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Schwab Removes U.S. Stock, ETF and Options Commissions
- justinzollars 7y agoThis is great news for small investors like me. I like to constantly buy, but the etrade fees were cutting into my margins. Their numerous tax integrations kept me attached to the platform. I won't be moving to RH
- dbiue94894 7y agoFor an unsophisticated rube investor (not trader) like myself, who wants to put a little bit of every paycheck into equities, RH is a superior product.I can wake up the morning my paycheck posts, transfer funds, and buy a couple of shares in seconds using my phone/tablet while I am in bed. Clean, simple, easy. I looked into other products, but felt that none of them addressed my particular use case. Felt like they were designed for someone very different than myself. Anyway, if there is some good alternative I don't know about (which is extremely likely), please suggest.
- saryant 7y agoPlain old mutual funds. You can buy Vanguard funds fee-free from Vanguard in whatever dollar amount you like. Been that way for decades.
- therealrootuser 7y agoThis, exactly. The only "flaw" of Vanguard's admiral funds is the $3000 minimum. For many of my friends, that is a bit of a high hill to climb to get started. Then again, those same friends seem to think nothing about speculating on whatever the hipster cryptocurrency is, so perhaps they have a different set of issues they need to address.
- ac29 7y agoThe target date funds have a $1000 minimum and are quite reasonable options for retirement or general diversified investments. The expense ratio is slightly higher, but if you have less than $3000, the difference is miniscule. Or you can buy ETF versions of Vanguard funds. Same expenses as mutual fund versions, but the minimum purchase is 1 share. Free to trade from a Vanguard account (or something like this Schwab account, since its exchange traded).
- therealrootuser 7y agoYep, the advent of ETFs has made it a lot easier to get started. I hadn't thought about the target date funds, that is a good thought.
- kelnos 7y agoYour friends can start off buying Investor Shares in the fund(s) they like. Once they hit the Admiral Shares minimum, they can convert over to them[0]. Many of their funds also have corresponding ETFs, and I've found that most (all) have similar or lower expense ratios, and the minimum buy is a single share (of course, you can't buy fractional shares like you can with mutual funds, so that can be annoying). [0] https://investor.vanguard.com/mutual-funds/convert-to-admiral-shares https://investor.vanguard.com/mutual-funds/convert-to-admira...
- therealrootuser 7y agoVanguard has gotten rid of a lot of their investor-share classes of mutual funds. VTSAX used to have a $10k minimum. Now it has a $3k minimum, which used to be the amount to get the equivalent investor shares fund. https://pressroom.vanguard.com/news/Press-Release-Vanguard-Lowers-Investment-Minimum-of-Admiral-Shares-111918.html https://pressroom.vanguard.com/news/Press-Release-Vanguard-L...
- RhysU 7y ago$3000 is definitely a hill, but wouldn't they need to at least climb that hill to put away a safety buffer /before/ putting any post-tax money into equities??
- therealrootuser 7y agoJust this morning when I woke up, I opened the Vanguard app, bought some shares of VTI, then got out of bed and went on with my day. You can do the same exact thing with the Schwab app (I have accounts at both). One reason I dislike Robinhood is that it seems to encourage speculative trading behavior as opposed to a proven long-term investment strategies. I don't care about free commissions much, because the only equities that I care about (index fund ETFs) are already available for free. I don't care at all about buying individual stocks. I don't care about buying cryptocurrencies either. And I don't care about cash management (y'know Robinhood, I have a real bank account that is actually FDIC insured, unlike the half-baked "savings" accounts you tried to sell us on) So for me, I actually greatly prefer using a more traditional brokerage that offers me exactly what I want and has a proven track record.
- novok 7y agoSchwab makes it even easier if your paycheck goes into their bank account. You don't even have to wait for a transfer :) I don't like their cash balance for their robo-investor. But then again most "robo-investors" are 100-500 line python lambda scripts that run on timer if a hypothetical trading api module existed
- neilv 7y agoFor Bogle-style[1][2] total-market low-ER index investing, free trades of ETFs is nice -- slightly more of each purchase goes towards shares, and that compounds, over a few decades. I happen to be married to Fidelity already. Their great support, even when I've been poor, means that I'll show some loyalty if I'm ever rich. But it's nice to know that Schwab, Vanguard, TD Ameritrade, etc. are also out there for people. [1] https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_... [2] https://www.bogleheads.org/wiki/Charles_Schwab https://www.bogleheads.org/wiki/Charles_Schwab
- Fomite 7y agoI'll say that I've been with Schwab since I was...15 or so...and they've always treated me like a customer who mattered.
- taurath 7y agoI can call at 2am PST and get a nice british support rep in about 1.5 rings. They’ve never given me a reason to think about leaving.
- rurp 7y agoI recently created an account with Schwab after trying and failing to setup one at Fidelity. For some reason that I could never get a clear answer on, every single transfer I scheduled from my regular bank failed. This has never happened with any other institution and Fidelity's support was absolutely no help. I finally gave up and asked them to close my account and was told a flat "No, that's not possible". I went back and forth with support on this for a while and was consistently told that it's literally impossible to close an account, even at a direct customer request for an account that has never held any funds. Overall it was a very poor experience with a lot of wasted time. Schwab on the other hand made it quick and painless to setup and fund an account, and so far I have had nothing but good experiences.
- sjg007 7y agoSo do they front run then?
- mieseratte 7y agoOf course not! They just sell your data to the people who do.
- Lazare 7y agoIf you have no idea what you're talking about, why even comment? They don't sell the data, they sell the orders, and the people that buy the orders and execute them aren't front-running them either. You can only front-run an informed trade, and the entire reason they're buying the orders is because they're uniformed. Nobody is front running some guy day trading AAPL on their lunch break. Not just because it's illegal and easy to catch (although it is both of those), but because it's mathmatically not even possible. If your trade is not, on its own, meaningfully moving the share price, you can't be front run.
- AnimalMuppet 7y agoPerhaps you could comment without the personal insults. You have good info to share. Let it speak for itself.
- mieseratte 7y ago1) I used to work in HFT, so I know what I’m talking about. 2) While it’s a joke, I have no knowledge that Schwaab engages in anything related to front-running: > Nobody is front running some guy day trading AAPL on their lunch break. Just like Google doesn’t spy on you, they spy on everyone together. If this wasn’t a problem SEC wouldn’t have pressed for something like the CAT. Perhaps you don’t know what you’re talking about.
- lbotos 7y agoThey use Payment for Order Flow: https://en.wikipedia.org/wiki/Payment_for_order_flow https://en.wikipedia.org/wiki/Payment_for_order_flow (Just like Robinhood - https://support.robinhood.com/hc/en-us/articles/360001400766-Stocks-Order-Routing-and-Execution-Quality https://support.robinhood.com/hc/en-us/articles/360001400766...)
- natvert 7y agoFeeling the competition from Robinhood app?
- evancox100 7y agoCommissions were only 7% of Schwab’s revenue. The real money is in 1) net interest on money in settlement funds, and 2) payment for order flow. For details see e.g. Matt Levine’s most recent news letter.
- wnissen 7y agoFor those not up on Matt Levine or where to find his newsletter: https://www.bloomberg.com/opinion/articles/2019-10-02/the-trades-will-be-free-now https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr...
- mikeg8 7y ago“Only” 7%... that is definitely real money and they would have probably preferred to keep it coming in
- eli 7y agoYeah but so is their marketing budget. I’m sure this move is driving lots of new customers in the door.
- manigandham 7y agoMuch more likely that it's keeping them from leaving.
- sdinsn 7y agoI'm a former RH user and I switched to Schwab so I could get an IRA. I'm guessing more people will be switching now that the fees are the same.
- tptacek 7y ago
- oplav 7y agoE*Trade and Ameritrade followed suit: https://techcrunch.com/2019/10/02/robinhood-e-trade-schwab-ameritrade/ https://techcrunch.com/2019/10/02/robinhood-e-trade-schwab-a...
- tmaly 7y agoE*Trade got a bailout from Citadel back during the mortgage crisis in exchange for selling order flow.
- mortehu 7y agoMost retail brokerages do this, and the information is regularly made public by law. https://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/order_routing.html https://www.schwab.com/public/schwab/nn/legal_compliance/imp... shows that Schwab sends less than 1% of orders to exchanges.
- perl4ever 7y agoPeople take offense at the idea someone is profiting off their stupidity, even if it's objectively making them better off because they get a kickback.
- mixmastamyk 7y agoSchwab is an ethical company, in stark contrast to most banks and other financial institutions, that view their customers as revenue opportunities to be harnessed for maximum profits. Happy customer for years.
- anon1m0us 7y agoI was a happy customer for a long time until they broke their web interface to the point I couldn't use it anymore. I tried everything. Finally I tracked down the bug to a particular line of javascript, emailed customer support with exact instructions how to fix it. They did nothing. Never fixed it, so I had to move to another broker that had working software.
- saryant 7y agoI had that same problem (pointed out a stale cookie issue that prevented me from logging in). They fixed it and tossed $50 in my account.
- slg 7y agoThey also used to truncate passwords at 8 characters without making that clear to the user. If you are someone who uses a passphrase you might have set your password to "PasswordCorrectHorseBatteryStaple" and entered that whenever you logged in, but anyone could access your account by just entering "Password". I tried on multiple occasions to be escalated to or referred to someone who would care, but no luck.
- kevindong 7y agoI've found that their website does just randomly break in a browser occasionally (like several times a year). As in, I will not be able to load even their homepage. It'll generally resolve itself within a few hours and in the interim, the iOS app works fine. Definitely concerning though.
- gargoyl 7y agoYeah, I still like Schwab, but their web interface has gotten much worse. Until about a year ago, it was spartan and blazing fast. For getting things done, it was way better than any other bank or brokerage website I'd seen. Then they moved to an AJAX laden monstrosity that makes a million requests to render a single page. It's slow and clunky, and in some browsers it doesn't work at all.
- maliker 7y agoProbably a good time to mention this* excellent piece on how they make money. In short: it’s interest on cash deposits. Not payment for order flow. * https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
- prostoalex 7y agoTo be fair to Schwab, they keep advertising SWVXX on sign-in page, which yields 2.02%, but getting in/out does take a day to settle.
- dehrmann 7y ago1) this doesn't affect settlement times (which are another scam the industry pulls) 2) that's a mutual fund, so it just works differently.
- Fomite 7y agoAnd they've done a good job convincing me to park my cash there - they're also a convenient and responsive bank.
- H8crilA 7y agoAnd probably also a lot on short fees on the securities they lend out. Cheap brokers lend out the securities you own to short sellers, short sellers have to pay interest for such privilege (there's essentially an OTC market for the % rate). Note that this is not much different from earning interest on lending out cash. Respectable brokers pass at least some of the short fees to the investor. Interactive Brokers, which I use, pays back around 50%.
- anon1m0us 7y agoThis is actually making me consider investing again.
- Scoundreller 7y agoWhat are you doing now?
- anon1m0us 7y agoCash and real estate. I realized after all the investing and while I did beat the market, I realized if I invested in myself I could get 1000x returns rather than 1.10x returns. So I got out of the market, started a bunch of different businesses. A couple stuck and now I'm working on another one that will need a lot of cash in the near future, so that's where I leave it.
- deleted 7y ago[deleted]
- arthurcolle 7y agoInnovation! Are they selling order flow like Robinhood?
- adrr 7y agoWhy does it matter if a broker is selling order flow?
- arthurcolle 7y agoAren't "hackers" interested in underlying implementations? This is Hacker News after all!
- slenk 7y agoBut what does selling the order flow mean?
- acchow 7y agohttps://en.wikipedia.org/wiki/Payment_for_order_flow https://en.wikipedia.org/wiki/Payment_for_order_flow
- arthurcolle 7y agoPioneered by Bernard Madoff[1], an extremely reputable broker in his own right. The market-making business was totally legitimate, let's not forget. [1] convicted of running the largest Ponzi scheme on record
- mruts 7y agoIt means the order is first sent to a HFT firm. They can either fill or pass the order on. HFT firm pays the broker for this priviledge. These firms like retail order flow because it’s generally uncorrelated with institutional flow. Also the chance of getting steamrolled by buying before the rest of the orders hit and depress the price is a lot smaller. For 99% of retail investors free trades in exchange for possibly worse execution is a good deal.
- vincentmarle 7y agoDoes Schwab allow you to buy fractional shares? That's the only reason why I'm not using Robinhood.
- zigzaggy 7y agoWait, you can buy fractional shares on RH??
- skinnymuch 7y agoI read it as OP is looking for that. RH lacks it.
- tmaly 7y agoIB offers fractional shares.
- danbrooks 7y agoYes, Schwab does allow fractional shares.
- jboydyhacker 7y agoThere is no such thing as a free lunch. Marketing trades either by Schwab or others is extremely misleading since Schwab is one of the brokers that sells your order flow. What's better- paying $5 bucks to trade or losing a % of your total order to someone like Citadel or routed to certain exchanges at a lesser price? If your trade size is even remotely decent in size you will lose a lot more on restricted order flow. The SEC needs to require the disclosure of this practice because most people don't realize that in exchange for "free" they are getting nuked every single transaction all the while thinking they are skirting the system. Like the old saying - if you look around the table and wonder who the patsy is-- you're the patsy!
- zigzaggy 7y agoWhich is why I always use limit orders. If I pick a price I don’t really care if someone front runs it or not. I’m getting it for my target price so everyone’s happy.
- perl4ever 7y agoThe problem is the vast majority of people have essentially no sense of what they should pay other than the current price. You could ban market orders, but that doesn't completely solve the problem of not having an objective yardstick.
- cheriot 7y agoAre there empirical estimates for how trades routed through Citadel and other intermediaries differ from trading directly on the exchange? I've read elsewhere that a large volume of small trades lets them sell to large entities the ability to avoid all the HFT players. It's less about making money on the small trades.
- thedufer 7y agoI'm not sure what kind of differences you're asking about, but they're required to give at least as good of a price as the exchange is offering, and in many cases they give a better price
- ausjke 7y agoEtrade just did the same, so called competition. besides all competitors had a really bad day on the stock market.
- whalesalad 7y agoAs a side note I use Schwab as a checking account and it’s incredible. Zero fees. Reimbursement of ATM fees. Easy overdraft protection from the brokerage account. I love them as a bank. This is even more reason to love them. I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab blows all of them out of the water.
- ndaiger 7y agoGreat customer service, too. Punch in your account number and you get a smart human immediately. No scripts.
- Consultant32452 7y agoI will second Schwab as an amazing bank. I would also add Fidelity as a great option in this same space. I use them now, only because my employer 401k is there and it keeps everything in one place.
- axaxs 7y agoImportant to note: they are one of the very few banks who do reimbursement of ATM fees not just in the USA, but worldwide!
- mlthoughts2018 7y agoIs it really few? I’ve never had a bank that didn’t. Three university federal credit unions, then later TD Bank.
- loeg 7y agoCredit unions are usually more consumer friendly than for-profit banks.
- an_account 7y agoLots of smaller regional banks pay ATM fees, as they don’t want to run their own fleet of ATMs. And they have local branches when you need it, like for a cashiers check.
- User23 7y agoIn a similar vein, many people don’t realize that you can actually negotiate commissions with your broker. You can even negotiate margin interest rates. The higher the total value of the account the better a deal you can get. Just like cable companies, brokerages have retention incentives.
- yalogin 7y agoAre they competing with robinhood or are they trying to put pressure on E*TRADE and ameritrade? Why did they do this?
- kelnos 7y agoEtrade and Ameritrade did end up following suit and slashed their commissions to zero as well. But yes, I expect they're afraid of losing customers to RobinHood. Given that brokerages typically make very little on commissions (the real money comes from interest on cash deposits), dropping commission fees is probably a great move.
- chrisweekly 7y agoI'm a Schwab customer and concur w/ positive comments here about high-quality retail customer service, eg for relatively "normal" investors / account holders (ie, 6 figures AUM, not 7+). But. It's worth reading Michael Lewis's "Flash Boys: A Wall Street Revolt" [for several reasons] before nurturing too many warm-n-fuzzies for Schwab or Fidelity or any other mainstream big bank. Maybe you fellow HN readers are more aware than I was, but I'd guess when most of you hear "high-speed trading" you think about performance optimization and interesting technical challenges. It's mind-boggling how blatantly and comprehensively / systematically the financial "markets" have been captured by the interests of a tiny few, who literally steal from pension funds. To say it's rigged is an understatement. Must-read for anyone who thinks they know how Wall St works -- or cares to.
- tptacek 7y agoThat book is terrible. Use the search box to find numerous critiques.
- harryh 7y agoRead the rebuttal: Flash Boys: Not So Fast - An Insider's Perspective on High-Frequency Trading https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-Frequency-ebook/dp/B00P0QI2M2 https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-...
- rdtsc 7y agoSchwab is great. Been their customer for more than a decade. I use them for checking, retirement and regular investment. Highly recommend them.
- jklein11 7y agoI have been a Schwab customer for over 10 years. I can’t speak highly enough about their service. I wouldn’t think of using a different checking account. I have only had two issues 1. At least 5 years ago I had a 6 digit password. If I typed in my password plus some extra digits I was able to log in. That never felt right to me. 2. I had just gotten a new debit card and was traveling outside of the us. When trying to activate my debit card via there international number it wouldn’t pick up my key pad. The customer support person seemed to think it was a known issue. I couldn’t just read the number to them for some reason. It was very annoying. Over all I have had an excellent experience with Schwab
- jpeeler 7y agoI thought the same thing about #1 until I read this: https://security.stackexchange.com/questions/214814/why-can-i-log-in-to-my-facebook-account-with-a-misspelled-email-password?utm_source=Iterable&utm_medium=email&utm_campaign=the-overflow-newsletter&utm_content=10-02-19 https://security.stackexchange.com/questions/214814/why-can-... Perhaps/hopefully the same thing is being done with Schwab. (As you can see from the URL, I got that link from the overflow newsletter.)
- manigandham 7y agoTDAmeritrade and Etrade also announced $0 commissions in response. Both brokers also had severe drops in their stock price, with TDA losing about 20% in a day. Seems the entire retail brokerage industry changed within 48 hours.
- lentil_soup 7y agoDoes anyone have any recommendations for similar brokers in Europe? All the ones mentioned here seem to be mostly US targeted
- patd 7y agoIf you're looking for cheap transactions, Degiro (EU based) or InteractiveBrokers (US based) are probably the best options. With Degiro you can get 20€ of free commission when you sign up with a referral
- patrickmcnamara 7y agoDegiro has free commission on a bunch of popular ETFs as well.
- cfontes 7y agoI actually work on one that is trying to do it, www.getbux.com Netherlands and Germany for now.
- mariushn 7y agoRevolut started to allow trading 1 month ago, but only for Metal cards customers so far. Hope others (Monese, Monzo) will follow.
- aphexairlines 7y agoFreetrade in the UK does this.
- C1sc0cat 7y agoInteractive Investor in the UK
- ajhurliman 7y agoI had to re-read the title a few times; the word "Commissions" is so far away from the verb I thought they were shuttering many of their business lines at first.
- deleted 7y ago[deleted]
- SnowingXIV 7y agoAnother strong recommendation for Schwab. The customer service has been stellar for years. I do hope they invest more into their UI and mobile app. That's the only thing that's slightly lacking. It's usable though. I've tried Simple and other "tech" banks and they've been terrible in comparison. Simple was a disaster there was a period where people couldn't login to access their accounts multiple times over a week because of their 2FA system having issues. You know what the response was? Sorry you're locked out, we can't do anything about it, wait a few days.