By Natalie DeCoste
Fidelity Investments plans to usher in a new and much younger generation of investors with the launch of specialty youth accounts.
The investment giant announced that 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 new service is called the Fidelity Youth Account, and it will allow users to buy and sell stocks, ETFs, and Fidelity mutual funds. Fidelity claims these accounts are the first of their kind in the finance industry.
“Fidelity is committed to responsibly supporting young investors,” said Jennifer Samalis, senior vice president of acquisition and loyalty at Fidelity Investments. “Importantly, our goal for the Fidelity Youth Account is to encourage young Americans to learn through action and foster meaningful family conversations around financial topics. Designed alongside teens and parents, the account is charting a new course by providing the ability for teens to build healthy money habits through learning by doing.”
The new accounts will offer users a new library of tailored educational content and tools, Fidelity’s award-winning brokerage platform, its mobile app with a simplified user experience, and customer-centric practices.
“There is a lack of financial literacy. People who are already Fidelity customers, they want to pass on their knowledge to their children. When we talked to them, they said they would love to have a product to develop better conversations with their children as soon as possible,” said David Dintenfass, Fidelity’s chief marketing officer and head of experience design.
The accounts will not require a minimum investment to open and will get all domestic ATM fees reimbursed. The accounts are not joint or custodial, meaning that it is the child and not their parents making the investment decisions, unlike a UGMA or UTMA account. Additionally, the accounts will not allow users to buy or sell cryptocurrencies, stock options, or ETFs that use borrowed money to supercharge gains and losses.
This move is part of a greater trend in the finance industry to draw more first-time investors into the market. Recently consumers have seen more and more brokerages slash trading commissions to zero and offer easy-to-use apps. Firms hope to boost the percentage of U.S. households in the stock market, which has climbed back above half.
Reducing stock-trading commissions to zero in recent years became the industry standard for 2020, a year when many retail investors discovered the allure of trading stocks.
In the first quarter of 2021, Fidelity added 4.1 million new accounts. Of those 4.1 million accounts, 1.6 million were opened by retail investors 35-years-old and younger, an increase of 222% from the year prior.
The new rush of young investors has raised some negative feedback from onlookers. The rise in popularity of trading app Robinhood, which requires users to be 18, has drawn criticism from both Congress and Wall Street. Detractors have credited the app with facilitating the meme-stock bubble where retail investors drove up the price of GameStop stock, causing problems for Wall Street firms who had heavily shorted the stock.
