Charles Schwab broker review

schwab(Check out all of our broker reviews here)

What’s the deal with Charles Schwab brokerage services?

Charles Schwab online brokerage services have everything you could need. They are a bank, a financial planner especially for IRA retirement work and online stock and securities trading. Commission is competitive and there are no account management fees. You can open an account with as little as $1000 and get access to their 3 trading platforms. A genuine strength for Charles Schwab is in the 2000 ‘no-load’ mutual funds that they can offer to the investors who like these vehicles.

Similar to most online brokerages the commissions charged for trading come down as the number of trades the investor makes  goes up and the same is true for the larger the balance held. For example, if you’re balance is over $1 million or you execute more than 120 trades in a year you can pay the minimum $8.95 per trade. A lesser level of trading activity and you will pay an above average commission of $12.95. Options contracts are typical for the sector at 75 cents. Margin rates also vary with account balance from base rate plus 1/2% to plus 2%. Experienced traders who are looking for brokerage purely on price will find better commission rates elsewhere.

Charles Schwab is a gateway online broker to the total investment landscape. All of the basic investments are available including stocks, options, mutual funds, futures and exchange–traded funds. They also offer any other fixed income investments that you can think of including bonds, treasury issues, Certificates of Deposit and many more. They offer a wide portfolio of 2,000 no-load mutual funds, annuities, money market funds and margin loans. You can also get trading access to non-U.S. securities and American Depositary Receipts or ADRs, and Canadian foreign orders. These esoteric investments are an attractive feature of Charles Schwab which otherwise has trouble standing out from the crowd.

The Charles Schwab trading platform has all the functionality of typical brokerage software. It is easy to use once the investor is familiar with it, but for the beginner these powerful trading tools may be an obstacle to effective investment management. The software enables you to make your own investment ‘desktop’ specify alerts for significant changes to your investments, level I and II quotes, option chains, ‘screeners’, ‘hot stock’ lists, charts and graphs and a great deal more. They also offer investment learning resources to build your technical knowledge of investment. Other resources include streaming headlines, research reports and daily and weekly market commentary from Market Edge®. They do not yet have a ‘roving’ investment option for trading via a cell phone. Why anybody would want to risk this kind of distracted investment on the move I cannot imagine but other brokerages offer it, yet Charles Schwab does not.

Where Schwab does score well is in customer service, with 300 physical offices around the country and all possible means of customer contact round the clock. However, customer service is all about responding well when mistakes are made and two ex-investors on ‘Dogs of the Dow’ tell stories around Charles Schwab that seem to indicate some systemic blemishes. The first one tells of a 2003 IRA contribution posted to 2004 and a stock offer that was paid in cash rather than stocks as requested by return mail. The second tells of two further blemishes. First, any cash in Schwab is swept into an account that only pays 1/2% unless you have more than half a million in assets and secondly, to use the “sell one fund and buy another” function, your buy trade execution takes 24 hours. You have to sell and buy in separate orders so that you get same day execution. This is not made clear at the time of trade.

Overall, Charles Schwab has an excellent brokerage service, the question you need to answer before deciding on these guys – is how much are you willing to pay as it relates to service? Tradeking (which we’ve reviewed for you), or one of the other brokerage companies (we have several reviews) may be a better option if you’re concerned about costs.

(Schwab is often mispelled Schwabb)

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3 Comment

  1. Anonymous says:

    Esoteric investments are an attractive feature of Charles Schwab which otherwise has trouble standing out from the crowd.

  2. Alln Stewart says:

    Over the years, I have had IRA accounts with Fidelity, Scottrade, Diversity, Vanguard, Mairs Powers, Dodge & Cox, and First Eagle, to name a few. I have never experienced poorer customer service than that at Schwab. To qualify for use of their StreetSmart trading software, I decided to move over a couple of our IRA accounts from Fidelity so as to bring my family account balances to over the $1 million balance required.
    My wife’s IRA account was opened from our home computer in Iowa City, funded with a transfer of an existing IRA from a major brokerage. There was no change in the name, address, email, or phone number of the account holder. The account to be transferred had been opened for over 15 years. This started the following series of events:
    . We received a form letter from Schwab indicating that they had trouble verifying wife’s identity and stating that no trades, deposits or withdraws would be allowed until they could.
    . One day later, we received letter saying account was open and asking us to contact them if any of the information, as reprinted in the letter, was incorrect.
    . Two days later, Schwab accepted and processed multiple deposits to the account totaling about $100k.
    . Checking the Schwab web site, we noted it indicated that all the funds in the account were available for trade or withdraw. There was no indication of any restriction on the account. This never changed.
    . Next, we submitted forms to Schwab to grant POA (Power of Attorney) to me on my wife’s account and to my wife on my account. Schwab set up the requested POA for both accounts as requested.
    . A Schwab Representative from their closest local office contacted Nancy to introduce herself. She made no mention of any restriction on her account.
    – The Schwab February was statement received. There was no indication of any restriction on the account.
    – Nancy received and accepted an invitation from the Schwab office to attend a dinner/seminar, which we both attended.
    – A Schwab representative us to discuss fixed income vehicles.
    . On April 3rd we tried to make our annual $6,000 deposit to the acct via ETF. But we could not because Schwab requires up to 2 weeks to allow a deposit via ETF. (Fidelity allows deposits immediately, but requires time to verify the information for withdraws.)
    . We sent checks to Schwab for IRA deposits to both our IRAs via our bank’s Bill-Pay.
    . On 4/8 I saw that the deposit to my IRA was posted the previous night, but my wife’s deposit was not.
    . On 4/8, after 15:00 CDT, I called customer service to make sure the delay was normal. I was informed that the check had been returned via postal mail because the account was restricted. In subsequent conversations with Schwab representatives that day, we were told;
    .. the account was restricted because we applied for it from New Jersey (What!!), and
    .. Schwab did not make any attempt to notify us that they had rejected our deposit because the Patriot Act does not allow it.
    Schwab saw nothing wrong with their handling of the situation – they did not think that rejecting a time-sensitive deposit, without any notification, was a big deal even though it would have cost their client over $2,000. They offered us no means of facilitating a timely deposit.

    Five days after filing a written complaint, I was called by a Schwab Representative that reiterated their non-apologetic position, although he had no explanation for the conflicting information we repeatedly received from them. Nor could he explain why they thought the IP address originated in New Jersey. Clearly, either their criterion for flagging accounts is faulty or their processing is sloppy. He also claimed that they mailed out a letter to us to tell us they rejected the deposit (the precious representative said that would be illegal). But after five days, we still have not received the rejected check back or any notification of the rejection. If it had been mailed when they claimed, I expect we would have it before now. We did receive the March statement though – again with no indication of any restriction on the account. I never heard a hint of an apology. Schwab’s only apparent concern through-out this has been their desire to justify their inexcusable handling of this account.

  3. Allen,

    Sorry to hear about that, thanks for sharing your experience with my readers, it helps others to make an informed decision when choosing a broker.

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