Scottrade is a full-service online broker with excellent customer service and a variety of investment options, but costs to get started are high.
Scottrade is one of the oldest brokerages in the online stock trading industry. Founded in 1980 in Scottsdale, Arizona, it has since become one of the most well-known online and branch-service stock trading services in the United States. People seem to like working with them, too. Between 2008 and 2016, the company was awarded several high rankings from Fortune, JD Power and Associates, and others for customer and investor satisfaction.
Stocks trade for a flat fee of $7.00 with a $0.70 commission charge per contract, which is competitive for the industry. Mutual Funds and Options trade at $17, and anything traded with broker assistance is $32.00. There are no monthly or maintenance charges on Scottrade accounts, which is a notable perk. Unlike other online brokers, however, Scottrade requires a $2,500 initial deposit to get started trading. Most online brokerages have a minimum starting deposit of under $1,000, or no minimum at all.
For anyone planning on investing over $2,500 anyway, though, Scottrade is still a smart option. It has hundreds of brick-and-mortar stores across the country (the most of any online brokerage) that provide a high level of quality customer service and a deep knowledge base. Scottrade’s online trading platforms also offer all-around functionality that’s user-friendly for both advanced traders and beginners. Affordable online banking products, such as IRA accounts and mutual funds, are available through Scottrade too.
Editor’s Note: TD Ameritrade is working on closing a deal to acquire Scottrade by fall of 2017 and a full conversion over to TD Ameritrade’s systems by 2018, according to the press release.
|Mutual Funds (Broker-Assisted)||No-load; no transaction fee: $25 to buy, sell, & exchange
No-load: $42 to buy, sell, & exchange
Load: $0 ($42 to sell & exchange)
|Mutual Funds||No-load; no transaction fee
No-load: $17 to buy, sell, & exchange
Load: $0 ($17 to sell & exchange)
|Options||Online: $7 + 0.70 contract
Broker-assisted: $32 + 0.70 contract
Touchtone (IVR) phone: $32 + 0.70 contract
Option exercises and assignments: $17
|Stocks & ETFs||Online: $7 flat fee
Touchtone (IVR) phone: $32
|Fees||$0 annual fee; $0 inactivity fee; $75 outgoing/transfer fee|
|Best For||Beginner investors with over $2,500 capital
Investments into IRAs
|Not For||Those with less than $2,500 startup capital|
|Standout Features||Email, chat, and toll-free phone customer support
Competitive stock trading fees, including the lowest mutual fund trade among the largest competitors ($17)
Availability of IRAs and other online banking products
|Number of Locations||500+ locations in 48 states (excluding North Dakota and Wyoming)|
|Products & Services||Stocks
Real-time quotes and trades
|Rank||Highest in the industry in J. D. Power and Associates 2013 Investor Satisfaction Survey with an overall score of 810 which is 58 points above the industry average.|
|Margin Rates||7.75% under $24,999.99
7.25% $25,000.00 to 49,999.99
6.75% $50,000.00 to $99,999.99
6.50% $100,000.00 to $249,999.99
6.25% $250,000.00 to $499,999.99
5.75% $500,000.00 to $999,999.99
5.25% Above $1,000,000.00
Scottrade prides itself on its unlimited $7 stock trades, as well as being one of the oldest and most trusted companies in the online stock trading industry. It boasts an impressive knowledge-base and educational platform that would be attractive to both intermediate investors and those just learning how to trade online. The trading platforms it provides are simple and easy to use, and with a variety of support options, new investors can expect the online trading learning curve to be relatively painless.
Is it True?
Yes. Scottrade makes good on its claims, offering industry-leading customer service, consistent and competitive trading rates, and an effective online trading platform. The stock trades are $7 + 0.70 per contract across the board. It also offers a variety of peripheral products, including IRAs, ETFs, mutual funds, and more. Scottrade consistently receives high consumer satisfaction ratings, too; offering one-on-one help at any one of its more than 500 store locations nationwide, as well as phone, email, and live-chat customer support. You can even ask questions through the company’s social media channels, and someone will actually respond to you.
Signing up is fast and easy: you open up an account on Scottrade’s site, fill out a standard account form, deposit money into an account with a check transfer (ACH, account, or wire transfer options are available as well), and then you begin to build your portfolio. After that, new users will have to print, sign, and mail in the account agreement — a standard process among all online brokerage companies. This is the same process you’d go through if you were opening up an account at a physical location, and it’s simply unavoidable.
Scottrade’s investor education program, the Knowledge Center, has a wide variety of informational literature and media that’s helpful to investors of every skill level, including investment education, trading calculators, help forums, how-tos, and updated lists of client education events. All of the articles are regularly updated and maintained, so you won’t be reading outdated information.
Our Deep Dive
- Trading Platform: The Scottrade Trading Platform is intuitive, and user-friendly. Every window is laid out in a systematic way that makes sense (Home; Trades; My Account; and so on), and each window can be moved to a new location, refreshed, or closed separately. All the tools you would need to start trading, or get info on trades, are available at the top of your account page. Scottrade also offers a unique Portfolio Review Tool that’s one-of-a-kind in the industry, and provides up-to-date analysis of your portfolio at the click of a button.
- Cost: After making the initial minimum $2,500 deposit, users can make any trade at an unlimited rate for $7 from their computer or mobile phone. Trading from a touchtone phone, or enlisting the help of an actual Scottrade rep, costs $32. The account must maintain a $2,000 balance and remain open and funded for at least six months. There is a $0 account minimum for IRA accounts. According to its website, users must have $500 in equity in an Individual, Joint, Trust, IRA, Roth IRA, or SEP IRA account with Scottrade to be eligible for a Scottrade Bank® account.
- ScottradeELITE: ScottradeELITE is Scottrade’s advanced trading platform, meant for customers that choose to fund their account with a minimum of $25,000. The platform is fully customizable and contains additional trading tools and functions within the platform.
- Streaming Quotes: Most online brokerages offer a one-time or subscription fee for streaming quotes, but Scottrade offers real-time quotes for free. The quote function also allows users to customize which stocks they want to track, news updates, and other real-time data that you might see on a CNBC or Bloomberg ticker.
- Banking: Scottrade offers users banking services so long as they have at least $500 in equity in an Individual, Joint, Trust, IRA, Roth IRA, or SEP IRA account with the company. Interest is only .01% on balances above $100, but there are options for free checking accounts, debit cards, online banking, along with free standard checks and withdrawals.
- No-Fee IRAs: Scottrade offers zero fees to open or maintain Traditional, Rollover, Roth, SEP, and Simple IRA accounts.
- Mutual Funds: Investors who want to diversify their portfolios to decrease risk will be pleased to know they can choose from more than 14,000 non-proprietary mutual funds — more than E*Trade (~8,000) or TD Ameritrade (~13,000). Over 2,000 of the Mutual Funds on Scottrade have no transaction fees.
- Forex: Trading foreign currency is possible through Scottrade, but it is a risky endeavor, and the Scottrade Trading Platform is geared more toward trading US stocks.
- Penny Stocks: Scottrade allows you to trade penny stocks at its normal $7 per trade rate, and will then charge $0.50% principal for any stocks that actually trade under $1.00, which is a standard practice throughout the industry.
- Scottrade Knowledge Center: Scottrade has a stockpile of free, helpful documents, video tutorials, live web seminars, interactive webinars, FAQs, podcasts, and investment calculators.
- Texting: You can set up Scottrade to notify you by text when your stock closes above or below average.
- Mobile App: Available for both iPhone and Android, Scottrade offers an impressive mobile app that syncs with your desktop account, allowing for real-time trading through either platform.
Scottrade requires an initial $2,500 deposit for new accounts, whereas most online brokerages require less than $1,000 to get started. E*Trade requires $500, for example, and TD Ameritrade and Ally Invest have no minimum deposit. But before you go running off to one of the brokerages that doesn’t require a minimum deposit, take pause. Remember that you’re going to have to deposit something into your account to be able to buy and sell stocks, no matter which online broker you go with. To make any substantial trades — even if just to learn how trading works — first time investors should make a $500-$2,500 deposit into any new trading account. It’s certainly possible to start making trades with a smaller initial deposit through one of Scottrade’s competitors, but if you know you are going to deposit an amount over $2,500 anyway, Scottrade will likely still be your best option.
Cheaper (or Free!) Alternatives
Unfortunately, there isn’t a way to trade stocks with Scottrade without the initial $2,500 deposit. It’s an expensive fact that can drive potential investors to brokers with lower startup costs. If you’re looking for the lowest per trade fee from an online stockbroker with a $0 minimum deposit, take a look at OptionsHouse or Ally Invest.
- TD Ameritrade: $9.99 flat free trade plan; $0 minimum deposit. TD Ameritrade is known for being a well-rounded broker, but it is also one of the more expensive brokers out there.
- Optionshouse: $4.95 flat free trade plan; $0 minimum deposit. OptionsHouse is extremely affordable, offering stock trades at half the price of many of its competitors. It often tops the list of online stock broker reviews.
- E*Trade: $6.95 flat free trade plan; $500 min. deposit. E*Trade is largely recognized by its humorous television commercials, and while it is not the most affordable option, it maintains a valuable customer-oriented business model, similar to Scottrade.
- Merrill Edge: $6.95 flat free trade plan; $0 minimum deposit. Owned by Bank of America since 2010, Merrill Edge is affordable and is a good fit for those who already have various BoA accounts.
- Ally Invest: $4.95 flat free trade plan; $0 minimum deposit. Ally Invest has gone through several evolutions since its formation in 2005. It has since emerged as a formidable competitor with affordable rates that are attractive to new investors.
What Others Are Saying
Scottrade’s platform and ability to deliver a positive trading experience to its customers has largely stayed out of the media over the years. That’s because there’s nothing overtly newsworthy about a company doing what it should be doing. Consequently, the media Scottrade has garnered focuses mainly on its problems:
- ThinkAdvisor reported that Scottrade and Morgan Stanley paid a sum of $950,000 to FINRA (Financial Industry Regulatory Authority) for failing to implement reasonable supervisory systems to monitor wire transfers to third-party accounts. Scottrade got hit again in November 2016 by FINRA for $2.6 million for failing to retain customer records and emails.
- Business Insider reported that Scottrade was notified by the U.S. authorities that they had been a victim of a cyber-attack in October 2015. According to the report, the company didn’t even know its system had been breached. Fortunately, Scottrade uses enhanced encryption techniques when handling its users’ personal information, so no username or passwords were compromised.
- Scottrade has also been charged or fined several times over the years by the SEC, for everything from misrepresenting details to customers, to failures in basic recordkeeping.
The Bottom Line
Scottrade is a veteran in the online stock trading industry, and provides consistent, quality customer service, along with a user-friendly trading platform at a reasonable cost; provided you can make the minimum $2,500 deposit to get started.