Overview of Charles Schwab IRA
Schwab advertises heavily and attracts a lot of customers. But how does the brokerage house actually perform in vital categories? And how does it compare to its major rivals? We’ve done a lot of digging, and we have the answers for you.
Range of Products
Schwab customers can trade equities, option contracts, ETF’s, fixed-income securities (this
includes a long list of products like STRIPS and CD’s), closed-end funds, mutual funds, IPO’s,
and futures (including bitcoin futures and options on futures). We didn’t find forex, precious
metals, contracts for difference, cryptocurrencies, or warrants.
Customer Service
Schwab has cut its commission schedule, but it has managed to keep 24/7 phone service. Chinese language service is available some hours, and the broker also offers international phone numbers for clients outside the U.S.
Schwab has around-the-clock chat service on its website. During a trial, we did receive a wrong answer. The website also offers internal messaging.
Beyond contacting a representative, the website provides a lot of self-help features. A travel notice can be submitted by debit card holders, paperless settings can be changed, a trusted contact can be added to an account, forms can be downloaded, and much more.
Clients who would rather skip all the e-channels can do so at one of Schwab’s 300+ nationwide locations. There’s at least one office in virtually every state. Puerto Rico, Hong Kong, and London also have brick-and-mortar locations.
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Learning Materials
The Schwab website has a treasure trove of learning materials that would be good for experienced and beginning investors alike. During our investigation, we found resources on a wide range of subjects. These include such general issues as the taxation of investments, getting married or divorced, planning for retirement, changing jobs, and saving for education.
The broker’s site hosts several calculators that can be used for a variety of purposes. A life insurance calculator is able to determine how much insurance is needed based on inputs such as mortgage balance, annual net income, and outstanding debt.
There are countless articles on learning to trade the products Schwab offers. We found an article on how to read option chains, another on the basics of preferred shares, and another on the characteristics of closed-end funds. Besides articles, the website hosts many videos.
Screeners are able to scan the securities markets in the hunt for undervalued opportunities. The equity search tool has tons of variables that can be used. Analyst ratings, PEG ratio, cash flow per share, and 5-day stochastic oscillator are just a few examples.
Stock profile pages have enormous amounts of information, including free pdf reports from a variety of sources, such as CFRA, Schwab, and Thomson Reuters.
Website
One of the first things we noticed about Schwab’s website is how much stuff is on it. While this does make it a little difficult to navigate at times, the sheer number of tools means the broker’s customers have a lot of benefits.
The first is a trade bar at the bottom of the monitor. It provides trade data such as volume and the day’s high and low prices for any ticker symbol entered. The trade bar provides pop-up charting and news articles. The one weakness it has is the inability to actually submit orders. This has to be done on a webpage order form. Besides market and limit, trailing and stop orders can be used. Timing offers several choices, including day, GTC, fill or kill, and extended hours.
Charting on the site comes with around fifty technical indicators, lots of drawing tools, comparisons, eight display styles, and three company events. One feature we didn’t find was the ability to display a graph the full width of the computer monitor.
StreetSmart Central is a browser platform that specializes in futures trading. We did find the ability to trade other products, though. The software makes up for the website by offering full-screen charting. The trade ticket offers additional features that the website ticket doesn’t provide, such as triggers.
Mobile App
Traders who don’t have access to a desktop or laptop can use the broker’s mobile system, compatible with both phones and tablets. Useful features include ACH transfer, mobile check deposit, and bill pay, all of which carry zero fees. A watchlist is integrated into the app, heat maps are displayed, and market movers can be found.
The app allows the trading of stocks, ETF’s, closed-end funds, option contracts, and mutual funds. Advanced features like direct-access routing and Level II data are missing; but we did find multiple order types and duration choices.
Charting on the app offers events, comparisons, and technical indicators. A total of seven graph styles are incorporated, which is quite impressive for a mobile platform. Up to 40 years of price history can be displayed, another impressive feat.
Other Trading Tools
Schwab clients who don’t care for the company’s mobile app, website, or browser platform can trade on StreetSmart Edge, a desktop program. There are many great tools embedded in this software, which carries no account requirements. CNBC streams at no cost, and Level II quotes are available. Technical analysis tools from Recognia can be used. Option chains show not just calls and puts, but several multi-leg trade ideas.
The order ticket on Edge comes with direct-access routing, customization, and several order types. Charting offers full-screen mode, several technical studies, drawing tools, and right-click trading. Price action can range anywhere from tick-by-tick up to 20 years.
Besides its desktop software, Schwab has a skill for Amazon Echo and Echo Show. The software can give quotes, create a watchlist, and broadcast the company’s market update.
An app for Apple Watch is able to display a small graph with current trade price. Other data points include volume, high and low prices, and bid-ask spread. An account’s watchlist can also be accessed.
Exchange-traded Funds
At Schwab, all ETF’s can be traded with zero commissions. Its website has a lot of great tools for trading these and other U.S.-listed funds. The screener is able to look for funds meeting many criteria, including total assets, price range, Morningstar rating, cash flow growth, 30-day yield, sector exposure, and many more.
An ETF’s profile page presents lots of information. A link to a fund’s prospectus is at the top of the page along with a report card from Schwab. Further analysis is available from Market Edge.
A Select List provides pre-screened funds from investment advisors at Schwab. These ETF’s are selected based on their low expense ratios. We were hoping for a more thorough analysis.
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Mutual Funds
Schwab’s performance in this category isn’t going to overly impress due to an undersized offering of mutual funds. With its screener, we found just 5,867 funds. This is a pretty small list by industry standards. Nevertheless, there are 3,456 funds that carry no transaction fee and no load.
The mutual fund screener offers tons of criteria to search by, including top ten holdings, fund strategy, Sharpe ratio, tax equivalent yield, distribution frequency, and more. A scan can be saved or detached into a separate window. There are also pre-defined screens.
Mutual fund profile pages at Schwab provide lots of good data. We found information on eligibility for automatic investing, gross expense ratio, top holdings, growth of $10,000, and management details.
Schwab’s site hosts a personalized portfolio builder that is able to build a diversified portfolio composed of ETF’s and mutual funds. The tool asks questions about taxes, risk profile, and time horizon. The software then recommends a fund investment.
Retirement and Education Accounts
Schwab customers can open a wide variety of account types. The brokerage firm offers a self-employed 401(k) and a large selection of Individual Retirement Accounts. These include Roth, Traditional, Inherited, Custodial, SIMPLE, and SEP plans. A retirement plan from a former employer can be transferred into an IRA with Schwab as well. Moreover, annuities are available.
For education saving, Schwab has a 529 plan, a Coverdell Education Savings Account, and a custodial account.
Schwab Fees, Commissions, and Account Policies
Stock and ETF transactions cost $0 at Schwab. Option contracts cost an extra 65 cents each. The broker’s mutual fund transaction fee is $49.95 on the buy side only. Futures contracts are $1.50 per contract per side. Options on futures have the same pricing.
Fixed-income securities are $1 each. There is a $10 minimum commission and a $250 maximum. Preferred stocks are charged the $0 equity commission. Treasury debt has no commissions, although there may be a markup on purchases and markdown on sales.
All of these numbers assume online trading. Using the company’s automated phone system incurs a $5 surcharge, and a live rep costs an extra $25.
Schwab has eliminated all account fees. This generous policy applies to taxable and nontaxable accounts. Moreover, there are no longer any account minimums or deposit requirements. The one exception is a charitable trust, which carries a $5,000 minimum account balance.
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Managed Accounts and Financial Advice
Schwab has the cheapest robo-advisory service in the world: it costs 0.00%. The brokerage firm is able to offer it for free because a large cash position is held at Schwab Bank, and the ETF’s in the program are Schwab ETF’s, another source of income. Both of these are conflicts of interest. Another downside is a $5,000 minimum deposit requirement.
A hybrid system combines Schwab’s computer algorithm with a CFP™-certified human financial advisor. This program requires a higher $25,000 minimum and a $30 per month advisory fee. There is also a one-time planning fee of $300. These additional charges provide a financial plan, on-going access to the financial planner, and some website tools that aren’t available with the free plan.
Traditional plans are also available. The primary advantage with these packages is that stocks and
bonds are on tap. Fees range from 65 to 135 basis points, depending on the securities chosen.
You can compare these rates to what the best priced
financial advisors in your area charge.
Stock accounts require $100,000, while balanced and fixed-income accounts require $250,000.
Cash Management
Schwab clients can open a checking or savings account with the broker’s affiliate Schwab Bank. Deposit accounts are automatically linked to brokerage accounts. A checking account comes with free checks and a Visa debit card. The website offers a tool to switch the card on and off, a nice feature. Schwab does not offer an FDIC sweep program because Schwab Bank is the only choice. What it does provide is a policy of unlimited global ATM fee refunds, the only company we know of to do so.
International Trading
Schwab has a Global Account that provides access to foreign markets. Alternatively, global access can be appended to an existing brokerage account. Twelve foreign securities markets are available in local currencies. Some of the available countries include Australia, Finland, Japan, and the UK. Schwab provides non-professional traders with real-time quotes.
Recommendations
Schwab would be an ideal broker for investors who want a one-stop full-service firm that offers almost everything at reasonable prices.
With its educational resources, the company would be an especially good pick for beginners. Small accounts will also benefit from the
broker’s no-fee policies. And its IRA’s are definitely worth opening.
Charles Schwab IRA Review Summary
Schwab is a great value with many good services. Although it underperforms for mutual fund, option, and forex traders, everyone else should
open an account here.
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