Scottrade Review: Discount Online Stock Broker

Published 9/10/09 (Modified 3/22/11)
By MoneyBlueBook

Scottrade Review: Discount Online Stock Broker

As the economy steadily recovers from the devastating recession that has gripped the nation for months, stock market prices that were previously beaten down into the depths of generational lows are finally starting to rise again. With opportunities afoot, it's perhaps time for those of us who have been cautiously hoarding cash on the sidelines to consider jumping back in again. Stock prices are extremely cheap right now, and tremendous long term gains are ripe for the taking. If you have been contemplating the prospect of getting back into the market again or perhaps getting started with investing for the very first time, now may be the time to consider opening up a new discount broker account. In the hopes of earning your business, a host of online brokerage firms are now offering consumers extraordinarily low prices for cheap stock trades - without scrimping much in the way of premium brokerage amenities and features.

One of the most highly touted low cost brokerages in the market today is Scottrade, a brokerage firm with which I have retained an investment account with for years now. While certainly the company's website design and palette choices aren't exactly the prettiest or most intuitive around, the firm's online trading tools and statistical reporting features are more than sufficient to satisfy the discerning needs of most run of the mill investors.

Scottrade's Best Features: Low Broker Commissions, Low Account Minimums, and No Hidden Maintenance Fees

Compared to all-in-one brokerage giants like E-Trade or Charles Schwab that offer one stop shopping for all of one's banking and stock trading needs, Scottrade focuses exceptionally well on its primary niche - individual stock traders and mutual fund investors who want to enjoy the benefits of deeply discounted fees and rates without having to pay extra for the premium services they never use. Striking a decent balance between quality and value, Scottrade offers a fairly robust line of investment products, differentiated online trading platforms for different types of investors, and enhanced market research tools for those that desire exceptional control over portfolio performance - all without breaking the bank in the way of fees.

Scottrade's trading fees are exceptionally low, even when compared to the rates touted by other online discount competitors - charging only a flat $7 fee for trades priced over $1. All equity and option trades, whether they be market or limit orders - are only a simple $7 per trade. This type of low and straight forward flat pricing not only should comfortably suit the needs of long term buy and hold investors, but also should greatly appeal to day traders and active investors who execute frequent buys and sells. Of course, do bear in mind that while $7 flat fee trades apply to all online Internet based transactions, if you choose to execute trades over the phone - it will cost $17 for phone based trades and $27 for broker assisted trades. Take my advice - regardless of which discount broker you ultimately decide to invest your money with, learn to make trades online - you'll save a bundle over your lifetime.

Both advanced traders and entry level beginners to investing will greatly appreciate the low minimum balance requirements for new accounts. Currently, Scottrade only requires $500 minimum to open a new account. The online broker also imposes no inactivity charges and levies no hidden maintenance fees as well. Leave your investment account idle for as long as you wish - there is no charge. For the convenience and freedom of its brokerage customers, Scottrade also imposes no account closure or transfer fees. Investors looking for a simple brokerage option that offers straightforward cost competitive pricing without anything tricky will do well with a firm like Scottrade.

Scottrade's Online Customer Support and Branch Offices Are Well Regarded and Highly Ranked

With over 400 local branch offices across the United States, a live Scottrade representative is definitely reachable when you need the prompt assistance of one. As someone who has called the Scottrade customer support phone line numerous times (800-619-7283) in the past, I've never encountered difficulty in obtaining assistance. It seems Scottrade strongly prides itself on its ability to deliver prompt personal attention to its customers. I recall when I first signed up for Scottrade online, within a few hours of registering for an investment account and even before I had set up my initial fund transfer, a Scottrade representative was already calling me up to introduce himself and ask if he could help me in any way or answer any questions I might have. From where I'm from, that's called excellent customer support and the start of a good relationship.

But then, you don't have to take my word for it. For many years now, the J.D. Power and Associates global marketing firm has consistently ranked Scottrade #1 overall in its Online Investor Satisfaction Survey - giving it the number one award for the "Highest In Investor Satisfaction With Self Directed Services" from 2001 through 2008. In another highly touted editorial review of the best discount brokers online, the SmartMoney best broker survey for 2009 awarded Scottrade 4 stars for its impressive array of investment products, online trading tools, and highly commendable customer service. Similar praise and reputational accolades have also been bestowed by Kiplinger's Finance and Barron's as well.

In terms of the firm's own employee satisfaction ratings, Scottrade has consistently been ranked by publications like Fortune Magazine and ComputerWorld as one of the best places to work at. While not totally pertinent to investor satisfaction, perhaps it's contagiously true - happy employees beget happy customers.

Scottrade Investment Account Features and Online Trading Tools

Like most online broker firms, Scottrade offers the usual array of investment products - such as stocks, options, mutual funds, IRA's, exchange traded funds (ETF's), Coverdell education accounts, bonds, CD's, U.S. Treasuries, and various fixed rate annuities. While Scottrade's online trading tools are pretty basic without much in the way of heavy hitting premium research material, they're more than adequate for most investors and traders.

In terms of Scottrade's online tools, the firm offers several options depending on how you wish to trade and how much investment control you desire. The vast majority of people will find the basic Scottrade website's research and trading tools more than sufficient for their investment needs. More experienced traders will likely gravitate towards the ScottradeELITE advanced trading platform, which is equipped with fancier tools like enhanced news tickers, higher performance stock scanners, improved graphical chart functions, and access to Level II quotes that help active investors react more quickly to market opportunities that present themselves. New entrants to option trading will find the Scottrade OptionsFirst platform quite easy and intuitive to get a hang of. Those of you equipped with iPhones and various smart phones who wish to perform stock research and stock trades on the fly may find the Scottrade Mobile platform quite useful.

My complaints regarding Scottrade are few as the company's pricing and customer service features make up for what shortfalls the firm has. But if I had to nitpick, my only dissatisfaction with Scottrade centers around the brokerage's lack of an automatic dividend reinvestment function and the firm's comparatively lackluster rates of return on un-invested sweep account cash balances.

I also wish the discount broker offered a more integrated and obvious way to engage in Scottrade ACH transfers for deposits and withdrawals. Presently, the firm offers MoneyDirect as a way to make one way electronic deposits via a bank account into a Scottrade brokerage account. However, account withdrawals require the submission of a request for a paper check of the balance desired. There is presently no similarly easy way for all participating Scottrade customers to withdraw such deposited funds online and on demand. The only current workaround is to qualify for check writing privileges by developing a brokerage balance of at least $5,0000. Only with check writing privileges enabled can one gain access to a checking account number and routing number that can be ACH linked to other banking institutions for easy electronic transfers. But despite the above mentioned gripes with Scottrade, none of these issues are significant enough to overshadow its pluses and discourage me from recommending Scottrade as a top online broker.

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10 Responses to “Scottrade Review: Discount Online Stock Broker” 

  1. B����rse says:

    The Scottrade flat $7 fee for trades is a verry good opportunity to profit by the cheap stock prices right now. But is now the time to invest in real estate stocks? I think this sector is affected with special risks.
    I prefer basic materials and renewable resources right now.

  2. Raymond says:

    No one can possibly know where the market will be headed in the future. All we can do is invest for the long term in solid positions during down times and let time take its course.

    Real estate stocks, financials, health care - they are all fraught with risks, but it's during such down times that fortunes are made by the bold. While I don't track them as closely, I'm sure basic materials and renewable resources also suffer from their own host of risks and dangers as well.

  3. Modder says:

    I have been a Scottrade user for 5 years now. Agree with your assessment above. However re withdrawal issue, I requested check writing privileges couple of years ago when I was way over the threshold. In the mean time I have moved most of my money out and only have $1k or so remaining in Scottrade and have still kept my check privileges. That have not bugged me about low balances and have even kept a second account alive for 2 years now although I cleaned it out entirely.

    My only real gripe is that they do not have ANY money market funds available for investment. If I want to move my position to cash, my only real choice is to leave it chilling in the account earning close to nothing as you pointed out. I am all cash right now for my taxable accounts, so I moved all my money from Scottrade to a higher interest savings account.

  4. John F says:

    This is a very helpful post. I go with Scottrade because I like the customer service. I agree that $7 is becoming too expensive. There is lots of competition for the online stock broker business. Here is a list of 60 online stock brokers!

    Good luck to all finding the lowest commissions!

  5. Simeon says:

    I hope you don't have the troubles with Scottrade that I have had. Their customer service is pretty bad. Rude people who are way too casual about a customer having a problem. They are way to relaxed about being of no help, they just couldn't care less. They can't do this and they can't do that and they lost the other thing.

    I've been a customer of Scottrade for a few years now. They make several thousand dollars a year off of me. But whenever I have to deal with an actual person, it's a nightmare!

  6. Jessica says:

    Hi Simeon,

    I am sorry to hear that you are not happy with your experience at your local branch. I understand that you have spoken with us and will be moving to a new branch office that opened this week. I hope you will have a better experience at that branch and that we can work through any unresolved issues you might have. We value your business and want to provide you with quality customer service, online and in-person. Should you have any additional feedback, don't hesitate to contact us at 800-619-7283.

    Best,

    Jessica
    Social Media Specialist, Scottrade

  7. terry says:

    I am upset with Scottrade and may be looking to go elsewhere. Their website goes out of service EVERY week, each and every week,I know it is not just me as others I have spoken to say so as well. Though the outage is temporary it is frustrating to have to log in and out again and in again.

    They say $ 7.00 for all trades but that is NOT the case at all, they charge more for certain stocks, and more for certain amounts of shares when you sell.

    You can only buy foreign stocks if they have an US registered ADR, which they never ever mentioned on the phone when I spoke initially to them.

    They FREQUENTLY have an "Additional maintenance requirement" of 15%, 40%, or 50% or even 60 % !!! on a listing of stocks, which very curiously are ones which are fast movers interestingly enough.

    You have to call them many times for ANY stock listed under $ 5.00, which lost me a lot of money yesterday when I had no way to call and the stock went up by 16 % and I lost out as I couldn't place an online order due to their wanting to hold my hand like a little baby.If I lose or gain it should me up to me, not Scottrade giving me an "ok" on an order by having to call them.I could have made over a thousand yesterday.

    Could have...

  8. Scottrade says:

    We are sorry to hear you are dissatisfied with your experience. Below are a few responses to your issues. We are also happy to try to help you or address your concerns at 800.619.7283 or by e-mailing support (at) scottrade (dot) com.

    We perform weekly scheduled maintenance from 9 p.m. Eastern time Saturday to 9 a.m. Eastern Time Sunday to minimize disruption to the trading week. We do not have regular outages, but some firewalls or proxy blockers can disrupt your connection. This can be more common if you are accessing your account from work or school. Our Tech Support team is happy to troubleshoot with you if you have regular disruptions.

    The commission for online market and limit stock trades is $7 per transaction for stocks priced $1 and above. This is for any number of shares. If you are trading stocks under $1 per share, the commission is $7 plus a ��% of principal. For example: if you buy $500 of a stock under $1 per share, ��% of $500 is $2.50 for a total commission of $9.50. For a complete commission schedule please go to this address: http://www.scottrade.com/online_trading_commissions/index.asp

    When you sell a stock, a small transaction fee is charged; these are known as 'Section 31 Transaction Fees.' The fee recovers the cost incurred by the government, including the Securities and Exchange Commission (SEC), for supervising and regulating the securities markets. You will see this fee listed as "Misc. Fee" on your trade confirmations for sell transactions only. The current calculation for this fee is $0.00169 per every $100 of sales proceeds. For more information regarding Section 31 Fees, please visit the SEC's website at www.sec.gov.

    While we do require an ADR for foreign stocks, we are happy to help you locate them for any stock you are interested in by contacting us by phone or e-mail. There are also some stocks that have higher initial margin and maintenance requirements based on their share price and volatility. To keep you informed the listing of securities that have special maintenance requirements can be found by logging into your Scottrade account, clicking on the 'Global Messages' link on the right side of the screen and then clicking on the 'Stocks Subject to a Higher Maintenance Requirement' link on that page.

    Scottrade does proactively restrict online purchases of some stocks for various reasons which may include operational, trading characteristics, or a variety of other reasons. However, this would not apply simply because the stock is under $5.00 in price. This review and restriction should not be construed as a reflection on the merits of the security involved or the people performing transactions in the security.

    Please note that these restrictions are temporary and do not prevent investors from selling these securities online or purchasing these securities at the Internet commission rate through your local Scottrade branch office. We have brokers standing by to place your trades for you from 7 a.m. to 1 a.m. Eastern Time Monday through Friday at the number listed above.

    Sincerely,

    Kristopher Reed
    National Service Center, Scottrade

  9. Kris says:

    We are sorry to hear you are dissatisfied with your experience. Below are a few responses to your issues. We are also happy to try to help you or address your concerns at 800.619.7283 or by e-mailing support (at) scottrade (dot) com.

    We perform weekly scheduled maintenance from 9 p.m. Eastern time Saturday to 9 a.m. Eastern Time Sunday to minimize disruption to the trading week. We do not have regular outages, but some firewalls or proxy blockers can disrupt your connection. This can be more common if you are accessing your account from work or school. Our Tech Support team is happy to troubleshoot with you if you have regular disruptions.

    The commission for online market and limit stock trades is $7 per transaction for stocks priced $1 and above. This is for any number of shares. If you are trading stocks under $1 per share, the commission is $7 plus a ��% of principal. For example: if you buy $500 of a stock under $1 per share, ��% of $500 is $2.50 for a total commission of $9.50. For a complete commission schedule please go to this address: http://www.scottrade.com/online_trading_commissions/index.asp

    When you sell a stock, a small transaction fee is charged; these are known as 'Section 31 Transaction Fees.' The fee recovers the cost incurred by the government, including the Securities and Exchange Commission (SEC), for supervising and regulating the securities markets. You will see this fee listed as "Misc. Fee" on your trade confirmations for sell transactions only. The current calculation for this fee is $0.00169 per every $100 of sales proceeds. For more information regarding Section 31 Fees, please visit the SEC's website at www.sec.gov.

    While we do require an ADR for foreign stocks, we are happy to help you locate them for any stock you are interested in by contacting us by phone or e-mail. There are also some stocks that have higher initial margin and maintenance requirements based on their share price and volatility. To keep you informed the listing of securities that have special maintenance requirements can be found by logging into your Scottrade account, clicking on the 'Global Messages' link on the right side of the screen and then clicking on the 'Stocks Subject to a Higher Maintenance Requirement' link on that page.

    Scottrade does proactively restrict online purchases of some stocks for various reasons which may include operational, trading characteristics, or a variety of other reasons. However, this would not apply simply because the stock is under $5.00 in price. This review and restriction should not be construed as a reflection on the merits of the security involved or the people performing transactions in the security.

    Please note that these restrictions are temporary and do not prevent investors from selling these securities online or purchasing these securities at the Internet commission rate through your local Scottrade branch office. We have brokers standing by to place your trades for you from 7 a.m. to 1 a.m. Eastern Time Monday through Friday at the number listed above.

    Sincerely,

    Kristopher Reed
    National Service Center, Scottrade

  10. Mike @ Annuity Rates says:

    Everybody wants a continuous cash flow even after retirement. In that sense, annuity is good because it guarantees a continuous cash flow even after retirement. So purchasing a fixed annuity product can become helpful to manage your retirement life financial needs.

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