There are dozens of stock brokerage houses in the United States. But four major firms stand out because of their name, offerings, their total amount of client assets, and the number of clients they serve. They are often referred to as the "big four brokerages." Each of these firms—Charles Schwab, Fidelity Investments, E*TRADE, and TD Ameritrade—comprise the top in terms of customers and assets.
This short article outlines the products, services, and fee structure of each brokerage. They are listed in no particular order.
- Charles Schwab is a leading U.S. stock brokerage firm with $4.04 trillion in client assets and 12.3 million active brokerage accounts.
- Fidelity Investments has $8.3 trillion in total customer assets, 30.6 million active brokerage accounts, and is a good choice for customers who want to invest in Fidelity ETFs and mutual funds.
- E*TRADE is an online brokerage pioneer, well-known for its full-featured mobile apps, top-notch options trading tools, and customizable user experience.
- Because of its extensive research and investor education tools aimed at all levels of investing expertise, TD Ameritrade is a top choice for active and new investors alike.
As of Dec. 31, 2019, Charles Schwab held $4.04 trillion in client assets, with a total of 12.3 million active brokerage accounts. It also operates Schwab Bank, one of the largest banks in the United States, which allows its brokerage clients to link their trading accounts with a checking account. The company boasted 1.4 million active banking accounts as of the end of 2019. Schwab really shines with registered investment advisor (RIA) accounts, where $1.69 trillion of assets under management (AUM) sits.
The firm offers clients a series of investment products including stocks, mutual funds, exchange-traded funds (ETFs), money market funds, fixed income products, options, futures, insurance, and annuities. Clients can invest in both Schwab's proprietary products and other third-party investments.
Charles Schwab's Fee Structure
Schwab, the country's first real discount brokerage, has consistently been rated one of the cheapest brokerage firms in the United States. Effective Oct. 2019, Schwab cut commissions from $4.95 to $0.00 for all U.S.- and Canadian-listed stocks, ETFs, options online, and mobile trades. Options trades still have the standard $0.65 per-contract fee.
The operating expense ratio (OER) fees for actively managed mutual funds can range from 0.21% to 1.92%. Fees for passively managed mutual funds can range from 0.02% to 0.39%. Annual portfolio management fees at Schwab start at 0.80% for the Schwab Private Client account. These fees decrease for clients with higher asset levels.
The firm also offers clients a worry-free, passive approach to investing through its robo-advisor service called Intelligent Portfolios. The online platform provides clients with an automated experience, giving them access to a series of ETFs that rebalances per the client's investment goals. The service requires a minimum $5,000 investment and comes with no advisory or commission fees.
On November 25, 2019, Charles Schwab announced plans to acquire competitor TD Ameritrade in a stock transaction valued at approximately $26 billion. Schwab anticipates the sale to close by the end of 2020, with full integration of the two companies expected to take between 18 and 36 months.
Fidelity Investments is the nation's largest keeper of 401(k) retirement savings plans and the largest provider of 403(b) plans for nonprofits. Founded in 1946 as Fidelity Management & Research, the company is based in Boston.
According to the company's website, Fidelity had $8.3 trillion in total customer assets as of Dec. 31, 2019, with an active 30.6 million brokerage accounts. The company also boasted 30 million individual investors and more than 625,000 commissionable trades per day.
Fidelity is the best choice for brokerage clients who also want to invest in Fidelity ETFs and mutual funds. The firm also offers investments in third-party products.
Fidelity Investments' Fee Structure
Fidelity touts its zero account fees and no minimums to open a retail brokerage account, including IRAs. Following Schwab's lead, Fidelity also offers commission-free stock, ETF, and options trades. Options trades still have the standard $0.65 per-contract fee.
There are no minimums to invest in Fidelity mutual funds. Fidelity does not charge an expense ratio fee for certain proprietary mutual funds and offers hundreds of other funds with no transaction fees.
Portfolio advisory service fees range from 0.50% to 1.50% based on the amount invested. Minimum investments range from $25,000 to $250,000 based on the investment options. For its automated Fidelity Go service, the firm charges a 0.35% advisory fee but requires no account minimum to open an account.
Through its mutual funds and other advisory services, Fidelity has tens of millions of non-brokerage customers, something the others cannot claim.
Founded in Palo Alto in 1982, E*TRADE began as a holding company and has transformed into a leading online discount brokerage service. The company was hit hard during the 2007-2008 financial crisis because of high exposure to subprime mortgage portfolios. Its stock dropped 86.7% in 2007 before the company implemented a "comprehensive turnaround plan."
The turnaround worked and E*TRADE has become a leading financial firm for its mobile accessibility, online trading tools, and customizable user experience. As of Feb. 2020, E*TRADE had $652.4 billion in total customer assets with 5.2 million retail brokerage accounts.
Just like the other main brokerages, E*TRADE offers its clients access to ETFs, mutual funds, stocks, options, and fixed income products. The firm also offers two checking accounts and mortgages. Clients can also choose a prebuilt portfolio, which gives them a diversified portfolio of mutual funds or ETFs built by an investment strategy team.
E*TRADE's Fee Structure
In 2019, E*TRADE joined Schwab and Fidelity in the march to no-fee trading. E*TRADE cut commissions on stock, options, and ETF trades to $0 each, while options contracts are charged $0.65 each ($0.50 with 30+ trades per quarter).
On Feb. 20, 2020, investment banking firm Morgan Stanley announced it would acquire E*TRADE in an all-stock transaction valued at approximately $13 billion. The acquisition is expected to close in the fourth quarter of 2020.
TD Ameritrade was founded in 1971 and is headquartered in Omaha, Nebraska. The firm became TD Ameritrade after the old Ameritrade acquired TD Waterhouse USA from TD Bank Financial Group. It acquired St. Louis-based rival Scottrade in 2017. Client accounts were fully merged and integrated into the TD Ameritrade system by February 2018.
TD Ameritrade is considered one of the top brokerage firms in the United States because of its value and quality of service. The firm provides clients with a 24/7 customer support system, a user-friendly website with mobile access, research, and advanced trading tools. The firm is considered a top broker for beginning investors.
According to the company website, TD Ameritrade has more than $1 trillion in customer assets. Furthermore, it boasts more than 11 million client accounts, with clients placing, on average, about 500,000 trades per day.
Investment products range from stocks, ETFs, mutual funds, options, and fixed-income investments. Clients can also choose to invest in futures and forex currency.
TD Ameritrade's Fee Structure
TD Ameritrade does not require an account minimum, charges no platform fees, and requires no trade minimums. TD Ameritrade offers commission-free trading, charging no commissions on online trading of U.S. exchange-listed stocks, ETFs, and options. A $0.65 per contract fee applies for options trades.