Fidelity generates revenue through various means, even though it may not charge explicit fees for certain services. One of its primary sources of income is the interest spread between short-term and long-term investments. Fidelity manages a vast portfolio of assets invested in bonds, stocks, and other securities. By investing short-term funds at lower interest rates and lending them out at higher interest rates, Fidelity earns a spread. Additionally, Fidelity offers investment advisory and brokerage services, which generate commissions and fees. The company also receives revenue from its mutual funds and 401(k) plans, where it charges management and administrative fees for managing and overseeing these investments. Diversifying its revenue streams allows Fidelity to sustain its operations and generate profits without relying solely on trading commissions.
Revenue from Assets Under Management
Fidelity Investments is one of the largest and most well-known financial services companies in the world. It offers a wide range of financial products and services, including investment management, brokerage services, and financial planning.
One of the ways that Fidelity makes money is through revenue from assets under management (AUM). AUM refers to the total value of the assets that Fidelity manages on behalf of its clients. Fidelity charges a fee based on a percentage of AUM, which means that it earns more revenue as its clients’ assets grow.
Fidelity’s AUM fees are typically very low, which makes it an attractive option for investors who are looking for a low-cost way to invest. However, Fidelity does charge other fees, such as trading fees and account maintenance fees. It is important to understand all of the fees that Fidelity charges before you invest with the company.
Here is a table that summarizes Fidelity’s revenue from AUM:
| AUM Tier | Fee Rate |
|---|---|
| $0 – $10 million | 0.50% |
| $10 million – $100 million | 0.40% |
| $100 million – $500 million | 0.30% |
| $500 million – $1 billion | 0.25% |
| $1 billion or more | Negotiable |
Interest Income on Loans
Fidelity makes money on loans by charging interest on the borrowed amount. When you take out a loan from Fidelity, you agree to pay back the principal (the amount you borrowed) plus interest. The interest rate is a percentage of the principal that is charged for the length of the loan.
The amount of interest you pay depends on several factors, including the loan amount, the interest rate, and the loan term. You can typically get a lower interest rate if you have a good credit score and a steady income. You can also get a lower interest rate if you opt for a shorter loan term.
Fidelity uses the interest income it earns from loans to cover its operating costs, such as salaries, marketing, and technology. It also uses the interest income to generate profits, which it can then use to invest in new products and services or return to shareholders.
Trading Commissions and Spreads
Fidelity does not charge trading commissions on online stock, ETF, or options trades. However, it does make money on these trades through the spread, which is the difference between the bid and ask price of a security.
For example, if the bid price for a stock is $10.00 and the ask price is $10.05, the spread is $0.05. Fidelity will make $0.05 on every share of this stock that is traded.
- Trading commissions are charged by brokers for executing trades on behalf of their clients.
- The spread is the difference between the bid price and the ask price of a security.
- Fidelity does not charge trading commissions, but it does make money on the spread.
| Type of Trade | Commission | Spread |
|---|---|---|
| Online stock trade | $0 | $0.05 |
| Online ETF trade | $0 | $0.01 |
| Online options trade | $0 | $0.50 |
Investment Banking Services
Fidelity provides investment banking services to companies and governments, assisting with mergers and acquisitions, capital raising, and other financial transactions. These services generate fees for Fidelity, as companies pay for the expertise and advice provided by its investment banking team.
Well, there you have it, folks! Now you know how Fidelity keeps the lights on without charging you fees. They’re pretty darn clever, huh? Thanks for sticking with me through this little financial adventure. If you’re curious about more money-saving tips or have any other burning questions, be sure to check back. I’ll be here, waiting to spill the beans on all things personal finance. Until then, keep your money safe and sound!