USAA Review (2020): All Financial Services Under One Roof

USAA Review

Active and retired members of the military will feel right at home here, but day traders might run away from the high commission fees.

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USAA - Reviews & Ratings

USAA is a company that provides insurance, banking, and brokerage services to members of the Armed Forces. The brokerage is available to civilians too but it suffers from high commission fees on stocks, ETFs, and options. However, there are 3500 mutual funds with no commission fees available, as well as some very good educational resources.
5/10

FAST FACTS:
• Account Minimum: $500
• Fees: Stocks and ETFs are $8.95; Options are $8.75 + $0.75 per contract
• Best For: Military/casual mutual funds investors
• Highlight: No transaction fee mutual funds

Usability: 4/10
Research and Education: 9/10
Customer Service & Help: 7/10
Commissions & Fees: 2/10
Tools & Resources: 6/10

Investor Warning: Options are considered speculative investment strategies. Option trading entails a high level of risk and is not suitable for all investors. Certain requirements must be met to be approved for option trading. Those trading options (both Buyers and Sellers) should be familiar with the theory, strategy, pricing of options and related risk factors.

United Services Automobile Association (USAA) is a financial services group that offers investing, banking, and insurance services through its subsidiary companies.

These services are meant for active and retired members of the United States Armed Forces, although the brokerage services are available to the general public. The company was founded nearly 100 years ago in 1922, and its headquarters are in San Antonio, Texas.

Overview and Summary

  1. Charles Schwab acquired USAA earlier this year. Perhaps great changes are coming to USAA.
  2. USAA is made for members of the military. It provides financial services like insurance, investing, and banking.
  3. A full range of offerings is combined with very high commission fees.
  4. The brokerage offers about 3500 mutual funds with no commission fees.
  5. The platform is basic but has notable research resources.
  6. USAA offers a great education for beginner and intermediate investors. There are also courses made by Morningstar, which cover a wide range of topics.
  7. Active traders will find many better alternatives.

USAA Investment Acquired by Charles Schwab - What Does This Mean?

Charles Schwab acquired USAA Investment earlier this year, and USAA accounts will all be transferred to Charles Schwab.

The details of this transition process have not been made known yet, but it is supposed to happen in 2020. USAA claims that this transition will be smooth and that users will not suffer any inconvenience.

Is USAA Right For You?

USAA is a company that offers insurance, banking, and brokerage services to its clients. The company mostly deals with active and retired military personnel and their families, but the brokerage service is also available to civilians.

That being said, if you are an active or retired member of the military, and like to have your bank, insurance company, and broker in one place, then USAA is made specifically for you.

Investors who are interested in mutual funds might also like USAA since they offer about 3500 mutual funds with no transaction fees. Active traders will most likely choose one of the better alternatives though. USAA has very high commissions and a subpar platform for day traders.

What You Can Trade With USAA

USAA offers a full range of offerings from stocks and ETFs to fixed income investments and mutual funds. The brokerage also offers its users corporate and municipal bonds, as well as US Treasury bonds.

Users have to place orders for bonds and multi-leg options by phone. Also, users with margin accounts can sell shorts.

Clients can opt for USAA Managed Portfolio (UMP). If you choose this service, USAA’s experts will frequently recommend multiple portfolio models for free. If you want a more complete service, you can have the brokerage’s experts rebalance, monitor, and relocate your portfolio, but that incurs a fee.

This service requires a $25.000 minimum balance on your account. The investment managers will strive to build up a portfolio that’s diversified and stable.

If the account minimum seems too high, or you want a more moderate service, you can take a  look at the robo-advisor. This service requires a $2.000 account minimum.

Taking a Look at the USAA Trading Platform

Desktop Platform

The USAA trading platform is fairly straightforward and has a broad array of features and data. Placing orders is effortless, as the trade ticket is omnipresent. You can place orders from just about any screen on the platform.

USAA Desktop Platform

Usability

USAA’s trading platform is very intuitive and offers a good selection of resources, especially when it comes to research and education. A large amount of content makes the platform a bit difficult to navigate in the beginning, but it becomes fairly simple once you figure out where everything is.

Checking current positions and historical activity is not difficult with the platform’s well-designed new dashboard. Making transfers, managing dividends, and accessing tax documents has also been made easy. The overall design is good but there are no customization capabilities.

Limitations of USAA’s platform

Users have access to just about all investment types, but USAA’s platform does not provide any basket-trading and order-staging capabilities. Users can not place advanced conditional orders.

Day traders who like to have multiple open tabs with real-time data will not enjoy this platform though, as you can only have a single window or data set open at any given moment.

The platform gets a bit convoluted when you access the “News & Research” bar. The information updates slowly and the interface is far more complicated than the rest of the platform. Therefore, USAA’s platform is not for quick trading.

There is little streaming data, and the information on the platform must be manually refreshed (although it’s updated in real-time). Order routing is also lacking. There’s no insurance you’ll get the best price for your trades, although, users can pay USAA to route their orders to particular venues.

Portfolio Analysis capabilities

Users of the platform have access to a bundle of solid, mid-tier portfolio analysis tools. You can quickly view your balances, daily losses and gains, and current positions. Like all data on the platform, balances, and history need to be manually refreshed even though they update in real-time.

If a client uses USAA Managed Account service, they have access to more guidance, trading advice, and data. This is the case for both fully-managed accounts and robo-managed ones.

Mobile App

USAA Mobile AppThe mobile app is also straightforward and user-friendly but it has fewer capabilities than the desktop version. Viewing basic account info and trading  ETFs and stocks is quick and smooth.

Users have to open the “News and Research” bar to gain access to use the stock screener or to view watchlist and detailed quote information.

Alternatively, you can access this data by clicking on a pop-up box of the ticker you’re interested in.

Unlike the app’s previous version, there are no advanced charting tools in the current version. Trading directly from the Tools & Calculators, Market Insights, and News & Research pages is a bit bothersome as they all have their own trading tickets.

Going back and forth from these pages to the dashboard requires you to log in again.

The mobile app is great if you want to monitor your account’s activity and make basic trades but the latest patch is slightly buggy and unpractical. It is better to do the bulk of your trading and analyzing on the desktop app if you are a USAA client.

All in all, the app has good features but it doesn’t compare well with the best trading apps currently on the market.

How is USAA’s Pricing?

USAA offers a few no-commission securities but the commissions are generally very high. However, about 3500 no transaction fee mutual funds are offered by the brokerage, and the account minimum is pretty low.

Stocks, ETFs, and Options

Some ETFs have no commissions but other ETFs and stocks are burdened with an $8.95 commission.

However, if the stock is priced at less than $1, only a $0.1 commission fee is incurred. Options trades are $8.75 plus $0.75 per contract. International stocks have a $70 fee and have to be placed by phone.

If your stocks trades are assisted by USAA’s advisors, the commission is $50 ($0.1 if the stock is priced under $1). Representative assisted options trades are $ 25 plus $0.75 per contract.

Traders interested in these investment types should probably look for better alternatives among the best online stock brokers.

No Transaction Fee Mutual Funds – A Great Selection

Stocks and ETFs may be practically untradeable for some active  traders because of their high commissions but mutual funds investors will probably sing a different tune. USAA offers around 3500 zero-fee mutual funds, which is a very competitive selection. Aside from the 3500 free ones, mutual funds have $45 transaction fees.

Invest. TypeStocksStocks under $1ETFsOptionsMutual fundsBonds
Trading Fee$8.95$0.1$8.95$8.75 + $0.75 per contract$45$45

Other Fees

The account minimum has been lowered from $3000 to the current $500. If a user’s account balance drops below $100 and is inactive for 12 months, it is charged with a $10 fee and closed.

Other costs are the usual fees you can come across in most brokerages. Closing an IRA will cost you $35.

Customer Service

USAA’s customer support has a good reputation among well-known brokerages. Reaching the company’s representatives doesn’t take long, whether you are using your phone or the platform’s online chat feature. The online chat is a better option if you have a general question, as the response time is usually short.

The phone service representatives can answer more difficult questions from 8 AM to 5 PM on working days. The phone service doesn’t work during the weekends. Live brokers can also be reached by phone but they are fewer in number than the general call center staff, so the waiting time is a bit longer.

Research & News

USAA stands out among the competition with its offer of research tools. Both platforms have a  powerful ETF and stock screener. Also, Morningstar’s mutual fund screener is built into the desktop platform.

By clicking on a ticker of their choice, users can access useful related data like watchlists and analyst reports. The “News & Research” section is handy as you can search for the news you need by typing relevant keywords in the search bar.

Trading Education at USAA

USAA’s website is enriched by Morningstar’s articles and courses. Morningstar education series has great lessons for beginner and intermediate investors on topics like portfolio management, investment strategies, portfolio withdrawal mistakes, etc.

USAA Trading EducationYou can also take a look at USAA Educational Foundation, which is a non-profit funded by the brokerage. They offer students a plethora of articles, educational resources, graphs, and video lessons about investing, retirement, and other, more general financial concepts.

USAA’s retirement center provides tools and articles that can help users plan their retirement.

What USAA is Great At

Active and retired military personnel can have their broker, banker, and insurance agent under one roof if they choose to do business with USAA. Members of the Armed Forces are the company’s target audience, after all.

The brokerage has a great offering of mutual funds. There are about 3500 no transaction fee mutual funds currently available to users. This selection will certainly catch the eye of mutual funds investors. However, there might be better alternatives if you want to build a portfolio full of quality mutual funds.

USAA’s research capabilities and educational resources are augmented by Morningstar’s great content. Compared to the competition, USAA’s platform isn’t rich with features, but the research tools are comprehensive and powerful.

Investors can also get direct help and advice from the company’s account managers, but that will incur very high commissions.

New and intermediate investors can really benefit from the educational content on USAA’s websites. Students can learn from a plentitude of articles and videos that USAA provides, but also from Morningstar’s fantastic educational program.

The commissions on stocks, ETFs, and options are really high (except for the few commission-free ETFs) but mutual funds are free and the minimum account balance is only $500, which is a step forward from the $3000 minimum they had last year.

Where USAA Falls Short

If you trade stocks, ETFs, or options on USAA’s platform, your profits will likely get obliterated. USAA has some of the highest commissions in the industry for these investment types.

The company’s platform isn’t great for day trading as it is slow compared to its  competitors’ platforms. Basically, active traders will find a lot of better alternatives.

Wrapping it Up

USAA is a company made for the members of the military and it provides them with services for all their financial needs, including investing. Civilians can also trade with USAA, but the only noteworthy offer on the platform is the huge selection of no transaction fee mutual funds.

This makes USAA a great place for the members of the Armed Forces and some casual investors, but active traders and even mutual funds investors will likely find a platform that better suits them.

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).