I’ve had an account with Scottrade for several years now, and here is an updated, in-depth review for 2012 (last one I did was in 2006!). I will focus on all the little things that make brokers different from each other, from completing your taxes to buying a stock on a moment’s notice. This review will be from the point of view of a casual private investor who does not trade daily but does mostly buy-and-hold ETF investing and also trades some individual stocks with a small portion of his portfolio (less than 5% of overall portfolio).
Unique Characteristics
- 505 physical branches nationwide. No other discount broker has nearly the same footprint. If you like the feeling of knowing there is a physical branch with friendly humans to interact with nearby, this is the broker for you.
- Fiercely privately-owned. The current CEO, Rodger Riney, is the same person that founded the company in 1980. He has rebuffed repeated offers to be sold to public corporations like E-Trade or Ameritrade. I kind of like this independence and unwillingness to cash-out. It helps them not have to worry about profits all the time. For example, even during both recent stock market busts, no one has ever been laid off, and no office has ever been closed. Their branch brokers don’t offer advice to customers and do not work on commission.
Commissions and Fees
- Stock commissions are $7 a trade. No maintenance fees, no minimum balance fees, no inactivity fees. $500 minimum to open the account. Options trades are $7 + $1.25 per contract.
- Electronic statements and trade confirmations are free, but paper ones are not. Mailed statements are $2 each, mailed trade confirmations are $1 each. It’s easy to download the statements as PDFs and print if necessary.
- No account closing or transfer-out fee. This is rare, as nearly all the other places charge you $50+ to move your positions away to another broker.
- No free dividend reinvestment. There is no free dividend re-investment plan (DRIP) at Scottrade. What I do is wait until enough dividends accumulate and then reinvest them along with new money, because I don’t like dealing with many small tax lots with partial shares.
No Transaction Fee Mutual Funds, No Commission ETFs
- Scottrade has a limited set of commission-free indexed ETFs that are co-branded with Morningstar. Here is the complete list. Although they have low expense ratios, these ETFs still have a low asset base and low trading volume, so I don’t use them. I’d rather just pay the commission for better ETFs, making my trades large enough so the commission doesn’t matter as much.
- Scottrade also has a number of no transaction fee funds, but these funds have to pay Scottrade to be in their “supermarket”, and thus the fund families I actually like including Vanguard will not be commission free. They do have good availability for other fund families though, at a cost of $17 per trade.
Funds Transfers, Banking Services
- Fund deposits. Scottrade uses a Yodlee-based interface to electronically link your external bank accounts. The good news is that this system allows instant availability of funds with high transfer limits. If I wake up on a Monday and want to buy $10,000 or even $100,000 of AAPL, I can request the transfer on Monday from an external bank and trade with that money immediately that same day (even though the funds won’t actually be debited until the next business day). This way, I don’t have to leave any idle cash at Scottrade. I really like this feature.
- Fund withdrawals. It’s not so easy on the way out, as you can’t withdraw funds using the same system. You can call your local branch and request a check to be mailed to you (same day if requested before 1pm ET), or you can write yourself a check (free checkwriting with $5,000 minimum account equity balance). It’s a little clunky, but I don’t withdraw money very much, so it hasn’t been a big deal. However, you can now get around this with Scottrade Bank…
- Scottrade Bank was rolled out in 2011, which let you add banking services to your brokerage account. Online Billpay, FDIC insurance, ATM fee rebates, and so on. I wasn’t really interested in these products, and the interest rates weren’t very good, so I have not opened any bank accounts. However, opening an account would provide a way to electronically withdraw my funds to an external bank.
User Interface and Real-time Quotes. There are three basic interfaces to choose from. The default web interface is about par with other brokers, you have little modules like Positions, Watch List, and Orders that you can move around to your liking. Alternatively, all users can get free real-time streaming quotes including NASDAQ Level II through the Scottrader Java-based interface (screenshot below). If you have a minimum account equity of $25,000, you can use the ScottradeELITE platform targeted at active traders.
Mobile trading. They have all the obligatory mobile stuff… Mobile trading website on any phone plus specific apps for iPhone, Android, iPad, and Blackberry.
Tax Lot Management. You also get free gain/loss tax management software powered by Scivantage Maxit, which does things like correcting cost basis based on corporate actions, tracks wash sales, and matching stock sales to specific tax lots. (Software used be provided by Gainskeeper, but I can’t tell any difference.) You can even choose a default tax strategy for your tax lots – minimum tax, first-in/first-out (FIFO), highest-in/first-out (HIFO), last-in/first-out (LIFO), and maximum gain. Finally, you can download your realized gains/losses in TurboTax® format (TXF) to easily create your Schedule D at tax time.
Customer Service. I haven’t used customer service for anything serious, which I suppose is a good thing, but every time I call the local office there is a human that answers with no hold time, and that same person actually answered my questions without having to be transferred.
Summary. Scottrade is a solid, independently-run, discount brokerage. It’s no longer the rock-bottom cheapest, but it still has good all-around value if you’re not making a ton of trades per month. They are focused on the self-directed investor who wants all the required tools covered well, without any hidden fees or being sold portfolio management advice. Feel free to ask questions below, I’ll try to answer them if possible.
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Any recommendations for ‘idle’ cash with Scottrade? I have several accounts with them: Roth IRA, Regular IRA (previous employer 401k rollover) and a ‘regular’ investment account. I can never seem to find what interest rate they pay on cash in these types of accounts but I believe that historically it’s pretty much infinitesimal. With the ‘regular’ account, I imagine I could transfer cash in/out as necessary to a higher interest bank account using Scottrade Bank like you mentioned but what about the IRA accounts…do you just try to always stay invested in something? How about dividends that are paid out? Scottrade doesn’t offer automatic dividend reinvesting do they? I think they do for mutual funds but not stocks, ETFs, etc. Do you just wait until you have enough dividends spun off (perhaps combined with a yearly contribution) to make it worthwhile to make another trade?
Well, as noted, I don’t feel the need to keep any idle cash in Scottrade because of their instant funds availability on transfers. I can wait until I actually want to place a trade to move over money. All brokers these days pay basically zero on cash deposits.
For my IRAs, which I don’t have any at Scotrade, I stay fully invested using mutual funds at Vanguard.
Since my taxable holdings are at Scottrade, I don’t like dividend reinvestment because it creates way too many tax lots. I’d rather just reinvest the dividends along with new cash inflows manually.
Great review. I appreciate your style of getting to the important difference and weeding out the fluff every commercial entity puts out as noise just to overwhelm. Didn’t know the private owned angle, I’m going to open an account just to support that alone.
Again, great piece and love the no nonsense reviews, hope you do more.
BTW, Quicken still sucks… Long live MS Money.
I’ve been a Scottrade customer for a few years and I’m very happy.
The local branches and the customer service are a huge positive for them. I’ve dealt with them a few times nwo for service and its been great. You call the local brancch and a competent person answers the phone and helps you. Its better than service I’ve come to expect from other big financial institutions. Its also convenient to stop into a branch to drop off papers or ask a question. It hardly seems that the $7 per trade could pay for the servcie you get.
Negatives : You can not do dividend reinvestment with my investments. I have to accumulate cash in a pile then place new orders. Their website is a bit ‘clunky’ in my opinion. Its not awful but it could be better design. You have to call them on the phone to ask them to send you a check if you have a cash balance you want to withdrawal. I’d prefer an online way to request a withdrawal.
Overall I’m very happy. I’ve had Fidelity, Etrade and my wife uses Schwab so I’m familiar with a few of the big names.
Chupacaba, Yes their cash balances pay virtually no interest. I wouldn’t expect more from other brokers. Interest rates are just too low right now.
Dividend reinvestment is a negative aspect for Scottrade. I just accumulate cash and buy in lots.
Some more info:
I looked up the interest rates for Scottrade idle cash sweep currently and they are 0.01% up to 0.05% for $99,999. Effectively zero.
The only place I could find the interest rates for the bank was by phone – call 1-800-SCOTTRADE (1-800-726-8872) and press 1 for Scottrade Bank, then press 2 for rate information and then press:
1. Certificate of Deposit Rates
2. Interest Checking Account Rates
3. Money Market Account Rates
4. Savings Account Rates
5. Line of Credit Rates
Briefly, 1 year CD paid from 0.20% to 0.35% APY based on balance. Savings account paid up to 0.33% APY based on balance. As of 6/12/12. The banking is more about adding convenience, as the rates are pretty unexciting.
On the privately-owned front, I also noticed that Scottrade always gets ranked in the 100 Best Companies to Work For by Fortune magazine.
Jonathan, after reading this review, I think the big thing that causes you to stick with them is the local branch feature. Seems convenient, trustworthy, etc.
However, there seem to be a lot of other negatives you shrug off. The transfer out system? Sounds like it’s from 2000. Can you not even go to a branch and pull your $ out, without having to wait for a mailed check? I would pull my hair out if I had to wait for a physical check in the era of e-banking and Check 21 (and I don’t like the ‘hostage’ scenario of being able to electronically transfer out if you just use their bank).
You also mention the free ETFs, yet immediately dismiss them because the selection isn’t too good and doesn’t provide enough family fund selection.
To me, it sounds like you need to look at TD. I am not a big ETF investor, but their list of free ETFs covers just about every fund most people would consider (including 32 Vanguard funds). The per trade cost is a little higher, but for someone like you who does mostly ETF transactions, it seems right up your alley. Here’s the ETF list: http://research.tdameritrade.com/public/etfs/commissionfree/commissionfree.asp
Inertia is a powerful force though. I’ve thought about moving from TD since I’m a little more active of a trader and would like a little lower per trade cost, but it’s tough to move everything over.
The main thing I don’t like about Scottrade is that they do not do DRIP. However, the low commissions somewhat mitigate that downside.
do they have any account opening bonus? i think i might open a sharebuilder account with their $200 bonus
Do you have any trouble accessing the Tax forms? I can’t seem to access mine, I click on it but nothing happens
I have been using Scottrade for about one year now, platform seems to have everything that is necessary for a good trading experience. After first opening the account I received a call from customer service, they were friendly and helpful and offered to schedule an appointment to visit a nearby branch to discuss how to properly use website/platform. After the visit I was surprised by how much interest they showed in helping me to become as familiar with their services as possible.
Here’s a code for 3 free trades at sign up in case anyone is interested: (removed) Never expires!!
I have an account at Scottrade and like others, the one negative is the lack of dividend reinvestments. It seems like they keep saying ‘soon’ but then nothing develops. I have a much larger account at a full service brokerage that I’m going to move as I intend to do more trading and the commissions there are absurd. I’d LIKE to go to Scottrade but am afraid I will not be able to because of the lack of dividend reinvestments.
FULL Transfer out of Scottrade now costs $75 as of October 2012. If they warned me weeks ahead that they will do this, I would have transferred before this new fee took effect. I was going to do the full transfer last year but didn’t have the time to do it. DRATS!
PARTIAL transfer is still free but you have to leave a total of $500 worth in the account. Sell the remaining stocks you hold, transfer cash in your bank and close the account. Closing is still free. That’s the only way to get out without fees. This is a hassle if you have an IRA account because transferring the funds to another broker gets more complicated.
i have a regular brokerage account with scottrade. can i flip it to an ira this year? if so, how do i go about doing this and will i get the deduction for the amount i put in the ira?