Updated March 2, 2017

Scottrade Review: Pros and Cons for Beginners

Online Brokers: Scottrade is Cheaper But Is It Better?
By Cynthia Cohen
Ad Disclosure: This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. This compensation may impact how and where products appear on this site. You help support CreditDonkey by using our links. (read more)

With low trade fees, excellent resources, and superior customer service, Scottrade is a highly trusted online broker. Read on for our in-depth review.

1/30/2021 Update: Scottrade is no longer available on CreditDonkey. This offer may have been discontinued or may no longer be available to new customers.

5-point scale (the higher, the better)

Pros and Cons

  • Low per trade fees
  • Physical locations
  • Easy-to-navigate website
  • No futures trading
  • High broker-assisted fee

Bottom Line

Solid choice for cost-conscious traders who are familiar with online investing

9/18/2017 Update: TD Ameritrade has acquired Scottrade. Scottrade accounts will convert to TD Ameritrade on February 26, 2018.

Overview

Scottrade has been around for over 30 years, so it's likely that even if you're a novice investor, you still know the name and the reputation.

Scottrade is a great option for investors who are new to investing. Their well-designed website is welcoming and suited not only for active investors but also for those looking to learn a thing or two about the self-directed investment field. It's also nice to know you can reach a live representative. The company has an extensive network of branch locations, so you could find a local rep in person to help you out.

More seasoned investors might find some of the research to be lacking or the platform itself not as advanced in functionality as some other brokerages.

We'll go into more detail on all that here.

FEES AND OPENING AN ACCOUNT

The fee schedule for Scottrade is relatively straightforward and very attractive price-wise:

  • Stocks, ETFs: $6.95 per trade
  • Options: $6.95 plus $0.70 per contract
  • Mutual Funds: No fee for load and no-load funds, with caveats:
    $17 per trade of no-load funds not in the NTF (no transaction fee) program
    $17 per trade to sell load funds
  • Broker-Assisted Trades: $32 per trade

It's important to note that if you trade over the phone instead of online, you'll be charged $32 per trade, which almost seems self-defeating for an investor who opts for a web-based brokerage. But Scottrade doesn't charge an annual maintenance fee or an inactivity fee, which are two advantages for those who don't delve into their accounts much.

Like most of Scottrade's counterparts, opening an account is easy and just takes about 10 minutes.

Note: Scottrade requires a $2,500 initial deposit, which you can transfer from your bank account, wire, or mail by check. If you already have a broker, you can transfer an existing brokerage account to Scottrade and you'll be refunded up to $100 of the transfer fee.

INVESTMENT PRODUCTS AND SERVICES

Scottrade offers most of the standard services, including:

  • FOREX/Currency Options: Scottrade lets investors trade foreign currency through currency options. Scottrade offers a clear explanation as well as examples of how to execute a trade on its website, so if this is something that appeals to you, check it out.

    But know that this is a very risky market, and, unfortunately, Scottrade doesn't offer a free virtual cash account where you can try your hand at the forex game like many of its competitors do. So, you might want to check out another online brokerage to practice trading currencies if you intend to utilize Scottrade as your online broker.

  • Penny Stocks: Scottrade caters to those trading in the risky penny stock (also known as OTCBB or "pink sheets") market by giving you access to resources such as real-time quotes, news, and analysis specifically for this type of trade. However, you'll pay quite a bit for them. It's $6.95 per trade, plus 0.5% principal for any stock trading under $1. That means if you buy 50,000 shares of a 5-cent stock - a $2,500 investment - you'll be charged the $6.95 trade fee plus $12.50, so the trade will cost you almost $20. That's a pretty steep fee for a risky investment that may not pay off.

  • Mutual Funds: If keeping risk to a minimum is a high priority but you still want to diversify, mutual funds might appeal to you. Scottrade offers over 14,500 to choose from, which is almost twice the amount E-Trade has to offer.

  • IRA: You'll be able to save for your retirement via Scottrade's no-fee IRA offerings (which include Traditional, Rollover, Roth) and those geared towards the self-employed and small business owner (the SEP and Simple IRA, respectively). There are no fees to open or maintain an IRA account, and there's no inactivity fee if you just let your IRA sit there and grow. If you need help understanding the benefits of each type of IRA, Scottrade can walk you through which is best for you by answering some interactive questions via its website.

  • Banking: Yes, you can do your banking via Scottrade, but no, you cannot open an account unless you already have a brokerage account with at least $500 in equity. If you do have that, you're in luck, because Scottrade offers free checking accounts, including free standard checks, withdrawals, debit cards, and online banking. You can also earn interest (albeit only .01 %) if you keep a minimum of $500 in your checking account. Note: Scottrade will no longer open new bank accounts beginning September 14, 2017.

RESEARCH AND TOOLS

Visually, Scottrade's website isn't that snazzy, but who needs flash when you're just looking to make a buck and invest in your future? Ultimately, what an investor wants is what Scottrade has to offer: a well-designed homepage that clearly lays out your options (the choices kind, not the investing kind) via an easy-to-navigate platform.

One of the plusses of having an account with Scottrade is the ability to customize up to three of your own homepages for your investments and view up to 23 tables per page. This can save an active trader a lot of time: you can see just what you're interested in and don't have to navigate through charts and symbols that don't mean anything to you.

You can also set up your pages with research, market data, and a Portfolio Review Tool, which will help you choose an investment geared specifically towards your own investment strategy.

Tip: Also part of Scottrade's resources are live seminars and interactive webinars, real-time streaming and quotes, video tutorials, podcasts, investment calculators and a variety of other helpful educational tools available on a well-designed page called the Knowledge Center.

SCOTTRADE ELITE

If you've got at least $25,000 in a brokerage account and place at least nine trades per quarter, you'll be rewarded with access to Scottrade Elite - and most likely, you'll need it, as it aims to help give your investing strategy an extra boost.

It's a more intensive layout that allows for more analytics, advanced quoting, more sophisticated research, scanning, and a deeper customization of the information you need. In comparison, E-Trade Pro has a similar platform for active investors who make at least 30 trades a quarter, but unlike Scottrade, you're not required to have a $25,000 minimum balance to use it.

SMARTTEXT

One of the most unique features of the Scottrade platform is SmartText. It can analyze charts and earnings for you and give you a simple explanation of what the research implies. For example, it might tell you, "On Wednesday, CDNKY closed above its 13-day moving average. This is generally considered to be an indication of a bullish trend."

MOBILE APP

Not wanting to miss a beat in the mobile trading market, Scottrade offers apps for iOS and Android devices. Knowing that some people might be skittish trading their finances on the same device they play Angry Birds on, Scottrade assures your security by requiring you to log in with a 4-digit passkey. You can then make trades, analyze the market, chart, and even do online banking.

Customers rate the app an average of two stars on iOS and three stars on Android platforms, which is better than many of Scottrade's competitors. You can also synchronize your mobile homepage with your computer's to make seamless trades from one device to the next. Another perk is that Scottrade has created a mobile website that is basically a carbon copy of its regular website for those who like consistency in their desktop-to-mobile world.

CUSTOMER SUPPORT

Scottrade has earned high scores for customer support from both Barron's and J.D. Power. One of the benefits of a Scottrade account is that you are linked to a live broker at one of its 500 branches. Any time you call the customer service hotline during normal business hours, you are connected to someone locally to assist.

Tip: If you prefer, you can visit a local office or contact an investment consultant through social media, live chat, or over the phone service center that handles telephone inquiries outside normal business hours. In addition, Scottrade offers education for investors through its blog, webinars and live presentations.

PROS AND CONS

To review, here are the pros and cons when considering Scottrade:

Benefits:

  • Customer service: Scottrade is known for its superior customer service, and no online brokerage more seamlessly integrates its online presence with its network of local offices. It also has over 500 physical locations you can visit for help.

  • Fees: At only $17, Scottrade has the lowest mutual fund trade fee among its competitors, and it's a sizeable difference: many charge $50 or more. Its stock trading fees are reasonable at $6.95 as well.

  • Banking services: For those looking for a one-stop financial services shop, Scottrade offers both IRAs and bank accounts to customers. Note: Scottrade will no longer open new bank accounts beginning September 14, 2017.

Drawbacks:

  • No commission-free ETFs: Most online brokerages offer some selection of commission-free ETFs, and many have a list of at least 100 different funds. For clients interested in ETFs, the fact that Scottrade doesn't offer any commission-free options could be a major downside.

  • Not the most technologically advanced: While the tools are certainly adequate, users who want the latest and greatest financial services technology might not be satisfied. It took major upgrades over the last two years to bring their mobile apps and flagship trading platform up to par with competitors, and even after the upgrade, other brokerages still offer applications that are flashier, more functional, and more pleasing to the eye.

  • No futures trading: Investors interested in futures will have to look to other online brokerages to purchase them as Scottrade does not currently offer futures trading.

How It Compares

Before you start making moves in any brokerage, you should make sure it's the right one for you. See how Scottrade stacks up to the competition:

ETrade: Scottrade is better poised to provide live assistance to clients - a definite selling point for novice investors. From a technology standpoint, ETrade definitely has the edge, though - if you're someone who places a lot of importance on the functionality and flash of mobile apps or trading platforms, ETrade might be the better choice.

Fidelity: Another platform that's very beginner friendly, Fidelity offers much in the way of tools and educational materials to get new investors up to speed on the basics of investing. Fidelity has just recently lowered their price to at $0 per trade, so they've now got the edge there. However, Fidelity has a tendency to restrict access to its better trading platforms to only those clients who are active traders, which could be a major obstacle for those pursuing "buy and hold" - or long-term - investment strategies.

TD Ameritrade: TD Ameritrade might be the right choice for some long-term investors. Take a look and see how they compare:

Ally Invest (formerly TradeKing): The Ally Invest platform is one of the few to undercut Scottrade on price, but you also lose a lot of the amenities that come with Scottrade's slightly higher price. Ally Invest is a no-frills platform for those who understand investment basics while Scottrade is much more friendly to those who need a little extra assistance.

BOTTOM LINE: Why Scottrade

If you're looking for a no-frills online brokerage with a solid reputation, low pricing, and a full array of investments, Scottrade is a good choice. While there are a multitude of online brokerages out there, Scottrade is a good middle-of-the-road, well-rounded online brokerage packed with features that might not be flashy but are certain to help you navigate the world of self-directed investing.

And if you like having face-to-face interactions with the people you've entrusted your hard-earned money to, it's nice to know that Scottrade has brick-and-mortar locations across the U.S. to serve you.

1/30/2021 Update: Scottrade is no longer available on CreditDonkey. This offer may have been discontinued or may no longer be available to new customers.

Cynthia Cohen is a retail analyst at CreditDonkey, a personal finance comparison and reviews website. Write to Cynthia Cohen at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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