Online Brokerages I Use: Scottrade Review
Scottrade is one of the better online brokerages that I’ve come across over my years of investing in the stock market. In fact, my wife and I have a number of accounts with them which has allowed us to get a fairly good grasp of how they operate. In light of that I thought I would do a Scottrade review to go over some of the ins and outs of Scottrade and why you might want to consider them if you’re looking for a new online brokerage to manage your investing.
I worked for a number of years in the online brokerage industry and have seen first hand how investors are hindered when they end up with a brokerage that doesn’t meet their investing needs. It’s my desire with this review of Scottrade to help you see if they, or some other brokerage, might be the right fit for you.
Related: If you’re looking for another online brokerage possibility, check out my Etrade review.
If you do a quick internet search for online brokerages you’ll see that there are dozens, if not hundreds, of them to choose from. You have cheaper brokerages that offer little service and are only a means to place stock trades on one end and you have bigger brokerages on the other end that offer a full range of services including possible advisory services.
Scottrade is squarely in the middle of those two extremes and provides a solid trading platform at a decent price. They first started in 1980 and have since grown into a branch network of over 500 branches nationwide. They are well known for their $7 flat unlimited trades and are commonly recognized by outfits such as J.D. Power as one of the best online brokerages to do business with. With that in mind, let’s get on with a review of Scottrade to see how they measure up against other online brokerages.
The trading platform: The Scottrade platform is very intuitive and user friendly. If you’re looking to place stock trades they’re a flat $7 (unless the stock price is below $1) whether you place the trade online or using their trusty phone app. If you place the trade through a broker the commission is a flat $27. If you look at the spectrum of major online brokerages out there, the commission at Scottrade is definitely on the more competitive end.
Streaming Quotes: Many online brokerages charge for access to streaming quotes; that is not the case with Scottrade. Streaming quotes are free the day you open the account and fill out a few short forms. Other brokerages either charge for this service or require that you do a certain number of trades per quarter or year to receive it. This is a huge benefit to having a Scottrade account as you can invest using real-time data as opposed to quotes that could be delayed by up to 20 minutes.
ScottradeElite: This is a service offered if you fund your account with more than $25,000. The benefit behind ScottradeElite is that it gives you access to increased charting, trading functions and trading tools. This may not be of benefit if you’re a buy and hold type of investor, but is great for those who are more active traders.
OptionsFirst: This is Scottrade’s answer to investors who want more advanced options trading. While not for everyone, options can be a great tool to further diversify your investing strategy. I have not used this service, though I have heard great things about it. Please do keep in mind that you do generally pay more for an options trade, and with Scottrade you add an additional $1.25 per contract on top of the flat $7 stock commission.
Advantages of Scottrade
Minimal Fees: Beyond the $7 flat trade price for stocks there is very little in terms of fees. There are no hidden fees, which I am a huge fan of and the account opening requirement is a very reasonable $500. The commission price is very competitive in light of other brokerages, especially when you take the value you receive into consideration.
Customer Service: My experience with Scottrade has been second to none. They have over 500 branches and the times I have visited our local branch their staff have been very helpful. On top of this they offer an instant chat feature on their website that not all online brokerages do. Having three little ones running around I have found this to be invaluable as I can ask my questions without having to deal with the noise our kids like to create when I am on the phone.
Many Investment Options: In addition to being able to invest in stocks, they offer many other options including fixed income, mutual funds, and banking products. Their mutual fund offering has over 14,500 options of which over 3,000 do not carry a transaction fee…which is more than many other online brokerages. If you’re looking for an online brokerage which allows you to handle your mutual fund investing as well, Scottrade is likely going to be one of the first ones you’ll want to look at so you can keep your portfolio streamlined.
Research and Trading Tools: If you’re looking for free online courses or would like to use a stock screener they have a solid offering. I’ve used a fair share of Scottrade’s trading and research tools and they hold their own with what I’ve seen from other brokerages. Comparing their screener tools to others I have used in the past, the screeners at Scottrade win hands down in terms of ease of use.
Disadvantages of Scottrade
No Dividend Reinvestment Program: Many investors that have dividend paying stocks like to have them reinvested to buy additional shares of stock. For some reason Scottrade does not offer this, though there are rumors they might in the future. If you do want to reinvest the dividends you then need to pay a commission to buy the additional shares.
***Update as of June 25, 2013 – Scottrade has introduced a unique Flexible Reinvestment Program. This does not allow you to reinvest into partial shares, but pools cash from dividends to buy additional shares of up to five eligible securities at a time. There is no commission charge for this at all. They allow you to pick specific stocks to have dividends reinvested towards, which I think is a great feature. I love that they have added this as I invest in several high dividend paying stocks through Scottrade and it allows me to add more to the given holdings as opposed to having the cash sit there doing nothing.
Limited Option Trading Options: If you want to do something simple like a covered call or buy an option you’re fine. However, if you want to do anything more advanced like placing straddle or spread trades and beyond you must apply to their OptionsFirst platform and have separate logins for that.
What’s My Take on Scottrade?
I believe for the right person, Scottrade could be a great fit for their investing needs as they offer value, great customer service and solid tools to use. That said, there are a number of good online brokerages to choose from and you need to choose one that best meets your needs.
I like Scottrade because they’re a brokerage that I can manage virtually all of our investing needs with as they have so many offerings. If you’re looking for an online brokerage, Scottrade makes the account opening process a breeze as you can open your account electronically in less than 15 minutes.
*Edited from original post on March 28, 2013
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