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Fidelity vs. Ameritrade: brokerages compared

Introduction

Since I’ve been using both Fidelity and Ameritrade (via Datek which Ameritrade bought out) for quite some time, I thought I might share my experiences with the world and help people choose the better brokerage for their needs.

Brokerage commissions

This is the biggest difference between Ameritrade and Fidelity, and Ameritrade wins hands down. Fidelity is expensive, and the price just keeps going up and up.

At Ameritrade, the commission is only $10.99. That’s it. Limit orders are the same price as market orders, it applies no matter how many shares are involved in the transaction, and even if you have only a small amount of money in your account, the commission is only $10.99.

At Fidelity, the commission is $29.95. Ouch. And it gets worse. Limit orders cost an additional $5. And even worse than that, the price only applies to trades up to 1,000 shares. You pay an addition $0.02/share above 1,000 shares, that’s $20 for every additional 1,000 shares. You can wind up getting reamed up the ass if you trade thousands of shares.

Fidelity is now advertising $8 commissions, but you only qualify if you have $1 million in your account, and you still have to pay $0.005/share for trades in excess of 1,000 shares. A little minnow with the bare minimum in his account pays less in commissions for a 2,000 share trade than a big whale with $1 million invested at Fidelity.

You also qualify for the “Gold Level” commissions if you have at least $30,000 invested (pretty easy) and have more than 120 trades in a twelve month period (that’s a lot harder). You’re going to get reamed on the commissions building yourself up to the Gold level. And when you finally get there, it’s still more expensive than Ameritrade.

Tax reporting

Fidelity’s website allows you to print a report showing all the information you need to fill out your annual Schedule D. This is a huge benefit for Fidelity. Why doesn’t Ameritrade add this feature?

History

Fidelity used to have a report where you could view all of your transactions during any time period and select types of transactions as well. A very useful report, but it has disappeared from the website. What a shame.

Customer service

I would hope that Fidelity’s customer service would be three time’s better than Ameritrade’s, because that’s how much more money you pay. But I have no way of knowing. I haven’t called either brokerage on the phone in a long time.

Last time I called Ameritrade was back in 2000 and it was Datek back then. Datek answered the phone quickly and answered my question. I recall being surprised that I received such good service considering how little money they charged.

Bill paying service

This is a useful feature of the Fidelity website that Ameritrade doesn’t offer. I use it to pay all my bills.

The problem is that it used to be free, but now Fidelity is charging me $6.95/month for it. This has been my experience with Fidelity over the last several years, the prices just keep going up. Ameritrade raised the commission by $1, but that’s nothing compared to how Fidelity just keeps charging for more and more stuff.

Considering that my bank offers bill paying for free, I really ought to stop using Fidelity and save myself $83.40/year, but I’m too lazy to switch.

Nifty real time tools

Once upon a time I saw Fidelity’s NASDAQ Level II quotes, but that was when I traded more actively and when you needed less trades per year to qualify. You have to qualify for the Gold commission schedule to get the Level II quotes. (You will notice that with Fidelity, the trend is for everything to get worse.)

Ameritrade, on the other hand, has some very good real time tools that everyone can use. For free you get a real time Streamer where you can track a bunch of stocks in real time. And there’s a useful last sale window which allows you to track a single stock and see every time it trades. It’s very useful, but too bad you can only track one stock at a time.

For only $9.99 a month you can buy Level II quotes. It’s worth the $9.99 if you’re going to be trading a lot of NASDAQ stocks during the month, because it gives you a much better view of what the market looks like. It may cost money, but this is a feature that Fidelity doesn’t offer at all unless you’ve made 120 trades in a year. Considering how much money it costs for commissions at Fidelity, it actually costs a lot less money to pay for the Level II quotes at Ameritrade.

Order Routing

Fidelity routes all of your NASDAQ orders to its preferred market maker. Ameritrade, on the other hand, gives you a lot more choices with regards to how you want your order routed. I always let Ameritrade auto route my orders, but some experienced traders may find it preferable to override the default. (Auto routed orders used to go to the Island when my account was owned by Datek. Now I presume they go to INET because INET is the result of a merger between the Island and another ECN, but I haven’t tested this since 2003.)

Multiple accounts

If you have more than one account, Fidelity links them together and you can easily switch between accounts with one login. This is very useful if you have both a retirement account and a regular account. At Ameritrade they are treated as separate accounts, each with their own separate login.

Options

Fidelity won’t let me trade them. They don’t think I’m qualified or some nonsense like that. At Ameritrade I did buy options once and lost 100% of my investment, but the commissions were cheap!

Pink Sheet stocks

Both Ameritrade and Fidelity allow you to trade these stocks. I mention this because once upon a time, Datek didn’t allow trading in Bulletin Board and Pink Sheet stocks.

Because these stocks trade at such low prices, you usually wind up buying thousands of shares at a time, so you get ripped off on the commissions with Fidelity because Fidelity charges you extra on trades larger than 1,000 shares.

And the conclusion…

If you haven’t already figured it out, I highly recommend Ameritrade over Fidelity. Not only are the commissions a lot lower, but you also get access to real time tools like the Streamer and NASDAQ Level II quotes.

The only benefits of Fidelity are tax reporting and the way that multiple accounts are linked.

posted Tuesday, July 27, 2004