Choosing the right broker is fundamental to your success as a trader. Get it wrong and you’ll be cursing the day you ever signed up with them. Poor training, expensive fees, unresponsive platforms and rude customer service representatives are all symptoms you’re with the wrong broker.
So how do you go about choosing the right broker? Well you’re reading this so that’s a start. I’ve been trading for over ten years and I’ve come across more than my fair share of dodgy brokers. So I created this site to help guide you through the minefield of selecting the perfect broker.
I’ll only be recommending the most professional brokers on this blog. I’ve tried to separate them into different categories depending on the type of training they offer and their respected platforms. In this article I’ll be covering Scottrade.
Who Are Scottrade?
You’re probably already familiar with Scottrade, they’re one of the largest and best known of the discount brokers, probably because they’re not entirely based online. They operate over 500 local branches across the U.S.
A private firm initially created as a local investment adviser in 1980 they went on to launch scottrade.com in early 1996. As one of the first online brokers they expanded quickly and by 2012 had revenues approaching $1 billion.
Scottrade Fees & Commissions
With a $7 flat fee for a standard stock trade Scottrade are one of the cheaper mainstream brokers, but they’re still considerably more expensive than some of the smaller brokers like OptionsHouse.
But it’s maybe a little unfair to compare an online only broker with Scottrade. So if we compare Stock, ETF and Option fees with other high street brokers like TD Ameritrade and Charles Schwab who also have a significant high street presence, Scottrade works out cheaper.
Things I Like About Scottrade
Scottrade are renowned for their customer service, they offer a number of ways to contact them and the customer service reps are both knowledgeable and friendly. They lack the personal touch however and they don’t offer a VIP service like TD Ameritrade Apex for instance. But for a large broker their service is pretty good.
More than Just an Online Broker
Aligned with customer service Scottrade have a network of over 500 local branches which you can call into. I know many investors like dealing with companies they can actually interact with face to face; this is hardly surprising since you’ll be handing over your hard earned cash.
So having a network of local branches gives you the satisfaction of knowing you can get at your money at any time. And there’s a lot to be said for that in this day and age.
I was quite surprised by the quality of training that Scottrade offer. I was expecting it to be the rudimentary, how to execute a trade and what is an option? That kind of thing. But they go into a lot more detail than that.
I found their training to be thorough and well thought out. There are programs aimed at beginners which show how to develop a strategy and implement proper money management. This is followed by some great intermediate options training which I think most traders will find useful.
Scottrade offers a trading community in the same way as TradeKing, this is unusual for a mainstream broker who seem to view such things as gimmicks. They don’t offer the same level of interaction as say TradeKing and you certainly can’t follow along with trades like you can with Zecco. But you can at least interact with other users and build friendships along the way.
No Hidden Fees
Scottrade does charge extra for trades that cost less than $1 but they’re upfront about it. There are no account maintenance, inactivity or account transfer fees however. Most brokers have knocked maintenance fees on the head thank goodness but they still charge for account transfers, so this is to Scottrade’s credit.
Things I Don’t Like About Scottrade
Scottrade has two primary trading platforms, the first is browser based and offers only basic functionality, this platform is really only suitable for beginners. But to be honest there are better platforms available and for the price of the trades I’d expect more.
For more experienced traders they offer the ScottradeELITE platform. This platform is much better and has access to many more trading tools including stock scanners and alerts, but it requires the account holder to maintain a minimum balance of $25,000 at all times. This really is unacceptable, especially since TD Ameritrade offers a much more comprehensive platform without requiring any minimum balance at all.
No Dividend Reinvestment Plan
Most brokers these days offer some sort of dividend reinvestment plan, even if it’s limited to whole shares only. Scottrade doesn’t offer any such plan, so if you want to reinvest your dividends in further shares you’ll have to carry out a separate transaction which will incur fees.
Dividend reinvestment plans or DRIPs are an excellent cost effective way to increase your holdings in a company. Scottrade’s failure to offer this service is unforgivable in my book. The only possible reason to not provide this service is so they can profit from the extra trades as a result.
To Sum Up
Scottrade is a quality broker, but I’m struggling to find a compelling choice to use them. They have a good reputation and the largest number of local offices. So if access to a local branch is important to you, Scottrade is the way to go.
If price is the biggest determining factor then they’re the cheapest of the mainstream brokers with a branch network. You’ll find better deals amongst the internet only brokers however. OptionsHouse charge just $4.75 for a standard stock trade, against the $7 Scottrade charge.
For beginners Scottrade provide some excellent training and their web platform is easy to use if a little light on tools. But once again there are better alternatives; TradeKing both have superior training for rookies and offer a more comprehensive trading community.
If you’re looking to manage your IRA you’re going to be hit by the lack of any dividend reinvestment plan. The ability to reinvest dividends in your IRA is crucial if you want to build a retirement nest egg.
When taken in isolation they’re not a bad broker, but no matter what kind of trader you are there are better solutions out there. I think this is a classic case of trying to be all things to all men. They’re a good broker, but not great.