There are dozens of stock brokerage houses in the United States. But four major 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.
As of Dec. 31, 2018, Charles Schwab held $3.25 trillion in client assets, with a total of 11.6 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 1.3 million active banking accounts as of the end of 2018. Schwab really shines with registered investment advisor (RIA) accounts, where $1.5 trillion of 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 and futures, insurance and annuities. Clients can invest in both Schwab's proprietary products and other third-party investments.
Schwab, the country's first real discount brokerage, has consistently been rated one of the cheapest brokerage firms in the United States. Trade commissions are $4.95 per trade for standard online and option trades, while options contract cost 65 cents each. The asset-weighted average operating expense ratio (OER) for actively-managed mutual fund fees is 0.69% and 0.03% for passively-managed ones. Schwab takes a 0.80% commission for private clients for its annual portfolio management fees.
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 as per the client's investment goals. The service requires a minimum $5,000 investment and comes with no advisory or commission fees.
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, it had a total of $7.4 trillion in customer assets by Sept. 30, 2018, with an active 27.2 million brokerage accounts. The company also boasted 28 million individual investors and more than 590,000 commissionable traders 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. Fees range from $4.95 per stock or options trades and 65 cents per contract on options. Clients who trade Fidelity or iShares ETFs are not charged a fee. But all other ETF trades are charged $4.95 per trade. Fidelity does not charge an expense ratio fee for certain proprietary mutual funds.
Portfolio advisory service fees range from 0.50% to 1.50% based on the amount invested. Minimum investments range from $50,000 to $200,000 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 a customizable user experience.
As of Q4 2018, E*TRADE had $414 billion in total customer assets with 4.9 million active 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 is a little higher than Schwab and Fidelity. Stock option and ETF trades are charged $6.95 each, while options contracts are charged 75 cents each. Those figures are reduced to $4.95 and 50 cents for active traders. Active traders are those who make 30 or more trades per quarter.
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.
According to the company website, TD Ameritrade has more than $1 trillion in customer assets. Furthermore, it boasts more than 11 million client accounts which place about 500,000 trades per day.
Investment products range from stocks, ETFs, mutual funds options and fixed income. Clients can also choose to invest in futures and forex currency.
TD Ameritrade does not require an account minimum, charges no platform fees and requires no trade minimums. It charges a flat $6.95 per trade online for equities and ETFs. For options traded online, customers are charged $6.95 plus an additional 75 cents per contract.