Charles Schwab Review - A Broker Worth Considering?The Charles Schwab Corporation began in 1963, not as a brokerage firm but as a newsletter called “Investment Indicator.” Schwab and two others began the new venture and it achieved relative success with 3,000 readers paying $84 a year, about two week’s wages for the average worker at the time. By 1971, the company took a new name and incorporated as First Commander Corporation. It held now only the newsletter, but also a broker-dealer securities business. Schwab was one of five owners of the corporation. It didn’t take him long before he bought out the other partners in 1972. One year later, he renamed the corporation Charles Schwab & Co., Inc. The deregulation of brokerage commissions and mandates for negotiated rates by the SEC gave Schwab just the right spark to start a different kind of brokerage firm, a discount brokerage. The first office was in Sacramento, CA. By 1979, he had more offices, extended business hours beyond the traditional 5:00 to an unheard of 9:00 and used one of the first computers to keep track of the transactions of the firm. He increased the services offered to his clients by establishing a 24-hour quotation service in 1980. Bank of America purchased Schwab in 1983 for $55 million, but by 1987, the management of the firm buys it back, this time for $280 million. It was a good move on their part because it continued to grow. By 1995, they were in many different countries, had their own family of funds, offered telephone brokerage service and had their first website. The first online trading was live in 1996. By today’s standards, the site was slow and simplistic, but it was a marvel for that time. Even though inflation continued to climb, by 2010, Schwab reduced the cost of online trading even more to $8.95 and $0 if you trade Schwab’s ETFs. Cost of Services Schwab’s trading fees are $8.95 as noted previously in this Charles Schwab review. However, like other companies that offer both online and brick and mortar brokerages, there’s an additional charge of $25.00 if you use the services of a live broker or $5.00 for the telephone trading option. Options cost the same plus an addition $0.75 per contract. There’s no annual fee for any of the accounts and the minimums for most is $1,000, which the company waives if you have systematic deposits on monthly basis. Custodial accounts and 529 plans have a lower minimum. Mutual fund transactions on funds participating in the OneSource service have no transaction fees, but may have loads. There is also a $49.95 charge if you redeem these funds within 90 days of purchase. All other open-ended funds have a $76 transaction fee. Brokerage CDs have the selling concessions built into the price of the CDs. Online users purchasing Treasuries pay no additional cost. Secondary trades in the bond market are $1 per bond with a $10 minimum. If you use a live broker, you pay an additional $25 for each trade. If you use the portfolio solutions option, a service where the company manages your investments, along with thousands of others, there are annual maintenance fees. The annual maintenance fees for these accounts can be as high as 1.35 percent, but they vary by the size of the account and type of investment. Products and Services Schwab offers more than the traditional online brokerages. They offer life insurance and annuities in addition to the other traditional brokerage products such as ETFs, stocks, options and mutual funds. They do not offer Forex or Futures, unlike some brokerage services. Platform This Charles Schwab review notes the platform for trading is outdated on two of the options offered for trading. The amount of money you keep with Schwab dictates the tools you can work with online. If you have the minimum, there are two online options for platforms. Neither of these is difficult to use, but both don’t offer many of the sophisticated services of other online brokers. If you have over $5,000 with Schwab, you can use the third option, which is in line with other online brokerage houses. Positives
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Conclusion Schwab was ahead of their time in the early years. The company needs to reach deep and look for some of the innovative talent of the company’s creator to use for its online services. This Charles Schwab review would be remiss not to mention the company’s assets under management grew while other brokerage houses and banks were begging for government funds. That says something impressive about the company and their investing philosophy.
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