Having reviewed many online brokers, I’ve noticed how many of them tend to cater to active traders and more sophisticated investors. Well stock brokerage firms are not all alike: some are really much more suitable for those people who trade frequently (see Zecco, OptionsHouse or OptionsXpress), while others are a better fit for the small (retail) investor who prefers to invest for the long term. Some, of course, try to cover all the bases.
Scottrade Review: Top Brokerage For Small Investors
One of those brokers who finds themselves comfortably in that “middle ground” is Scottrade, which is actually quite a popular and well respected company in the industry. They’re pretty well established: they are a leader in the brokerage industry and have been around longer than many discount brokers (having been founded in 1980), with 422 local branch offices around the nation. One thing I know about them, I’ve gotten many positive comments about them on this site, with many happy customers telling me they’d recommend them as a broker. So what makes them such a great choice for many?
Awards
It’s not just the word of mouth compliments that have helped out Scottrade’s reputation, it’s also the series of top awards they’ve received from the media. Here is a list of achievements they’ve managed to score well on lately:
- Fortune’s “Top 100 Best Companies To Work For”: #60 in 2009 and #58 in 2008. They snagged this award because they prevailed during the Wall Street debacle last year, and have shown strong growth over the last several years.
- J.D. Power and Associates’ Online Investor Satisfaction Survey: #1 from 2001 through 2008 for overall investor satisfaction.
- SmartMoney Broker Survey for 2009: 4 stars for investment products, trading tools and customer service.
Pricing
Stock and Option Trades. The base commission fee at Scottrade is $7 a trade, which applies to stocks and options. However, for options, they do tag on $1.25 per contract to the $7 that is charged. But these great prices are only good for online trades — if you decide to use their phone system you’ll pay $17 while broker assisted calls will set you back $27 (ouch!). So it’s best to keep to online transactions!
Mutual Fund Trades. They also have over 1,150 mutual funds that qualify as “no load and no transaction fee” (or NTF funds); these funds are free for you to buy, sell or exchange online at completely no cost. But be wary that they’ve got no load funds without the NTF designation that will cost you $17 to trade. Load funds can be purchased at no charge, but there’s a fee for selling or exchanging them (subject to some conditions). Once more, if you decide to use a broker to place mutual fund orders, you’ll be hit with an extra $20!
Other things to note: It’s easy to get started with Scottrade since you only need $500 to open an account, plus they have no maintenance fees and no account closing and transfer out fees.
That’s their pricing in a nutshell. If Scottrade sound like your cup of tea, you can open an account here. They’ll reimburse any transfer fees up to $100.
Scottrade Features
We already know that Scottrade is tops for customer service and investor satisfaction. So let’s delve into some more details:
Trade Execution Quality. I’m impressed by their dedication to trade execution quality, which they’ve demonstrated by creating a proprietary algorithm called the SBI (Scottrade Best Execution Index) that measures execution speed, effective spread, and certain quote and pricing components. Scottrade utilizes this index to address those market centers that under-perform.
Stock Market Research. They provide an educational center and screeners for stocks, mutual funds and ETFs. And if you become an account holder, they promise you access to more advanced screening tools that rate stocks, funds and ETFs, and that show you dividend history along with price, industry and short interest information.
Products and Services. Their offerings run the gamut of investment products including equities, funds, options and ETFs, as well as fixed income products, CDs and bonds. As I’ve mentioned before, they’re one of those brokerages that provides great support for the average small investor, so you can also open a no fee retirement account or a Coverdell education savings account with them.
Trading Tools and Knowledge Center. For the more active traders, they have an advanced trading platform, streaming quotes and a professional options trading platform. They also have mobile support for those people who want the flexibility of checking their investments anywhere. On top of this, they’ve got a great library of investment resources which include content, reading material and webcasts for your perusal. Note that they were given 4 stars by SmartMoney for their tools and products!
From what I’ve seen, I can consider Scottrade as one of my top choices for online brokers. Their pricing may not be as cheap as TradeKing, Zecco or OptionsHouse, but they more than make up for it by being so well attuned to the needs of the average investor. The icing on the cake is their investor community, where you can learn from and connect with other investors.
To sign up with Scottrade, here’s where to go!
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