New online brokers come and go. But one thing stays the same: Charles Schwab brokerage keeps winning top marks from customers and ranking among the best online brokers.
And it's happened again. Charles Schwab rated among the top three brokers in nine of the 15 attributes that matter most to investors, according to the latest Investor's Business Daily's Best Online Brokers survey. And that broad approval again put Schwab brokerage among five Best Online Brokers overall.
Such support shows Schwab's long-term commitment to individual investors even amid many new entrants. And yet Schwab brokerage, a 50-year-old firm instrumental in bringing online trading to the masses, continues to show how it's able to keep its technology fresh.
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And this creates some serious loyalty with investors.
Charles Schwab Keeping Customers Happy
Gary Carlson, 92, is a testimony to how Schwab knows what its customers want and keeps giving it to them. Year after year.
The retired computer scientist in Provo, Utah, has been with Schwab for more than 40 years. He likes the fast executions he gets on the 20 to 40 trades he does a year. Accuracy and some extra tools to pinpoint investments also keep him at Schwab.
Schwab is a full brokerage offering, not a specialist. As such, it routinely scores among the best in an array of areas. And as Carlson notices, trade execution is one of those areas where Schwab is in the upper echelon. It ranked No. 2, only behind the study's overall winner Tastyworks, in Trade Execution Speed/Price.
And speed of execution just feeds into an overall site experience Schwab customers like. Again, for Site Performance, Schwab ranked only behind Tastyworks.
Best Online Brokers Features: Charles Schwab |
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| Minimum to open an account: $0 (Schwab One brokerage account) |
| Number of accounts: 29.2 million (including TD Ameritrade accounts) |
| Shorting restrictions: Must consent to a margin and short account agreement |
| Margin restrictions: Must have $2,000 in cash or marginable securities in account |
| Commissions: $0 for online trades; $0 for options trades plus $0.65 per contract |
| Special features: Satisfaction guarantee refunds fee or commission if not completely satisfied |
| Website: Schwab.com |
Price No Longer The Big Differentiator For Schwab Brokerage
Free trades for most stocks became the norm in 2020, including at Schwab brokerage. So brokers need to find new ways to elevate their service beyond low commissions, says Mike Foy, senior director, Wealth Management Practice, at J.D. Power.
New brokers like Robinhood are scooping up many of the new and young investors piling into the stock market, he says. And that's putting the pressure on established brokers like Schwab to appeal to a new audience where the smartphone is their go-to trading device.
And if there's a place where Schwab might up its game, it's in mobile. It ranked fifth in the IBD analysis for Mobile Trading Platforms/Apps, though that still made it a top broker among the 10 firms studied. "Schwab is trying to be an innovator, at least, among the incumbents," Foy said.
Schwab Brokerage Innovations
One example of innovation is Schwab Stock Slices. This offering allows customers to buy just a part of a share of any stock in the S&P 500. Investors with just $5 to invest can buy a portion of up to 10 different stocks for no commission. And as part of Schwab's long-term focus, clients can give Stock Slices to children as gifts.
Meanwhile, Schwab in mid-2020 bought the technology of Motif, an online firm that lets advisors and clients essentially build their own exchange traded funds. This is an appeal to the growing number of investors who like to pick stocks based on themes.
Schwab, too, is looking to add oomph to its mobile capabilities. Now 40% of its clients are mobile only. And in early 2020, it launched the Schwab Assistant. The A.I.-powered mobile tool lets investors ask the app for real-time market information, show them how their portfolio is doing or offer Schwab brokerage statements or support.
Schwab partnered with Google to allow for portfolio tracking and account information on devices equipped with Google Assistant. And it's locked down with security know-how from decades of experience. Schwab ranked No. 2 for Website Security among those polled by IBD.
What's Next For Charles Schwab Brokerage?
Perhaps the greatest game-changer for Schwab, though, is one that's made barely any noticeable difference so far. During October 2020, the company completed its purchase of one of its chief rivals, TD Ameritrade. So far, Schwab is making changes slowly. Schwab brokerage says integration of the two brokerages will take place over the next 18 to 36 months.
And Schwab says it looks to bake in the best of TD Ameritrade's tools into its key offerings. That could benefit the millions of investors who hold accounts with the merged firm. TD Ameritrade ranks No. 2 for Equity Trading Tools, in the IBD survey, outpacing Schwab by two positions.
Barry Metzger, senior vice president of trading and education at Schwab, said in a statement, "As we look ahead, we intend to thoughtfully combine the great capabilities, tools and service at both firms to provide a unified, world-class trading experience for clients."
Keeping An Edge
Some Schwab customers worry service will suffer now that Schwab's number of accounts doubled to more than 29 million after the merger. Schwab customer Richard Burke, 54, in North Carolina says it takes longer to reach someone on the phone when you call than it did before.
Schwab was the industry disrupter in the 1970s. Its do-it-yourself discount trading upended the traditional brokerage. The key now will be using its size and scale to deliver a broader offering to serve growing needs of mobile-first customers, J.D. Power's Foy says. And that goes for many younger investors, attracted by free commissions, who also need advice and tools. Schwab can use its size to offer services beyond what's possible from smaller brokerages, he says.
For instance, Schwab Plan launched in August 2020 to help investors build and track their retirement plan. There's no fee or minimum deposit for this digital tool. "There's appetite for advice and guidance," Foy said. "Firms can do a better job at delivering that in a range of different ways."
Follow Matt Krantz on Twitter @mattkrantz
