In a recent video we looked at one of my favorite legacy brokerages, Fidelity. And in that video I
briefly touched on the many differences between an old-school brokerage account like Fidelity
any more modern sleep platform like Robinhood. So today do a proper comparison of these two
platforms and also take a broader look at the industry differences between a old-school
brokerage and a newer brokerage. Alright let’s jump right into it. What is going on everyone
I hope you are all having a fantastic day. So I’ll say right out of the gate that Robinhood
and Fidelity are both great platforms that in many ways have sheep the industry. I should
also mention that I am not being paid by either of these companies and I have used both of them for
a long time so let’s get into my fully impartial comparison of Fidelity and Robinhood. Obviously
Fidelity is what I would call the legacy brokerage in today’s comparison seen that it was started in
1946 and has changed significantly since then. Robinhood on the other hand was founded in 2013
really pioneered the concept of commission free trading and is largely why platforms like Fidelity
have since moved in that direction. Both platforms have a desktop and mobile-based usability however
Robinhood is very clearly more mobile focused and offers investors a sleek and simple way
to invest rate from their smart phone. In general I’d say that the Robinhood platform is much easier
to use and again is going to provide you with that sleek and modern look that many other platforms
have since copied but more experienced investors and active traders could definitely argue that
the Robinhood app is lacking in a number of analytical tools. Well fidelity does have
a fantastic mobile application with millions of positive reviews, they are definitely more desktop
focused offering a standard web platform as well as their more robust Active Trader Pro which is
fully customizable unlike Robinhood. So if you are brand new to investing you’re used to doing things
on your smart phone then you’ll love the Robinhood platform but if you’re looking for a more robust
user experience on a computer then you definitely wanna go with Fidelity. Now in terms of account
options and types of investments, Fidelity definitely blows Robinhood out of the water.
Beyond the standard brokerage and IRA account options, Fidelity offers 401(k) rollover‘s,
529 college savings plans, youth accounts, custodial accounts, health savings accounts,
trust and estate account options and so many other situation specific account options that are simply
not available on Robinhood. Additionally, Fidelity allows you to invest in not only individual stocks
but also mutual funds, ETFs, index funds, bonds, single and multi leg options contracts, Forex,
fracional shares, and the list goes on. Now Robinhood does offer many of those asset types
at least on the stock side of things but the biggest differentiator is that Robinhood does
not currently offer any kind of mutual funds however you can buy certain ETFs and Robinhood
does not currently offer bonds or any kind of Robo advisory service like Fidelity’s Fidelity Go Robo
advisor. That being said while you are now able to invest in cryptocurrency’s wih fidelity through
very specific digital asset accounts, Robinhood obviously leans heavily on cryptocurrency’s and
allows you to actively buy and sell tons of different digital assets. So again that one is
going to depend on what you need from your investment account but in general, Fidelity
definitely has more account options and more types of investments. Another big differentiator that
isn’t nearly as why they talked about is actually the execution strategy and technology that each
of these platforms is using. That probably sounds super boring but Fidelity actually uses
a proprietary routing system that is seeking the best available price and with over 87% of orders
seeing an improved share price, there average 1000 share order saves nearly $20 when compared to the
quote of the original order. I know that’s getting really in the weeds but for comparison, Robinhood
doesn’t even publish their trading statistics and that’s a large part of the reason why they have
received so much negative publicity over the past several years since many users wonder whether or
not Robin Hood‘s technology is actually seeking the best price. If you’re buying and holding for
decades then it really doesn’t matter but if you’re actively trading that could make
a huge difference. Now like I mentioned earlier in the video, both of these platforms are largely
free across the board however there are some fees associated with certain trades that you
wanna be aware of. Trading for stocks and ETFs are completely free on both platforms and there’s no
account fees or minimum investment requirements for either platform. You also have free domestic
wires however Robinhood does charge $75 if you want to transfer your investment account
off the platform while Fidelity does not charge anything for that. Additionally trading on margin
which I would never recommend does require the premium Robinhood gold subscription which is five
dollars per month but anything beyond your first thousand dollars of margin will be charged 3.5%
interest. Fidelity’s margin on the other hand is 9.075% for your first $10,000 and 7.575%
up to $100,000. Both of those platforms are well below the industry average but again I would not
recommend trading margin so it really doesn’t matter. When it comes to educational resources,
both platforms are actually fairly comperable with Robinhood offering their snacks newsletter,
podcast, educational video series and daily updates on market conditions.
I think all of these are really important resources especially for new investors
but Fidelity offers a very robust learning center as well that includes articles, videos, webinars,
and the ability to ask live questions to a real coach using the trading strategy desk. That being
said while the educational resources are similar when it comes to analysis of your own portfolio,
Robinhood does leave a little bit to be desired. Beyond your real time balances, margin, and buying
power, you really don’t get much else. Now in fairness there’s only so much you can display on a
smart phone and seeing that Robinhood is a largely mobile based platform, this is to be expected. But
there are certain features like asset allocation, your internal rate of return, and even a basic way
to estimate tax implications that simply leave a lot to be desired with Robinhood. Unsurprisingly
with a desktop focused platform, Fidelity has a number of portfolio analysis tools
that can help you keep your portfolio on track, see unrealized and realized gains and losses,
account balances, internal rate of return, and all of this information is displayed to you in
real time. Not everyone needs to know all of those numbers and if you’re brand new to investing then
that could actually be overwhelming but if you’re a little bit more proficient
than not having an information could be a little bit frustrating. Alright here is a huge
differentiator that is honestly the final nail in the coffin for me that of course will be the
differences in customer support. If you’ve seen any of the articles about Robinhood in the news
over the past few years, and you may know that their customer support is borderline nonexistent.
There’s no telephone number that you can even call and while you are able to submit your phone number
for a call back and get support through their chat bot, I find this to be incredibly frustrating and
if you need help quickly and your money is on the line then not being able to talk to a real
person quickly could honestly be a dealbreaker. Compare that to Fidelity’s 24/7 phone line as
well as their web-based support and chat bot and the customer service category clearly goes to
Fidelity. I feel like it’s fairly obvious where this one is headed at this point but the last
thing I feel is really important to talk about is security. Nowadays every platform is going to have
your standard two factor authentication and biometric recognition but that’s the bare
minimum you’d expect. Robinhood does have the standard SIPC coverage up to $500,000
including $250,000 for cash claims but they do not carry any type of insurance beyond that for their
members. If you have less than $500,000 in your investment account then that doesn’t really matter
but Fidelity does carry excess SIPC insurance all the way up to $1.9 million in uninvested
cash limits and according to Fidelity that is the maximum that is currently available within
the industry. Over the past several years Robinhood has had several data breaches with
the most recent one occurring last year which impacted millions of customers and that coupled
with the lacking ability to talk to a real person definitely concerns me a bit. We could honestly
sit here and compare the fine details of these two platforms to each other for days and while I
strongly believe that platforms like Robinhood do have a purpose and don’t want to discount the
fact that they did help move the industry in an entirely new direction, they simply leave a lot to
be desired across-the-board. Yes Robinhood has an incredibly sleek and modern platform and yes they
have made investing accessible and affordable to the masses when just a few years ago that was not
the case. Add on top of that the fact that I am incredibly grateful that they move the industry
in a commission free direction and overall I do enjoy the Robinhood platform. However when
compared to one of these legacy brokerages, it’s just not even
close and if you’re like me and you’re looking to invest for decades and decades
then you want to make sure that you’re going with a brokerage account that has that proven track
record it isn’t going to throw a wrench into your investing goals years down the road because they
had improper security protocols or lacked features that you need in the future. I’m sure i’ll get
a lot of interesting comments for this one but obviously in today’s comparison I will personally
be going with Fidelity for all of the reasons that we talked about in today’s video. But that is just
my opinion and I understand a lot if you really love Robinhood and
similar to me it may have been one of your first experiences with investing.
So I’d love to know your thoughts on this comparison it down in the comment
section below and if you prefer Fidelity in those old-school brokerages or if you prefer platforms
like Robinhood delight to do everything from your phone. Be sure to check out some of my favorite
financial tools using this link down below the light button the course thank you so much for
your time I really do appreciate it so much take it easy and I’ll see you in the next one!