Charles Schwab vs E*Trade

August 17, 2018 — 1:27 PM EDT

Charles Schwab and Co. revolutionized the brokerage industry when they opened their doors in 1975, allowing middle-class Americans to buy stocks with sharply lower commissions than those charged by Wall Street investment houses. E*Trade had an equally disruptive impact in the 1990s, as the first broker to offer low-cost online trading that eliminated phone calls or car trips to a local branch.

A Quick Look

 
 
 

 Products & Fees

  • Stock trade fees: $4.95
  • Account minimum: $1,000
  • Stock trade fees: $6.95
  • Account minimum: $500

 Fast Facts

  • Commission-free products
  • $2.9 trillion in client assets
  • Multiple Platforms across the website and mobile app
  • Commission-free products
  • Diverse Asset Selection
  • $348.2 billion

 User Experience

  • Intuitive interface that's ideal for casual investors 
  • Range of research tools consolidated into one place
  • App is easy to navigate 
  • Mobile Deposit for checks
  • Powerful mobile and desktop experience
  • Portfolio management is sleek and easy 
  • Easily navigate among different investment options
  • CNBC videos integrated into the mobile app

 Education

  • In-person workshops
  • Education on products and investments
  • Real-time and in-person events
  • Diverse selection of videos 

 Research & Insights

  • Product screeners 
  • Analyst Rating and Reports
  • Indicators & Studies
  • Recommendations
  • Planning Tools and calculators
  • Technical Analysis Charting Tools
  • TipRanks Recommendations
  • Analyst Ratings

 Customer Support

  • Excellent support with multiple options to get help
  • Excellent support with multiple options to get help

 

Schwab had little in common with E*Trade when the electronic broker opened for business at CompuServe and America Online in the 1990s but that’s changed considerably in the last 25 years, with customers at both operations accessing a broad basket of services that range from day trading and short selling to long-term investment and retirement planning. However, key differences remain and you should compare offerings and the fine print before funding an account. 

Commissions

A Schwab online equity trade costs $4.95 for buy or sell orders while equity options cost $4.95 + 65-cents per contract each way. They have broad futures coverage, charging a competitive $1.50 per contract. New issue bonds/CDs, OneSource ETFs, and mutual funds are commission-free but popular ETFs, including the SPDR Trust and Invesco QQQ Trust, incur the same commission as stocks. Schwab offers no direct forex coverage but clients can trade currency futures contracts. 

E*Trade charges $6.95 for online equity trades and $6.95 plus 75-cents per options contract. They match Schwab at $1.50 per futures contract and also offer commission-free ETFs and mutual funds. However, the fine print raises a red flag (and a major disadvantage) because they charge up to $19.99 if account holders buy and sell commission-free ETFs too frequently, unlike Schwab’s no-penalty policy. 

E*Trade offers a discount program for high-frequency stock and option traders, with 0-29 trades per quarter maintaining the full rate while  30+ trades per quarter drops the commission for equities to $4.95 and options to $4.95 plus 50-cents per contract. Commissionable ETFs follow the equity fee schedule but no discounts are offered to high-frequency futures traders. Schwab offers no discount or tiered pricing programs.

Banking

Charles Schwab provides a menu of banking services that include interest-bearing checking and savings accounts, free checking, free online bill pay, and self-branded debit and credit cards. There are no ATM fees and they reimburse third-party fees. The High Yield Investor Checking Account pays 0.25% interest while the High Yield Investor Saving Account offers a 0.40% rate but is limited to six monthly withdrawals. There are no account minimums but bank customers need to maintain linked brokerage accounts.

E*Trade also runs a licensed bank, offering interest-bearing checking and saving accounts as well as no-interest checking with no balance requirement. Higher tier Max-Rate Checking includes free bill pay and ATM fee reimbursements while paying 0.05% interest. Premium Savings pays a healthy 1.50% annual rate. The checking account charges a monthly fee if less than $5,000 is held in the account, also waived with a linked brokerage account of $50,000 or more. 

Wealth Management

Schwab offers customized wealth management and investment guidance through tiered programs and fees. The no-fee Intelligent Portfolio offers automated advice for a $5,000 minimum commitment. The fee rises to 0.28% of portfolio assets for the Intelligent Advisory, which includes human and automated advice for accounts in excess of $24,999. The top-tier Private Client provides extensive investment management for $500,000 and above account holders, incurring fees that start at 0.90% for equities and 0.70% for fixed income.  

E*Trade investment advice is managed through four tiered programs. The $5,000 Core Portfolio provides automated advice for a 0.30% annual advisory fee. The $25,000 Blend Portfolio includes a consultant who tailors and manages investments for a fee that varies between 0.65% and 0.90%. The $150,000 Dedicated Portfolio offers a dedicated consultant and active portfolio management for a steep 0.95% to 0.125% fee. Finally, the $250,000 Fixed Income Portfolio features a dedicated consultant who constructs a customized bond portfolio for a 0.35% to 0.75% fee.

Trading Platforms

Both brokers offer active trading services through the web, standalone software, and mobile access. There are no maintenance fees and $2,000 is needed to open margin accounts. E*Trade’s standalone OptionsHouse platform features fully-integrated trading of stocks, options, ETFs and futures, as well as pro-level idea generation tools and advanced intraday and historical charting, with more than 100 studies, drawing tools, and chart types. 

Schwab customers can trade stocks, options, and ETFs, but no futures contracts, with StreetSmart Edge. Both standalone and web versions include integrated tools to identify potential trading opportunities, CNBC Live TV, real-time news, and custom layouts. Advanced charting features include pattern recognition, momentum indicators, and customized watch lists, while an advanced order entry interface can handle all sorts of complex entry and exit strategies. 

E*Trade uses sliding scale margin fees that start at 10.50% for accounts under $10,000. The fee drops to 9.00% at $100,000 and 8.00% at $500,000. The lowest 7.00% rate requires an account of $1,000,000 or more. Schwab’s sliding scale offers lower rates across similar tiers, starting at 9.325% for accounts under $25,000. The fee drops to 7.825% at $100,000 and 7.575% at $250,000. A phone call is required to obtain the rate for accounts of $500,000 or greater.

Research and Education

Schwab StreetSmart Edge software includes fundamental research that includes company earnings, dividends, ratings, and short interest. The web-based Insights & Ideas provides daily market updates, workshops, white papers, and expert picks, as well as separate menus for retirement planning, personal finance, portfolio management, sector views, and fixed income. The monthly On Investing magazine covers general investment topics, with an emphasis on retirement, income protection, and financial planning. 

E*Trade’s OptionsHouse platform includes basic research and Morningstar ratings as well as performance data and headline news. The website’s Knowledge section covers educational topics, market news, and hundreds of investment and trading topics. A fully loaded webinar schedule includes technical market lessons as well as “how-to” tutorials on their trading platforms. In addition, both clients and the general public can access a deep trove of archived webinars.   

Customer Support 

E*Trade provides a toll-free number for the brokerage and bank but its hours of operation are not listed. Customers can also call dedicated numbers for retirement specialists, credit cards, and stock plans. The limited local branch list includes hours of operation and an online appointment tool.  A chat link allows current and prospective clients to talk in real time with a company representative. Account holders can also submit secure e-mail inquiries after logging in.

Schwab's wealth management customers can contact their dedicated professionals by phone if that service is included in the tiered plan. A 24/7 customer service number can be used for general account inquiries while other numbers are listed for the brokerage, trading services, and bank. Clients can also visit hundreds of local branches without making an appointment. Schwab offers no chat function, snail mail, or e-mail access. 

The Bottom Line

Schwab offers lower commissions and fees despite E*Trade’s deep discount reputation. Cost differences narrow at higher account and activity levels, which seems odd because E*Trade’s active trading reputation is likely to attract a higher percentage of lower-tier account holders. However,  E*Trade's OptionHouse platform and vast educational resources may justify the additional costs, offering more powerful features than Schwab’s trading platform or web research.