One of the Lowest Priced Brokers Around
With roots going back to 1980, Scottrade is a mainstay of the modern discount brokerage industry. In addition to having a substantial history behind it, the company distinguishes itself with commission levels that can be noticeably lower than those of competitors like E*Trade and Charles Schwab. As will be seen, those lower fees do entail some compromises, but many investors will find that Scottrade makes good sense when the overall picture comes into view.
Getting started with Scottrade is as easy as with other online brokers, and the process will feel very familiar to anyone who has opened a brokerage account before. Those starting fresh accounts will need to pony up a manageable $500 minimum, a figure that puts Scottrade’s bar of this kind well below those of Schwab and Fidelity, although higher than TD Ameritrade’s. Few investors will take much notice of this requirement, regardless, since doing any kind of productive trading is going to demand substantially more in the way of a bankroll. Investors who wish, on the other hand, to transfer over existing accounts from other brokerages have it just as easy. Scottrade will cover Automated Customer Account Transfer Service (ACATS) fees of up to $100 for those who bring over accounts worth $10,000 or more, and the process of authorizing the move is virtually foolproof. In case of account setup problems of any kind, skilled customer service agents are available during business hours to help move things along.
Commissions and Fees
One of Scottrade’s primary attractions is the company’s strikingly low commission schedule. In fact, that has been a major focus for Scottrade ever since the beginning, and the $7 fees that attend most stock trades today are among the lowest out there, having not ballooned a bit since 1998. Those interested in penny stocks, though, should beware of an additional fee that is levied on such trades; the half of a percent that gets tacked on might not seem like much in dollar terms, but it can easily add up when it comes to determining whether especially active traders find themselves in the black. Although the company is known for its inexpensive stock trades, it positions itself as an equally frugal outlet for options trading, and the basic $7 fee that accompanies every option trade does seem like a good start. In fact, though, the $1.25 fee that is added for each additional contract is close to twice that charged by many competitors. OptionsHouse, the company that actually provides Scottrade’s options trading platform and functionality, for example, takes quite a bit less for the average trade in the final analysis. If options fees are a weak point, Scottrade recovers nicely when it comes to mutual funds. It boasts one of the industry’s best selections of funds in general, offering access to nearly 15,000 of them as of this writing, with an especially attractive assortment of the no-load funds that so often make the best sense for investors. At $17, Scottrade charges less than anyone else in the industry for getting into or out of a mutual fund. Couple that fact with the undeniably impressive selection, and it is easy to see why so many fund-focused investors speak highly of the company. As with other discount brokers, Scottrade primarily targets self-directed investors. Even the most independent of investors can sometimes benefit from ordering through a professional, though, and Scottrade’s fees for broker-assisted trades are reasonably competitive at $32 each. That puts the company in the middle of the pack overall, although this is unlikely to be much of a consideration for most investors since such trades tend to be fairly rare.
Noting that Scottrade’s basic stock-trading fees are around 30% below what TD Ameritrade and E*Trade charge, many investors are going to wonder where the difference comes from. The availability of research is part of the answer, although that is not to say that Scottrade is entirely lacking in this respect. In fact, the company does a good job of giving clients access to the most-used research sources and data points. Pulling up earnings figures or insider activity reports is just as easy and fruitful as it is at more expensive competitors, and clients of the company can also expect to read up on what Standard & Poor’s, Morningstar, and other big names have to say. Where Scottrade can fall behind, however, is in the availability of the specialized, industry- and niche-specific research reports that often interest more advanced investors. While those investing based on fundamentals, then, will probably not find anything lacking, investors seeking more involved and nuanced perspectives on particular companies are more likely to come away disappointed. Customer Service Working with a discount broker necessarily means forgoing the handholding that full-service alternatives specialize in, but there are going to be times in every investor’s life when some assistance will be required. Despite being among the lowest-priced brokers around, Scottrade excels at customer service, this being another important reason for the company’s strong reputation. Like several competitors, Scottrade has a thriving network of local offices spread around the country. Clients who call for assistance are automatically directed to that of these 500 brick-and-mortar locations geographically best positioned to serve them, a smart touch that helps to give a personal feel to interactions with the company’s representatives. Just as importantly, Scottrade brokers and customer service representatives are highly knowledgeable and well trained, right down to knowing the ins and outs of relatively obscure-seeming features of the company’s several trading platforms. Good advice and effective assistance, then, are easily available to clients, although the fact that these skilled customer service reps are only available during normal business hours takes away some of the shine.
Mobile Trading Capability
As phones and other portable electronic devices have become ever more capable, brokers have taken note. Scottrade stands as one of the industry’s leaders here, having put out several revisions to its mobile apps that leave them today among the best on the market. Available for both iOS and Android, with a tablet-specific version for the former platform, the mobile apps are simple but powerful. Watch-lists and other personalized features can be set to synchronize with Web-platform settings, meaning that much less in the way of housekeeping is required than with some competitors’ offerings. In addition to being well designed, the apps work smoothly and reliably, prerequisites for investing that have sadly been in short supply elsewhere at times. Many investors, in fact, will find that the mobile apps make for the perfect way of getting routine trading done, with in-depth research and more sophisticated strategies being left to the personal computer.
Platforms & Tools
While the company’s mobile apps are something of a high point, Scottrade’s basic trading platform is much less distinguished. The Java-based, browser-embedded application does offer up most of what investors will need in order to craft and execute profitable trades, but it can feel somewhat clunky and limited when compared to competitors’ offerings. For example, investors are on their own when it comes to managing the many windows they will inevitably want to open up. Other platforms provide automated ways of snapping these user interface elements together so that users can easily keep things organized while enjoying a bounty of information. With Scottrade’s basic “Streaming Quotes” platform, on the other hand, it is easy to either become overwhelmed by the disarray that develops or waste too much time keeping it from building up. The company’s more advanced stock-trading platform, Scottrade ELITE, is a better piece of software. In addition to providing a number of sophisticated technical tools that are lacking in the basic platform, it is also more customizable, meaning that creating and sticking to a productive layout is far less trouble. On the other hand, Scottrade limits access to this platform to customers who entrust $25,000 or more to the company, meaning that many investors will not even have the option. As mentioned previously, options traders will find themselves presented with a Scottrade-branded version of the well-known OptionsHouse platform. While it is something of an apples-to-oranges comparison, working with this software does tend to emphasize the weaknesses of Scottrade’s stock-trading platforms. From user interface basics to more advanced functionality, the options platform is simply easier and more pleasant to work with.
Scottrade has an undeniably important and justified position in the discount brokerage industry. At the same time, the particular combination of strengths and weaknesses that characterize the company means that investors will do well to think hard about whether it is the best option for them. Scottrade’s single most attractive and talked-about feature is the company’s low, $7 fee for most stock trades. Saving 20-30% per trade compared to Schwab or Ameritrade is enough of an issue that active investors should certainly give the company’s services some consideration. On the other hand, those investors who trade relatively infrequently will need to figure out whether those $2 to $3 savings will add up enough over the course of an average year that they can justify making the switch. Even more active investors will need to look beyond the commissions, too. Scottrade’s relative weakness when it comes to research means that many of the engaged, advanced investors who could potentially benefit most from its low commissions will need to have other sources when it comes to delving deeply into the prospects of particular companies. This will not be a deal-breaker for many advanced investors, but, like the weaknesses of the company’s trading platforms, it may somewhat dim the luster of those notably low commissions. One segment of the investing public for whom Scottrade seems clearly unbeatable would be those who intend to focus primarily on mutual funds. Between the unbeatable selection of funds and the equally attractive fees that Scottrade charges for trading them, it would be hard to find a more suitable broker for investors of this stripe.