Fidelity's main income comes from trading commissions, account fees, and investment products it manages

Fidelity generates revenue through multiple channels rather than a single source. The company charges commissions when you trade stocks and options, collects fees on accounts and services, earns spreads on currency and bond transactions, manages trillions in assets for a fee, and sells its own mutual funds and exchange-traded funds (ETFs). Understanding how Fidelity profits helps explain why certain services are free while others carry costs.

The business model has shifted over the past decade. In 2019, Fidelity eliminated commissions on stock and ETF trades for retail customers, a move that forced the company to rely more heavily on other revenue sources. This change affected how Fidelity makes money but did not eliminate profitability — it redistributed where the money comes from.

Key Takeaways

  • Fidelity no longer charges commissions on stock and ETF trades for individual investors, but still earns money from spreads, account fees, and advisory services.
  • The company manages trillions of dollars in assets and charges fees based on account size, which is a major revenue source.
  • Fidelity earns spreads on bonds, options, and currency transactions — the difference between the bid and ask price.
  • Fidelity's own mutual funds and ETFs generate revenue when customers invest in them, and the company also earns fees for advisory and retirement plan services.

Trading spreads and options commissions

Although Fidelity eliminated commissions on stock and ETF trades, the company still profits from those transactions through spreads. A spread is the difference between the bid price (what buyers offer) and the ask price (what sellers want). When you buy or sell a stock on Fidelity's platform, the company captures a portion of that spread.

Options trading is different. Fidelity still charges per-contract commissions on options trades — typically $0.65 per contract, though this varies by account type and trading volume. A single options trade might involve multiple contracts, so the total commission can add up quickly. This is one of the few remaining per-trade fees Fidelity charges retail customers.

Bond transactions also generate revenue through spreads. When you buy or sell a bond through Fidelity, the company marks up the price slightly — you pay more than the wholesale price, and Fidelity keeps the difference. The spread on bonds is often larger than on stocks because bond markets are less transparent and less liquid.

Account fees and advisory services

Fidelity charges fees for certain account types and services. Retirement accounts like IRAs may carry annual maintenance fees, though Fidelity often waives these if you maintain a minimum balance or set up automatic deposits. Brokerage accounts themselves are free to open and maintain, but specialized accounts or services carry costs.

Advisory services are a significant revenue stream. Fidelity offers managed accounts where advisors build and monitor a portfolio for you, charging a percentage of assets under management (AUM). These fees typically range from 0.35% to 1% annually depending on the service level and account size. Fidelity also offers financial planning services, which may be bundled into advisory fees or charged separately.

Retirement plan administration is another fee-based service. Employers pay Fidelity to administer 401(k) plans, handle payroll deductions, and provide participant services. These fees come from the employer, not from individual employees, but they represent substantial revenue for Fidelity.

Assets under management and mutual fund revenue

Fidelity manages trillions of dollars in assets for individuals, institutions, and retirement plans. The company charges fees based on the amount of money under management — typically a percentage of assets, though the percentage decreases as accounts grow larger. A customer with $100,000 under management pays a different percentage than a customer with $1 million, but Fidelity collects fees from both.

Fidelity's own mutual funds and ETFs generate revenue when customers invest in them. These funds charge expense ratios — annual fees expressed as a percentage of the fund's assets. Fidelity keeps a portion of the expense ratio to cover the cost of managing the fund. When you own a Fidelity mutual fund, you pay this fee automatically through the fund's net asset value (NAV), whether you notice it or not.

The company also earns revenue from money market funds and sweep accounts. When you hold cash in a Fidelity account, the company may sweep it into a money market fund or cash management account that earns interest. Fidelity captures a portion of that interest as revenue.

Interest income and cash management

Fidelity earns interest on customer cash balances held in the company's accounts. When you deposit money into a brokerage account and do not when ready invest it, that cash sits in a sweep account or money market fund. Fidelity earns interest on this cash, and the company shares a portion of that interest with customers while keeping the rest.

The amount of interest customers receive varies based on market conditions and Fidelity's sweep arrangements. In periods of higher interest rates, customers earn more, but Fidelity also earns more. This creates a natural alignment — when rates rise, both the company and customers benefit.

Margin interest and lending

Fidelity earns interest when customers borrow money through margin accounts. Margin allows you to borrow against your portfolio to buy additional securities. Fidelity charges interest on the borrowed amount, and this interest is a source of revenue. The interest rate varies based on the amount borrowed and current market rates.

The company also lends out customer securities to short sellers, earning a fee for facilitating these loans. This practice is common across brokerages and generates revenue without requiring customers to do anything — the lending happens in the background if you hold securities in a margin account.

Premium services and subscription products

Fidelity offers premium subscription services that generate recurring revenue. Fidelity Go, the company's robo-advisor service, charges a flat annual fee or a percentage of assets depending on the tier. Fidelity also offers premium research tools, advanced trading platforms, and educational content through subscription models.

Some of these services are free to all customers, while others require a subscription or minimum account balance. The tiered approach allows Fidelity to generate revenue from customers who want enhanced features while keeping basic services available to everyone.

Frequently Asked Questions

Why did Fidelity eliminate stock trading commissions?

Fidelity eliminated commissions to remain competitive with other brokerages and attract more customers. The company compensates for lost commission revenue through spreads, advisory fees, and assets under management. This shift also encourages customers to trade more frequently, which increases spread revenue.

Do I pay Fidelity when I buy a mutual fund?

You do not pay an upfront commission to buy most Fidelity mutual funds, but you pay an annual expense ratio that is deducted automatically from the fund's value. This ratio covers the cost of managing the fund, and Fidelity retains a portion of it as revenue.

How much does Fidelity make from my account?

The amount varies based on your account size, trading activity, and which services you use. A customer with a $50,000 account who rarely trades generates less revenue than a customer with a $500,000 account who trades options regularly. Fidelity does not disclose per-customer revenue figures.

Are there hidden fees I should know about?

Fidelity's main fees are transparent: spreads on trades, options commissions, advisory fees, and expense ratios on funds. The spreads are not listed as separate line items, so they are less visible than commissions, but they are not hidden — they are built into the price you see when you trade.