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Investors Business Daily
Business
ALAN FARLEY

Charles Schwab's Customer Care Powers It To No. 1 In IBD's Best Online Brokers Survey

Charles Schwab, a pioneer in discount trading, has won IBD's 11th annual Best Online Brokers survey, taking the crown for the third time in six years.

Schwab beat out rivals in one of the toughest trading years in recent memory. In 2022, the S&P 500 lost 19.44%, its worst performance since 2008. But Schwab rose to the challenge, giving account holders the guidance, service and resources needed to manage their hard-earned money.

Schwab finished in the top three places in 12 of 18 attributes rated by survey respondents. That's a remarkable performance, and even more notable because its wholly owned subsidiary, TD Ameritrade, competed against it.

Jonathan Craig, Schwab head of investor services and marketing, says that investor education was "critically important" in 2022. It's also a major plus of the Ameritrade acquisition.

"We've always been great at education," he said. "It's been a core part of what Schwab's done, but Ameritrade is strong as well. The combination will make us even stronger."

Charles Schwab Brokerage, Over 50 Years Of Experience

Charles Schwab started his empire in the 1960s, publishing the "Investment Indicator" newsletter. It grew so successful that he opened a brokerage for subscribers in 1971, and then transitioned to a discount brokerage in 1974.

Early discount brokerages changed the trading landscape by providing low-cost trade execution, compared with expensive Manhattan investment houses. Before Schwab and other discounters, those big investment behemoths charged $100 or more to buy or sell 100 shares of General Motors and other Dow Jones stocks.

These rapidly growing firms stoked the popularity of stock trading. And rivals had to lower their prices to compete. Today, Schwab says it's the nation's largest publicly traded investment services firm.

"We started as a self-directed trading firm," said Craig. "Today, we're a full-service financial firm with over $7 trillion in assets. And we serve (a range of) people, from self-directed investors to very active traders to people looking for comprehensive wealth management."

The 2020 Ameritrade acquisition is expanding Schwab's reach and it marks a step away from the company's previous aversion to volatility. For years, Schwab warned clients about the perils of rapid-fire trading, the core of TD Ameritrade's popularity.

Schwab Wins Customer Service Ranking

Schwab brokerage beat Fidelity and TD Ameritrade, taking the top spot for 2023. But less than two points separates these three financial giants. E-Trade, Vanguard, Robinhood and Interactive Brokers round out the seven entrants.

Taking the No. 1 spot in seven of the 18 attributes, Schwab showcased its strengths. It was also the second-place finisher in three categories. Of note, Schwab won the customer service category, which was ranked fifth in importance by survey respondents.

TechnoMetrica Market Intelligence partners with IBD to conduct survey polls. IBD's Best Online Broker survey asks active investors about features, characteristics and services they value. It then ranks the responses according to a precise methodology.

Customer service is enormously important in an age of foreign call centers and long wait times.

Beverly Hills real estate agent Carmen Queral summed up her customer service experience, illustrating why Schwab stands out from the pack.

"What I value most about Schwab is that if I call them, there's someone to answer the phone immediately and I can ask a question 24/7 and someone will answer my question with knowledge," she said.

Customers also praised Schwab for its prompt handling of fund transfers, accounting issues and the availability of financial pros.

Innovator Evolves Into A Financial Powerhouse

The Schwab brokerage sends trades through enormous clearinghouses, receiving payment for order flow. In exchange, it offers $0 commissions on listed stocks, commission-free ETFs and no-load, no-transaction-fee mutual funds.

Its options contract fees are highly competitive and the TD Ameritrade transition may drop costs further.

Investors of all stripes find what they need at Schwab, from simple trading tools to complex portfolio management. Like its competitors, the broker also offers AI portfolio tools, better known as robo-advisors.

Charles Schwab Account Features

Minimum to open an account: $0
Number of accounts: 33.6 million
Shorting restrictions: $2,000 in cash or marginable securities, 50% of net proceeds
Margin restrictions: $2,000 in cash or marginable securities
Shorting leveraged ETFs initial margin: 60% to 90%
Special features: Schwab Stock Slices offers fractional shares, so investors can buy a small slice of a stock rather than paying the full share price. Single slices are available for as little as $5 and investors can buy up to 10 slices at a time, limited to S&P 500 companies
Website: schwab.com 

However, Craig says that "many clients are looking for a certain degree of planning and support." Thus Schwab provides AI-driven investing strategies — offering no-fee, fully automated portfolios at the low end — and fee-based financial counseling and management at the high end.

Also, the broker is registered as a bank and customers can visit 300-plus locations. This is especially attractive to older investors, who may prefer to do business face-to-face.

Checking, savings, credit cards and home loans also keep customers close to the Schwab web portal, enabling it to profit from enormous assets under management.

Charles Schwab Brokerage: Focus On Trading Platform

Survey respondent James Crockett emphasized Schwab's rock-solid platform, reporting "consistently good experiences with trading and fast execution. (Plus, Schwab's) email communications are outstanding. I have not had a bad experience."

Most important, "I have never thought about changing brokers because of the excellent service," said Crockett.

Survey respondent Jim Burt reiterated positive experiences, noting "95% of my trading activity has been through the Schwab application. The trading quotes are accurate."

However, he believes "the Schwab application is not frictionless. It requires multiple screen journeys to enter (an) order."

He is also confused about "price improvement" and wonders if he's getting the best possible pricing on his trades. Pricing is the focus of proposed SEC reform. The agency wants restrictions on stock clearinghouses and their cozy relationships with brokerages (see our story on trade execution/speed/price and trading platforms).

Investors ranked Schwab fourth in the Best Online Brokers attribute trade execution/speed/price. On its website, traders can explore Schwab's information on price improvement.

Plentiful Market Research, Trade Ideas

Another factor in Charles Schwab brokerage becoming this year's Best Online Broker: It landed the top score in attributes including investment research, timely information on market shifts, up-to-the-minute data on inflation and other market influences, and trade ideas for a down market.

Thus, market research categorizes four out of Schwab's seven top-ranked attributes. Its research keeps customers glued to the site.

Plus, Chief Investment Strategist Liz Ann Sonders and other high-level analysts maintain robust social-media interaction, commenting on stocks, the economy, international markets and fixed income.

As a final note, Ameritrade customers will fold into Schwab's universe in 2023, initiating the next chapter of the broker's cradle-to-grave strategy.

Soon, young investors will trade options on TD Ameritrade's Thinkorswim platform, execute high-risk plays on Schwab's StreetSmart Edge application and set up retirement investments for their senior years.

This speaks to the point made by Schwab's Craig that it evolves "consciously with our clients."

Alan Farley has been a Schwab account holder for more than 25 years. Follow him on Twitter @msttrader.

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