Charles Schwab Review 2021

Investing
Updated: 1st Jan 2021
Written by Ryan Barnes
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The Charles Schwab Corporation is the godfather of discount stock brokers and still the dominant player to this day.

In 1975, it was the first to offer discounted commissions on trades. Since then, Schwab has been one of the top online investment brokerages, winning countless awards for customer service and overall user experience.

Whether you are looking to start investing or are on the market for a new broker, read on to see if Charles Schwab is the right place for you to open an account in 2021.

Charles Schwab Overview

Charles Schwab Corporation is the parent company of the Schwab brokerage platform. It is one of the largest financial institutions in the United States.

Founded and based out of San Francisco, CA, Charles Schwab is a big financial services firm offering asset management, banking services, and financial planning for its customers.

Charles Schwab Review. Pros, Cons, and why investors love this broker.

For over 40 years, Schwab has been a pioneer of low-cost stock trading and has constantly been innovating its online brokerage operations.

Charles Schwab is an online stock broker that can serve different types of investor, from someone just getting started, an individual looking for access to real people to talk with, professional money managers – and everyone in between. Schwab has been serving them all well for decades.

You can open a wide array of accounts at Schwab, including IRAs, taxable and non-taxable, options & futures trading, margin trading, asset management or self-directed (DIY) trading.

And while just about every Schwab account can be opened 100% online – in a matter of hours – Schwab also has physical branch locations around the country where you can meet with advisors for financial planning and banking services.

Most accounts have no account minimum to get started, and their fees are some of the lowest available anywhere.

Schwab was the first online broker to cut stock commissions to zero – they care about their customers and push the envelope to get them the best deals. Hard not to like a broker who makes so many moves that benefit the customer base.

Schwab At a Glance

Features: Details
Account Minimum: $0 minimum balance to open an account.
Commissions:$0 commissions on all stock trades and ETFs. $25 service fee for any broker-assisted trades. $0.65 per contract fee for trading options. Schwab family mutual funds trade for $0. Other mutual funds incur a $49.95 fee per purchase.
Management Fee(s):No management fee
Account TypesStandard and Joint Taxable Accounts, Retirement Accounts, Individual and Custodial Trusts for Estate Planning, High-Yield Checking Account
Automatic Rebalancing:Yes, on Schwab Intelligent Portfolio's.
Expense Ratios:Operating Expense Ratio's (OERs) range from 0.0% - 0.39%
Customer Support:24/7 Customer Support
Human Advisor(s):Yes
Mobile App:Yes
Tax Strategy:Yes, only available on select accounts
Tradeable Securities:Stocks, ETFs, Mutual Funds, Options, Forex, CDs, Bonds, Treasuries
SIPC InsuredYes

Charles Schwab Account Details

Account Minimum Balance:

$0 minimum balance for all Individual and Joint brokerage accounts, all Individual Retirement Accounts (Traditional, Roth, or Rollover), and Schwab Bank High Yield Investor Checking accounts

There are minimum account balances required if you want to participate in Schwab asset management and professional advisory services such as Schwab Intelligent Portfolios (a Robo-advisor), from $5,000 on up.

Commissions:

$0 commissions on all stock trades and exchange-traded funds (ETFs) made online or on the mobile app; $25 service fee for any broker-assisted trades.

Options contracts trade for $0 commission and a $0.65 per contract fee.

Schwab family mutual funds trade for $0 commission; other mutual fund trades will cost up to $49.95 per purchase

Management Fee(s):

Zero management fees for the base robo-advisor package, Schwab Intelligent Portfolios. The only asset-based fees the customer must pay on Schwab Intelligent Portfolios are the base expense ratios for the Schwab ETFs held in the portfolio.

Account Types:

  • Individual and Joint taxable brokerage accounts
  • Traditional IRAs, Roth IRAs, Custodial IRAs, and Rollover IRAs
  • Individual and Custodial trusts for estate planning
  • Schwab High-Yield Checking Account (must be linked to taxable brokerage account)

Automatic Rebalancing:

Yes, on Schwab Intelligent Portfolios, an automated “robo-advisor” service. Rebalancing is monitored daily to keep asset allocations in line with client targets.

Expense Ratios:

On Schwab passively managed mutual funds, annual operating expense ratios (OERs) range from 0.0% per year to 0.39% per year.

On Schwab actively managed mutual funds, OERs range from 0.22%-1.92% per year.

On Schwab passively managed ETFs, OERs range from 0.03%-0.39% per year. Schwab also offers ETFs from third parties; OERs vary.

Customer Support:

Support for customers is available by phone, 24/7 – average wait times are below 30 seconds to speak with a real person.

Support is also available via online chat on desktop or mobile.

Human Advisor(s):

Yes, human advisors available for broker-assisted trades.

Schwab also has professionals on staff to conduct financial planning and estate planning services, either for a flat fee or part of a broader wealth management package.

Customers with Schwab Intelligent Portfolios Premium can receive unlimited consultations with Certified Financial Planners (CFP).

Mobile App:

Schwab has a highly-rated mobile app for Android and IOS users, receiving the highest overall score in a J.D. Power 2019 U.S. Wealth Management Mobile App Satisfaction Study.

Tax Strategy:

Tax preparation services are available but not standard for the taxable account and retirement account customers.

The Charles Schwab website has extensive resources available to help with tax strategy, with articles and guides written by experienced fiduciary managers and updated with current tax information each season.

Robo-advisor clients using a Schwab Intelligent Portfolio product have built-in tax-loss harvesting and rebalancing strategies to optimize your tax bill.

Tradeable Securities:

All U.S.-exchange listed stocks, index funds, and ETFs are available to trade. More than 16,000 mutual funds are also available, and over 4,000 ETFs at no commission cost and no-loads (upfront sales fees).

Futures, Stock Options, Over-The-Counter stocks (penny stocks), and Forex can all be traded at Schwab, as well as short sale trades (customers may need to seek special authorizations to freely trade all these instruments, as well as open a margin account and sign additional disclosures of risk).

Fixed income investments can also be traded, including Treasuries, Municipal & Corporate bonds, secondary market issues, and C.D.s.

Foreign investments can be made in certain stocks and bonds from over 10 non-U.S. countries, including Japan, Canada, Australia, and most of the EU-member nations. Forex capabilities allow users to buy on local exchanges after converting currency out of U.S. dollars.

Fractional shares of stock can be purchased, at a $5 minimum, on all companies within the Standard & Poors 500 Index.

Socially Responsible Investing:

More and more investors are drawn to socially responsible investing, which considers more than just the risk and return characteristics of company/stock, but also the environmental, social, and corporate governance (ESG) factors.

Charles Schwab maintains a list of socially responsible investment (SRI) funds and ETFs that are available to trade at their brokerage, including over 500 mutual funds and 80 ETFs.

Current Promotions:

Schwab currently offers a bonus to new customers (of a retail brokerage or retirement account) from $100-$500 if you receive a referral code from a friend or family member who is currently a Schwab customer.

The bonus amount starts at $100 for initial deposits of less than $25,000 and over $100,000 in an initial deposit is required to receive the full $500 bonus.

Margin Trading:

Margin trading is available on taxable Schwab accounts. Customers must fill out a separate application form that includes disclosures related to the additional risks involved with trading securities on margin.

The interest on margin balances fluctuates based on market conditions (such as the rate on near-term Treasury Bills) and how much a person has in their margin account (higher balances are charged lower interest rates).

Margin interest starts at 8.325% for balances under $25,000, and margin rates can go as low as 6.575%.

Charles Schwab Asset Management:

Asset management services begin with Schwab’s subsidiary company, Charles Schwab Investment Management, which manages a suite of funds and ETFs available to brokerage clients.

There is no annual management fee. The only fees are the low operating expense ratios that start as low as 0.03%.

Schwab manages over $550 billion in assets for customers. Robo-advisor services like Schwab Intelligent Portfolios allow customers with as little as $5,000 to invest in Schwab Funds and charges zero management fees.

Schwab uses an online questionnaire to assess a client’s risk tolerance, goals, and investing time horizon before constructing a portfolio of ETFs and Funds for them; this portfolio is monitored daily and adjusted automatically to keep asset allocation goals in line.

Pros:

  • Schwab is consistently ranked as the top online broker for all varieties of investors, from beginners to experienced.
  • They were the first broker to slice commissions to zero on all stock trades, and Schwab continues to lead by example in what’s best for the customer with the widest offering of no-commission securities to trade in the business.
  • Customer service is top-notch at Schwab – either by phone, in-platform chat with a real agent/broker, or at one of their hundreds of physical locations.
  • Schwab has even shown responsiveness to support requests made on social media platforms like Twitter (although discussions with a support representative will be taken to a non-public forum to preserve privacy).
  • Charles Schwab has as wide a breadth of offerings. Combined with low, low costs, it is impossible to find a better online brokerage.

Cons:

  • Schwab’s trading platform is highly customizable and very robust, which could be intimidating for someone very new to investing.
  • Lower margin interest rates can be found at other brokers for elite, high volume active traders.

Charles Schwab Review

Charles Schwab offers a full suite of products, research and educational tools, taxable and non-taxable accounts, financial planning, and even banking.

They practically invented the online, low-cost brokerage, and they’ve been at the top of the mountain the whole time, which says a lot about their ability to make customers happy.

I have been a Charles Schwab user for over 20 years and have found them to be consistently excellent across any metric one could think to evaluate them on.

They have been dropping hammers on their competitors the past five years by slashing commissions, expense ratios, account minimums, and fees faster than their peers.

And they’ve been doing all this while supporting a robust, sturdy, and customizable technology platform across web and mobile.

The mobile app is a complete offering – it can be used to place trades, view balances, deposit checks, create watchlists for investments and conduct research on individual stocks and funds.

There is also voice-assisted functionality within Schwab’s mobile app to assist with making trades, researching market data, and viewing account balances.

Who is Charles Schwab Best For?

  • New Investors
  • Experienced Investors
  • Those Who Want Multiple Accounts (Roth IRA + Taxable Brokerage)
  • Young Adults Planning for the Future

With a complete offering of all manner of account you can open, and a fully-functioning bank within the company, Schwab is best for a one-stop solution to all your investing and retirement planning needs.

They have human assistance when you need it, and if you don’t, you can just enjoy rock-bottom industry rates across the board on fund fees and expenses.

Schwab has a myriad of educational resources, from the introductory to deep dives. All information is easily searchable and navigated.

And with TD Waterhouse – a technology innovator in the brokerage industry with tools designed by traders – now under the Schwab corporate umbrella, customers can expect a steady stream of new features and capabilities in the coming years.

What is Charles Schwab?

Charles Schwab is an FDIC, and SIPC-insured brokerage and financial institution offering consumers access to buy and sell stocks, bonds, funds, and countless other investments.

Schwab was founded as a low-cost brokerage and continues that pledge to customers decades later, even as they have become one of the 10-largest financial institutions in the country.

They are one of the few brokerages with physical locations around the country and a deep bench of brokers, financial advisors, and other fiduciaries working on behalf of clients’ best interests.

How Does Schwab Brokerage Work?

Customers of Schwab brokerage can open an account with no minimum deposit and begin investing in stocks, bonds, and funds.

Charles Schwab has cut almost all commissions (the sales fees to make a trade) to zero, so they make their money through several mechanisms, including:

  • Scale – since their fees are so low, they count on having an enormous base of assets to earn (small) fees on an annual basis
  • Interest on Cash Balances – Schwab earns interest income on un-invested cash balances held at their brokerage and pays only part of that interest income back to customers via cash yields
  • Interest on margin – customers who take out loans to buy stocks or other investments pay interest on those loans
  • Payment for Order Flow – Schwab, like all other brokers, earn small fees from market makers that work for securities exchanges (like the New York Stock Exchange and the Chicago Board Options Exchange). Schwab receives between $0.000 and $0.0028 per share from market makers in exchange for information about where the money is flowing in the broader market.

Charles Schwab Standout Features:

Here are a few reasons why investors praise a Charles Schwab brokerage account.

  • Zero and Low-Cost Trading
  • Low/no Account Minimums
  • Fractional Share Purchases
  • Low-Cost Robo-Advisor Services

Schwab also offers a robust suite of educational resources, calculators, and tools to help investors increase their knowledge base, learn about markets, and plan for longer-term financial goals.

How Charles Schwab Invests Your Money

Schwab is primarily a self-directed trading platform, where you make the decisions on what to invest in.

There is a Schwab Intelligent Portfolio robo-advisor solution for people that want to have things automated for them; you will simply tell Schwab about your risk tolerance, time horizon, and goals, and they’ll do the rest!

Does Schwab Offer Wealth Management?

Schwab offers wealth management solutions through their Charles Schwab Investment Management subsidiary, which manages ETFs and mutual funds, as well as works with independent financial advisors who hold client assets at Charles Schwab.

In total, there are over $1.5 trillion in wealth management assets held at Schwab.

Charles Schwab Fees and Pricing

Charles Schwab charges zero commissions on all stock trades and exchange-traded funds (ETFs) made online or on the mobile app. A $25 service fee is assessed for any broker-assisted trades.

Options contracts trade for $0 commission and a $0.65 per contract fee. Schwab family mutual funds trade for $0 commission; other mutual fund trades will cost up to $49.95 per purchase.

There are zero account opening fees or annual maintenance fees for taxable, retirement, trading services, or high-yield cash accounts.

There are no management fees for the Schwab Intelligent Portfolios base package (a robo-advisor product).

There is a Schwab Intelligent Portfolio Premium solution that offers an initial consultation with a CFP at the cost of $300. Also, the Premium solution has a $30/month advisory fee.

Is Charles Schwab SIPC Insured?

Yes, All assets (securities + cash) held at Charles Schwab are Securities Investor Protection Corporation (SIPC) insured up to $500,000 in the event of a broker-dealer failure.

This $500,000 in protection applies to each account capacity (such as Individual, Joint, or Trust account).

The limit for SIPC claims on un-invested balances is $250,000 cash. Commodity and futures positions are exempt from SIPC insurance protections.

Charles Schwab’s Research Resources and Tools

With the recent acquisition of T.D. Ameritrade – previously the 3rd largest online broker in America – Schwab now owns and operates all of T.D. Ameritrade’s trading platform, client accounts, assets, and intellectual property.

This includes T.D. Ameritrade’s popular Thinkorswin trading platform. As of November 2020, Schwab has committed to keeping this platform running independently, as its robust research and customization capabilities have made it a favorite of active traders. It is available on desktop and native web applications, as well as on mobile.

Charles Schwab has a similar research and trading tool called StreetSmart Edge that allows users to filter investments based on a wide array of criteria, create complex trade strategies, and monitor all accounts.

Charles Schwab’s Educational Resources

Schwab’s website has a plethora of educational resources available in its Resource Center, with hundreds of articles covering every investing topic and asset class you could dream of.

Want to learn more about individual sectors of the economy? How about real estate vs bonds as an investment, estate planning, or tax efficiency?

You can read about all that and more from Schwab’s stable of investing and retirement professionals.

Schwab’s commitment to furthering and broadening your education makes them one of the best brokers for beginners, as well as offering deep insights for the more experienced investor class.

Related: Best Stock Market Research Websites

Bottom Line: Charles Schwab Review

Charles Schwab is more than just a standard online stock broker. It is a one-stop-shop. From tailored guidance to robust educational resources, and everything in between, Charles Schwab is a clear industry leader and is ready to help you start investing.

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Ryan Barnes
Ryan Barnes
Ryan is a certified Chartered Financial Analyst (CFA) with over 15 years of experience managing and steering hundreds of millions in client assets through complex and dynamic financial markets. Ryan’s work has appeared in the Wall Street Journal, Barron’s, Forbes, Nasdaq.com, Investopedia, and Bloomberg. Additionally, he has multiple citations in peer-reviewed papers for reporting done on the U.S. housing market preceding the Great Financial Crisis.