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Scottrade review: Low fees and strong customer service

By Satta Sarmah-Hightower | Money Rates Columnist

This is the logo for ScottradeIn the crowded online brokerage market, Scottrade is easily one of the most recognizable names.

And that’s for good reason. The firm, which opened in 1980 with two branches, now has more than 500 brick-and-mortar locations to complement its online offering, Scottrade.com, which launched in 1996. Its $7 price for unlimited trades is a draw for many customers, allowing self-directed investors to build their investments without worrying about exorbitant fees.

Pros: Affordable, Diverse, Helpful

The commonly held belief is that you can get either quality or affordability, but not both. Scottrade largely contradicts this with its low fees and accolades for customer service. In both 2013 and 2014, the firm had the highest ranking for self-directed investor satisfaction, according to J.D. Power.

Scottrade has several offerings that make it attractive to individual investors:

  • $7 per trade, which investors can execute via phone or online.
  • More than 14,000 mutual fund options.
  • No maintenance, inactivity or closing fees.
  • No minimum to open an IRA account.
  • For options traders, contract orders for $7 per trade +$1.25 for each option contract.
  • Mini-option contracts for Apple, Amazon, Google and two exchange traded funds that allow traders to buy and sell 10 share options contracts for the same fee as above.
  • Free real-time streaming quotes through a dashboard that features instant updates from Dow Jones, advanced charting, watch lists and an advanced order entry tool that lets investors create provisional trade commands.
  • User-friendly web functionality like a Quick Trade Bar located on every web page. The bar is detachable, so investors can use it even when they aren’t on Scottrade’s site. Also, if you forget your Scottrade login and the forget password isn't working for you, the company provides a helpful toll-free phone number on the same page.
  • Customer service via Facebook and Twitter, in addition to the traditional channels.

Along with these benefits, investors should take advantage of Scottrade’s current promotional offer of up to $2,000 in bonus cash and 50 free trades for new or existing customers who open or fund a brokerage account by April 18.

Fund your account with between $10,000 - $24,999 and get 50 free trades. A qualifying deposit of between $25,000 and $49,999 gets you a $100 bonus and 50 free trades, while investors who deposit $1 million get the maximum $2,000 cash bonus along with free trades. The offer is an attractive option for customers who want to maintain all their investments at one brokerage firm or first-time investors who have saved up enough money to meet the minimum threshold. When you do the math, Scottrade is offering customers a $350 value, which is a respectable sum for anyone who is green to investing or online trading.

Scottrade also offers a product, ScottradeELITE, for more well-heeled investors. Through ScottradeELITE, advanced traders who fund their account with a minimum of $25,000 get access to a customized trading platform that features advanced charting tools to test different trading strategies, daily trading ideas from Trading Central and Recognia(R) and a proprietary platform to measure market trends within sectors, among other advanced features.

Cons: High Minimum, No Dividend Reinvestment and No Commission-Free EFTs

At $2,500, Scottrade’s minimum deposit requirement for opening an account is higher than competitors like Charles Schwab’s ($1,000 minimum) or TD AmeriTrade (no minimum, but $2,000 requirement for margin and options trading).

Scottrade also doesn’t offer any commission-free EFTs, exchange-traded funds that trade like common stock and give investors some return at a lower cost. Commission-free EFTs are common at online brokerages that offer a low price per trade. If you’re an investor who favors diverse trading options, then this won’t be a problem. Otherwise, expect to pay more in commissions.

Also keep in mind that the $7 per trade price is only for stocks that are more than $1 per share. Less than that and you’ll pay $7 plus .5% of the principal value. There’s also a $32 trading fee if  you need personalized help from a broker or want to use the company’s touch-tone phone system.

But the biggest drawback at Scottrade is that there isn’t a dividend reinvestment plan, which allows investors to buy additional shares at a low cost. Right now, investors must pay the same $7 price to reinvest their earnings. However, the company does offer a Flexible Reinvestment Program that allows investors to reinvest their dividends in up to five eligible securities commission-free. Scottrade then executes these trades on monthly or quarterly basis. It’s better than nothing, but with Scottrade’s Flexible Reinvestment Program you don’t qualify for the same tax benefits you’d get with a traditional dividend reinvestment plan.

At $7 per trade, Scottrade has a lower price per trade than Charles Schwab ($8.95) or E*TRADE ($9.99). With its network of 500 local branches, varied mutual fund options, low fees, extensive client education resources available through its Knowledge Center and advanced tools to help investors optimize their investment strategy, Scottrade is an attractive option for first-timers or anyone who wants to consolidate their investments at one brokerage — especially given the company’s current promotional offer. If you have $2,500 to spare and are a fan of low fees (who isn’t?), Scottrade may be the right investment platform for you.

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