelity. Initially developed for use by institutional clients, FDLM can access all types of markets, including dark pools, exchanges and market makers, as well as Fidelity's CrossStream ATS.
Fidelity is primarily a discount broker, which means that it allows self-direction of customer portfolios by the trader. On the contrary, Fidelity's mobile offering is complete, with almost the same functionality as the desktop trading platform. Fidelity Puritan Fund, Fidelity's first mutual fund with the goal of earning income from shares, is introduced.