Fidelity vs. Vanguard vs. Schwab: Which Brokerage Is Best?

If you're deciding which one to use, to take a close look at Fidelity vs. Vanguard vs. Schwab, because there are some differences between the companies.

In this article, I’ll help you understand those differences and hopefully point you toward the brokerage that’s best for you.

Table of Contents

Why Clark Loves All 3 Companies

If you've listened to Clark for any period, you know he recommends Fidelity, Schwab and Vanguard quite often as preferred investment companies.

All three companies provide low costs for investing including commission-free trades. Vanguard and Schwab offer extremely low-cost advice you can trust. You can use Fidelity or Schwab to do your banking.

In other words, you can handle your comprehensive financial needs — including banking and retirement planning — within this group of three investment companies.

“These three companies have grown to be such huge behemoths because people just realized over time that these three were doing a much better deal of serving the investor than the traditional investment community,” Clark says.

In full disclosure, Clark Howard actively does business with Fidelity, Vanguard and Schwab. However, he does not recommend the complication of operating accounts with all three companies simultaneously. Clark advises you to decide which of the three is the best fit.

Fidelity vs. Vanguard vs. Schwab: 10 Common Use Cases

It’s hard to go wrong investing with any of these three companies.

However, I’ve looked at 10 factors that may interest you when deciding which brokerage to use.

I’ve chosen a “winner” for each category.

1. Target Date Funds: Vanguard

Choosing between Fidelity and Vanguard here is splitting hairs. But Vanguard relies on many of its own index funds within its catalog of target date funds, so I'll give it the edge.

2. Index Funds: Vanguard

Clark almost always recommends Fidelity Zero, aptly named for zero cost. For overall selection, average expense ratio and general index fund expertise, it's hard to argue with Vanguard. But I must mention Fidelity's trump card.

3. Individual Stocks: Fidelity

With the best mobile trading platform, the best education and the best order execution of the three companies, Fidelity tops this category.

4. Low Fees: Fidelity

Outside of $0 commissions on stock, ETF and options trades, which are now commonplace, investment companies can rival banks with hidden and expensive fees.

Fidelity comes the closest to being fee-free even when it comes to more complicated or nuanced investment strategies.

5. Education: Fidelity

Fidelity's Learning Center is everything you want in investment education. It's organized and thorough and offers content through just about any medium you can think of.

Fidelity’s educational materials cater to beginners and experts separately and also offers roadmaps with progress tracking.

6. Research: Schwab

There’s a strong argument that Schwab was already No. 1 in terms of giving you tools to research individual companies and ETFs. Then it acquired one of its two top competitors in the research space: TD Ameritrade. It would be tough now for any competitor to claim research tools that even approach what Schwab offers.

7. Financial Advisors: Vanguard

Vanguard's Digital Advisor offers robo-advisor services with a $3,000 minimum.

If you have at least $50,000 to invest, it's hard to do better than Vanguard's Personal Advisor, which typically charges 0.35%.

Basically, it's a robo-advisor for your investments. But you get the bonus of access to a human financial planner, including coaching calls on several topics.

8. IRAs: Schwab

This is another extremely close call, as Fidelity is excellent in this space as well.

Schwab’s IRAs get the edge, at least in part because of the all-around strength and comprehensive nature of Schwab’s products and services.

But the company also does a good job giving IRA customers strong choices including the ability to invest your IRA through its robo-advisor and get help from a financial advisor.

9. Physical Locations: Schwab

With nearly 400 branch locations, Schwab has nearly twice as many as Fidelity (390 to 215 by my count). Of course, if in-person help matters to you, the answer to "best" in this category may depend on which company has a branch closest to your home or office.

10. Active Trading: Fidelity

Fidelity’s superior trading platform, education and order execution makes it the best choice of the three here.

Fidelity is a good option for active traders even within the scope of the broader marketplace. However, there may be reasons why those who trade for a living (or as a serious hobby) decide to use other investment companies instead.

Comparing Fidelity vs. Vanguard vs. Schwab

Fidelity vs. Vanguard vs. Schwab: Minimum Deposits and Commissions

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All three investment companies also offer $0 commissions on stocks, options and ETFs. And you can open an account at any of the three brokerage firms without making a deposit.

However, Vanguard traditionally requires the most capital. Its STAR Fund requires a minimum investment of $1,000; most of its other funds require $3,000.

Vanguard is also 35 cents more expensive per options contract. (Clark discourages options trading because it's risky.)

Fidelity and Schwab charge higher transaction fees on mutual funds.

Fidelity vs. Vanguard vs. Schwab: Asset Classes, Features and Services

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The major theme this chart reflects is that Vanguard’s services are narrower in scope than those offered by Fidelity or Schwab. Vanguard mainly serves long-term, low-cost investors.

Vanguard doesn’t offer a cash management account. You can handle your day-to-day banking through Fidelity and Schwab as you would with an online bank or credit union.

Vanguard also does not offer Forex trading and doesn’t offer any appreciable fractional shares program. Fidelity and Schwab offer fractional shares, although there are other companies with more expansive fractional share offerings.

Schwab is the only one of the three that offers futures trading.

Clark also went into great detail about Vanguard's recent customer service shortcomings on a podcast. He says Vanguard needs to prioritize improving the customer experience from its phone support to its app even if it means temporarily halting its decades-long war on fees.

Fidelity vs. Vanguard vs. Schwab: Account Types

Fidelity, Vanguard and Schwab all offer the following account types:

You can basically open every account type in the book at any of the three investment companies. There are small differences, for example, between the IRAs each company offers. However, what Clark says is true: These brokerage firms are comprehensive.

Reasons Why You’d Choose (or Avoid) Each Investment Company

Fidelity Investments: Fewer Fees, Better Education

If you’re a fee-conscious investor, which is smart, Fidelity may be the best investment company for you.

In addition to commission-free trades, Fidelity doesn't make money on Payment for Order Flow (PFOF), and that often means you'll get a better price per share. It offers several zero expense ratio mutual funds (Fidelity Zero funds). And unlike Vanguard and Schwab, Fidelity doesn't charge fees for things like insufficient funds or bank wires.

Fidelity may offer the best investment education in the industry, especially when it comes to planning for retirement.

The in-house Fidelity Viewpoints content, which provides market analysis, draws consistent praise. The company’s robust online learning center offers videos, articles, podcasts and infographics that cater to every level of investor. Fidelity also offers free in-person help and hosts investor seminars.

The Fidelity Rewards Visa Signature credit card, which recently made our list of the best rewards credit cards, offers 2% cash back awarded as a $50 credit to your Fidelity investment account for every $2,500 you spend.

Clark hasn’t liked Fidelity’s robo-advisor plus financial planner hybrid as much as the other two companies in the past. But Fidelity has slashed its price (0.50% before, now 0.35% annually).

Customers may need to use multiple platforms to take full advantage of Fidelity’s research and investment tools.

The Vanguard Group: Great for Index Funds

Vanguard is especially strong on low-cost index funds for long-term investors.

Known for consistently producing the lowest average expense ratio in the industry, this is a great company to use if you’re looking to buy index funds.

One of Clark’s primary investment recommendations is to diversify by buying three different index funds: a total stock market, an international and a bond fund. Vanguard is a great place to do that. It’s also a good place to park your emergency fund in a short-term bond fund.

Clark loves Vanguard's Personal Advisor Select, which gives you unlimited access to a specific Certified Financial Planner and invests your money through a robo-advisor while typically charging 0.35% annually for low-level investors.

Personal Advisor Services does require an initial investment of at least $50,000. And Vanguard’s proprietary funds carry minimum investments between $1,000 and $3,000.

As I mentioned, Clark has taken Vanguard to task the last few years for letting its customer service slip.

Vanguard doesn’t offer any banking services. And it can’t compete with Fidelity or Schwab in terms of research, education and functionality. Vanguard’s focus is inexpensive, no-frills, long-term investing.

Charles Schwab: Tremendous Research Tools

Schwab would be a popular choice for self-directed investors on the strength of its superior research capabilities alone.

But now that it has bought TD Ameritrade, also strong on the research front, Fidelity is the only brokerage that can hope to compete with Schwab’s powerful research tools.

Those strong Schwab research and screening tools extend to exchange-traded funds (ETFs), which are commonly index funds, one of the best ways to invest on your own. Schwab's proprietary StreetSmart Edge software could be the best ETF research tool on the market, and you can use it even if you aren't a Schwab customer.

Schwab also has tools that help you research stocks, ETFs and mutual funds simultaneously, displaying comparative data.

Clark is a big fan of Intelligent Portfolios Premium. After a one-time $300 planning fee, you'll pay $30 per month for a robo-advisor service on top of unlimited guidance from a team of Certified Financial Planners. Intelligent Portfolios Premium does require a $25,000 initial investment.

Schwab did not make our list of the best robo-advisors in part because it keeps a disproportionate amount of its portfolios in cash. Schwab's cash management accounts currently pay just 0.48% APY. Schwab is more aggressive than Fidelity and Vanguard about profiting from the cash of its customers.

Questions To Ask Yourself Before Choosing a Brokerage

Before you decide between Fidelity vs. Vanguard vs. Schwab, you should assess your goals, circumstances and personality.

Do you want to make your investing strategy as simple as possible? You'll want to consider investing in a target date fund at one of the three investment companies on this list or with a robo-advisor.

Do you need help with tax strategy, estate planning and the best way to take distributions from your investment accounts during retirement? Perhaps you need to start by finding a financial planner, which could lead you to the hybrid options at Vanguard or Schwab that Clark recommends.

Are you thinking about taking more risk with a small amount of money outside of your core portfolio? Depending on what (or how) you choose to trade you may want to consider a brokerage firm outside of Fidelity, Vanguard and Schwab. I wrote about some of the reasons to consider another company.

Regardless of your current financial status, it's a good idea to know how to save and invest like Clark Howard.

And once you know how you'd like to invest, you should consider these factors when evaluating any investment company (including the three in this article):

Final Thoughts

Fidelity, Vanguard and Schwab are super popular in the United States for good reason. They make the most sense for most investors.

However, even though we tend to group them at Clark.com since we recommend all three companies, there are subtle and not-so-subtle differences between them. Understanding those differences will serve you well in the long run so you can work with the company that’s best aligned with your financial goals.

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