Scottrade Review - More Than Just A Good Discount Broker

Scottrade encompasses more than just an online brokerage firm; it’s a traditional brick and mortar firm too. No Scottrade review would be complete without noting the history of the company.

The founder, Rodger Riney, started the traditional brokerage firm in Scottsdale, Arizona in 1980, long before Internet trading became popular. Using the town as part of the firm’s name, he called it Scottsdale Securities. It grew from one branch to 16 branches rapidly and today has 500 brick and mortar buildings across the United States.

Riney realized the need for the public to find a more inexpensive method of trading as more and more citizens became aware of the opportunity. He realized the potential for online brokerages to fill that need and launched the online brokerage site in 1996. Since the name of his brokerage firm was not available, he used the name Scottrade.com for the site, one of the first of its kind affiliated with a traditional brokerage firm. Lower cost trades made it feasible for those traders who wanted to invest smaller amounts of money. Stock trading was no longer a rich man’s method of investing.

Since the launch, the company grew in size, due to its vigorous attention to benefits for the client and customer service. They offer mobile applications for those traders always on the go, banking services and even their own suite of low-cost ETFs.

Cost of Services

Even though Scottrade advertises a trading price of $7, it’s only for stocks that cost $1 or more. For those who want to trade penny stocks, you have to add ½ percent to that price. If you’re trading in pink sheet or foreign stocks, the price might even be higher, since there’s a potential you might have to use a broker for the trade, which drives the price up to $27. For those stocks that cost less, it can dig deeply into any profit you might hope to achieve in this risky area. While a criticism, this Scottrade review also notes that few companies offer trading in penny stocks.

If you want to purchase ETFs and don’t have a company preference, Scottrade allows trades of Focus Morningstar ETFs at no cost when traded online. Otherwise, the cost is the same as a stock trade. Some no-load mutual funds are also free of transaction charges. These are funds that in their NTF—no transaction fee—program. Others have a $17 buy/sell cost. Loaded funds also charged a sales charge. The charges for the sale of a mutual fund is ridiculous since brokers receive compensation from the fund when clients purchase and also through 12b1 fees, an interior fee removed before the calculation of the share price and returns. Even if Scottrade didn’t receive the benefit of the upfront commission, overall, the good will earned and 12b-1 fees should encourage clients to transfer all mutual funds to Scottrade and more than offset any costs. Because of these costs, it would be wiser for the client to go directly to the mutual fund company or a local sales representative for the funds.

However, this Scottrade review notes there are many, many fiscal reasons to choose Scottrade over other online brokerage firms. There’s no annual account maintenance fee, no inactive account fee and no transfer or closing fee. When you have an account, you also receive real-time streaming quotes and charts, Dow Jones real-time news, the benefit of the DRS---Direct Registration System, mobile trading, knowledge centers, cost basis reporting (a huge benefit for those mired under in the record keeping area) and even live educational events held at Scottrade offices.

Products and Services

Scottrade offers a range of traded products, which includes, options, stocks, ETFs, mutual funds, UITs, CDs, municipal, corporate and treasury bonds, T-bills, STRIPS, treasury notes, new corporate bond offerings and foreign stocks. You can open individual accounts, joint accounts, both Roth and traditional IRA accounts, both testamentary and living trust accounts, Pension, Keogh and profit sharing accounts, custodial accounts such as UGMA accounts, guardianship accounts, Cloverdale accounts and even business accounts for LLCs, partnerships, sole proprietors, stock clubs, corporations and associations.

Platform

The ease of use of the trading platform can keep clients loyal or drive them away. If the online trading requires you to call the service office each time, or even worse, resort to the use of a live broker, it isn’t worth your time. Not only does Scottrade offer an easy to use platform, they also have many online trading tools such as Quick Quotes, market snapshots and Morning Star Data. You can also customize your data.

Compared to the Elite account platform, only available to those with $25,000 or more, the platform is simplistic, but extremely functional. The Elite platform is Scottrade’s effort to draw higher dollar investors.

Positives:

• A limited time offer reimbursing up to $100 of the transfer fee from another company.
• Low trading costs
• No maintenance, transfer or inactivity fees
• A wide product selection
• Banking service availability
• Easy to use platform
• Live brokerage firms in many cities
• Free trading services such as real-time quotes
• A wide variety of accounts, including trust and custodial accounts

Negatives:

• Brokerage doesn’t hold annuities and you must cash out annuities to transfer to Scottrade.
• More sophisticated trading platform only available to Elite customers.
• Minimum deposit $500—lower than most but higher than some.

Conclusion:

The benefits of low cost trades, banking services, free financial trading services, an easy use platform and the ability to contact a local live broker are more than enough reasons to change to Scottrade. However, if your goal is to keep everything in one place, Scottrade doesn’t have the ability to hold annuities, so you might want to consider a different option for an online brokerage service if you own one.