Scottrade Review: Discount Online Stock Broker

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

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.