Investing With Fidelity's BrokerageLink

by Michael on Apr 17, 2013

Fidelity Logo

Do you have an employer-sponsored retirement plan with Fidelity and wish that you had access to better investment choices? If so, then you should definitely check to see if their “BrokerageLink” service is available within your plan.

To be fair, Fidelity has a number of good, low-cost options in the form of their Spartan mutual funds. But there are times when you might want access to more than what your retirement plan offers. Enter BrokerageLink.

If your plan offers it (and once you set it up), BrokerageLink will be listed alongside your other investment options just like another mutual fund. But it’s not just another mutual fund, it’s more like a brokerage account housed inside your retirement plan.

And, depending on what your employer allows, you can use it to buy individual stocks and bonds, ETFs, and/or mutual funds that aren’t otherwise available to you. In other words, it opens up a whole spectrum of additional investing options.

BrokerageLink fees

There’s no annual fee for BrokerageLink, though there are (potentially) some other fees involved. I couldn’t find a copy of the commission schedule but, when I called Fidelity, I was told that it’s essentially the same as their standard schedule.

So… If you want to avoid fees entirely, you can choose from 65 iShares ETFs as well as a fairly extensive list of no-transaction fee (NTF) mutual funds. Currently, there are 2,845 NTF funds available with over 2,600 being non-Fidelity funds.

Online equity and options trades can be made for $7.95/trade. The same goes for all ETFs other than the 65 free iShares options. US Treasuries (including TIPS) can be bought with no commission as can “primary market” CDs. Other bonds and secondary market CDs trade at $1/each.

And if those aren’t enough… You have access to over 10,000 additional mutual funds through their “FundsNetwork.” These are priced at $75/transaction, but… Once you’ve established a position, future auto-investments can be made free of charge.

Note: This latter point is a huge development. Until a couple of months ago, they charged $5/transaction for ongoing auto-investment in non-NTF funds. Now you just pay once ($75) to establish a position and it’s free forevermore.

How I use BrokerageLink

As it turns out, my employer only offers mutual fund access through BrokerageLink as they want to discourage active trading. That’s all well and good, though it would be really nice to have access to those commission-free iShares ETFs.

Without going into too much detail, our investment plan calls for a healthy slug of TIPS. We’ve been buying these via the Vanguard Inflation-Protected Securities Fund (VIPSX and VAIPX) in our retirement accounts.

The way things have worked out, we’ve needed to expand these holdings into one of our Fidelity accounts. Unfortunately, we don’t have any inflation-protected bond options via Fidelity. They exist, we just can’t access them.

As a result, we’ve turned to BrokerageLink to increase our fund access.

A quick walkthrough

To get started, I had to fill out the BrokerageLink application. Once that was done, it was simply a matter of establishing a position in our desired fund (plain old VIPSX since they don’t offer Admiral Funds) and then setting up the auto-investment.

What follows is a quick rundown of the process — this is as much a note to myself as anything, but I thought some of you might find this level of detail to be useful. Note that you can come at this either from the or the NetBenefits side of things. I did the former.

  1. From the main page, click on the name of your “core” account (i.e., your main retirement account; you should also see the BrokerageLink account in the list).
  2. Click “Change Investments” which can be found along the left side of the page under the “Act” heading.
  3. Click “Exchanges” to move money between accounts (i.e., from your “core” account to BrokerageLink).
  4. Choose the investment from which you want to move the money as well as the amount that you want to move.
  5. If prompted, choose the source of the money (in my case, there was only one choice: “Retirement Plan Contribution“) and proceed.
  6. Pull down the menu on the next screen to “BrokerageLink” for the destination and click to continue.
  7. Finally, perform the exchange.

The trade/transfer should execute at the end of Day 1, at which point the money will be moved into BrokerageLink in the Fidelity Cash Reserves money market fund. You can then log in on Day 2 and move the money into your investment of choice.

Be aware that the balance will likely show as an “Unsettled Amount” under “Pending Activity” on Day 2, but you should still have access to make trades with it.

To execute the trade, do the following:

  1. From the main page, click on the “Select Action” pulldown alongside your BrokerageLink account and select “Balances.”
  2. On the left side, click “Trade Mutual Funds.”
  3. Select “Buy a Mutual Fund” and continue.
  4. Select “Your Fund” if you already have a position, or “New Fund” (and enter the ticker) to establish a new position.
  5. Enter the amount you would like to exchange, being sure to account for any possible transaction fees.
  6. Click the button to preview your order, at which point you will likely see a fee warning. If you do, click again to preview your order.
  7. Finally, click to place the order.

That’s it.

Now… To take advantage of the free, ongoing auto-investments, go back to the main page (you can click “Accounts & Trade” and select “Portfolio” to get there). Click the name of your core account, click “Change Investments” on the left, and then click “Investment Elections.”

From here, you can choose to direct your contributions into any of a number of funds. But if you look closely, you’ll see that BrokerageLink is included in your list of options. Select it and specify a percentage of your contributions to go there.

Finally, you’ll have to call Fidelity to tell them how you want this money invested. I have no idea why you can’t do this online but, as of this writing, you have to call them and tell the rep which fund(s) you want to use.

As an aside, it may be possible to set up the auto-investments without first establishing a position (and thus saving the $75 fee). But we had an existing balance that we wanted to move, so the manual transaction was a necessary evil.

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