Is E*Trade a Scam

Is E*TRADE Safe and Legitimate?

Is E*TRADE a legit, safe, and trustworthy firm? Or is E*TRADE a scam or a fraud? E*TRADE reviews and complaints.

Is E*Trade Safe?

E*Trade is one of the most well-established online brokers in the industry. Even with E*Trade being a household name, some people might still have questions in their minds such as if E*Trade is a scam or legitimate and if they are a safe broker to use or not. We answer those questions as well as provide a review of E*Trades commissions and pricing, trading platforms, research tools, and more.

The origin of E*Trade began around 40 years ago when they claim to have been the first company to ever execute an online trade sent to an exchange for a retail investor. Most regular people are probably familiar with the name E*Trade from seeing their famous baby commercials during super bowl ads. In the investment world, E*Trade has a stellar reputation for its powerful, user-friendly trading tools and platforms.

In late 2020, Morgan Stanley acquired E*Trade in an all-stock transaction that was valued at around $13 billion at the time. E*Trade now lives under the Morgan Stanley ownership umbrella, however, still operates as the E*Trade name, website, tools, etc. In E*Trade’s last fiscal year of 2019, prior to being acquired by Morgan Stanley, they reported processing over 291,000 daily average customer trades, having over 7.2 million total accounts, and producing close to $3 billion in total revenue.

E*Trade Better Business Bureau (BBB)

The Better Business Bureau serves as a classic starting point for trying to figure out if a company is legitimate or not. E*Trade has a profile with the BBB but is not accredited with the BBB. Don’t be alarmed by this, it just means they probably don’t want to pay the fee to the BBB to become accredited.

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E*Trade has 53 customer reviews with a 1.09/5 star rating and 426 complaints closed in the last 3 years with the BBB. To help put these numbers into context, E*Trade has millions of customers. Therefore, that number of complaints breaks down to a very small percentage of unhappy customers that took the time to file complaints against E*Trade and give them a bad review on their BBB profile.

Is E*Trade Legitimate?

If you are worried about E*Trade being a legitimate broker, you can rest assured that they have plenty of regulators making sure that they are operating in an ethical and legitimate way. With E*Trade being in the financial industry and handling people’s money, there is significant regulatory oversight and many rules that they have to constantly comply with.

Some of the regulatory organizations that oversee E*Trades operations include the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and the U.S. Financial Crimes Enforcement Network (FinCEN). E*Trade also provides an industry-required Statement of Financial Condition on its website that reveals its assets, liabilities, and equity.

Is E*Trade a Scam?

E*Trade is actively registered with both FINRA and the SEC. If you want to look up either of their registrations, E*Trade’s CRD number with FINRA is 29106 and its SEC number is 8-44112. On ETRADE’s FINRA profile, they have a total of 226 disclosures including 93 regulatory events and 133 arbitration events. You can view ETRADE’s detailed report on its FINRA profile if you want to read about any of the disclosures.

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Is E*Trade Insured?

For assets you hold within any type of E*Trade brokerage account, you are covered under Securities Investor Protection Corporation (SIPC) insurance for up to $500,000, including $250,000 of cash. SIPC insurance protects your securities and cash from being lost in the case of E*Trade going bankrupt or going out of business.

For checking and savings accounts offered on E*Trade through Morgan Stanley Private Bank, you can have your cash FDIC protected between $250,000 and $500,000, depending on the account. Federal Deposit Insurance Corporation (FDIC) protects your cash held at a bank against the failure of the bank.

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E*Trade offers an Extended Sweep Deposit Account for cash inside of non-retirement brokerage accounts and a Retirement Sweep Deposit Account for cash inside of retirement brokerage accounts. The sweep programs work by automatically sweeping your cash to up to 5 different banks that each have FDIC insurance. Each of these sweep programs makes you eligible for up to $500,000 of FDIC coverage on your cash in the programs.

E*Trade customers also have their cash and securities covered by a supplemental insurance policy that applies in excess of SIPC coverage for an aggregate of $1 billion.

Is E*Trade Secure?

E*Trade delivers numerous ways of protecting customers’ accounts, privacy, and data. E*Trade protects customers’ accounts by adhering to the SEC’s Customer Protection Rule. The rule requires E*Trade to keep all fully paid customer securities segregated from E*Trade’s own assets.

E*Trade goes above and beyond the SEC’s required customer protection rule by offering its own Complete Protection Guarantee. The guarantee states that E*Trade will restore any losses that happen in your accounts resulting from any unauthorized use of your accounts. The guarantee also states that E*Trade won’t sell your personal information to third parties or marketers for any purpose.

The security measures that E*Trade enforces to protect your accounts and privacy include dedicated fraud protection teams, firewalls, and encryption. The optional security tools that E*Trade provides to customers are two-factor authentication (2FA) upon logging into your account and security alerts via text messages and/or emails.

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Is E*Trade a Scam or Legitimate? The Verdict.

Based on the evidence, E*Trade is clearly a legitimate company. They are running a highly regulated operation and appear to take customer account safety very seriously. E*Trade has account insurance, various account security protocols, and a solid reputation in the brokerage industry.

Account Types

E*Trade offers non-retirement brokerage accounts, IRAs, custodian accounts, Coverdell accounts, IRAs for minors, professionally managed accounts, small business retirement accounts, checking accounts, and savings accounts. E*Trade also offers margin accounts and futures trading accounts, each requiring additional approval to open.

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E*Trade has recently changed its selection of professionally managed accounts since being acquired by Morgan Stanley. E*Trade’s main managed account offering is now called Core Portfolios. A Core Portfolios account is a personalized, diversified portfolio of ETFs selected, monitored, and automatically rebalanced by E*Trade’s investing technology. The account has a $500 minimum balance amount to enroll and an annual flat fee of 0.30% of the account value.

An offering that E*Trade has newly implemented, is a fully comprehensive wealth management program that includes customizable managed account solutions and working with a Morgan Stanley Financial Advisor. To access this offering, you need to first request to speak with an advisor through E*Trade’s website.

Investment Products

E*Trade’s investment products lineup includes stocks, ETFs, mutual funds, options, futures, options on futures, bonds, CDs, and IPOs. E*Trade offers trading in US exchange-listed stocks, OTC US stocks, and OTC foreign stocks. E*Trade offers over 6,500 different mutual funds including a large selection of no-transaction-fee funds.

E*Trade’s futures products include agriculture, metals, interest rates, equity index, and more. E*Trade is currently among the large brokerage firms that haven’t yet capitalized on offering trading directly in cryptocurrency. The good news is that you can trade Bitcoin and Ethereum cryptocurrency futures on E*Trade.

Two unique investment products offered by E*Trade are prebuilt mutual fund portfolios and prebuilt ETF portfolios - each curated by E*Trade’s investment analysts. Both prebuilt portfolio products have 4 different investment strategies to choose from: aggressive, moderate, conservative, and income. The prebuilt ETF portfolios have a $2,500 investment minimum and the prebuilt mutual fund portfolios have a $500 investment minimum.

Pricing & Commissions

You can trade stocks, ETFs, and options commission-free on E*Trade. Commission-free stock trades apply to online trades of US exchange-listed stocks. For trades of OTC stocks, E*Trade charges a $6.95 commission for customers who place less than 30 trades per quarter and $4.95 per trade for customers who place more than 30 trades per quarter.

For options trades, E*Trade charges $0.65 per contract for traders who place less than 30 trades per quarter and $0.50 per contract for traders who place more than 30 trades per quarter. E*Trade offers a unique “Dime Buyback Program” that allows you to buy-to-close short options worth $0.10 or less with no options contract fee.

E*Trade allows online trading in U.S. treasuries commission-free at auction and on the secondary market. For all other bonds, E*Trade charges $1 per bond for secondary trades placed online. E*Trade sells bonds from its own inventory and charges a markup/markdown automatically included in the price of the bond when acting as principal.

E*Trade charges a commission of $1.50 per contract for futures trades, excluding cryptocurrency futures which have a commission of $2.50 per contract. E*Trade’s margin borrowing interest rates are on the higher side compared to its competitors. Its’ published margin rates start at 13.20% for borrowing less than $10,000 and progressively decrease to 11.20% for borrowing between $250,000-$499,999.99.

Banking Services

After its acquisition by Morgan Stanley, E*Trade now offers a suite of banking services through Morgan Stanley Private Bank. The Premium Savings account has no minimum initial deposit required, no monthly fee, and offers 3.50% APY on all balances. The account has to be funded within 30 days of opening in order to stay open.

The Max-Rate Checking account offers unlimited ATM withdrawal fee refunds, an APY of 0.05% on all balances, and a $15 monthly fee that can be waived by meeting certain requirements. E*Trade also offers home loans and lines of credit that allow you to borrow against your eligible brokerage accounts with a combined balance of $50,000 or more.

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E*Trade’s website is beginner-friendly, aesthetically pleasing, and easy to navigate. The website provides everything you need to place trades, research investments, track your portfolio, manage your accounts, and more. The “Markets & Ideas” section of the website contains some amazing features and research tools.

On the “Markets & Ideas" section of the website, you can find screeners for stocks, ETFs, mutual funds, options, and bonds. You can also find overview pages for US Markets and Global Markets that provide a comprehensive overview of key things happening and to know in the markets. One of E*Trade’s unique research tools on its website is the “Thematic Investing” page. The page shows different investing themes such as “Clean energy”, “Hedging with gold”, and “Artificial Intelligence” that you can click on and see a list of ETFs that relate to that theme.

Power E*Trade Review

For active traders or serious investors looking for more advanced features and tools, E*Trade offers a web-based platform called, Power E*Trade. The Power E*Trade platform is free to use for all customers and doesn’t require any downloads. Power E*Trade offers a customizable layout as well as customizable charts with drawing tools and technical indicators.

Etrade Pro

A unique feature of Power E*Trade is the TradeLab tool. The TradeLab tool allows you to build a strategy of hypothetical stock and options trades, then generates and displays analytical data about your strategy including a risk profile, upcoming events to watch out for, and risk metrics. Another unique feature of the platform is the ability to place trades by clicking on areas of a chart.

Mobile App

E*Trade has two different mobile apps: the E*Trade mobile app and the Power E*Trade mobile app. The standard E*Trade mobile app is well-designed and comes with everything that you would expect in order to be able to monitor your investments, place trades, and do research all on the go. The trading screen on the app is very straightforward and easy to use.

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The Power E*Trade app is a mobile version of the Power E*Trade web platform. The app has more advanced charting features and more powerful research tools than the standard E*Trade app. Two unique features of the Power E*Trade app are paper trading and futures trading.

E*Trade Review Conclusion

E*Trade claims to be the pioneer of online retail trading and is now, 40 years later, still going strong today. Morgan Stanley’s acquisition of E*Trade has opened up some incredible new services that E*Trade now offers and has allowed E*Trade to continue offering its competitive commissions and pricing. Overall, E*Trade is a great broker for all levels of investors and traders.

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About the Author
Paul Johnson is a Licensed Stockbroker with 7+ years of experience in the financial services industry. Paul enjoys teaching about investing and writing about financial topics. He is a husband and father of twin boys.