Vanguard vs. Fidelity 2021: Here’s the Best Robo-Advisor

Fidelity vs Vanguard

Vanguard and Fidelity are two of the world’s leading brokerage firms. Both rose to prominence via their low-cost mutual fund lineups, and they remain industry leaders in that area. Not too long ago, Vanguard and Fidelity also unveiled their own robo-advisors and now go toe-to-toe in this arena as well.

Keep reading to learn how Vanguard vs. Fidelity stack up in terms of their respective robo-advisor platforms.

Pro Tip

A robo-advisor automates investing, which could be useful whether you’re new to investing or experienced but lacking the time to actively manage your portfolio. The two brokerages offer both kinds of investing — actively managed trades or passive investing designed for long-term growth.

Vanguard or Fidelity: How Do They Work?

Vanguard got its start as a direct-to-consumer mutual fund company but has since evolved into a full-fledged brokerage firm, offering everything from stocks and bonds to options, mutual funds, exchange-traded funds and more. Vanguard also offers a robo-advisory platform known as Vanguard Digital Advisor.

Fidelity has always been a low-price leader when it comes to stock trading, and now its commissions for online stock, ETF and option trades have dropped to $0. Fidelity also has a well-regarded mutual fund family and a robo-advisory platform dubbed Fidelity Go.

Building Wealth

Vanguard’s mutual funds are award-winning because of their low-fee structure and solid performance over time. Whether you choose a full brokerage product or the low-cost Vanguard Digital Advisor, you’ll likely make a good choice. On the other hand, Fidelity has broader investment options. You can even purchase Vanguard funds through Fidelity. Unlike Vanguard, you can get started with less than $3,000 although fees are higher than Vanguard’s. Take a closer look at how Vanguard vs. Fidelity compare.

How Do Vanguard and Fidelity Compare?

Overall, Vanguard or Fidelity have inexpensive, well-run robo-advisor platforms. A side-by-side comparison of various features can help you pick the right one.

Features Vanguard Fidelity
Annual management fees 0.15% 0.35%
Minimum initial deposit $3,000 $0 to open, $10 investment minimum
Human advisors No Yes, for a 0.50% annual fee
Tax-loss harvesting No No
Fractional shares No No
Single stock diversification No No
Taxable accounts Yes Yes
401(k) plans No No
Individual retirement accounts Yes Yes
Roth IRAs Yes Yes
Simplified employee pension IRAs No No
Trust accounts No No
529 plans Yes Yes

Here’s a more in-depth look at how the Vanguard Digital Advisor and Fidelity Go platforms compare in terms of certain key features.

Features and Accessibility

Fidelity Go gets the nod over Vanguard Digital Advisor when it comes to ease of opening an account.

For Fidelity Go, you can simply log on to the website, answer a few questions regarding your investment objectives, risk tolerance and the amount you can invest, and provide basic identifying information such as your age. At that point, you’ll be presented with a sample portfolio based on your responses.

For Vanguard Digital Advisor, the same overall principle applies in terms of getting a portfolio. However, before you can begin the process, you’ll have to sign up for a generic Vanguard account. The $3,000 required to open a Vanguard Digital Advisor account must first be invested in the Vanguard Federal Money Market Fund.

Both robo-advisor platforms offer standard features such as automatic rebalancing and automated investing.

Vanguard vs. Fidelity Fees

Both Vanguard and Fidelity have straightforward pricing on their robo-advisor products. Fidelity fees are a flat 0.35% annually across all balances, while Vanguard fees are 0.15% annually.

Building Wealth

If you desire direct human interaction in the form of a personal financial advisor, Fidelity and Vanguard each offer access through their robo-advisor platforms, albeit at a higher cost.

The cost for Vanguard Personal Advisor Services is 0.30% per year on amounts of up to $5 million, with costs dropping as low as 0.05% annually on assets above $25 million. There’s a $50,000 minimum for this service.

Fidelity Personalized Planning and Advice works in conjunction with the Fidelity Go robo-advisor for a 0.50% annual fee and a $25,000 account minimum.

Good To Know

One important distinction between the Fidelity and Vanguard products is in the expense ratio of the funds used. Although Vanguard is one of the industry’s low-cost leaders when it comes to ETF fees in general, Fidelity Go only invests in its Fidelity Flex funds, all of which have an expense ratio of zero.

Retirement Planning

Both Fidelity and Vanguard offer their robo-advisory services for traditional and Roth IRAs.

Portfolios

Vanguard’s Digital Advisor platform offers access to four ETFs:

Vanguard ETFs

  • Vanguard Total Stock Market ETF
  • Vanguard Total International Stock ETF
  • Vanguard Total Bond ETF
  • Vanguard Total International Bond ETF

Investments are allocated among these four choices based on an investor’s self-provided risk tolerance and financial goals.

Fidelity Go allocates user investments across its line of seven Fidelity Flex funds. Depending on how you fill out your investment questionnaire, you may or may not be invested into all of these funds:

Fidelity Flex Funds

  • Fidelity Flex 500 Index Fund
  • Fidelity Flex Small Cap Index Fund
  • Fidelity Flex Mid Cap Index Fund
  • Fidelity Flex International Index Fund
  • Fidelity Flex Municipal Income Fund
  • Fidelity Flex Conservative Income Municipal Bond Fund
  • Fidelity Flex Government Money Market Fund

All of these funds have a 0% expense ratio.

Goal Setting

You’re completely in charge of the investment goals you want to save for when you use the Fidelity and Vanguard robo-advisory platforms. For both, when you open an account, you’re required to complete a questionnaire that asks for information such as your age, risk tolerance and investment objectives. Your portfolio is then customized according to the specific goals you have outlined.

Tax-Advantaged Investing

Fidelity Go offers access to tax-advantaged investing through its Fidelity Flex Municipal Income Fund and its Fidelity Flex Conservative Income Municipal Bond Fund. Regardless of whether you want any tax-advantaged investments or not, you can contact Fidelity and specify your investment parameters in terms of tax management.

Vanguard only offers four ETFs in its robo-advisor platform, none of which are dedicated to tax-free investing.

Digital Experience

Although both have mobile apps and an online platform, Fidelity’s is more robust. Keep in mind that you may not need all that functionality if you’re simply checking in on how your automatic investments are doing.

Vanguard’s design seems no-frills and doesn’t play well with Android devices. It also lacks the research and functionality more advanced investors would like from their digital experience. As far as the app goes, here’s how Vanguard vs. Fidelity compare:

Security

Fidelity’s security offers the type of guarantee designed to make clients rest easy. With the Fidelity Customer Protection Guarantee, the firm promises to reimburse customers for any losses incurred as a result of unauthorized trading in accounts.

Specific security protocols used at Fidelity include two-factor authentication, security text alerts, voice identification, encryption, firewalls and constant system surveillance.

Vanguard has a similar online fraud policy, offering to reimburse assets taken from your account if you’re a victim of unauthorized transactions. However, the firm does caution that you must follow the steps outlined in the “Your responsibilities” section of the policy to be protected.

Beyond this pledge, Vanguard uses many industry-standard fraud protection policies, ranging from encryption and password protection to SSL certification and security questions.

Customer Service

Fidelity Go offers 24/7 phone-based customer service. It also has an online chat option available Monday through Friday from 8 a.m. to 6 p.m. EST.

Vanguard’s customer service is a bit more limited, offering phone hours from 8 a.m. to 8 p.m. EST Monday through Friday only, with no live chat option available.

Vanguard vs. Fidelity: Which Is the Best Option?

Vanguard or Fidelity? If you’re trying to pick a winner in the Vanguard or Fidelity debate, the bottom line is that both firms offer excellent robo-advisor platforms. Deciding which one is better depends on your specific needs. However, there are some notable differences that might tip the scale more toward Fidelity for average investors.

Fidelity offers a wider range of investment options in its robo-advisor and has no minimum investment requirement. Vanguard has a slight edge when it comes to costs, though Fidelity’s management fee of 0.35% per year is far from expensive. Overall, Fidelity noses just ahead of Vanguard in a head-to-head comparison, particularly for beginning investors.

Cynthia Bowman contributed to the reporting for this article. 

About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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