Charles Schwab Review (2020): Cutting Fees & Making Waves

Charles Schwab Brokerage Review

With educational resources and insights for all levels, $0 commission and a recent acquisition that will take them to the next level, Schwab are on the road to industry domination

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Charles Schwab - Reviews & Ratings

Charles Schwab offers high-quality insights, tools and resources, low fees, and a huge investment selection. 2020 is sure to be a year of growth and transformation for the company as it gains a larger client base and increases its efficiencies in what can only be a positive for investors.
9/10

FAST FACTS:
• Account Minimum: $0
• Fees: $0
• Best for: All investor types and levels
• Highlight: Best online broker for stock trading

Portfolio Analysis : 9.5/10
Tools & Resources: 8.5/10
Commissions & Fees: 9.5/10
Usability: 8/10
Investment options: 9/10
Customer experience: 8/10

Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).
Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled Characteristics and Risks of Standardized Options.

Charles Schwab are a great broker for all levels and types of investors, and they deliver on quality, too. Schwab’s 50 years experience in the industry proves to be an advantage against some newer competitors; giving the company the experience to gain an insight and understanding into its customers and the market.

Whether you’re new to the investing game and want some insight and easy-to-use tools to help you along, or someone with the experience, looking for advanced trading platforms, Charles Schwab offers quality for all.

We’ve analysed how Schwab’s acquisition of TD Ameritrade came about and how it may affect things for customers in the future, we’ve also looked at their features, customer service and Insights. Here’s our review of Charles Schwab.

Overview and Summary

  1.  Charles Schwab is a full-service broker founded in 1971 by Charles R. Schwab
  2.  From bonds to stocks, Schwab offers a diverse range of investments to satisfy every investor’s goals.
  3.  Charles Schwab merger with TD Ameritrade will increase Schwabs efficiency and thus, lower their costs and increase their margins
  4.  Schwab’s trading platforms are an intuitive and flexible design that adapts to your style as you grow and your strategies become more complex
  5.  Schwab offers investors a comprehensive and clear selection of insights to help you grow
  6.  In late 2018, Schwab was one of the first to introduce a $0 account minimum, a reduction from $1,000.
  7.  Schwab’s customer service and app could be improved. Their customer service can be slow to answer and their app can be slow to load.

What is Charles Schwab?

Charles Schwab is a full-service broker founded in 1971 by Charles R. Schwab. The broker is headquartered in San Francisco, California with 345 branches positioned around the United States, managing $3.56 trillion in investments for more than 11 million clients.

Their recent acquisition of TD Ameritrade in a $26 billion all-stock deal, announced in late November, will increase its client base by 12 million and it’s client assets by $1.3 trillion.

Altogether, this gives the company 24 million clients accounts and more than $5 trillion in client assets.

Charles Schwab Set to Dominate the Brokerage Industry

Schwab shocked the world on November 25th 2019, when it announced its plan to buy one of its biggest rivals in a $26 billion deal.

“It’s clearly a monumental deal in the space, one that quite frankly caught us by surprise,” Mike Pizzi, CEO of E*Trade said. Everyone was expecting them to buy E*Trade, not TD Ameritrade.

This shock twist may have come about due to the recent war on fees. In October 2019, Schwab announced that they would be going commission free, a move that put pressure on TD Ameritrade to do the same and potentially put a squeeze on them.

The move to eliminate commissions however, resulted in the fall of both companies stock. At the time, TD Ameritrade’s stock fell 26%; a blow that may have just weakened them enough to consider a merger with a larger company.

Former Schwab executive theorizes that “it could have been a $30 billion deal”, but Schwab swooped in and got them while they were down, for $26 billion. Their strategy was ruthlessly well-timed.

This merger will increase Schwabs efficiency and thus, lower their costs and increase their margins. Of course, its customer base and market share will increase, and Schwab have more responsibility for RIAs (registered investment advisors), too.

This merger will result in $5 trillion in assets, an annual revenue of almost $16 billion, pretax profits of $8 billion and 24 million brokerage accounts. It will also provide custody services for around 14,500 registered investment advisors.

With lower fees and accessible trading now becoming the new norm in the industry, growth and efficiency will be key to profit.

It’s expected that Schwab will cut about $2 billion of TD Ameritrade’s operating costs, in a start-up style business structure to be implemented by Schwab CEO, Walter W Bettinger.

Schwab’s Advertising: Things You Can Do With Schwab

Schwab’s branding is witty and to the point. In October 2019 the online broker released an advert titled, “Earn More.” In it they list, “Things you can do with Schwab” and highlight two advantages it has over its competitors.

The first advantage the broker highlights is that customers will earn more when they invest with them. To which the broker compares their Schwab Advantage Money Fund, a money market fund, to Fidelities money market fund.

Investors will earn 1.84%, with $0 investment minimum with Schwab, in comparison to Fidelity’s 1.75% and $0 investment minimum, they state.

The broker goes on to highlight the fact they offer a satisfaction guarantee and invite viewers to “wonder why [their] competitors don’t offer that.’ They end the advert by claiming that they are “a modern approach to wealth management.

Both points have no doubt been a big selling point for Schwab in 2019. If you’d like to watch the ad for yourself and get a better sense of Schwab’s branding, you can take a look at Schwab’s “Earn More” advertisement and others including, “Why Consider an Independent Advisor.”

How Does Charles Schwab Work?

Previous to the industries move towards lower fees, Schwab required a minimum investment of $1,000. In October 2019, however, the company was pressured into lowering their fees in a bid to remain competitive with upstarts, including Robinhood, resulting in a $0 fee for retirement and domestic retail brokerage accounts.

As Schwab derived only 6% revenue from trading previous to the zero-commissions trend, this industry transition won’t have a huge impact on the company. It will however, make it increasingly hard for upstarts to stand out. E*Trade for example, derived 16% of their revenue from trading. TD Ameritrade estimated that it would cost them a loss of about 16% revenue.

With this, Schwab has an incredible selection of almost 250 commission-free ETFs and thousands of transaction fee-free mutual funds. If you’re wondering how you’ll make your way through this amount then worry no more, you’ll have the option to filter everything down to a smaller list that captures only what you’re looking for.

Who Charles Schwab is Best For?

Charles Schwab is best for you if you consider yourself one of the following:

  • Beginner
  • Experienced trader
  • Need premium search
  • Looking for no-minimum index funds
  • Prioritising free-commission brokers

Charles Schwab can do no wrong. The broker delivers on quality, experience and show a strong understanding of their investors needs.

If you’re looking for comprehensive research, professional guidance and low fees then Schwab offers this at competitive trading costs. In addition to this, its recent acquisition of TD Ameritrade, should only be a positive sign of things to come.

Charles Schwab is best for traders of all levels and expertise.

Where Charles Schwab Shines

Commissions and Fund Expenses

Charles Schwab was one of the first to reduce their commissions in 2019. Now they’ve completely eliminated commissions for online trades of ETFs, stocks and options, rivaling Robinhood in a war on fees. Investors will also be free from transaction costs for Schwabs 4,000 mutual funds.

Since the announcement of Schwabs acquisition of TD Ameritrade, customers can expect even better efficiencies and innovation through larger teams and bigger savings. If fees are important to you, be sure to check out how Charles Schwab compares to E*Trade — one of its primary competitors — when it comes to commissions and fees.

Investment Products

Charles Schwab’s generous selection of investment products helps you build a diverse portfolio and reach your goals. Plus, they’ll provide a reliable guide to help you make the right decisions every step of the way.

The main benefits of Schwab’s investment products are firstly, the large choice of products that you can easily navigate through and search by feature, expense ratio or however suits you. Their Personalized Portfolio Builder will help you create a diverse and customized portfolio to suit your needs.

With that, customers won’t need to make a minimum investment on mutual funds and you’ll be charged a flat rate expense ratio.

Featured Investment Products

Find the Right Mutual Funds

Your funds will be managed by a professional, usually with no transaction fees or funds. And over 4000 funds to choose from, increasing the odds that you’ll find the right one for you.

Diversify with ETFs

Create a diverse portfolio using exchange-traded funds to expose you to a certain market mix.

The Place for Fixed Income

Get low prices, experienced guided and a great selection to help you go after your investing goals, whether you’re looking to increase your income or protect your assets.

Charles Schwab’s Customer Support: Chat Support & Workshops

Schwab offers around-the-clock 24/7 support, and their chat support is good for quick and efficient answers, setting them apart from other Vanguard and other leading brokers.

Customers can also attend one of their complimentary workshops in over 350 branches, where you can speak to financial consultants on appointment.

Of course, if you’d prefer the broker to manage your portfolio completely, you’ll have access to a robo-advisor offering intelligent portfolios.

  • Access to Schwab professionals for clear and comprehensive guiding
  • Access to professionals in the financial sector through their 350+ branch network
  • Expand your knowledge and network by visiting workshops and seminars.
  • Get your initial priorities sorted by working a New Client Concierge

Take Your Trading to the Next Level: Schwab’s Insights

Schwab have the following sections when it comes to providing you with research and insight:

  • Knowledge center
  • Insights and ideas
  • Media and live programs
  • Investing principles
  • Experts on hand

Schwab’s insights has a wonderful array of sections, including a knowledge center, insights and ideas, investing principles and even an experts section. The broker offers its own equity ratings, reports from Morningstar, Market Edge, Credit Suisse, and others.

Real-time news and earnings reports, in addition to research reports and market commentary by Schwabs own experts will all become a part of your army to tackle investing, not to mention, you’ll receive a free magazine each quarter.

Each section, again, is easy to navigate and broken down into categories, so you can find exactly what you need, and more.

Schwab’s 7 Investing Principles for Success

1. Establish a plan based on your goals

Set realistic goals, review your plan annually and modify it as your situation changes. Be realistic about your goals.

2. Start saving and investing now

Maximise your investments. Timing the market it almost impossible, so don’t try it.

3. Create a diverse portfolio based on your risk tolerance

Be aware of your comfort level with temporary losses and understand that asset classes act differently. Don’t chase previous performances.

4. Reduce fees and taxes

Markets are never certain; fees are certain. Watch your net returns and minimize your taxes to increase returns.

You can listen to Charles Schwab, Founder and Chairman, speak about his strategies for taxes in this helpful and clear video.

5. Protect against significant losses

Modest temporary losses can be recovered from quickly, but significant losses may take years. Use investments in cash and bonds for diversification.

Consider options as a hedge against market declines – Create options strategies to help you offset losses

6. Regularly Rebalance your portfolio

Become disciplined about your risk tolerance and stay engaged with your investments.

7. Ignore the noise

Keep in mind that the press makes noise for the sake of marketing. Know that markets fluctuate but you should stay focused on your plan.

Account and Investment Minimums

In late 2018, Schwab was one of the first online brokers to reduce it’s account minimum to $0; a reduction from $1,000. This move put Schwab in direct competition with TD Ameritrade and Fidelity, other no-minimum brokers. An additional and arguably, key factor of the TD Ameritrade and Schwab merger.

The company also removed investment minimums on all Schwab index funds, too. Making investing more accessible by allowing Investors access into index funds with small amounts of regular payments.

Premier & Customizable Trading Platforms

Schwab offer basic trading features on their website, along with two other robust trading platforms StreetSmart Edge and Tradesource. You can also avail of the brokers mobile trading on either the StreetSmart or Schwab’s mobile app.

Both Trade Source and StreetSmart have no trade minimums or fees and are available for customers who use the brokers trading services. Both also offer access to research and tools to help you make the best investing decisions at the time.

StreetSmart Edge

StreetSmart Edge is Schwab’s premier trading platform. It has fully customizable features and an intuitive workflow that matches your trading style. This platform suits both simple and complex strategies with its advanced and easy to use tools.

Advanced Features and Design

  • An intuitive and flexible design that adapts to your style as you grow and your strategies become more complex
  • Advanced tools that allow you to identify and act on opportunities quicker and better
  • Risk management features to help you monitor and act on open orders and positions

StreetSmart Edges advanced features include advanced charting tools, tools to monitor your market exposure and the ability to trade multiple securities in the same order window.

Customizable features include their Balance Bar, where you can see an overview of your account and buying power, in addition to creating and editing trading outlets. Lastly, you can view real-time market data, research a symbol and enter an order.

Trade Source

Trade Source is Schwab’s online trading platform. It has a suite of programs for options tradings called StreetSmart Central. On Trade Source you can monitor your portfolio, analyse the market, and get access to research and data. The features include an intuitive trade ticket for stock, ETF and options orders, all of which take into account current market data.

Where Charles Schwab Fall Short

Customer Experience

Charles Schwab Chat SupportSchwab’s website is very informative and relatively clear, once you know what you’re doing that is. If you don’t then it can be hard and time-consuming trying to go through it all.

Their app can also be a bit disappointing, with a slow loading time, irrelevant push notifications and even issues logging in.

Transaction-fee Funds

Schwab has a long list of no-transaction-fee funds. However, any funds not on this list will cost you. The fee to buy transaction fee funds is $49.99, which is one of the highest out there and therefore merits being highlighted.

Although, if you do have any issues, Schwab offer a satisfaction guarantee. You can simply contact the broker and once your concern meets the criteria, Schwab will offer a refund or transaction fee.

Comparison of Brokerages

Comparison of Robinhood, Merrill Edge, and Charles Schwab:

  • Account min: Robinhood $0 Merrill Edge $0, Charles Schwab
  • Fees: Merrill Edge $2.95, Charles S $0 , Robinhood $0
  • Highlight: Merrill Award-winning research, Charles best online broker for stock traders, Robinhood Pioneer of commission free stock

What Does This All Mean?

Charles Schwab is perfect for investors looking for a high-quality, full-service broker. They offer research and education packages to give investors the knowledge needed to perform at the top of their game. Their recent acquisition also should enable the company to become more efficient, with better tools and services.

Their recent acquisition only proves that Schwab have a hunger to do what it takes to offer customers the best.

Investors interested in research and education should take a look at Merrill Edge, while Fidelity are excellent options for market commentary and research on stocks.

Investors interested in a good investment selection should also take a look at TD Ameritrade.

About Author

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim is also the co-founder of Protective Technologies Capital (protechcap.com).