In some ways, reviewing Charles Schwab isn’t much different now than it would have been in the 1970s.
Guided by the philosophy of its founder, the Charles Schwab Corporation has been an industry leader for decades when it comes to disrupting the status quo to better serve its customers.
In this article, I’ll explain why Schwab is a great all-around investment company that money expert Clark Howard strongly recommends.
Founded in 1971 and headquartered in Westlake, Texas, Schwab was managing $7.9 trillion in assets as of May 2022.
Schwab gained popularity early in its history by reducing commissions and making it easier for individual investors to access the market. The company is largely responsible for the term “discount broker.”
Founder Charles R. Schwab sold his company to Bank of America in 1983 but bought it back in 1987.
The company made a splash that rippled across the industry when it announced commission-free trades in October 2019. And Schwab continues to expand: It acquired both USAA and TD Ameritrade in 2019.
Schwab is a well-rounded investment company built to meet the needs of almost everyone. It has a long history of treating its customers well and offering competitive products.
Here are some examples of the investors Schwab serves well:
It’s hard to review Schwab and narrow the company’s strengths down to a handful of attributes.
But here are some of the easiest things to appreciate about Schwab:
Investment companies have to make some value judgments. How to make money, which products to offer and how detailed to make its features and information are all questions with no perfect answers.
With that in mind, here’s where Schwab’s choices leave something to be desired:
Schwab’s layered approach to tools, education and platforms is a double-edged sword. It takes some thought — and frankly, some effort — to figure out the subset that’s best for you.
Schwab compounds the issue with names that aren’t always intuitive, so I’ve sussed out the definitions:
The website, app and desktop software each have a different ecosystem of features. But if you can get oriented, Schwab probably delivers the best research of any brokerage firm.
Schwab’s in-house education and market commentary content includes frequent, timely updates. There are nearly a dozen Schwab webcasts that broadcast live every weekday, and there’s a quarterly magazine.
Customers can read third-party reports from giants like Morningstar, MarketEdge and Credit Suisse. You can find real-time news and earnings reports.
Schwab’s screening tools, used to look for specific types of companies or trades, are thorough and customizable. StreetSmart Edge goes deep, offering tools, charts and features for active traders.
TD Ameritrade runs another popular trading platform called thinkorswim. It will be interesting to see how Schwab integrates that into its current offerings.
Schwab consistently receives accolades as the best investment company for exchange-traded funds (ETFs), but its website tools are decidedly middle-of-the-road for ETFs. What gives?
Well, in order to unlock Schwab’s ETF powers, you first need to download the StreetSmart Edge software I mentioned earlier. On StreetSmart Edge, you’ll find what’s probably the best ETF screener on the market.
A screener is something that helps you filter a data set. For example, if you had a spreadsheet filled with thousands of birthday dates, the right code could pick out every person born on a Tuesday.
The screener within StreetSmart Edge allows you to filter ETFs through more than 150 criteria including performance and asset class. It’s customizable, so you can combine multiple criteria. It also lets you save and re-use combinations of filters.
Schwab provides users with reports from third-party analysts like Morningstar. You can also search for and compare stocks, ETFs and mutual funds side by side, which I have found to be unique in the industry.
Even non-customers can download and use StreetSmart Edge. And all ETF trades are commission-free through Schwab.
Money expert Clark Howard has three primary recommendations for people who are looking for a financial advisor:
Intelligent Portfolios is Schwab’s entry-level robo-advisor (more on that soon). If you invest $25,000 or more, you’re eligible for Premium, which unlocks access to a team of CFPs.
However, this service probably doesn’t make sense unless you invest significantly more than $25,000.
You’ll pay a one-time initial fee of $300. After discussing your financial goals, a CFP will create a roadmap for you that takes into account your income, expenses, investment portfolio, retirement plans and more.
After that, you’ll pay $30 per month for continuous access to a CFP (not necessarily the same one), your digital financial roadmap and online planning tools.
Here’s a look at the annual fees you’ll pay in the first year (including the one-time $300 charge) and second year based on your investment amount:
You’ll unlock tax-loss harvesting if you invest at least $50,000. The more you invest, the smaller the annual fee you’re paying, though the $30 per month charge stays the same.
Members of the financial media often refer to 1% as a benchmark annual fee for financial advisors. In truth, the fees financial advisors charge vary widely. For reference, Vanguard’s PAS charges an annual fee of 0.30% with no additional upfront cost.
Schwab’s Intelligent Portfolios Premium can be an inexpensive way to get full access to a CFP. But because of the pricing structure, the amount you invest can drastically change your annual costs for the better.
Yes. Schwab’s entry-level robo-advisor is called Schwab Intelligent Portfolios. It requires a minimum investment of $5,000 and doesn’t charge an account management fee.
However, the cash allocation of Schwab’s portfolios tends to be on the high side — typically between 8 and 10% depending on your risk tolerance and other factors. It also skews toward bonds.
According to Backend Benchmarking’s detailed report on robo-advisors in the fourth quarter of 2021, Schwab produced an annualized return of 12.5% in the previous three years, the worst among the robo-advisors the company measured. Schwab also ranked last in that measure for the previous three years as of the fall of 2020.
Intelligent Portfolios also doesn’t offer tax-loss harvesting unless you invest at least $50,000.
As such, Intelligent Portfolios did not make my list of the best robo-advisors.
I’ve already talked about Schwab’s robo-advisor as well as Intelligent Portfolios Premium.
However, Schwab has some other options if you’re looking to work with a financial advisor.
If you have at least $1 million to invest, you can access Private Client. The annual fee starts at 0.80% and decreases if you meet certain investment thresholds.
Private Client gives you a team of people to work with. They’ll offer advice on insurance, taxes, retirement planning, investment management and more.
If you have at least $500,000 to invest, you can seek advice through the Schwab Advisor Network. These are local CFPs who are affiliated with and vetted by Schwab.
Schwab also offers Managed Portfolios ($25,000 minimum for a portfolio of mutual funds or ETFs) and Managed Account Select ($100,000 minimum for a portfolio of stocks or bonds) if you’re just looking for professional investment guidance.
Schwab’s ThomasPartners Strategies offers investment plans especially built for retirement years.
Yes. Schwab Bank offers checking and savings accounts.
You can also get a variety of banking products and features through your Schwab brokerage account including:
Yes, Charles Schwab offers fractional shares through a program called “Stock Slices.”
Fractional shares allow you to invest in a company based on a dollar amount rather than by buying a specific number of shares.
The price of one Amazon share is more than $2,000 as of May 2022. Previously, if your portfolio was small and you wanted to diversify, you may not have been able to justify buying a share of Amazon. Fractional shares have unlocked that capability.
Schwab’s “Stock Slices” are more limited than the fractional shares offered by some companies. Schwab allows you to invest in up to 10 companies at once with “slices” that cost as little as $5 each. But the companies must be part of the S&P 500.
Legacy companies can get fat and happy. Not Schwab. Despite being around for 50 years, Schwab is still fighting to serve its customers and outpace its competitors (new and old).
Schwab made major news when it eliminated commissions on trades and acquired TD Ameritrade. It will be interesting to watch how Schwab chooses to merge its products and services with TD Ameritrade in the next few years.
As you’ve probably concluded by my Schwab review, I consider it to be one of the two strongest all-around investment companies because it serves almost anyone really well.
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