Charles Scwab - Opinions wanted

There's no single best answer - it depends on how much weight you place on each of the factors you mention (and more). Connsumersearch surveys the various magazines for ratings articles and summarizes their findings here:

Schwab's plusses include good service, wide variety of NTF mutual funds (including the occasional load waiver that you won't find elsewhere), local offices, good research (including Goldman Sachs). Main downsides are higher commissions (including $50 fee for non-NTF funds) and a fee structure that seems to change every year or two (they just went to "simplified pricing" this year).

If you are not trading stocks frequently (the base commission is $13), you could do a lot worse than Schwab.

Mark Freeland snipped-for-privacy@sbcglobal.net

Hi Patrick,

These days brokerage web sites make it easy to compare one company with another, especially when we are talking about companies as big as Schwab. Schwab competes well with Fidelity and is superior to Vanguard as far as stock transaction commissions and "no fee account minimums" are concerned. You could use Schwab to buy stocks and ETFs and probably have the least, or nearly the least, expensive transaction costs available.

Vanguard's main advantage is its many low expense mutual funds. It is famous for these, though the competition has been catching up, especially in the ETF arena. So it's hard to argue to go with Vanguard at the moment. Bond fund offerings will probably still be best at Vanguard, compared to anyone else, though.

Disclaimer: I am a 20+ year Fidelity customer, but if I had it to do over, I would have gone with Vanguard at the beginning, because back then, its mutual fund offerings were superior. I remain with Fidelity because I am dealing almost exclusively in stocks these days; its customer service is highly competent and courteous; terrific web site; low cost index ETFs are now available.

Its actively managed funds are typically only 15-20 basis points higher cost than its index funds. Very few families come close (DFA, American, TIAA-CREF come to mind).

Vanguard's funds are fine, great in fact, but Vanguard shares a problem with Fidelity and other large fund families in finding it difficult to offer good small cap funds. If you have to lock yourself into one family, Vanguard is fine, but the OP rightly asked about NTF funds, to diversify across families. That means using a brokerage.

Vanguard (and T. Rowe Price, American Century) brokerages seem to be set up for their fund investors who want to trade an occasional blue chip stock, not for people looking first for a brokerage. Vanguard Brokerage Services(R) (VBS) does not offer a cash management account until you reach Voyager ($250K) level. That means no small checks (only checks out of you MM account), no ATM access, no bill pay service, etc.

They are available only 8AM-8PM ET, M-F. (This is an issue that Schwab has had as well. A couple of years ago, in an attempt to economize, Schwab cut back on 24 hour phone service. It has since restored all 24 hours.)

I've used a variety of brokers and fund families. They all have warts. Your choice does depend on what you consider important. I use Vanguard for funds; I don't see someone using them as a brokerage, except as a Flagship ($1M) customer, or as a Voyager ($250K) customer to buy Treasuries. YMMV.

Mark Freeland snipped-for-privacy@sbcglobal.net

Thanks for the responses. I suppose what I am looking for is a company that will provide me with a wide range of mutual funds (including NTFs, good bond funds and international funds). I imagine that for the present time, the bulk of my transactions will be within our IRA accounts.

I am getting the idea from the replies to my orginal post that "i could do worse" than Schwab, but I am looking for a good decision. Thanks.

Patrick

I have several of the various fund companies.... Over the years, chasing different types of funds, I've invested mutual funds in Fidelity, T.Rowe, Vanguard, American Century, Janus, and Schwab for stocks... All have been ok.... Still have one or two funds at each company. When I worked downtown, there was a Schwab & Fidelity office near us. Before that, I've had Vanguard funds for years, or is that decades :) T.Rowe had some Asian & Health funds that I added... (market has since caught up) Currently, the ETF's almost make it a coin toss of Mutual Funds vs ETFs.

Unlike most other discount brokerage firms, Schwab has its own stock recommendation service, "Schwab Equity Ratings" (SER)

. There was an interview in this week's Barron's with the head of thatgroup, which uses a quantitative approach that makes sense to me. Ithink SER has outperformed the S&P 500 and the recommendations of mostinvestment banks.

The slightly higher cost of Schwab compared to the deep discounters should be weighed against premium services such as SER.

I am a financial "quant" but have no connection with Schwab.

wrote

from the link that Barron's awarded first place toSchwab's SER stock pickingapproach for a recent five yearperiod, about 2001-2006. The award is for beatingthe S&P500 by more than any other approach. Over the last fiveyears, REITs (e.g.as measured by VGSIX) and mid-cap funds(e.g. VIMSX) also generally whoopedpopular, broad indiceslike the S&P 500 and DJ Wilshire 5000. Theserealitiesshould start to give a newbie some pause. Furthermore: Forthe last 52weeks, as Schwab freely admits, the SER-Aapproach is about tied or slightlylagging the Dow JonesWilshire 5000 composite index. Many of the stocks it ratedayear ago as 'not expected to perform as well' (and so givenby Schwab grades of"B" through "C") actually beat thestocks given a grade of "A"(!). I think thisshould givefurther pause.Historical data is plentiful. Any methodology,including theSER approach, proposed to be superior to othe! rs can bebacktested. Schwab's SER approach has not been backtested.Why not?That's what would really sell me on it.To its credit, Schwab is prettyforthcoming about its SERapproach. This speaks to the integrity of the company,IMO.> The slightly higher cost of Schwab compared to the deepdiscounters> shouldbe weighed against premium services such as SER.As far as picking stocks isconcerned, I recommend peopleseek instead brokerages with good online stockscreeners,ideally also offering the customer a variety ofmuch-discussedstrategies. I am a Fidelity customer and amimpressed with all the variations onstock screening itoffers, for one. Schwab may offer similar; I just have notgonelooking for it.It's not that I have fondness for any particular,popularstrategy. It's that a lot of learning about what it means toinvest instocks results by examining many differentstrategies. Just recognizing thatthere is wide disagreementover which strategy will reap the most returns is h! ighlyinstructive.

Brokerages often earn fees by lending out shares of their customers, but they rarely share those fees with customers. That may be changing, according to a Forbes article "Shortchanged", by Liz Moyer, 12.11.06

. Schwab and Smith Barney are two brokers cited by the article as giving customers rebates on hard-to-borrow stocks, sometimes in the 10%/year range. Academic research has found that hard-to-borrow stocks underperform, but if one is going to own such a stock, a rebate is obviously good.