Both Charles Schwab and Vanguard manage trillions of dollars of assets for investors around the world. But they have different ways of operating, and if you're looking for an online broker, Schwab is clearly the better choice. Schwab was near the top of our 2019 online broker review, earning 4 stars overall, while Vanguard came in almost at the bottom, with just 2 stars. Vanguard's online presence is deliberately bare-bones while Schwab offers multiple platforms, full banking capabilities, and plenty of tools. Vanguard's services are geared for buy-and-hold investors who focus their investments on Vanguard products.
In our 2019 Best Online Brokers Awards, Vanguard received an award for Best for ETFs.
Charles Schwab received awards for Best Overall Online Brokers, Best for Beginners, Best Stock Trading Apps, Best for ETFs, Best for Options Trading, Best for Penny Stocks, Best for Roth IRAs, Best for IRAs, Best for International Trading, and Best Web Trading Platforms.
On November 25, 2019, Charles Schwab announced a buyout of TD Ameritrade’s online brokerage. The transaction itself is expected to close in the second half of 2020, and in the meantime, the two firms will operate autonomously. Schwab expects the merger of its platforms and services to take place within three years of the close of the deal.
- Account Minimum: $0
- Fees: Free stock, ETF and options trading commissions in the U.S., as of October 7th, 2019. $0.65 per options contract.
- Account Minimum: $3,000 for most mutual funds
- Fees: $7/stock and ETF trade, $7 plus $1 per contract for options
- Best for: ETF investing
Vanguard focuses its considerable energy on helping its high wealth clients plan for retirement and other long-term goals. As such, its trading technology is lacking. Fulfilling their long-term focus, there is little of interest to active traders or derivatives traders. There are no streaming quotes; you have to manually refresh the screen to get updates. You cannot trade complex options strategies on Vanguard.
Schwab has several platforms that you can launch after logging on to their flagship website, or you can download the StreetSmart Edge platform to your desktop, or run it from the cloud. StreetSmart Edge is Schwab’s advanced platform which features streaming real-time data and news along with a customizable charting toolkit. All of the platforms have the All In One Trade Ticket available, which lets you build an order using the asset class you choose in a flexible and intuitive way. Quotes update in real time. Schwab monitors its execution quality statistics, and the reports provided to clients after every trade include how much price improvement was achieved.
- No streaming quotes
- No complex options
- Very simple trading experience with few creature comforts
- Several platforms from which to choose that offer streaming quotes and news
- All-in-One Trade Ticket lets you build an order using any asset class
- Trade execution reports include price improvement achieved on the order
Mobile and Emerging Tech
Vanguard offers mobile apps for iOS, Android and Kindle Fire devices. The layout is actually much nicer and easier to use than the website. They added mobile check deposit in the last year. Quotes, however, are delayed. There is no online chat capability for contacting customer service.
Schwab clients' trading customizations and watchlists are stored in the cloud, providing the same setup no matter which platform is in use. Streaming video and almost all of the education resources can be accessed via mobile device as well. Options analysis and trading tools are built into the StreetSmart mobile apps.
- Very simple app, most useful for checking balances
- Data is delayed
- Mobile check deposit available
- Customization choices stored in the cloud and persist across platforms
- Streaming video and education offerings available on mobile devices
- Complex options analysis and trading possible on StreetSmart app
News and Research
Vanguard offers a stock screener, and a separate ETF screener. The mutual fund screener is very basic, and focuses on finding Vanguard funds even though they carry funds from many more fund families. Options research is limited to looking at options chains, which are significantly less informative than chains on other broker sites. Charting is extremely basic and includes no customization or technical studies. There are plenty of calculators and planning tools for the long-term investor.
Schwab offers extensive equities research from a variety of sources including Credit Suisse, Morningstar, MarketEdge, Reuters, and CFRA are available. For real-time news, you can pick up articles from the Associated Press, Globe Newswire, MT Newswires, Business Wire, and many others. Schwab’s proprietary rating system generates grades for over 3,000 companies.The Idea Hub on StreetSmart gives you several ways to seek out options trading ideas, and links to deeper analysis that you can do before firing off the trade. Charts on the StreetSmart platforms use streaming real-time data, and you can place a trade from a chart if you’d like.
- Stock, ETF and mutual fund screeners available
- Planning tools for long-term investing are plentiful
- Extremely basic charting that lacks customization or technical analysis
- A wide range of equities research and news available
- StreetSmart's Idea Hub helps sort for options trading ideas
- Charts on StreetSmart platforms use streaming real-time data
Education and Security
Vanguard's education offerings are fairly basic, and are aimed at very long-term investing. They host occasional webinars that focus on the longer term. The website is encrypted according to industry standards, and you'll face a security challenge when logging in from an unrecognized device
A recently launched initiative has led to Schwab Live Daily, which provides 4–7 hours of video content every trading day. Most of it can be viewed via a Webex broadcast, and it’s open to clients and non-clients as well. Schwab also offers its Choiceology podcasts, which include information about behavioral economics and how to make better decisions. The firm publishes a magazine, “On Investing,” four times per year. The Schwab Learning Center covers a wide and deep range of educational content that focuses on different skill levels. Trading Paths are a series of bite-sized lessons that combine articles, videos, and worksheets to help clients understand different investing-related topics in depth. Schwab's security guarantee covers 100% of any losses in any Schwab accounts due to unauthorized activity.
- Education is basic, aimed at long-term investing and goal setting
- Webinars offered occasionally for long-term planning
- Security features include a challenge when logging in from an unrecognized device
- Schwab Live Daily provides 4-7 hours of video content every trading day
- The Schwab Learning Center covers a wide and deep range of educational content
- Schwab's security guarantee covers 100% of any losses in any Schwab accounts due to unauthorized activity.
Vanguard's standard commission schedule is very high, at $7 per equity trade, and $7 plus $1 per contract for options. Margin rates are on the high side. There are 1,800 ETFs you can trade without paying a commission, though, and clients with very high account balances are treated to much lower commissions.
Schwab eliminated its base commissions for stock and ETF transactions as well as its per-leg fee for options trades. Commissions are also eliminated for OTCBB (penny stock) transactions, which is a differentiator. Options trades are now $0.65 per contract, which is a large price cut for smaller multi-leg trades. Their margin rates are average, though lower than TD Ameritrade and E*TRADE.
Vanguard’s strength is maintaining a varied array of low-cost ETFs and mutual funds, but you can buy them on any online broker’s site. If you are looking for trading tools and in-depth education, Vanguard’s offerings will not please you. This brokerage seems to actively dissuade investors who want to trade more often than once per solar orbit of Jupiter.
As one of the largest online brokers around, Schwab is able to offer its customers a wide array of services and tools including a top-notch mobile app. Over the last few years, they seem to be encouraging their customers to work with an advisor, whether human or robo. Self-directed traders can still go it alone, while one-stop shoppers will be happy with the combination of brokerage and banking services.
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In addition, every broker we surveyed was required to fill out a 320-point survey about all aspects of their platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of their platforms at our offices.
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