Millions of new investors have signed up for stock-trading accounts this year, inspired by the downtime during the Covid-19 crisis and the volatility in the market. While the startup Robinhood has gotten much of the attention for its big account growth, some older stalwarts also saw impressive growth.
In particular, Fidelity just released data showing that it has had a big year. The financial giant said it added 1.17 million accounts in the second quarter. Combined with first-quarter numbers, Fidelity added 2.26 million accounts. TD Ameritrade Holdling (ticker: AMTD) led the publicly traded brokers with 1.27 million new accounts. Robinhood, which is privately held, said in May that it had added 3 million accounts in 2020 to reach 13 million, but has not released further quarterly data.
Vanguard, another major privately held broker, did not release numbers but a spokesperson wrote to Barron’s that “Vanguard has experienced record growth in retail accounts this year.”
Fidelity is also seeing an uptick in trading volume on its platform. Equity trading more than doubled year over year to 2.3 million trades per day on average in the second quarter. The company’s assets under administration also rose 8% year over year to $8.3 trillion during the quarter. Discretionary assets were up 15%.
The company also added more than 2,000 financial consultants, technology associates, licensed representatives, and customer service representatives between April and June “in order to be there for our clients during this challenging time,” it said.
Fidelity is one of the leading retail brokers in the U.S., but its position is often overshadowed by its other operations, such as its enormous retirement business.
Because it’ is a private company, Fidelity doesn’t have to release numbers, but it makes some figures public each quarter in a tab on its “About” page. This quarter, the company has increased its disclosures.
The company is clearly looking to highlight its retail operations more, and show how it is keeping up with the trends now dominating retail trading. Fidelity was also ahead of the curve in offering fractional shares, which let people buy portions of a stock that may have an expensive per-share price. The firm also quickly followed Interactive Brokers (IBKR) and Charles Schwab in offering free trades last fall, ahead of other competitors such as Vanguard. Fidelity is now reducing the account minimums on separately managed accounts to draw new traders.
“What we’re finding is if we’re not proactively sharing this information, then people are not including us, and we are the largest retail brokerage firm from an account perspective,” said Fidelity spokesperson Nicole Goodnow. “Oftentimes people forget because we don’t share with the same habits as a public company.”
Asked why she thinks the company has been experiencing such growth, Goodnow said “In times of volatility people are looking for help and guidance. They go to where there’s stability.”
CFRA analyst Pauline Bell says Fidelity is releasing more data to help advertise its services and make sure it isn’t forgotten as brokers fight for market share.
“I see Fidelity stepping up their marketing efforts to court retail investors, aiming to reach more millennial and Gen Z investors who are now forming brand loyalty and have the potential to mature into buy-and-hold investors as their savings grow,” Bell wrote in an email to Barron’s.
Fidelity’s early decision to offer fractional shares attracted young users, and the company is trying to keep the momentum up, Bell wrote. “About 45% of its fractional trading clients are 18-35 years old, i.e., a sweet spot for Robinhood and the demographic where Fidelity (and other incumbents like Schwab, E*Trade and TD Ameritrade) wants to extend their reach, hoping that small accounts become large, active accounts in the future,” she wrote.
Corrections & Amplifications: An earlier version of this story said that Fidelity offered free trades before Charles Schwab. In fact, Schwab announced its free trade offering nine days before Fidelity.
Write to Avi Salzman at avi.salzman@barrons.com
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Robinhood Gets the Headlines, but Fidelity Had an Big Quarter, Too - Barron's
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