How does Fidelity makes money, if I own all Vanguard funds or ETFs
- LiveSimple
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How does Fidelity makes money, if I own all Vanguard funds or ETFs
(Yes feeling lazy to google or easy to type or helps others as well )
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
Invest when you have the money, sell when you need the money, for real life expenses...
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
May be they can loan it to those who are shorting.
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
They do charge substantial transaction fees. It probably doesn't cost too much to do basic record keeping for an investor who never trades. (It probably costs them more to keep records for those who trade a lot, but those people are charged more transaction fees).
They may loose a small amount of money on people who buy and hold for very long periods without making transactions. They may choose to eat that cost and operate at a loss for buy and hold investors in order to avoid either putting in complex rules/charges or in hopes that the buy and hold investors eventually have more transactions.
I think Fidelity may operate at a very slight loss (or with only marginal profit) for their index funds. Again, these may be sort of like "loss leaders" as they're hoping those who buy index funds also decide to buy Fidelity active.
If this is the case, one can take advantage of this opportunity to buy services and index funds at slightly below cost - Vanguard operates at cost. Just stay the course forever and do not get tempted to do what Fidelity probably hopes its indexers/buy&hold folks do - trade frequently and/or buy into expensive products.
They may loose a small amount of money on people who buy and hold for very long periods without making transactions. They may choose to eat that cost and operate at a loss for buy and hold investors in order to avoid either putting in complex rules/charges or in hopes that the buy and hold investors eventually have more transactions.
I think Fidelity may operate at a very slight loss (or with only marginal profit) for their index funds. Again, these may be sort of like "loss leaders" as they're hoping those who buy index funds also decide to buy Fidelity active.
If this is the case, one can take advantage of this opportunity to buy services and index funds at slightly below cost - Vanguard operates at cost. Just stay the course forever and do not get tempted to do what Fidelity probably hopes its indexers/buy&hold folks do - trade frequently and/or buy into expensive products.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
- Lieutenant.Columbo
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
why do you have your Vanguard holdings at Fidelity?LiveSimple wrote:if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
A business does not make money from every customer. But they do have to offer what customers want. So they offer Vanguard hoping that some customers will also trade enough or buy stuff that does pay them on some form.
So they may not make much money from you, but others make up for that. Some of the "others" might be people who hear that you are very happy at Fido.
So they may not make much money from you, but others make up for that. Some of the "others" might be people who hear that you are very happy at Fido.
Link to Asking Portfolio Questions
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Why not? I only have a fidelity account and I have VII, VTI, VOO and a couple of others - along with Fidelity equivalents.Lieutenant.Columbo wrote:why do you have your Vanguard holdings at Fidelity?LiveSimple wrote:if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Fidelity has you in the door. Now they just hope eventually you will turn towards a revenue generating product. This is why these brokerages always push their active trading platforms, options trading technology, financial advisors, ect ect. They figure eventually you will go to the dark side.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
That would be the incentive. I'm pretty sure they don't make any money if all you do is store Vanguard funds there.alwayshedge wrote:Fidelity has you in the door. Now they just hope eventually you will turn towards a revenue generating product. This is why these brokerages always push their active trading platforms, options trading technology, financial advisors, ect ect. They figure eventually you will go to the dark side.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Um, not the same scenario at allrebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
They also know that you will not be managing your account forever. Some day, you will be incapable of managing the account and someone else will manage it for you (or you will be incapable and are managing it anyway). Alternatively, your heirs may be managing the account. Most people are not as astute about investing costs as Bogleheads are. So, if they don't ensnare you into higher cost products, perhaps they can catch your successor.alwayshedge wrote:Fidelity has you in the door. Now they just hope eventually you will turn towards a revenue generating product. This is why these brokerages always push their active trading platforms, options trading technology, financial advisors, ect ect. They figure eventually you will go to the dark side.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
They collect interchange fees on every transaction you make.rebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
I have a Fidelity account with a Vanguard ETF in it. I have never made a transaction in that account: The shares were transferred into the account in-kind in order to get a frequent flyer mileage bonus. Yes, I get dividends which are sent directly to my external checking account. When I am ready to sell these shares, I will transfer then in-kind to a non-Fidelity account.
I just think Fidelity is happy to count my shares in their total assets of customers, so that they are not completely scooped by Vanguard and Blackrock.
I just think Fidelity is happy to count my shares in their total assets of customers, so that they are not completely scooped by Vanguard and Blackrock.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
At one point in time some investors had problems with repeated transfers of funds into Fidelity as they were considered "not qualified" for the bonus. I had the experience of getting a conversation about that escalated to a couple of levels up from the phone line. It appeared the deciding question was "How much trading are you going to do?" I remained "not qualified" though sometime later that didn't seem to be a problem anymore.
- triceratop
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
How does Fidelity make money? How does Merrill Edge / Bank of America make money off of the any of the Bogleheads who invest there with commission-free trades, obtain excellent signup bonuses, and use credit card rewards / signup bonuses? (I'll make $675 just for opening up accounts with them). And they pay no interest because they carry no balance.
They don't. But they have no way of filtering out such people, either (or doing so would cost them too much money), so they continue to offer their products, knowing that enough people who sign up will make them money.
They don't. But they have no way of filtering out such people, either (or doing so would cost them too much money), so they continue to offer their products, knowing that enough people who sign up will make them money.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
- Phineas J. Whoopee
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
I don't know specifically about privately-held Fidelity with few disclosure requirements, but there are many ways financial intermediaries make money that don't show up as line item charges to their customers. This is just off the top of my head. No doubt there are more.
They lend out your securities and keep both the fees and the interest from the collateral.
They provide research and other services in return for soft dollars.
Acting as dealers they trade their own accounts and charge others spreads.
Sometimes when they send you information they're charging others for access to you.
Even if it seems like you always get interest on your cash, that's day by day. Cash can be, and is, lent for mere hours at a time at interest, which they keep without mentioning it to you.
I'm not accusing anybody of being a crook, just discussing some of the ways broker/dealers and others generate revenue that aren't immediately apparent.
PJW
They lend out your securities and keep both the fees and the interest from the collateral.
They provide research and other services in return for soft dollars.
Acting as dealers they trade their own accounts and charge others spreads.
Sometimes when they send you information they're charging others for access to you.
Even if it seems like you always get interest on your cash, that's day by day. Cash can be, and is, lent for mere hours at a time at interest, which they keep without mentioning it to you.
I'm not accusing anybody of being a crook, just discussing some of the ways broker/dealers and others generate revenue that aren't immediately apparent.
PJW
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Um - sure it is - they both make money off of others. triceratop said it above perfectly.Silverado wrote:Um, not the same scenario at allrebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
- triceratop
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
At the same time Eric76's point is well-taken, though if this reference is correct they don't break even for the highest tiers.rebellovw wrote:Um - sure it is - they both make money off of others. triceratop said it above perfectly.Silverado wrote:Um, not the same scenario at allrebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
The same way that E Trade and AmeriTrade make money... Executing trades. They probably also figure that a certain percentage of DIIY investors will opt for their expensive asset management services, as well as sales of commission-based products.LiveSimple wrote:(Yes feeling lazy to google or easy to type or helps others as well )
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
They probably take a small loss on you. However, for every investor like you they probably hook 20 that buy and sell all the time, and others that are lured into investing in Fidelity funds thinking that they might "beat the market".
That said, why do you have a Fidelity account if all your funds are at Vanguard? That makes even less sense than Fidelity's business model
That said, why do you have a Fidelity account if all your funds are at Vanguard? That makes even less sense than Fidelity's business model
- Phineas J. Whoopee
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
They charge the merchants transaction processing fees in excess of the amount they rebate to you.rebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
PJW
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Just to take a very comparable company, Charles Schwab has a net profit margin of 25%. That's pretty good. As such, I don't feel any need to worry about how they are making money off of me. They will still be around next year and they don't need jack up costs to be very profitable.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
One thing I know is they are not getting any money from me that I could otherwise have gotten for myself or avoided spending. Due to bonus's they have actually given me some money.
- triceratop
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Not always, as the link above shows. BoA is losing money on those cards on some customers, even including transaction fees.Phineas J. Whoopee wrote:They charge the merchants transaction processing fees in excess of the amount they rebate to you.rebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
PJW
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Fidelity might try to turn heirs into better paying customers.
- LiveSimple
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Thanks a lot.
I got the answers I was looking for, seems like they lend the securities and make money and use the assets for their calculations to show their assets under management.
Why Fidelity, we are between Vangaurd and Fidelity, due to work 401 K reasons and rolled them into IRA, also easy to keep his and her accounts as well.
Thinking through, if we do consolidate, what to do for various reasons.
One reason is that the heirs can walk into an Fidelity office, that is where the managed services may come in, if the heirs do not want to manage themselves.
I got the answers I was looking for, seems like they lend the securities and make money and use the assets for their calculations to show their assets under management.
Why Fidelity, we are between Vangaurd and Fidelity, due to work 401 K reasons and rolled them into IRA, also easy to keep his and her accounts as well.
Thinking through, if we do consolidate, what to do for various reasons.
One reason is that the heirs can walk into an Fidelity office, that is where the managed services may come in, if the heirs do not want to manage themselves.
Invest when you have the money, sell when you need the money, for real life expenses...
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
LiveSimple wrote:Thanks a lot.
I got the answers I was looking for, seems like they lend the securities and make money and use the assets for their calculations to show their assets under management.
I think a fund can engage in securities lending and a broker can lend stocks. I am not sure you can lend an ETF and nearly certain you can't lend a mutual fund. But someone can explain that. It is true they can use any cash you leave lying around, and assets under management look good.
Why Fidelity, we are between Vangaurd and Fidelity, due to work 401 K reasons and rolled them into IRA, also easy to keep his and her accounts as well.
Thinking through, if we do consolidate, what to do for various reasons.
Not consolidating has the advantage of not having everything subject to an operational glitch all at the same time.
One reason is that the heirs can walk into an Fidelity office, that is where the managed services may come in, if the heirs do not want to manage themselves.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
My reaction is that we should be good customers too. I am a Fidelity customer and in my Fidelity account, I have mostly Fidelity products. My holdings there are mostly index funds. To me it seems odd that you would go to Fidelity to buy Vanguard products, why not just go to Vanguard? If Fidelity makes a buck off of you, it isn't the end of the world. That is how capitalism works. Of course, one shouldn't pay needless fees but on the other hand if you want some service, you have to pay something for it.LiveSimple wrote:(Yes feeling lazy to google or easy to type or helps others as well )
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
I am frugal and I like good deals like anyone else but I do have concerns about the race to the bottom. I think of Walmart and how many people literally shopped themselves out of their own jobs. There is a point where the cost of rock bottom prices is too high. People have to make a living. Walmart has done great things for the consumer but I also know how tough they are on their suppliers. No wonder why it seems that everything has to be made in China. It seems that a lot of companies operate with skeleton crews which is great as long as everything goes exactly right. If there is a problem, the people who could fix it were long ago laid off.
If you have a Fidelity account and buy Vanguard products, Fidelity will charge transaction fees and whatever other fees are associated with your account. I suspect the fees would be relatively low and if you held the Vanguard funds and ETFs for long periods of time that you would not be a profitable customer. What they are hoping is that you will do some trading.
A fool and his money are good for business.
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
If I may be permitted to quote some examples from the link:triceratop wrote:Not always, as the link above shows. BoA is losing money on those cards on some customers, even including transaction fees.Phineas J. Whoopee wrote:They charge the merchants transaction processing fees in excess of the amount they rebate to you.rebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
PJW
Visa Credit Retail Swipe:
Visa CPS Retail: 1.510% + $0.10
Visa Rewards Traditional: 1.650% + $0.10
Visa Rewards Signature: $2.300% + $0.10
Visa Rewards Signature Preferred: 2.100% + $0.10
Visa Corporate: 2.100% + $0.10
Visa Business: 2.200% + $0.10
Visa Purchasing: 2.400% + $0.10
The same merchant pays a different interchange fee for different customers who use Visa credit cards to pay the same amount for the same merchandise on the same day, depending on the terms and conditions between the issuer and the cardholder. The consistent pattern is the better the customer's credit the more the merchant pays, and clearly it's enough to fund point and cash rewards while still leaving some room for interchange profit.
Debit cards are more tightly regulated, as the numbers in the link reflect. Naturally debit cards are tied to deposit accounts, on which depository institutions have a variety of methods from which to profit.
It is possible for a business to lose money on some specific customer, but I don't believe Visa and Mastercard are in the business of losing day-by-day money on very many. Of course the individual issuers, which pay hefty license fees in return for offering the brand name cards, fees not discussed in the link, predict and account for an expected level of defaults.
PJW
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
This is exactly what Fidelity is looking for. You may not be very profitable for them. However, if they can get their hands on a naïve heir, the smiling, nicely dressed "financial advisor" will get them all set up in a hurry. Fidelity has some very expensive products and fees that they would like to convince a trusting customer to use.LiveSimple wrote:One reason is that the heirs can walk into an Fidelity office, that is where the managed services may come in, if the heirs do not want to manage themselves.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
I believe that only works for ETFs, not mutual funds.amitb00 wrote:May be they can loan it to those who are shorting.
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Hard to make money off bogleheads who get a big bonus to transfer an account, buy and hold index funds, trade infrequently at $5 a trade, apply for a credit card to get 50-100k miles then cancel the card after a year. Guilty as charged!
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Not sure how this works in the computer era, but way back when brokerage back office work was done by humans, brokerages were paid a small percentage for the administrative tasks they took on, eg., paying dividends to customers on behalf of corporations and changing ownership of shares when they were bought and sold (brokerage acting as transfer agent).Phineas J. Whoopee wrote:I don't know specifically about privately-held Fidelity with few disclosure requirements, but there are many ways financial intermediaries make money that don't show up as line item charges to their customers. This is just off the top of my head. No doubt there are more.
They lend out your securities and keep both the fees and the interest from the collateral.
They provide research and other services in return for soft dollars.
Acting as dealers they trade their own accounts and charge others spreads.
Sometimes when they send you information they're charging others for access to you.
Even if it seems like you always get interest on your cash, that's day by day. Cash can be, and is, lent for mere hours at a time at interest, which they keep without mentioning it to you.
I'm not accusing anybody of being a crook, just discussing some of the ways broker/dealers and others generate revenue that aren't immediately apparent.PJW
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Is that how companies like Ameritrade, Fidelity, etc. are able to offer commission free ETFs?madbrain wrote:I believe that only works for ETFs, not mutual funds.amitb00 wrote:May be they can loan it to those who are shorting.
- triceratop
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Indeed, I believe that is fully consistent with what I posted. They lose money on some customers even after interchange fees.Phineas J. Whoopee wrote:If I may be permitted to quote some examples from the link:triceratop wrote:Not always, as the link above shows. BoA is losing money on those cards on some customers, even including transaction fees.Phineas J. Whoopee wrote:They charge the merchants transaction processing fees in excess of the amount they rebate to you.rebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
PJW
Visa Credit Retail Swipe:
Visa CPS Retail: 1.510% + $0.10
Visa Rewards Traditional: 1.650% + $0.10
Visa Rewards Signature: $2.300% + $0.10
Visa Rewards Signature Preferred: 2.100% + $0.10
Visa Corporate: 2.100% + $0.10
Visa Business: 2.200% + $0.10
Visa Purchasing: 2.400% + $0.10
The same merchant pays a different interchange fee for different customers who use Visa credit cards to pay the same amount for the same merchandise on the same day, depending on the terms and conditions between the issuer and the cardholder. The consistent pattern is the better the customer's credit the more the merchant pays, and clearly it's enough to fund point and cash rewards while still leaving some room for interchange profit.
Debit cards are more tightly regulated, as the numbers in the link reflect. Naturally debit cards are tied to deposit accounts, on which depository institutions have a variety of methods from which to profit.
It is possible for a business to lose money on some specific customer, but I don't believe Visa and Mastercard are in the business of losing day-by-day money on very many. Of course the individual issuers, which pay hefty license fees in return for offering the brand name cards, fees not discussed in the link, predict and account for an expected level of defaults.
PJW
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
rebellovw wrote:Why not? I only have a fidelity account and I have VII, VTI, VOO and a couple of others - along with Fidelity equivalents.Lieutenant.Columbo wrote:why do you have your Vanguard holdings at Fidelity?LiveSimple wrote:if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs
Same here. Imho, Fidelity is a superior financial services company compared to Vanguard. I like Vanguard products and so 90% of my portfolio is comprised of Vanguard ETFs in my Fido accounts. Fidelity does offer many low cost index funds now too. If I was just starting out, I'd consider those.
I like Fidelity so much that I use their cash management account as my primary direct deposit, online checking and bill pay. I use the Fido cash back credit card too. That's how they make money off of me. To buy or sell stocks/ETFs, is only $4.95 now and many iShares ETFs are free; so transaction costs are pretty minimal.
I closed my Vanguard accounts several years ago and consolidated at Fidelity. Not sure if things have changed, but back then Fidelity's website put Vanguard's to shame.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Yes. Also, I believe the fee also has to be shared with others involved in the processing route. This gives an example.triceratop wrote:Indeed, I believe that is fully consistent with what I posted. They lose money on some customers even after interchange fees.Phineas J. Whoopee wrote:If I may be permitted to quote some examples from the link:triceratop wrote:Not always, as the link above shows. BoA is losing money on those cards on some customers, even including transaction fees.Phineas J. Whoopee wrote:They charge the merchants transaction processing fees in excess of the amount they rebate to you.rebellovw wrote:How do credit card companies make money when they offer 2% cash back and you always pay your full bill - meaning no interest?
PJW
Visa Credit Retail Swipe:
Visa CPS Retail: 1.510% + $0.10
Visa Rewards Traditional: 1.650% + $0.10
Visa Rewards Signature: $2.300% + $0.10
Visa Rewards Signature Preferred: 2.100% + $0.10
Visa Corporate: 2.100% + $0.10
Visa Business: 2.200% + $0.10
Visa Purchasing: 2.400% + $0.10
The same merchant pays a different interchange fee for different customers who use Visa credit cards to pay the same amount for the same merchandise on the same day, depending on the terms and conditions between the issuer and the cardholder. The consistent pattern is the better the customer's credit the more the merchant pays, and clearly it's enough to fund point and cash rewards while still leaving some room for interchange profit.
Debit cards are more tightly regulated, as the numbers in the link reflect. Naturally debit cards are tied to deposit accounts, on which depository institutions have a variety of methods from which to profit.
It is possible for a business to lose money on some specific customer, but I don't believe Visa and Mastercard are in the business of losing day-by-day money on very many. Of course the individual issuers, which pay hefty license fees in return for offering the brand name cards, fees not discussed in the link, predict and account for an expected level of defaults.
PJW
https://gendal.me/2014/08/09/a-simple-e ... -industry/
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
A few bad experiences with Vanguard customer service was enough to cause me to consolidate at Fidelity years ago. I hold mostly Vanguard and Schwab ETFs there. Fidelity spends more money sending statements to me than they make from $5 a trade.nedsaid wrote:My reaction is that we should be good customers too. I am a Fidelity customer and in my Fidelity account, I have mostly Fidelity products. My holdings there are mostly index funds. To me it seems odd that you would go to Fidelity to buy Vanguard products, why not just go to Vanguard?
But they do make decent money off the .3% expense ratio I'm paying on holdings in FZDXX, their premium money market.
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Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Fidelity provides a lot of other financial services and products that you may pay for if you use them.LiveSimple wrote:(Yes feeling lazy to google or easy to type or helps others as well )
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
https://www.fidelity.com/why-fidelity/pricing-fees
https://www.fidelity.com/trading/commis ... rgin-rates
$4.95 per trade for a Vanguard ETF at Fidelity, $75 per a purchase trade for a Vanguard mutual fund (minimum $3000 trade), no cost for redemption. That contrasts with $0 for an iShare trade or the Fidelity index funds (and the Fidelity ETF's). The $4.95 trading fee for the Vanguard ETF is not so bad, but we'd go with iShares and or Fidelity funds if holding, re-investing dividends, re-balancing, etc... at Fidelity.
From the Wiki..https://www.bogleheads.org/wiki/Three-fund_portfolio
Fidelity
With Fidelity, for example, you could construct a three-fund portfolio using: [note 3]
Fidelity Total Market Index Fund Investor Class (FSTMX) or Premium Class (FSTVX)
Fidelity Total International Index Fund Investor Class (FTIGX) or Premium Class (FTIPX)
Fidelity U. S. Bond Index Fund Investor Class (FBIDX) or Premium Class (FSITX)
note 3: Investor Class funds have a $2500 minimum and higher expense ratios. Premium Class funds have a $10,000 minimum and lower expense ratios.
When using iShares ETFs, investors can build a three-fund portfolio using:
iShares Core S&P Total Market ETF (ITOT)
iShares Core MSCI Total International Stock ETF (IXUS)
iShares Core Total U.S. Bond Market ETF (AGG)
When investing in Vanguard ETFs, investors can create a three-fund portfolio using: [note 10]
Vanguard Total Stock ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market ETF (BND)
note 10: Investors using The Vanguard FTSE All-World ex-US ETF for international stock allocation need to recall that the fund does not provide exposure to small cap international stocks. Investors wanting to include small cap international stocks in the portfolio can add the Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) .
"Save like a pessimist, invest like an optimist." - Morgan Housel |
"Pick a bushel, save a peck!" - Grandpa
- Earl Lemongrab
- Posts: 7270
- Joined: Tue Jun 10, 2014 1:14 am
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
I'm another that has received a fair amount of bonus money from Fidelity over the years (unfortunately they don't have any offers currently). The only products I buy when I'm there are the commission-free iShares ETFs. Possibly some transfer fees, but those always get paid by someone else.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Short answer: VG customer serviceLieutenant.Columbo wrote:why do you have your Vanguard holdings at Fidelity?LiveSimple wrote:if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
FYI, I used to work on the margin desk.dbr wrote:LiveSimple wrote:Thanks a lot.
I got the answers I was looking for, seems like they lend the securities and make money and use the assets for their calculations to show their assets under management.
I think a fund can engage in securities lending and a broker can lend stocks. I am not sure you can lend an ETF and nearly certain you can't lend a mutual fund. But someone can explain that. It is true they can use any cash you leave lying around, and assets under management look good.
Why Fidelity, we are between Vangaurd and Fidelity, due to work 401 K reasons and rolled them into IRA, also easy to keep his and her accounts as well.
Thinking through, if we do consolidate, what to do for various reasons.
Not consolidating has the advantage of not having everything subject to an operational glitch all at the same time.
Stock Loan, securities lending, it does not matter, it is a stock hypothecation loan.
A broker can only lend out stock worth 130% of your margin loan. 2 things here. If you don't have a margin loan they can't lend out your stock. A broker will charge you a couple of percent for the margin loan, they will earn about .02% from lending out your securities. So no, Fidelity is not making much money from you off of stock loans.
Brokers can lend out both ETFs and mutual funds. ETFs which have futures and options are in high demand. There are cool arbitrage tricks one can do with borrowed shares. While mutual funds can be lent out who in their right mind would want to borrow them? Have you every tried to short a mutual fund? I saw somebody do it. It was painful.
Lastly, I am not sure what you mean by "use any cash you leave lying around" but they can't do much. The choice is either a money market fund or a bank account. Margins here are thin. They are one of the least profitable products a brokerage has.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Thanks. That is very informative. Possibly the most relevant comment is they can't lend if you don't have a margin account. Also this is different from stock lending by a mutual fund itself.alex_686 wrote:FYI, I used to work on the margin desk.dbr wrote:LiveSimple wrote:Thanks a lot.
I got the answers I was looking for, seems like they lend the securities and make money and use the assets for their calculations to show their assets under management.
I think a fund can engage in securities lending and a broker can lend stocks. I am not sure you can lend an ETF and nearly certain you can't lend a mutual fund. But someone can explain that. It is true they can use any cash you leave lying around, and assets under management look good.
Why Fidelity, we are between Vangaurd and Fidelity, due to work 401 K reasons and rolled them into IRA, also easy to keep his and her accounts as well.
Thinking through, if we do consolidate, what to do for various reasons.
Not consolidating has the advantage of not having everything subject to an operational glitch all at the same time.
Stock Loan, securities lending, it does not matter, it is a stock hypothecation loan.
A broker can only lend out stock worth 130% of your margin loan. 2 things here. If you don't have a margin loan they can't lend out your stock. A broker will charge you a couple of percent for the margin loan, they will earn about .02% from lending out your securities. So no, Fidelity is not making much money from you off of stock loans.
Brokers can lend out both ETFs and mutual funds. ETFs which have futures and options are in high demand. There are cool arbitrage tricks one can do with borrowed shares. While mutual funds can be lent out who in their right mind would want to borrow them? Have you every tried to short a mutual fund? I saw somebody do it. It was painful.
Lastly, I am not sure what you mean by "use any cash you leave lying around" but they can't do much. The choice is either a money market fund or a bank account. Margins here are thin. They are one of the least profitable products a brokerage has.
- dodecahedron
- Posts: 6563
- Joined: Tue Nov 12, 2013 11:28 am
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Every day my eyeballs get bombarded with ads that companies (financial services and others) are paying for, almost none of which actually change my behavior in favor of profitable transactions with those companies. How do the companies make money off those ads? Obviously, there is some percentage of eyeballs that do respond to those ads and hitting ad-impervious folks like me is just a collateral cost of reaching those more responsive folks.
I see incentive bonuses as simply a different kind of promotional cost. It pays off for some of those it reaches but not others.
I also agree about the bragging rights argument too. It may help Fidelity win 401(k) provider contracts if they can say to employers that a huge number of folks have accounts at Fidelity (regardless of what those accounts actually hold.)
I see incentive bonuses as simply a different kind of promotional cost. It pays off for some of those it reaches but not others.
I also agree about the bragging rights argument too. It may help Fidelity win 401(k) provider contracts if they can say to employers that a huge number of folks have accounts at Fidelity (regardless of what those accounts actually hold.)
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
I do the same. I also use a whole raft of other Fidelity services including credit and debit cards, Charitable Donor Funds etc. In the past I've had 401Ks there. Before I discovered passive investing I owned some of their actively managed accounts.LiveSimple wrote:(Yes feeling lazy to google or easy to type or helps others as well )
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
I like to think we have had a mutually beneficial relationship over the last 38 years.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Yes, I started at Fidelity through options accounts held there by my employer.Ged wrote:I do the same. I also use a whole raft of other Fidelity services including credit and debit cards, Charitable Donor Funds etc. In the past I've had 401Ks there. Before I discovered passive investing I owned some of their actively managed accounts.LiveSimple wrote:(Yes feeling lazy to google or easy to type or helps others as well )
if I have Fidelity account, how does, Fidelity, makes money when I hold all Vanguard funds and ETFs, in a buy and hold fashion, with minimal transaction fees.
I like to think we have had a mutually beneficial relationship over the last 38 years.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
I am not sure what you mean by this. The mechanics and channels are the same.dbr wrote:Also this is different from stock lending by a mutual fund itself.
Are you referring that the rules are slightly different for individual investors? This dates back to the 50s and 60s. Firms would co-mingle client's stock, lend them out, the borrowing party would fail, and the broker could not replace the stock. From this sprung the 130% rule, SPIC, and some SEC audit guidelines for brokerage operations.
Some brokers will let you lend out your shares without a margin loan. They will then split the securities lending fee with you. However this is rare. Most people who have in demand securities - where the fees for lending them out are decent - really don't want to lend them out.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
- whodidntante
- Posts: 13090
- Joined: Thu Jan 21, 2016 10:11 pm
- Location: outside the echo chamber
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Not every customer is profitable.
Re: How does Fidelity makes money, if I own all Vanguard funds or ETFs
Isn't it true that a mutual fund such as VTSMX might loan shares of the stocks held by the fund even though I, as an owner of shares of VTSMX and not being in a margin account, would not see my shares of VTSMX loaned. That is what I am referring to.alex_686 wrote:I am not sure what you mean by this. The mechanics and channels are the same.dbr wrote:Also this is different from stock lending by a mutual fund itself.
Are you referring that the rules are slightly different for individual investors? This dates back to the 50s and 60s. Firms would co-mingle client's stock, lend them out, the borrowing party would fail, and the broker could not replace the stock. From this sprung the 130% rule, SPIC, and some SEC audit guidelines for brokerage operations.
Some brokers will let you lend out your shares without a margin loan. They will then split the securities lending fee with you. However this is rare. Most people who have in demand securities - where the fees for lending them out are decent - really don't want to lend them out.