Charles Schwab vs. E*TRADE

Charles Schwab and E*TRADE are both heavyweights and early entrants into online brokerage. Their long experience in the business and very large customer base provide them both with significant resources to invest in their platforms and services. Schwab has $7.4 trillion and more than 14.1 million accounts, and E*TRADE has 5.5 million retail and corporate accounts totaling $800 billion in platform assets. They have also both gotten larger, as Morgan Stanley purchased E*TRADE in 2020, and Schwab has purchased TD Ameritrade. Both brokers were quick to go commission free for stocks and ETFs. They also offer similarly excellent tools and screeners as part of their platforms. While E*TRADE and Schwab are both very good online brokers that have many common features on their respective mobile, web, and desktop offerings, we will take a closer look at the differences between them to help you decide which is right for your investing or trading needs.

Usability

Both Charles Schwab and E*TRADE have robust platforms that offer streaming quotes and allow you to trade stocks and ETFs commission free. The two brokers have the capability to handle conditional market orders and also overlap on other features like the ability to keep notes on individual trades and stage orders on their intuitive platforms. It was easy to check balances and get fundamental and financial information and research about stocks on both Schwab and E*TRADE.

Both platforms have a web version and a streaming version, with the streaming versions being more robust platforms with more offerings. Schwab has a single mobile app offering, while E*TRADE has a mobile platform for each of their online and computer workstations that replicates the web or desktop experience. Overall, we found E*TRADE’s platforms are slightly easier to use, but this category was very close. 

Trade Experience

Desktop Trade Experience

Charles Schwab has a website and their Street Smart Edge desktop workstation, both of which have real-time data streams and stock screeners. While the website does not offer many customization options, the workstation can be customized for things such as information shown in the top account balances line, the ability to save specific stock or ETF searches, and even the ability to customize the trade ticket. While Schwab’s desktop platform supports options strategies up to four legs, such as butterfly and condor strategies, the website is limited to two leg strategies like strangles, straddles, and vertical, calendar, and ratio spreads. 

E*TRADE’s offerings include a standard website that, while mostly intuitive, has a two level menu system that can sometimes be confusing. Trading on E*TRADE is simple and straightforward: enter a symbol, select an order type and quantity, and preview and approve. E*TRADE’s platforms allow you to create customizable watchlist views and the watchlists can be easily created from screeners. 

E*TRADE’s recent platform redesign has improved its options offerings, as it now uses a drop down menu that shows the various strategies and can even help determine a strategy based on risk tolerance and sentiment on the expected price direction of the security. E*TRADE allows users to trade directly from a chart, and you can track your order visually. While the technology was quite close and both brokers offer screening tools, portfolio analytics, news, and educational material, we feel E*TRADE provided a slightly better trading experience because of more interactive charting, more customization options, and streamlined order entry.

Mobile Trade Experience

Charles Schwab’s mobile platform is intuitive and easy to use, and you can trade the same asset classes as the desktop version. Investors and traders can see basic information such as balances and news on stocks in your portfolio. The Schwab mobile app also provides charts, Schwab’s research rating, a quote summary, news, earnings and announcements, and margin requirements for individual securities. Schwab provides an easy drop down menu for selecting up to four leg options strategies, but the mobile app does not provide options profitability graphs or high level options analytics. The mobile platform’s inability to handle contingent orders is another notable weakness. Schwab’s mobile app will meet the needs of most investors, but active traders (especially options traders), will find the system lacking compared to the functionality and tools available on the Schwab Street Smart desktop platform.

E*TRADE offers its customers the choice of two mobile apps corresponding to the different platforms, web and desktop. The E*TRADE mobile app is focused on watchlists, market research, quotes, and portfolio management, so it is excellent for investors, but less so for active traders. The regular E*TRADE app, just like the website, provides third party investment research, real-time data streaming, and market news from Bloomberg TV. The Power E*TRADE app is designed for active investors and traders, and has tools. This includes the ability to trade stocks, ETFs, basic and complex options up to four legs, and futures all from a single trade ticket. E*TRADE’s apps do not have fixed income, so active bond investors will find that an important gap at E*TRADE. 

Overall, we give E*TRADE a slight edge over Charles Schwab for their mobile offering because the two apps mirror the respective website and desktop platforms, allowing you to select the best match. E*TRADE’s apps are both easy to use and accommodate less active investors and more active traders with a specific offering rather than one app that attempts to do it all.

Range of Offerings

Charles Schwab and E*TRADE both have very similar offerings.

Order Types

The Charles Schwab and E*TRADE platforms both provide multiple order types. Schwab offers one-triggers-other (OTO), one-triggers-two orders (OTT), one-cancels-other (OCO), and market-if-touched (MIT), market-on-open (MOO), and orders contingent on spread price, price, volume, and time on its desktop platform. StreetSmart Edge, Schwab’s desktop workstation also offers traders an opportunity to enter more sophisticated orders, such as a limit order with an OCO contingent order and stop loss and profit taking levels. E*TRADE offers contingent, bracketed, OTO, OCO, one-triggers-a-one-cancels-other (OTOCO) on its website and desktop platforms, and contingent and OTO orders on its mobile platforms. We give Schwab the slight edge because of the specialized orders available through its desktop application.

Trading Technology

Schwab provides price improvement on more than 93% of its orders by using their own proprietary order routing system with average execution speed of 0.04 seconds and a savings to investors averaging $0.01719 per share. E*TRADE also uses its own system for order routing and the average time to fill an order is approximately 0.09 to 0.12 seconds depending on the shares, with price improvement of $0.00612 per share and $3.38 per contract on option orders. Both firms offer portfolio margining, but Schwab offers fractional shares while E*TRADE only offers fractional shares in its dividend reinvestment and robo-advisor offerings. Both fill their orders quickly, but Schwab gets the small edge over E*TRADE for trading technology.

Costs

Both Schwab and E*TRADE were quick to adopt commission free trading, so neither company charges commissions for stock and ETF trades. E*TRADE charges options traders with less than 30 trades per quarter $0.65 per contract and $0.50 per contract for active traders with over 30 trades. Schwab charges $0.65 per options contract for all traders. For those trading over the counter stocks, Schwab does not charge anything, while E*TRADE charges $6.95 for less active investors and $4.95 for more active account holders. Neither company charges inactivity or minimum fees, and both charge $25 for broker assisted trades. In fixed income, Schwab does not charge commissions for T-Bills, Notes, bonds, TIPS, and new certificate of deposit (CD) issues. At E*TRADE, secondary market transactions for corporate, municipal, agency, and zero coupon bonds, and CDs are $1 per bond, with a $10 minimum and $250 maximum commission. E*TRADE is less expensive for trading mutual funds outside of the no transaction fee program, with E*TRADE charging $14.95 per trade compared to $49.50 at Schwab. 

At Schwab, margin rates are lower than E*TRADE’s 8.70% for account balances of $10,000. Schwab offers 8.45% for balances of $25,000, 7.95% above $50,000, and 7.45% for $100,000 accounts. Schwab also charges by account size with these breakpoints: Under $25K 8.325%; $50K 7.825%; $100K 6.875%; $250K 6.825%; $500K 6.575%. Both companies also have stock loan programs allowing account holders to benefit from lending their shares. For futures traders, E*TRADE and Schwab both charge $1.50 per contract, per side, with the exception to this E*TRADE’s $2.50 per side fee for Bitcoin futures. Finally, the robo-portfolio minimum is just $500 at E*TRADE, and charges 0.30% on assets, compared to Schwab’s $5,000 minimum for the basic program that does not charge fees and $25,000 for the premium platform along with a one-time $300 setup fee and monthly advisory fee of $30.

While it is a bit of a mixed bag in regards to which products you specifically trade, Schwab offers lower margin rates and fixed income fees, giving it the edge in costs. E*TRADE may still appeal to lower balance account holders that want robo-portfolios. Traders focusing on options trading are likely to find Schwab and E*TRADE pricey in comparison to lower cost brokers catering to this market.

Account and Research Amenities

Both E*TRADE and Schwab have excellent research, news, account analytics, screeners, calculators, and tax reporting tools for account holders. We found Schwab to have the better ETF screener, but both brokers had strong screeners in addition to options specific screeners. E*TRADE’s charting offering is better than Schwab’s because it has better drawing tools and you can visually see orders and positions on charts. While you can open a trade ticket from charts on Schwab, it’s really just opening an order ticket, with no levels, orders, and no integration with the chart. E*TRADE’s charting also had more technical studies. We give E*TRADE the edge here because of the better charting, but both platforms have strong offerings for customers relative to account and research amenities. 

Portfolio Analysis

Both Schwab and Fidelity have excellent suites of analytics for accounts, margin, and buying power, in addition to calculators covering retirement and long term planning. They also offer all the tax reporting tools an investor needs. The brokers are both excellent in this category, but Schwab’s overall suite of offerings has the small edge over E*TRADE.

Education

Again, both platforms have a broad range of educational offerings, including many articles, videos, and classes. E*TRADE has a lot of good information for new investors covering long-term investing, tax planning, and options and futures. E*TRADE also recently introduced Virtual Learning Environments, which are full-day structured online events with targeted learning objectives, such as beginner options. Schwab also has a very robust array of educational offerings. Both E*Trade and Schwab increased the volume of webcasts and online events as a result of the Covid pandemic, but Schwab offers more of this programming than E*Trade. Schwab also has a branch network of more than 2,400 branches to assist customers further, while E*Trade only has 30 branches. We give the edge to Schwab in the education category because of the volume of information, including five hours of dialing live programming, and a branch network with professionals that can also educate investors.

Customer Service

Both E*TRADE and Schwab offer customer service to account holders and potential customers with 24/7 support by phone and via chat with a live person. The support received is generally good, and customers can speak with live brokers and financial advisors. The average hold time at Schwab is 102 seconds. At E*TRADE, this had been 44 seconds to reach someone from 2017 through 2019, but the significant increase in customers and trading activity since the Covid pandemic has resulted in a 65% increase in inquiries that brought their average hold time to more than 11 minutes. E*TRADE is working to ramp up their capacity, but Schwab’s customer service is better, and they also have a branch network that can provide service. Schwab has the advantage in customer service. 

Security

Schwab and E*TRADE are tied when it comes to security. Both Schwab and E*TRADE both have strong security that includes two-factor authentication for all platforms, and neither company suffered any serious platform outages in 2020.

Our Verdict

While E*TRADE and Schwab are very competitive with each other, we give the nod to Schwab by the smallest of margins. This is because Schwab has better customer service, a larger breadth of educational offerings, superior screeners, and lower commissions for fixed income. That said, the competition was very close, and other investors may find E*TRADE the better choice should they prioritize better charting and lower options commissions for active traders. Both brokers are excellent choices for the majority of investors and traders, with the exception being highly sophisticated traders that want control over routing their own orders and lower options commissions.