charles schwab

Brokerage Review: Charles Schwab


15 August,2012

One of the most well-known brokerages is Charles Schwab. This is a venerable brokerage that was a more traditional brokerage before brokerages became a big deal online. Now, of course, Charles Schwab offers online brokerage accounts, and it’s possible for almost anyone to invest with Schwab. Additionally, Charles Schwab provides banking and lending services, as well as active trading opportunities.

There are a few more account requirements with Schwab than many other brokerages have, and the prices can be somewhat high when compared with many of the other brokerages, but some investors like the idea of having everything all in one place, and some like the idea of an old hand in the investing game offering access to investments.

What Accounts are Available with Charles Schwab?

There are a number of accounts available through Charles Schwab. You can choose from:

  • Individual and Joint Brokerage Accounts ($1,000 minimum to open)
  • Rollover IRA and Inherited IRA ($1,000 minimum to open)
  • Traditional IRA and Roth IRA ($1,000 minimum to open)
  • 529 College Savings Plan ($500 minimum to open)
  • Education Savings Account ($1,000 minimum to open)
  • Custodial Account and Custodial IRA ($100 minimum to open)

As you can see, Schwab requires that you have a minimum amount of money in the account in order to open it. It is worth noting, though, that custodial accounts require much less — since they are accounts on behalf of minors.

Charles Schwab also offers a range of investing products for businesses. It’s possible for a business to use Schwab to offer a 401(k) to its employees. You will see that Schwab really is a full-service brokerage account. Schwab offers you the ability to trade on margin, as well as trade foreign currencies. The mobile trading platform allows you to complete your transactions from anywhere. You can also use the connectivity of your banking and investing accounts to quickly move money around.

Commissions and Fees Charged by Charles Schwab

You don’t have to worry about maintenance fees when you use Schwab. There are no maintenance fees, although you do have to pay a fee if you transfer out. Schwab charges a fee of $8.95 per transaction to engage in online trading. It’s also possible to use a touchtone phone if you are willing to pay $13.95 for a trade. Schwab is really expensive on the broker assisted trades, though: $33.95. For that much, one hopes that you are getting remarkable insight as well as help executing a trade.

Schwab also offers options. These trade for $8.95 + $0.75 per contract. Margin rates change with the market, so if you borrow to make trades, you will pay an interest rate based on the current rates, and how much you end up borrowing. The rates start at base plus 0.50% for $2.5 million on margin, and go up from there. The highest rates are on amounts under $25,000, with a base + 2% rate.

One of the cool features of Charles Schwab, though, is access to free trading on certain investments. Schwab offers its own ETFs free of charge. You have to pay for non-Schwab ETFs, though. So, if you trade Schwab ETFs online, you don’t have to pay a fee at all. (There is a fee of $5 for an automated phone trade, though, and a $25 fee for broker-assisted Schwab ETFs.) The same is true if you trade OneSource Funds online. Schwab won’t charge you for those mutual fund trades online, or even with an automated phone trade, though you will need to pay $25 if you get a broker-assisted trade.

If you are primarily interested in building an ETF portfolio, Schwab can be a solid choice, since you have a variety of free ETFs to choose from. The expenses are fairly low, so you have the benefit of low cost ETFs, combined with the commission-free trading. The savvy ETF investor can benefit quite a bit from this set up.

Charles Schwab Features

As you might expect, Charles Schwab features a number of helpful trading tools and resources. Schwab offers advanced charting, along with chart pattern recognition. Additionally, you can put together a watch list to keep up with investments of interest. Real-time news can be streamed, and you can customize your news so that you see relevant information related to investments of greatest interest. Schwab also provides detailed research so that you can analyze your investments more thoroughly. Find out fundamental information, as well as technical information.

The resource center offered by Schwab includes market commentary and insight. You can get a bond snapshot, as well as insight and analysis about what is happening in Washington, and how it might impact your investments. Schwab features sections on personal finance and retirement, and the “Ask Carrie” section puts a very real face on questions that people ask.

There is also a section on investing basics, designed to help the beginner get started. You can use Charles Schwab to plan out your future as well, since the resource center provides guidance in how to plan for such milestones as marriage, children, college, and even divorce. There are a number of workshops and videos you can access for tutorial style information on what’s available to you.

Mobile trading tools work on tablet, smartphone, and mobile web. This makes it convenient to take your research, preferences, and trading ability anywhere you go. If you are an Active Trading client, you can add StreetSmart Edge, Schwab’s flagship platform designed for those who need fast and flexible trading abilities. It comes with greater account and order control, as well as integrated tools that help active traders identify and capitalize on opportunities.

Bottom Line

Charles Schwab costs more in some areas than other online brokerages. However, if you are looking for one stop for banking, borrowing, and investing, Schwab isn’t a bad choice. The tools and resources are excellent, if you are willing to pay the price. Where Charles Schwab really shines, though, is with the free ETF options. If you are interested in trading ETFs, Schwab is a great place, since there is a reasonable variety of fee-free ETFs to choose from.