Broker Comparison
Vanguard and Charles Schwab have roughly $7 trillion in client assets each. Does that mean they’re
about even? Let our research provide the answer.
Commissions
| Broker Fees |
Stock/ETF
Commission |
Mutual Fund
Commission |
Options
Commission |
Maintenance
Fee |
Annual IRA
Fee |
|
Charles Schwab
|
$0
|
up to $74.95
|
$0.65 per contract
|
$0
|
$0
|
|
Vanguard
|
$0
|
$20
|
$1.00 per contract
|
$20*
|
$20*
|
|
Chase
|
$0
|
$0
|
$0.65 per contract
|
$0
|
$0
|
Services
First, We Need to Look at Investment Styles
Schwab and Vanguard both offer self-directed and managed accounts.
Vanguard:
Vanguard’s investment-advisory service includes both robo and traditional packages. The automated version is the cheapest, not surprisingly. It has a $3,000 minimum deposit requirement and costs up to 0.20% per annum. ETF’s from Vanguard are the only available assets.
The brokerage house has several old-school programs with human advisors. The cheapest option is 30 basis points per year. It has a $50,000 asset minimum. Vanguard will count household assets across multiple accounts to meet the minimum.
Self-directed accounts pay no fees (if they sign up for electronic delivery of account documents or meet other requirements) and have no minimums. These accounts can trade mutual funds, ETF’s, equities, OTC equities, options, and fixed-income assets.
Schwab:
Schwab’s robo service is free. It’s able to do this by keeping up to 7% of client assets in cash. There are several fund families that provide ETF’s. They include Schwab, Invesco, iShares, and Vanguard. There is a $5,000 minimum.
Traditional packages have a variety of minimums and fees. Typically, these are at least $25,000 and no more than 1.0%.
Self-directed accounts at Schwab have neither fees nor minimums. They can trade the same instruments that Vanguard self-directed customers can plus futures contracts and foreign stocks. Although Vanguard does offer a few foreign exchanges, it doesn’t have a dedicated global account like Schwab does.
Winner: Schwab
Next, Let’s Have a Look at Mobile Apps
Both brokerage firms in this contest have mobile apps that function on both tablets and phones.
Vanguard:
Vanguard recently made a major overhaul to its app. The changes are both good and bad. They are good to the extent that the app is now easier to use and better designed. They are bad because many tools are now absent, and there’s not much the app can do. For example, stock research has been removed, and only Vanguard-branded funds can be researched and traded.
Vanguard funds do have charts, although there is only one plot style (line), and vertical format is the only possible viewing mode.
The only really positive thing we can say about this app is that it has mobile check deposit.
Schwab:
Moving on to Schwab, we find two apps. One is called StreetSmart Mobile. It is designed to trade futures and options, although it can be used to trade stocks and ETF’s, too. During our test drive of the platform, we found fonts that overlapped with each other, and it was not very well-designed.
A better trading experience will be found on Schwab’s regular app. Although it can’t trade futures contracts, it can trade everything else StreetSmart Mobile can. Plus, it has a lot of features that are missing on the StreetSmart app, like an artificial intelligence, mobile check deposit, live streaming of CNBC, thematic stock lists, a mutual fund trade ticket, and much more.
It’s pretty obvious that this is the app that Schwab is putting its resources into developing going forward.
Winner: Schwab
Third, It’s Other Software
Vanguard:
Vanguard’s website is simple, but yet surprisingly, sometimes difficult to use. Although there is a top menu, items are not always arranged logically, and we found it difficult to navigate at times during our use of it. Charting and order submission are on a basic level with few advanced features.
The brokerage firm does not have a desktop platform, smartwatch app, or browser platform.
Schwab:
Schwab does have a desktop platform, smartwatch app, and browser-based trading platform (in addition to a website). The watch software shows a color-coded watchlist, minimal trade details on a security, and a small graph.
Although the website might be considered the most basic of the other three platforms, it actually has some powerful tools. For example, Schwab’s website has integrated option spreads like short straddles, iron butterflies, and long calendars.
Better charting, though, will be found on the browser platform where full-screen mode and lots of technical studies are available along with an order ticket with some pretty sophisticated trade types. And the desktop platform has direct-access routing (only two routes, though), profit-loss diagrams, Level II quotes, and more.
Winner: Schwab
Fourth, Let’s Inspect Margin Services
Not surprisingly, both brokerage houses in this competition offer margin trading.
Vanguard:
Traders at Vanguard pay margin interest on a tiered schedule. The lowest rung starts at
13.25%. It takes a debit balance of $1 million
or more to get to the lowest rate: 9.5%. The broker’s website and mobile app do not display margin details for a security.
Schwab:
Schwab’s website does show the initial margin requirement for a stock or ETF. The broker-dealer
starts its tiered schedule at a slightly lower rate (13.075%) and goes to 11.325% with a loan above $250,000. Above $1 million, rates are negotiable.
Winner: Draw
Fifth, We Need to See Miscellaneous Services
Banking Tools: Vanguard has unfortunately discontinued all cash management services. Schwab hasn’t, and it offers some of the best banking services in the investment world.
Extended Hours Trading: Vanguard has an after-hours trading period but not a pre-market session. Schwab has both.
DRIP Service: Available at both firms.
Fractional Shares: Whole-dollar investing is possible at Schwab in the stocks that make up the S&P 500 index. There is a $5 minimum purchase amount. Vanguard does not yet have any type of fractional-share trading service for stocks or ETF’s.
Individual Retirement Accounts: Multiple IRA types are available at both Vanguard and Schwab. The former broker charges $25 per year for each Vanguard fund in a SIMPLE IRA (large accounts don’t have to pay it). Schwab has no such fee.
Initial Public Offerings: Schwab has an IPO section on its website where investors can participate in upcoming initial and secondary offerings. Vanguard offers no IPO services.
Periodic Mutual Fund Investing: Recurring purchases of mutual funds can be established at Vanguard for Vanguard funds. Schwab offers the service for all fund families.
Can You Buy Vanguard Funds Through Charles Schwab?
For investors who are wondering "Can I buy Vanguard funds through Charles Schwab?", we offer the article exploring this topic in detail
under this link.
Our Recommendations
For beginners, either automated investing program will work.
For active stock and option traders, Schwab has much better digital trading tools. It also has more thorough stock research. Easy choice.
Mutual Fund Investors: Schwab has a much better mutual fund screener with more thorough fund profiles. Plus, it has over 6,000 mutual funds, most of which have no load and no transaction. Again, we endorse Schwab.
For IRA’s and retirement saving,
although Vanguard has a lot of the same retirement resources that Schwab has, including self-employed
401(k)’s, educational materials, and target-date mutual funds, it doesn’t have annuities for retail
clients. Schwab does. We would go with Schwab.
Small Accounts: In today’s $0 commission world, Vanguard still caters to large accounts in several situations. The recommendation goes to Schwab.
New Account Promotions
Charles Schwab: Get commission-free online stock trades.
Vanguard: does not offer promotions.
JP Morgan Chase:
Get up to $700 when you fund a J.P. Morgan Self-Directed Investing account.
Charles Schwab vs Vanguard: Which is Better?
No, these two brokerage firms are not anywhere near even. Schwab outperforms its rival here by a
large margin.
Anyone looking for the top-rated brokerage firm on the market
should go with TD Ameritrade
or read TD Ameritrade review.
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Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
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