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Fidelity Investments strikes right back at Schwab with retail direct indexing that offers two apparent advantages -- it shaves $95,000 off the minimum and already is accepting assets

The Boston giant launches FidFolios today (Apr. 1) in a covering move that goes one better than Schwab with a radically lower barrier, though Schwab questions its utility in the real world.

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Tom O'Shea: '[The FidFolios launch] is really provocative, and, I would say, groundbreaking.'

Related Moves

RIA recap: Bernie Clark promises to 'be there' for coming TDA-Schwab system snafus; Fidelity gets custody win; Vanguard dishes out big tax bill to investors

Schwab RIA chief petitions for 'patience' for coming merger inconveniences but 'repapering' is no culprit; Carrie Pomerantz gets Schwab board seat; Addepar wins $65 billion AUM contract.

November 3, 2022 at 1:59 AM

Apex nabs Jon Patullo from 'Schwabitrade' to 'raise the bar' and make his new firm's RIA system as 'frictionless' as the old one

The loved and admired TD Ameritrade software chief will bring his playbook -- and possibly Schwab's -- to Apex, which continues to try putting a winning front-end on its old Penson backend, a source says

October 11, 2022 at 12:40 AM

Chuck Schwab reveals Part B, doubling-down on Walt Bettinger by making him co-chair, a day after Part A -- wagering $15 billion from the Schwab corporate treasury on the CEO's future leadership

The 84 year-old founder's elevation of his 61-year-old protege may foretell bigger fireworks from Rick Wurster who recently took over many of Bettinger's CEO duties, one executive recruiter says.

July 30, 2022 at 12:41 AM

Fidelity Investments loses Kathleen Murphy who largely caught up Fido to Schwab (near $4T) on the retail side by reversing net promoter scores

The 'no whining allowed' leader of the Boston giant's retail business, who oversaw $2 trillion in net new assets, was ready to exit but hung in through a year dominated by COVID-19 challenges

January 23, 2021 at 2:02 AM

See more related moves


Iraklis Kourtidis

Iraklis Kourtidis

April 2, 2022 — 1:58 AM
Some extra nuance: servicing 100x times as many accounts (even at 1/100 the average size), is actually less than 100x the effort. However, it's way closer to 100x than 1x. Here are some reasons why. Bad 3rd party data: a stock split or cash dividend that was published or handled incorrectly will affect all accounts that held that stock, regardless of account size. This is even more likely for a broad market stock index such as the S&P 1500 (not a typo), which Wealthfront used to do DI on at the highest account tiers. Such errors tend to be more likely for smaller stocks in practice. So now you have to 'lock' 100x as many accounts and prevent further trading in them until you resolve this. The same thing holds for any mishandlings of index additions/deletions, bad ESG data (e.g. the provider changes their methodology and a stock that was previously saintly erroneously turns evil overnight), etc. Infrastructure: with fractional shares (which I surmise Fidelity is using), clients would still hold (roughly) all index constituents, just at smaller quantities. However, storing smaller quantities doesn't take up less space. So now your database needs to be ~100x bigger, which means you may need altogether different storage techniques, etc. This is mostly one-off complexity that applies when you build a system, but there are also ongoing operational concerns as well. Human / operational: a reasonable guess is that 100x the clients will result in ~100x customer service interactions. Maybe it's less (small clients don't care as much) or more (small clients are less sophisticated) - I don't know. But it won't be 1x. Code bugs: if you discover a bug somewhere, it's likely to affect 100x as many accounts. Fixing the code takes the same time, of course. However, fixing the *accounts* will take longer. If you have e.g. 5 large accounts, you can probably run a few commands and fix them (and confirm the fix worked) by hand. With 500 (100x), you can't.
Brian Murphy

Brian Murphy

April 2, 2022 — 8:50 PM
Thanks to Iraklis for providing color to the problems associated w/ DI at scale for smaller accounts. Great insight. I still think we're missing the forest (goal of wealth accumulation) through the trees (specific technologies DI/ESG). A couple of points on this: Which indices are we applying DI to? Growth/Value/Blend? And who is providing insights on which indices are best suited going forward? For example, growth did incredibly well during the money printing regime of the last 10 years - and one could've implemented a DI strategy around a blended strategy and missed out on over-emphasizing growth. Or they could've bought QQQs early on, never re-balanced, and vastly out-performed a blended strategy using DI. And if they over-emphasized value they would've under-performed. The goal of retail savers is not to index tightly to specific indices, but to accumulate after-tax wealth over time for retirement, home purchases, etc. Discussions of DI/ESG are discussions around ways to implement a strategy. The intelligence layer needs to be added at a higher level - and no one has been working on that. Why does that matter? Regimes change - and perhaps what worked best over the past 20 years won't be well suited for the next 20. Who, or what, guides these macro decisions? Walt Bettinger and his counter-part at Fidelity?
brooke southall

brooke southall

April 2, 2022 — 9:15 PM
It all comes back to forestry!

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