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All Contents © 2020The Kiplinger Washington Editors
By Ryan Ermey, Associate Editor
| August 29, 2018
It’s hard to go wrong choosing an online brokerage these days. Just about all of the firms in our recent broker ranking allow investors to trade stocks, bonds, mutual funds and exchange-traded funds online, and all provide ample research and tools to help users make educated financial decisions. With so many brokers offering similar services (and at reasonable prices), your choice may depend on one or two features.
Here are some lesser-known online brokerage perks.
Dividend-paying firms typically disburse cash every three months. If you invest for income, you may have a diverse portfolio of stocks, but if many of them pay out on the same schedule, you may find yourself going through long spells with little cash flowing in.
Three brokers – E*Trade, Merrill Edge and TD Ameritrade – have income estimator tools that can help you keep on top of future payments. Each tool uses recent payout data to project the value and timing of your portfolio’s dividend payments over the next 12 months. TD’s tool shows dividends from stocks and ETFs only, while E*Trade and Merrill Edge factor in income from bonds and mutual funds as well.
Fidelity brokerage customers have access to two mutual funds with no minimum investment and 0% expense ratios: Fidelity Zero Total Market Index (FZROX), which tracks the U.S. stock market, and Fidelity Zero International Index (FZILX), which tracks foreign stocks. To avoid paying licensing fees to index makers such as Standard & Poor’s, Fidelity’s funds track indexes assembled in-house. That means the funds may outrun or lag ETFs that track traditional indexes. Still, it’s easy to see the benefits of free funds with no investment minimum, especially when the savings are compounded over a lifetime of investing.
None of the brokerages in our ranking can beat Firstrade on commissions – at least so far. In the time since we surveyed the brokers for our 2018 ranking, Firstrade announced free online trading for stocks, ETFs, options and mutual funds – down from $2.95 per trade. Fidelity ($4.95), Schwab ($4.95) and TD Ameritrade ($6.95) all charge a fixed rate for trading, but some other firms charge lower commissions for frequent traders or those with high balances. E*Trade’s $6.95 commission drops to $4.95 for clients who make 30 or more trades per quarter, and Ally Invest’s fee drops a dollar, to $3.95, if you trade 30 times per quarter or have a balance of $100,000 or more. WellsTrade shaves $3 off its standard $5.95 charge if you link a Portfolio by Wells checking account. Merrill Edge customers with $50,000 in combined assets at Merrill Edge, Merrill Lynch and parent company Bank of America qualify for 30 free stock and ETF trades per month if they sign up for the bank’s Preferred Rewards program.
Investors increasingly want to do brokerage business on the go. In response, all of the brokers in our survey offer mobile apps that you can use to do just about anything you could do on your desktop, such as trading stocks, accessing research, paying bills and transferring funds.
But tech-savvy investors will be pleased to know that some brokers’ platforms extend beyond websites and mobile apps. Investors can interact with their Fidelity, Schwab and TD accounts by chatting with Alexa, Amazon’s digital assistant. Schwab users, for instance, can ask their Alexa for market information, stock quotes and updates on personalized watch lists. TD Ameritrade customers can ask questions or even execute a trade through direct messages on Twitter, on Facebook Messenger or through the iPhone Messages app as well. If TD’s computer-generated responses don’t satisfy you, you’ll be automatically connected with a live representative.
Nearly every brokerage tries to entice investors to open new accounts or add substantial sums to existing accounts by offering free trades or cash bonuses. Promotions come and go among the firms; here are some recent offers. Firstrade will reimburse up to $200 in transfer fees and $25 in wire fees when you transfer money from another firm’s account. You’ll also get a $50 bonus if you refer a friend who opens an account and funds it with $2,000. Schwab is running a referral promotion as well – though the $100 cash reward goes to the friend you refer, not to you. Fidelity customers who deposit at least $50,000 in new or eligible existing accounts receive 300 to 500 commission-free trades over the next two years.
Merrill Edge will give you a $600 bonus when you open and fund a new investment account or IRA. TD will give you up to $600 when you open a new account as well, depending on how much you deposit, along with 60 days of free stock, ETF and option trading. Depending on how much you deposit, new account holders at E*Trade can earn from $200 up to $2,500 in cash along with 60 days of commission-free stock and option trades. Customers who sign up at Ally can earn from $50 to $3,500 to go along with up to 90 days of commission-free trades.
Opening a credit account linked to your brokerage can help you earn cash back to beef up your investments. The Fidelity Rewards Visa Signature card comes with no annual fee, and all purchases earn 2% cash back, which can be divided and deposited into up to five Fidelity accounts. At TD, spend $500 on a TD Ameritrade Client Rewards Visa within 90 days of getting the card and you’ll receive 10,000 points (which can be redeemed for $100 cash). All purchases come with 1.5% cash back. Deposit your rewards into your TD Ameritrade brokerage account and you’ll receive a 10% bonus on the cash-back. The Schwab Investor Card from American Express offers a $100 credit if you spend $1,000 in the first three months. After that, you’ll get 1.5% cash back automatically deposited into your Schwab account.
Merrill Edge customers with $50,000 in assets in their account and who sign up for Bank of America’s Preferred Rewards program receive a 50% boost on the cash-back reward from eligible Bank of America credit cards. Say you hold the Bank of America Cash Rewards credit card, which offers 2% cash back at grocery stores and wholesale clubs, and 3% on gas for the first $2,500 in combined grocery, wholesale club and gas purchases each quarter, plus 1% on everything else with no limit. If you move a $100 cash-back reward into a BofA account, for instance, you’ll receive a $50 bonus, increasing your total windfall to $150.
Whether you set up a cash-management account or just take out a debit card linked to the cash balances in your brokerage account, several brokerages will reimburse your fees when you withdraw cash at any ATM. E*Trade, Fidelity and TD Ameritrade will reimburse ATM fees nationwide. Schwab does that too, plus waives the 3% foreign transaction fee most debit issuers charge to make purchases abroad. Ally offers more-traditional banking services, such as checking and savings accounts. There’s no fee to withdraw from one of 43,000 Allpoint ATMs, and the bank will reimburse up to $10 in ATM fees per statement cycle Merrill Edge investors who have $50,000 in assets (combined at Merrill Edge, Merrill Lynch and Bank of America) and who have joined the Preferred Rewards program can get 12 ATM-fee reimbursements per year at non-Bank of America ATMs in the U.S. (Bank of America ATMs are free).