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Fidelity’s Pitch to America’s Teens - No-Fee Brokerage / WSJ

edited May 19 in Other Investing
“Fidelity Investments Inc. plans to open the door to a new generation of investors who will be able to trade stocks even before they learn how to drive or head to college. Fidelity said Tuesday it will issue debit cards and offer investing and savings accounts to 13- to 17-year-olds whose parents or guardians also invest with the firm. The accounts will let teens buy and sell U.S. stocks, Fidelity mutual funds and many exchange-traded funds. Similar to how it works for adults, the service won’t charge account fees or commissions for online trading.


“The offering marks Fidelity’s latest move to position itself as a lifelong financial adviser to millions of Americans. Once known for the stock-picking mutual funds it sold through other brokers, the firm has spent the past few decades building direct connections to individual investors. Today, Fidelity runs one of the world’s biggest brokerages and the nation’s largest servicer of 401(k) plans and other retirement accounts offered by employers.


“Fidelity and other major wealth managers slashed their stock-trading commissions to zero in recent years. Eliminating those costs had set the stage for the industry’s banner 2020, when many individual investors rediscovered the allure of trading stocks. Many brokerage and wealth-management firms reported a surge in enthusiasm and new accounts, especially among younger participants. Fidelity is among them. In the first three months of 2021, the company added 1.6 million accounts from investors 35 years old or younger—more than triple the number of new accounts from that demographic a year earlier, Fidelity said.”


The Wall Street Journal - May 19, 2021

Comments

  • Was researching FIDO's structure just now, and found this article from 2016 that I wish I hadn't read. The Johnson family is sneaky, and they seem to use Fido mutual funds for their own PRIVATE gains.

    Not sure if this situation has since changed this article was written.

    William Danoff paid $.07/share for Alibaba via the VC fund controlled by the Johnson family. Nice "compensation" for this Fund mgr.

    https://www.reuters.com/investigates/special-report/usa-fidelity-family/

  • While the article says that Danoff donated those shares, I wonder if this deal is structured so that those receiving distributions can treat them as carried interest, as "at risk" money.
    https://www.taxpolicycenter.org/briefing-book/what-carried-interest-and-how-it-taxed

    With respect to the original WSJ article, Fidelity's pushing the envelope in signing up kids. This seems a far cry from the old Stein Roe Young Investors Fund that did not just throw kids into the deep end:
    Stein Roe & Farnham, with its $708 million Young Investor Fund, does more than just accommodate children with low minimum investments. It provides newsletters and games to teach the fundamentals of investing and the economy, and it created a portfolio of companies such as Nike Inc., McDonald's Corp. and Walt Disney Co. that young investors will recognize. That has been a winning formula.
    https://www.washingtonpost.com/archive/business/1998/05/10/the-young-and-invested/83fe06a6-4542-4b9a-ab95-158f35c95fd2/

    Nor does it seem the market now is so much larger, rather the marketing is more aggressive.
    According to one survey, 31% of youths in grades 8 through 12 now own stocks, bonds or mutual funds, up from 14% in 1993.
    LA Times, Oct 3, 2000.
    https://www.latimes.com/archives/la-xpm-2000-oct-03-mn-30317-story.html

  • I saw this the other day and flashed back to the late '90s when everyone became a daytrader as the Dot Com bubble happened. Remind me again how that turned out for most people?

    A friend laughed at this article running around his office laughing and saying 'THE TOP IS IN'! for equity markets --- because when the truly uninitiated flock into the markets that tends to signal irrational euphoria.

    IMO this is no different than a Las Vegas Casino giving parents the ability to create 'kiddie cards' to use at the tables. Translation: The house still wins.
  • I agree @rforno … not sure it’s a good move on their part to compete with Robinhood…
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