High Net Worth Pros & Cons – Fidelity vs Schwab vs Vanguard

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

3 Best Brokerage Firms for High Net Worth

1. Vanguard
2. Schwab
3. Fidelity

This article will reveal the pros and cons of working with Vanguard, Schwab, and Fidelity – specifically from the perspective of an ultra high net worth investor.

All these large Investment Companies excel in creating online tools that allow you to track and adjust your portfolio at any time you need to do so. They are reliable, well-known, reputable, powerful institutions that live up to their customers’ expectations. The others include Fidelity, Vanguard, and Schwab, all of which are top online brokers, and each offers a complete range of investment services to suit the requirements of different investors.

However, especially for ultra-high net worth families with well over $10 million, you’re going to find that a multi-family office approach will serve your needs far better than these large institutions can deliver. They simply aren’t built for that level of service. You will miss out on high level coordination between elite level specialists, which will result in frustration, tax inefficiencies, and wasted time.

For example, we met with an investor with a nine-figure portfolio. His tax return was four inches thick. He went to a well-known bank for ultra high net worth service. What he really wanted was what a multi-family office provides, though he wasn’t yet aware of that term. What he got was a presentation that made it clear they just wanted to manage his assets and take their fee.

If you want to see more ways the large brokerage firms fall short for ultra high net worth investors and what you should expect for the level of wealth you’ve accumulated, get our free guide revealing the 7 Secrets to High Net Worth Investment Management, Estate, Tax and Financial Planning.

How We Created This Article

Pillar Wealth Management wants affluent investors to have clear and thorough information about the very significant life and financial decisions they face. Whether you work with us or not, you need to know the facts so you can make intelligent choices with confidence.

To that end, we did what’s referred to as ‘mystery shopping.’ We created a fictional persona with a unique ultra high net worth life situation, and paid someone to call up each firm, present their situation, and work through each firm’s process.

The whole process took several months. We held multiple calls with each firm, received a proposal in some form detailing what they would do with our assets, experienced their customer service, worked with their online platforms, and got a pretty good sense of their service to ultra high net worth clients.This article is one of many we will be writing based on that investigation. Reach the other articles from this main page.

Comparing Fidelity vs. Vanguard vs. Schwab

Fees

Finally, in the last few years, thanks to the elimination of transaction fees, those investors who use the Vanguard, Fidelity, and Schwab platforms are not required to pay commissions or trading fees, even for any stock purchase. While the cost of mutual fund trades, internally and especially with in-house funds, is mostly free, there are some exceptions where non-proprietary mutual funds may incur up to more than $49.95 in transaction costs.

You will incur transaction costs for options trading, but the costs are generally quite low. Fidelity and Schwab charge $0.65 per options contract, while Vanguard charges $1. These are contract fees, not commissions. Some more specific transactions may incur additional fees.

You may incur charges for owning shares of certain funds, although Fidelity has a wide variety of funds that have no expense ratio, while Vanguard and Schwab have lower-than-average expense ratios.

Services and Features

What Vanguard, Fidelity, and Schwab provide are some of the same services. As a note, they give free-of-charge to individual equity traders. They also sell a variety of accounts such as 401(k), 529 plans, custodial accounts, and IRAs.

Transitions, University, and ESA require minimum investments irrespective of the sum invested due to their specific nature; the minimums are initially $250. There are no investment minimums for most other accounts though Vanguard has minimums for investing in some of its mutual funds, generally ranging from $1,000 – $3,000.

Vanguard is a market best known for its fund offerings as investors manage their own money by avoiding watching a portfolio composed of stocks throughout 24 hours. Providing the same products offered by any other brokerage the Vanguard just targets investors who would like to invest in mutual, exchange-traded, and index funds.

At Fidelity, stock trading is commission-free, but you can also have access to a variety of funds adequate for passive trading. And Fidelity provides a lot of educational material. Additionally, the Fidelity brokerage account is full of advantages for the investors.

When it comes to robo-advising, all three platforms provide it, but Schwab’s Intelligent Portfolios are the clear leader. It inquires about your goals of investment and puts your funds in low-cost funds relevant to your responses.

Fidelity Go (Fidelity’s robo advisor) will charge you a monthly fee of $3 if you invest between $10,000 and $50,000 and above that, the fee is 0.35% of what you invest yearly.

The minimum for Vanguard’s robo-service, Vanguard Personal Advisor Services, is $50,000. Such a service is a fusion of automated and customized investment services for the management fee of 0.3%, which might be in the same range as Vanguard’s financial advisor fee.

Online and Mobile

All three firms can be accessed via app or desktop, as well as by phone. Via desktop, you can access the full functionality of the website, which may be more limited on the mobile version, although there is no limitation on your ability to trade—buying and selling stocks and funds. You can also transfer money and use the robo advisor.

Schwab’s app, although well-rated, is commonly criticized for having too much information. Vanguards’ app is not far behind. Fidelity’s app has the highest rating on the Apple and Google stores.

Minimum Deposits and Commissions

Feature	Fidelity	Vanguard	Schwab
Minimum Deposit	$0	$0	$0
Commissions (Stocks/Options/ETFs)	$0	$0	$0
Transaction Fees (Mutual Funds)	Up to $49.95/trade (buy)	Up to $20/trade	Up to $74.95/trade (buy)
Commissions (Options Contracts)	$0.65/contract	$1/contract	$0.65/contract

Asset Classes, Features and Services

Feature	Fidelity	Vanguard	Schwab
Bonds	✓	✓	✓
Broker-assisted trades	✓	✓	✓
Cash management	✓	X	✓
Cryptocurrencies: Supported by all three brokers	✓	✓	✓
Electronic funds transfers: Available on all platforms	✓	✓	✓
Financial advisors	✓	✓	✓
Forex	✓	X	✓
Fractional shares	✓	Vanguard ETFs only	✓
Futures/commodities	X	X	✓
Mutual funds	✓	✓	✓
Robo-advisors	✓	✓	✓
Short selling	✓	✓	✓
Stocks	✓	✓	✓

Account Types

Fidelity, Vanguard, and Schwab all offer the following account types—401(k), 529, custodial, Individual Retirement Account (IRA), joint, taxable, and trust.

Who Should Use Vanguard, Fidelity, and Schwab?

Cash idle in a brokerage account is the term used to describe uninvested cash. For those contemplating Vanguard, Fidelity, and Schwab, the management of this cash will depend on the individual or the financial goals. Vanguard gives money market funds for stability. Fidelity offers similar alternatives and tools. Schwab has a high-yield savings account. Each fits different needs, guaranteeing that investors find the perfect match.

Vanguard, Fidelity, and Schwab offer the coverage to invest in many different securities, including equities and funds, without incurring fees and low to zero expense ratios for funds. The three firms all provide online trading and account management functionalities. Yet, they have their differences.

Vanguard is attractive mainly for its wide range of funds in exchange-traded, index, and mutual funds. One of the funds requires a high minimum, but if you have the funds then the platform is great.

Fidelity succeeds due to an extremely wide variety of products and services. The complete suite of investment tools and educational resources provided by Fidelity can help rookies hone their investment skills.

The Schwab robo-advisor feature is particularly notable, unlike most other robo-advisors, you can also do it yourself, which most experienced investors do at Schwab.

The Six Pros of Working with Fidelity, Schwab, and Vanguard—for Ultra High Net Worth

All three of these large discount brokerage firms share several strong points in their favor, even for ultra high net worth investors.

1. Separate Service for High Net Worth Investors
2. High Quality People
3. Team Approach
4. Low Fees
5. Commitment to the Client
6. Robust Online Tools for Self-Managed Accounts

1. Separate Service for High Net Worth Investors

All three companies offer a separate service for clients with greater wealth. Vanguard’s high net worth service is called Flagship Select. Schwab’s is called Private Client. Fidelity’s is simply called Wealth Management.

Having a separate service enables them to offer more personalized and customized investment management and portfolio planning.

2. High Quality People

Once you reach their high net worth financial advisors, all three firms have exemplary people. We had long in-depth conversations about a variety of issues, and the interactions were pleasant, informative, and respectful.

There was no pressure to choose them or to rush to make a decision – and they all knew we were looking at other firms too.

3. Team Approach

Because they’re sizable companies, Fidelity, Schwab, and Vanguard all rely on a team-based approach when serving clients with significant wealth.

You will have a main point of contact, and that person is either a certified financial planner (CFP) or a registered investment advisor (RIA). They have other people who help process transactions such as moving money around, and others who manage your actual investments.

The point of contact is your consultant. This is the person you will know, trust, and work with for a long time. They are your advocate. But they rely on others to handle various tasks and provide extra expertise when needed.

4. Low Fees

All three firms offered us low fees, in part because the amounts we were investing were going to be quite high. Like most firms, (including Pillar Wealth Management), Fidelity, Schwab, and Vanguard charge lower percentage fees as the amount of assets under management increase.

5. Commitment to the Client

It was clear that all three high net worth advisors were willing to invest time with us, getting into the details – the weeds – of our persona’s situation. Had we continued the process, it was clear they were going to walk with us every step of the way and not leave us hanging.

6. Robust Online Tools for Self-Managed Accounts

If you want to manage your own investments instead of using a financial advisor, all three companies offer outstanding online platforms that are relatively easy to use and understand.

To learn these tools, you don’t need the high net worth advisor’s help either. Fidelity, for example, first connected us with a different advisor, who walked us through many of the various retirement planning and investment tools available on their site. Each of these companies has powerful online services for investors who want to do their own research and investment management.

4 Shortcomings of Fidelity, Schwab, and Vanguard for Ultra High Net Worth Investors

Just as they have strengths, all three of these large discount brokerage firms revealed some inadequacies in their ability to serve high net worth clients. Here are a few:

1. Hard to Connect with the Right Person
2. Hard to Get a Proposal Out of Them
3. Falter at Risk Management
4. Advisors’ Expertise is Limited

1. Hard to Connect with the Right Person

It takes a fair amount of initiative on your part to get through all the red tape before you reach the high net worth financial advisor you were hoping to speak with. All three companies use gatekeepers to vet potential clients before passing them on to the actual wealth managers.

And this is absolutely normal. They feel that they should not occupy their experts’ time. However, the other end of that stick is of course that it is a complete waste of time.

It took multiple long conversations in some cases before we even got introduced to the high net worth advisor. This is frustrating, because their websites all have contact forms and phone numbers on their pages for their high net worth services. The natural assumption is, if I use the number on this page to contact them, it will take me straight to the advisors who work with clients like me.

But that turns out not to be the case for any of these companies. You cannot reach the specialist on your first call.

And, in Vanguard’s case, they fumbled the handoff. While they were the fastest to reply and set up the first meeting – with the person who turned out to be the gatekeeper – over a month went by before we got to meet the high net worth advisor. We heard nothing for weeks.

Fidelity sent us to a person who clearly was not attuned to the needs of high net worth clients, and it took several conversations for this to become clear. Schwab did a good job of getting us to the right person, but their initial response of setting up the gatekeeper meeting was very slow.

In all three cases, we had to take initiative at some point to make sure we talked to the right person.

In contrast, if you call an ultra high net worth wealth management firm like Pillar Wealth Management, who exclusively serves affluent investors, you talk to the high net worth advisor on your very first call. This saves you lots of time, and gets you moving forward faster with getting your situation addressed.

2. Hard to Get a Proposal Out of Them

The details would take a while to explain, but getting some kind of proposal document showing how they would invest our assets, with projections of what we could expect and a rationale for why this plan makes sense, was difficult in all three cases.

Vanguard was the only one of the three that volunteered a proposal without having to be asked. But then, when their proposal came, it was only hypothetical, not based on the actual assets we would be investing. So, it wasn’t customized to us. And this was after a long phone call detailing our persona’s specific situation.

3. Falter at Risk Management

Incorporating risk is a cornerstone of any financial plan – but especially for high net worth investors.

First, risk must be defined. It is more than just a feeling. Then, it must be quantified.

All three firms did an excellent job of explaining how risk influences your financial plan. They asked good questions, used helpful analogies, and clearly laid out the various options.

But none of them appeared to have any sort of defined process for how to quantify the impact of risk on the financial plan. It never advanced very far beyond how we feel about how much loss or gain we’re willing to tolerate or pursue.

But risk must be more than just a feeling. Begin Pillar’s process by scheduling your first call, and see what we do with risk.

4. Advisors’ Expertise is Limited

This is a hard one to describe, because all three high net worth advisors demonstrated great command of their industry. The simplest way to say it is this:

All three advisors mentioned the option of using outside advisors to help manage our actual investments. Fidelity and Schwab even have names for these networks of advisors whom they have vetted and approved. Schwab in particular pushed pretty hard on this – it is their process to connect you with one of the expert – but external – advisors in their network.

So that begs the question: If these high net worth advisors are experts, why do they need an external network? If they’re just going to connect you with an outside wealth manager, wouldn’t it be easier to just go straight to that person?

Viewed in this way, the large firms take on the role of a middleman. And ultra high net worth investors, in most cases, don’t want to work with a middleman. Managing your investments does not appear to be the central role of your primary advisor, especially at Fidelity or Schwab.

It was also apparent that they didn’t have deep and granular knowledge about the intricacies of tax planning, estate planning, and insurance. Again, it’s hard to describe the differences here, because they do know a lot about these topics. But each one had moments where they didn’t know the answers to certain questions that an expert would know.

What to see what Pillar knows about these critical topics?

Request a complimentary copy of our book – The Art of Protecting Ultra-High Net Worth Portfolios And Estates: Strategies for Families Worth $25 Million to $500 Million

Vanguard vs Fidelity vs Schwab

Here are a few ways these firms distinguished themselves from each other.

Vanguard

Vanguard probably has the clearest value proposition of the three.

They push very strongly about their low fees, their cost transparency, and the fact they have no shareholders, no commissions, and no owners reaping billions off the customers.

Vanguard emphasizes its preference for predominantly working with ETFs and low-cost index funds, citing their significantly lower expense ratios compared to other investment options. Vanguard will not invest in individual stocks for their clients.

Vanguard also had the best email follow-up. We received several reminders and other helpful information, and we always knew where we were in the process – aside from the pretty serious fumbled transition between the gatekeeper and the high net worth advisor.

Vanguard doesn’t offer any local presence. They don’t have local branches, unlike the other two. And this was made pertinent when the subject of state taxes came up, because their advisor didn’t know our state’s tax laws.

Fidelity

At first, Fidelity did a poor job of funneling us to the right advisor. It took several calls before they figured out who should have been serving us from the outset.

But, once we finally reached a high net worth advisor, we received the best and most customized experience among the three companies. This advisor’s recommendations were very specific to our situation. It was clear he had listened well, and incorporated our specific needs and preferences into his recommendations, which were well thought out and had clear rationale behind them.

In contrast, the proposals from the other two were more vague and broad, and didn’t really address the biggest challenges of our situation. They were mostly just focused on investment projections. That was important, but it wasn’t the only issue.

Schwab

Schwab offered the most personalized service of the three, and their high net worth advisor had the best phone follow-up. We were called several times once we got connected with their high net worth advisor. We felt like our situation really mattered to them, and that they truly wanted to help, not just make money off us.

The Schwab advisor had much more insight into local, state and federal tax issues, not only on income taxes but also estate and real property taxes. This information is critical in drawing up a complete financial program in most states of the USA. Even though Schwab does not have the same level of fund recognition as Vanguard, it offers investors both passively and actively managed funds to consider. Also, investors can trade individual stocks via Schwab. Additionally, Schwab has robo-advisor services aimed at those who want to manage their money automatically. For investors who need personalized guidance, Schwab, too, allows using a human advisor.

However, Schwab also made the biggest fuss about the proposal. They would not send an electronic copy unless we opened an account, which we didn’t want to do since we hadn’t chosen to go with them yet. So, we had to have the proposal mailed.

Vanguard vs Schwab for Ultra High Net Worth

Platforms and trading

Both Schwab and Vanguard have online and mobile platforms. You can set up an account online with either firm, but with Vanguard you may have to wait a few days to log in. Also, Vanguard’s mobile app has fewer features than Schwab’s as Vanguard is generally more appealing to buy-and-hold investors. Schwab is a good choice for someone looking for lots of tools.

On StreetSmartEdge and Schwab.com, all of Schwab’s asset classes can be traded. The Schwab app is more versatile than Vanguard’s, addressing the needs of active traders who typically engage in more frequent trading compared to buy-and-hold investors. StreetSmartEdge is intuitive to use and helps option active traders browse and analyze trades efficiently. Vanguard’s platform is not as easy to use, nor does it have as many features, while still letting you place orders and monitor your performance.

Services and order types

Schwab provides the usual banking services, while at Vanguard you will pay a fee for their VanguardAdvantage account.

Schwab and Vanguard provide commodities shorting, ETFs, bonds, complex options, robo advisors, international exchanges, fractional shares, and penny stocks. Schwab as well offers futures and future options, Bitcoin futures, Forex, thus offering a greater range of options than Vanguard. Still, Vanguard’s 500 ETF and its funds belong to the best in the market.

Schwab accepts several order types, e.g., day orders, good-till-canceled orders (valid for 60 days), fill-or-kill orders, and immediate or cancel orders. Additionally, Vanguard has limit, market, stop, and stop-limit orders.

Vanguard supports market, limit, and stop-limit orders. With Schwab, you can stage orders as well as place conditional orders.

Order routing

Schwab has its own proprietary order routing system that provides a price improvement on more than 96.6% of its orders, yielding an average savings of about $27 per order. The system has an average execution speed of 0.04 seconds. Vanguard’s order routing technology boasts a price improvement of $0.023 per share, which is quite high for the industry; however, you cannot route your own orders or automate a strategy. In contrast, Schwab does have strategy testing tools.

Costs

At Vanguard, broker-assisted trading prices range from $0 to $25 while the price at Schwab is $25 per trade. Both companies also have the same thing for no commissions for online trades placed by U.S. clients. Mutual funds are pricier at Schwab. Vanguard and Schwab also earn interest on the money in your account but you can transfer funds to a money market account for more money.

Schwab Wealth advisory program has the highest fee set at 0.80% of AUM while an account minimum is set at $1 million. With a minimum account of $500,000, you have the opportunity to get an advisor who will establish their own charges. Other account minimums also have their fee structure.

Broker-assisted Vanguard trades are priced between $0 and $25, while at Schwab, the price is $25. Both companies have no online order commissions for U.S. clients. Mutual funds are more expensive to deal with at Schwab. Both Schwab and Vanguard make interest on the money in your account but then you can change the funds into a money market account for better earnings.

Schwab’s wealth advisory program has it´s highest fee to 0.80% of AUM with a minimum account balance for $1 million. For a minimum account value of $500,000, you get an advisor, and the advisor will charge his own fees. Other account minimums have their individual fee structures.

Vanguard Personal Advisor Services combines automated with human financial advice, needing $50,000 as a minimum investment. Advisory fees are dependent on the worth of your assets; they can charge up to 0.20%.

Research and analytics

Schwab, as it caters to more self-directed traders, offers more online tools for researching trades than Vanguard. It provides charting tools and idea generators. Vanguard has no online technical analysis capability, but there is limited charting and tools for retirement planning.

With Vanguard, portfolios can be saved and they can be compared against Vanguard models, which range from 100% bonds to 100% stocks. Schwab offers Portfolio Checkup to check your diversification and ratings on your stocks and mutual funds. Both firms generate PDFs of portfolio analysis results.

Customer education and security

The Vanguard website provides customer education through its offering of videos and articles, numbering in the hundreds. They cover subjects such as how to invest, financial management, planning for retirement, and investing for life events. Vanguard provides education through its personal advisor services, where investment professionals can help their clients better understand markets, investment vehicles, and risk.

Schwab provides Schwab Live Daily, a video stream that can educate investors in investment topics relevant today, in addition to on-demand videos and articles written by trading experts at Schwab. And education is provided by personal advisors in the Schwab Advisor Network.

Vanguard and Schwab have customer support representatives available by telephone and live online chat. The customer service hours of Vanguard are from Monday and Friday only, however the live chat is available 24/7.

Vanguard and Schwab rely on two-factor authentication to enforce access to their services and the SIPC insurance shields brokerage accounts valued up to $500,000.

Passive investors who are looking for investment options will like Fidelity, Vanguard, and Schwab best. Fidelity has many low-cost index funds, and in fact, Vanguard is famous for being the first index fund that had low expense ratios. Schwab, on another note, even gives you free ETF and index funds. On these platforms there exist a lot of options for passive investors to implement their strategies.

Do You Want Ultra High Net Worth Caliber Wealth Management Services?

While we have great respect for Fidelity, Schwab, and Vanguard, and use them for custodial accounts for some of our own clients, after reading this you can probably see the shortcomings of using them for ultra high net worth financial planning and wealth management. Feel free to schedule a free consultation to talk to us – on your first call.

 

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