How Does Fidelity Make Money
Understanding how financial services companies generate revenue can lend insight into their operations and help consumers make more informed decisions. Fidelity Investments, one of the largest financial services firms in the world, employs various strategies to generate income. This article will detail how Fidelity makes money, offering a comprehensive overview of their business model.
Brokerage and Trading Services
One primary revenue stream for Fidelity is its brokerage services, which include trading of stocks, bonds, mutual funds, and ETFs (Exchange-Traded Funds). Here's how they make money in this area:
-
Commissions and Fees: Traditionally, brokers charged commissions on trades. However, with the shift toward commission-free trading, fees have decreased. Fidelity earns from options trading fees, where customers still pay per-contract fees.
-
Margin Lending: Fidelity offers margin accounts where investors can borrow money to purchase securities. The firm earns interest on these loans, contributing significantly to its revenues.
-
Securities Lending: Fidelity lends securities owned by customers to other financial institutions or hedge funds and earns fees in return. This practice helps maintain liquidity in the market and provides a steady income stream.
Asset Management
Fidelity is also a significant player in asset management, managing trillions of dollars through mutual funds and other investment products. Key income sources from asset management include:
-
Management Fees: Fidelity charges management fees as a percentage of assets under management (AUM). These fees can vary depending on the type of fund, with actively managed funds typically having higher fees compared to passive or index funds.
-
Expense Ratios: For actively managed funds, the expense ratio covers the costs involved in managing the fund. Although they have reduced these over the years to remain competitive, it remains a vital revenue component.
Table 1: Comparative Expense Ratios
Fund Type | Average Expense Ratio | Revenue Contribution |
---|---|---|
Actively Managed Funds | 0.50% - 1.00% | High |
Index Funds | 0.05% - 0.20% | Moderate |
Financial Planning and Advisory
Fidelity offers financial planning and advisory services tailored to meet individual investing goals. Their revenues here are generated through:
-
Advisory Fees: These are percentages of the assets managed or flat fees for access to professional financial advice. Services can range from robo-advisory platforms to personal financial advisors.
-
Relationship Fees: For clients who require ongoing advice and portfolio management, Fidelity charges relationship fees that provide tailored strategies and regular consultations.
Retirement Services
As a prominent provider of retirement plans, Fidelity generates income from:
-
Recordkeeping and Administrative Fees: Fees are charged to businesses for maintaining employee retirement plans such as 401(k)s. These fees cover administrative tasks, compliance, and other management costs.
-
Plan Consulting Services: Fidelity also offers consultation services for companies to set up and optimize retirement programs, charging fees for these insights and structured recommendations.
Cash Management Services
Fidelity enhances its revenue through cash management solutions, including:
-
Interest Spread from Cash Balances: Fidelity earns by holding customer cash balances and investing them at higher interest rates. The difference between what they earn and what they pay out to clients is called the interest spread.
-
Banking Services Fees: Although not a traditional bank, Fidelity offers banking-like services, including checking accounts, for which they may charge various fees.
Technology and Platform Solutions
With a strong emphasis on technology, Fidelity also offers platform services that include:
-
Platform Fees from Investment Software: They provide technology platforms to institutional investors and other financial firms. These platforms can include APIs, trading software, or data solutions, all of which carry associated fees.
-
R&D and Technology Initiatives: While Fidelity invests heavily in research and development to enhance its platform, this translates into innovative new products and services that, once commercialized, add to their bottom line.
Real Estate and Other Investments
Fidelity Ventures and Real Estate also contribute to their income:
-
Real Estate Income: Fidelity holds substantial real estate assets. Profit is generated from leasing these spaces or overall asset appreciation, contributing a steady revenue stream.
-
Venture Capital Investments: Through Fidelity Ventures, they invest in startups or emerging businesses. Profits are realized when these investments are sold or when the projects yield dividends.
Common Questions & Misconceptions
1. Is Fidelity dependent solely on trading fees?
No, while trading fees used to be central to earnings, Fidelity has diversified its income across asset management, financial advisory, and retirement services to build a balanced revenue portfolio.
2. Are Fidelity's mutual funds the main source of income?
Although Fidelity's mutual funds are significant due to their management fees and AUM, their comprehensive suite of services ensures income from varied avenues, diminishing dependency on one category.
Strategic Diversification and Sustainability
Fidelity’s ability to innovate and diversify ensures long-term sustainability and growth. They have continually adapted to market changes, shifting from traditional fee structures to more value-added services.
To remain competitive and profitable, Fidelity leverages technological advancements, rolling out mobile apps and platforms that enhance customer experience, ensuring client retention and attracting new users.
Exploring Fidelity's Business Model Further
For a deeper dive into how Fidelity's model adapts to economic trends, considers their latest fiscal reports, or financial industry analyses, you might explore well-reputed financial news websites or Fidelity's own financial publications.
Understanding Fidelity's multifaceted revenue strategy can guide consumers and investors in making informed decisions, aligning their choices with their financial goals. By considering how professional firms like Fidelity generate income, you can better appreciate the value-added services offered and employ them to your benefit.

Related Topics
- are fidelity advisors fiduciaries
- are fidelity financial advisors worth it
- are there foreign transaction feels with fidelity debit card
- are you allowed to day trade on fidelity
- can a non us citizen open a fidelity account
- can i buy bitcoin on fidelity
- can i buy crypto on fidelity
- can i buy foreign currency at fidelity
- can i convert fcash to money market fidelity
- can i find fidelity account with joint account
- can i fund fidelity account with joint account
- can i fund fidelity account with joint account reddit
- can i fund fidelity acount with joint account
- can i get a debit card for fidelity investment account
- can i invest in clearview ai through fidelity
- can i move my roth ira from tiaa to fidelity
- can i rollover my ally roth ira to fidelity
- can i sell cds on fidelity
- can i send an ach from fidelity cash management account
- can i use fidelity debit cardregular use
- can permanent residents open a fidelity account
- can you buy bitcoin on fidelity
- can you buy crypto on fidelity
- can you buy doge on fidelity
- can you buy fractional shares on fidelity
- can you buy ibit on fidelity
- can you day trade on fidelity
- can you do a buy stop on fidelity
- can't link fidelity to marcus
- do you have to call fidelity to exercise stocks