Both of these brokers have features built to appeal to buy-and-hold investors who take a long view. Vanguard built its reputation on mutual funds, and it is the world’s top provider of index funds. The brokerage was launched in 1983. Merrill Edge started operations in 2010 following Bank of America's acquisition of Merrill Lynch, so its history has fewer chapters.
Merrill Edge has continued to evolve by making a deeper connection between the online brokerage and Bank of America's vast banking capabilities. Over the past year, there have been numerous updates across Merrill Edge’s online and mobile experiences based on client requests, highlighting the firm's commitment to servicing investors better.
Vanguard was not and has never been designed for frequent traders or short-term investors, but it serves investors philosophically aligned with Vanguard's approach to investing, providing a low-cost brokerage experience. Vanguard dominates the managed account business, but this is not much of a factor when it comes to active trading.
- Account Minimums: $0
- Fees: $0 per stock trade. Options trades $0 per leg plus $0.65 per contract
- Account Minimum: $0
- Fees: $0/stock and ETF trade, $0 plus $1 per contract for options
In our 2020 Best Online Broker Awards, Merrill Edge earned awards in Best for Beginners. Choosing between them will most likely be a function of the asset classes you want to trade and the frequency of your trading. We'll look at how these two match up against each other overall.
It’s simple to get up and running on Merrill Edge, especially if you're already a Bank of America customer. Five tabs across the top of the screen keep the broker's features at your fingertips. From there, you can launch the streaming app, MarketPro, which opens in a separate window. The website isn't customizable, but MarketPro lets you set up trading defaults and arrange widgets on the page to your specifications. Merrill Edge is putting more of an emphasis on personalization rather than customization by making things the client uses repeatedly easier to find. Your news feeds, for example, can be filtered to show only the content relevant to your holdings and watchlists. Most of the features you'll find on the website are also available on the mobile app. Watchlists are shared between the web and the mobile app, though watchlists you set up on MarketPro are not, as those customizations are saved on the local device rather than in the cloud. You can see watchlists you’ve set up on the web or mobile in MarketPro, however. You cannot trade fixed income on the mobile app, but all other available asset classes can be traded. Though there is charting capability on the mobile app, price data does not stream and there are no drawing tools.
In contrast, getting started at Vanguard is a relatively lengthy process. Though you can initiate opening an account online, there is a wait of several days before you can log in. Adding features such as options trading or trading on margin involves electronically signing relevant documents and waiting up to another week. Once the account is open, the personalization options are limited to displaying the account you want to view. The current site has an old-fashioned feel, though there is work being done to update the workflow. You can trade stocks, ETFs, and some fixed income products online; all other asset classes involve calling a broker to place the order. Vanguard's mobile app is simple to navigate. Placing an order is straightforward. However, there are few features for doing research on investments other than the most rudimentary data. Watchlists, a key feature that other brokers have made available across all platforms, aren't available through Vanguard's app.
The trading experience across Merrill Edge's platforms is relatively consistent and straightforward. Trading on any platform involves selecting the asset class, which opens an order ticket. If you’re trading a particular options strategy, the order ticket is designed to make sure you don’t make any huge mistakes. You can’t trade spreads of three or more legs online, though. MarketPro lets you set some trading defaults and you can change the layout to suit your preferences. Despite the customizations, it is important to note that the Merrill Edge and MarketPro experience is geared more towards long-term investing rather than active, positional trading.
From a trading perspective, the Vanguard website is, frankly, outdated. Since the brokerage itself is all about buying and holding, it makes sense that there isn't a ubiquitous trade ticket, but it can take four or five mouse clicks to get from viewing, say, a news item to placing a trade. This makes the idea of placing multiple trades over multiple sessions painful, further emphasizing that Vanguard isn't intended for traders. Vanguard's data is delayed by 20 minutes outside of a trade ticket. Within the trade ticket, you will see a real-time quote. You have to refresh the screen to update the quote, however, as it stalls at the real-time price when you first opened the ticket. You will also have to set the order parameters each time you enter an order. Finally, you are also unable to stage orders or enter multiple orders simultaneously through Vanguard's platform. Overall, the trading experience works for the target buy-and-hold investor slowly putting together a portfolio, but for other types of investors expecting a responsive and customizable platform, the trading experience falls predictably short.
You'll get a good picture of your funds available for trading on the Merrill Edge app; the enhanced balance feature shows settled and unsettled cash, plus all of the margin balance values. Though quotes do not stream on mobile, you can update price data or news feeds by dragging the page down and letting go. Pricing data on charts lags a few seconds behind real-time and there does not seem to be a refresh option—again, this is one of those subtle indications that Merrill Edge wants you to buy and hold rather than trade. You can filter which news feeds are displayed in the app just as you can online. Other than charts, the data is almost always up-to-date assuming you refresh the page as needed.
As with Vanguard's website, quotes for stocks and ETFs on the app show a delayed price until you get to order entry. No other data, such as the day's change or volume, is displayed in the mobile view. There is a complete lack of charting on Vanguard's mobile app. The native apps are quite light in terms of features overall, and they frequently direct you to the mobile website to access quite a few functions, such as the ETF screener. Here again, the user interface can best be described as outdated.
Range of Offerings
Merrill Edge clients can trade equities, options, fixed income and mutual funds on the website, but you cannot trade fixed income through the app. Some international transactions can be made with the help of a live broker. Vanguard clients can trade most asset classes online, but occasionally will run into an instrument that requires a call to a live broker. All international transactions at Vanguard are made with live brokers.
Neither firm offers futures, futures options, or cryptocurrency trading.
Merrill Edge clients can input basic order types on the website, mobile app, and MarketPro, but none of the conditional orders that frequent traders like to use. If you've been buying into a particular stock over time, you can select the tax lot when closing part of the position, or set an account-wide default for the tax lot choice (such as average cost, last-in-first-out, etc.). You can also set an account-wide default for dividend reinvestment.
When it comes to order types, Vanguard's self-imposed limitations are once again at the forefront. The only order types you can place are market, limit, and stop-limit orders. There are no conditional orders or trailing stops. Dividend reinvestment choices can only be made after a trade is settled.
The Bank of America Merrill Lynch (BofAML) smart order routing technology looks for both displayed and reserve liquidity at hidden and visible venues at each price level up to the limit price of the order. If the order becomes unmarketable, the router will post any residual quantity across multiple venues, redistributing residual posted share quantities dynamically as executions occur. The order router prioritizes price improvement rather than speed of execution. Merrill Edge does not accept payment for order flow from market makers.
Similar to the trading platform itself, Vanguard's underlying order routing technology isn't fancy. It has a single focus: price improvement, and it achieves its goal in this area. Vanguard reports price improvement on stock orders of $0.85 cents per share, which is extremely high. We could not independently verify this figure. Clients cannot select the venue for routing an order, nor is there a trade simulator available, which is not surprising with how the live platform works to discourage trading as opposed to long-term investing.
Neither broker has the capability to automate or backtest a trading strategy.
Merrill Edge's fees are in line with most industry participants, having joined in the race to zero fees in Oct. 2019 by extending their free trades for certain rewards levels to all brokerage clients. Merrill Edge charges no commissions for online equity, ETF, or OTCBB trades. There is no per-leg commission on options trades. Per-contract commissions are $0.65. Mutual fund commission for funds outside the No Transaction Fee program is $19.95. Fixed income trades for secondary issues are $1 per bond. Margin interest rates are slightly higher than the industry average.
Vanguard joined the zero-commission brokerage movement in January of 2020, well after other brokers. This may be because most of its trades had already been executed without commission prior to that due to its extensive no-commission ETF offerings. Vanguard charges no commissions for online equity, ETF, or OTCBB trades. There is no per-leg commission on options trades. Per-contract commissions are $1, which is significantly higher than other online brokers. Mutual fund commission for funds outside the No Transaction Fee program is $50 ($40 for clients with $500,000–$1 million). Clients with over $1 million in their accounts pay no commission. Fixed income fees are $2 per $1,000 face value for accounts under $500,000, $1 per $1,000 face value for accounts $500,000–$1,000,000, and free for accounts over $1,000,000. Margin interest rates are average for the industry. There is a $20 annual account service fee for very small accounts (under $10,000 in Vanguard funds).
Both brokers earn money on the difference between what you are paid on your idle cash and what they can earn on customer cash balances. At Merrill Edge, you can select either a bank deposit account or a money market account for your cash, and it is automatically swept to earn interest that ranges at least half of the Federal Funds rate. If you do not make a choice, you are paid very little on your cash balance. Vanguard pays out a high percentage of the interest it earns to its clients, sweeping uninvested cash into a money market fund. Neither broker offers a stock loan program. Neither broker accepts payment for order flow from market makers, and both emphasize price improvement when routing orders.
This is an area of differentiation between the two brokers.
Fundamental research shines at Merrill Edge. Bank of America and Merrill Lynch have a huge library of proprietary research and stock rankings. Merrill Edge offers a customizable stock screener on the Research/Stocks page. You can add criteria weighting to the screener so it ranks the list of resulting stocks according to how well they fit. There are numerous pre-defined screeners including "Warren Buffett Stocks" and "Cash Cows." You can filter by environmental, social, and governance (ESG) ratings as well. Technical screeners are provided by Recognia. Several thousand stocks are covered by Merrill’s “Stock Story” feature, which dives deep into how the company works and where it’s going. ETF and mutual fund traders also have several screeners handy, and the “Fund Story” feature goes in depth, offering terrific data and information, especially for customers new to the markets. Both of these “Story” features emphasize impact investing with MSCI ESG scores. The Options Strategy Builder guides the user through building an options trade based on outlook for the underlying stock. The bond screener, unfortunately, is less useful than those built for other asset classes, but it lets you peruse the secondary offerings available.
Merrill Edge offers over 30 new sources. Clients can filter the news stream by holdings or watchlists, and can uncheck certain news providers. Merrill Edge MarketPro has full charting and customization capabilities with streaming data, free of charge for clients that qualify based on assets held or trades executed. Limited charting capabilities are available on the website and mobile applications.
Vanguard offers very limited screeners. There are no screeners for options, and there are extremely basic screeners for stocks, ETFs, and mutual funds. Fixed income products are presented in a sortable list. Vanguard offers several tools focused on retirement planning. There is an asset allocation questionnaire to guide you toward a properly diversified portfolio matching your risk profile. News for individual stocks are provided by MT Newswires and the Associated Press. All available research is proprietary with no third-party offerings. Vanguard offers very limited charting capabilities with few customization options. No technical analysis is available.
Merrill Edge's portfolio analysis capabilities are excellent and using these tools is highly recommended no matter how experienced you are at investing. Portfolio Story, Merrill Edge’s website-based analysis feature for your investments, offers a two-minute streaming report that grabs real-time data to display insights on portfolio performance. This mini-video links into a longer multi-chapter dive into holdings. From there you can dig into individual portfolio items, including links out to Stock Story or Fund Story, and get an overall ESG rating on your portfolio. It’s one of the best pieces of portfolio analysis technology we’ve seen, and is especially helpful for those new to investing. Balances, buying power, and margin information is updated in real-time, as is internal rate of return. Merrill Edge does not have a tool that helps you figure out the tax impact of a planned trade though you’ll find some proprietary functionality for reporting capital gains.
In contrast, ways of analyzing your portfolio through Vanguard are limited to realized and unrealized gains and losses. There is little in the way of tax analysis, though you can import your transactions to tax prep programs that use the TurboTax format. Vanguard has signaled that there are some updates in the works for portfolio analysis that will give clients a much better picture of their portfolio returns.
Merrill Edge's Investor Education center starts out by asking, "How do you like to learn?" You can pick an experience level (beginner, intermediate, or advanced) or a topic (including investing and markets, options, mutual funds, and others). From there you can select a format, sorted by articles, videos & webinars, courses, or calculators. There is an entire page devoted to those new to investing that lays out the investing cycle, which begins with prioritizing your financial goals. Merrill Edge clients can choose a Morningstar Classroom, which offers a series of courses that can be tailored. These classrooms include videos and articles with the occasional quiz. There is a mobile optimized Guidance and Retirement Center in the native mobile apps, and the education capabilities include retirement planning, college planning, life priorities, financial education and insights from thought leaders.
The focus of Vanguard's investing education content is on helping clients set financial goals and then figure out how to reach them. Most of the education offerings are presented as articles; approximately 250 new pieces were published in 2019. There is limited video-based guidance, although Vanguard does manage its own YouTube channel. Unfortunately, those videos are not embedded on the website. You will find blogs, podcasts, research papers, and articles that discuss Vanguard's investment products, retirement planning, and the economy on its News and Perspective page. Vanguard offers no live events.
Merrill Edge offers a 24/7 phone line as well as online chat. The phone line is answered relatively quickly, though you start with an automated menu before being routed to a human. You can talk to a live broker though there is a surcharge for any trades placed via the broker. FAQs are primarily focused on trading-related information. You'll find a financial consultant available in almost every Bank of America branch nationwide, so you can walk in if you need in-person assistance. These consultants are primarily focused on life stage planning. Support on Twitter appears to be supplied primarily by Bank of America personnel; the @MerrillEdge Twitter account mostly posts investing information.
Vanguard’s phone support (customer service and brokers) is available from 8 a.m.–8 p.m. Monday through Friday. There is no online chat capability, though you can send a short secure message via the website, which will be answered in the order received. The time you'll spend on hold with Vanguard depends on the level of service for which your account size qualifies; in essence, the bigger the account, the shorter the time on hold. Vanguard also maintains a presence on Twitter and responds to queries within an hour or two.
Merrill Edge offers biometric entry (fingerprint scanner or face recognition) for mobile devices. Soft tokens for login and high risk trade authorization are available through text, phone, and email. A hard token is offered through the SafePass card for high risk trade authorization. Excess Securities Investor Protection Corporation (SIPC) insurance is provided by Lloyd's of London. There is an aggregate loss limit of $1 billion.
Vanguard also offers biometric (face or fingerprint) recognition for login to its mobile app. Vanguard carries excess SIPC insurance provided by Lloyd's of London and London Insurers with an aggregate limit of $250 million in addition to those returned in a SIPC liquidation. The maximum for any single customer is $49.5 million with a cash limit of $1.75 million per customer.
Both of these brokers are built for long-term investors, but it’s hard to recommend Vanguard over Merrill Edge.
Those who already have a banking relationship with Bank of America have an obvious and easy choice, mostly due to the Preferred Rewards program. Your Merrill Edge balances count towards qualifying you for higher rewards levels, which can offer great value for loans or for discounts on the management fee assessed by the robo-advisor, Merrill Edge Guided Investing. There are great resources for newcomers to investing and for those exploring various life stages.
Merrill Edge has also turned out some nicely-designed pieces of technology. The Story features, for example, are especially helpful for understanding what is going on in a client’s portfolio, or what is affecting the performance of a particular stock or fund. Merrill’s commitment to best execution and refusing payment for order flow from third party wholesalers allows the brokerage to pass savings on to their clients in the form of price improvements and overall execution quality. Going forward, the firm is focused on providing additional value now that commissions for equity trades are no longer a deciding factor for choosing a broker.
Vanguard customers will likely use the platform to purchase Vanguard funds, both exchange-traded and mutual, but will otherwise not be very engaged in the markets. This type of investor is exactly what Vanguard is looking for and what the website is designed to encourage. However, the advantage of being able to trade these funds for free has essentially evaporated now that most brokers offer zero-commission ETF trading. One advantage of Vanguard is the ability to sweep uninvested cash into a higher-paying money market fund while you are pondering what to do with it.
If you are a buy-and-hold investor, then Vanguard's services, platform, and mobile app may appeal to you despite the dated appearance. They aren't fancy, but they can help you build and maintain a diversified portfolio—one that will no doubt feature many of Vanguard's industry-leading funds. If, however, you are looking for trading tools and in-depth education, Vanguard's offerings are not up to the standards of its more well-rounded competitors, such as Merrill Edge.
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