Brokerage start-ups such as Robinhood, M1 Finance and SoFi are tiny compared with the trillions of dollars in brokerage assets at the likes of Schwab and Fidelity. But they've already made a big dent in the way things work: These small online brokers pioneered commission-free stock trading and fractional-share purchases, and now those services are standard fare at the bigger firms.
And that's one of the reasons we keep an eye on smaller brokerage firms – because they're shaking up the industry. If not for Robinhood, for instance, we might still be paying commissions on stock and ETF trades.
For investors who just want a handy phone app or online platform where they can trade stocks, exchange-traded funds, options or cryptocurrencies on the cheap, these brokers will do the trick. We refer to these firms as "smaller" shops for the sake of this article, but in terms of customer counts, that's not always the case anymore (we're looking at you, Robinhood).
These smaller firms don't qualify for our annual review of the best online brokers because they don't offer mutual fund or bond trading. But they may be worth a look by investors who want to be on the bleeding edge of innovative offerings at rock-bottom fees. We evaluated four firms: Moomoo, Robinhood, Tastytrade and Webull. (M1 and SoFi did not respond to our invitations.) Here is how the four stack up.
Best small online brokers for investment choices
None of these brokers offers mutual funds, corporate bonds or municipal bonds. Only Tastytrade allows you to buy and sell Treasury securities.
Robinhood and Tastytrade offered the broadest selection of investment choices, with the biggest inventories of fractional shares of stocks and ETFs, for example. They're the only two that trade cryptocurrencies – Robinhood offers 11; Tastytrade, four.
Moomoo pays the highest rate on its "sweep" account: 5.1%. Webull pays 5%.
Best small online broker for mobile apps and desktop tools
Most of the brokers here started with a mobile-first mindset, so there is little difference between their mobile and desktop functionality.
Moomoo and Webull's robust apps include stock and ETF screeners, chart-drawing tools and cost-basis calculators. Tastytrade has highly sortable lists rather than screening tools.
Best small online broker for advisory services
Webull's Smart Advisor is the only advisory service offered in this group. Its computer algorithms will create a portfolio of ETFs for an annual fee of 0.2% of your portfolio. You can choose among six options tailored to your risk appetite and goals.
Best small online broker for customer service
None of these brokers have brick-and-mortar locations, and all have limited customer service. Moomoo has humans answering chat requests. Robinhood says a staffer will call or email you back upon request. Tastytrade offers a chatbot that it says will eventually connect you to a human if you ask.
Best small online broker for fees
Robinhood, which launched the no-commission price war, charges no fees for options trading. It's experimenting with another pricing innovation: For $75 a year, investors can enroll in "Robinhood Gold," which entitles them to perks including 3% matching contributions to a Robinhood IRA and 5% interest on a sweep account.
Moomoo stands out for its $0 fees to trade options on stocks; $5 for 10 index option contracts.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
