As a side note I use Schwab as a checking account and it’s incredible. Zero fees. Reimbursement of ATM fees. Easy overdraft protection from the brokerage account. I love them as a bank.
This is even more reason to love them.
I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab blows all of them out of the water.
Story time: when I was fresh out of college, I deposited a check to my Schwab bank account via mobile deposit, but realized that I wasn't going to have enough time for the funds to clear before I needed to write a check from my account to my new landlord. I called Schwab customer service, not really thinking that they would do anything, but to my surprise, the banker said "Let's fix this for you!" and suggested that we conference call the counterparty check's bank to verbally confirm the funds, at which point he manually cleared the funds into my account and told me "You're good to go!" Schwab has some of the best customer service I've ever experienced, even for new (i.e. poor) grads ;)
I don’t know if this is general policy for all accounts or if there’s some balance threshold to enable it, but these days Schwab will instantly clear up to $10,000 of checks deposited via Mobile Deposit.
If for whatever reason you don’t have overdraft protection, they will send out an email if an ACH presents which would cause an overdraft and they give you until 10:00am the next day to transfer in funds to cover it.
I read this yesterday and was really interested in the idea. I am looking to move my small business checking account from my current bank which is the poster child for everything that is wrong with brick and mortar banks. I dug a little further in to Schwab and for business accounts, the minimum balance is $250k. Bummer.
That sounds pretty dubious to me. Either you deposited a check from your account held at a different bank or a check someone else gave you drawn on their account.
If it was your own account, then during the conference call you had to give out your personal information to identify yourself as the account holder at the other bank, all while the Schwab agent is listening in..
Or if it was someone else's account then that other bank's agent should never have discussed anything to do with that account with you and certainly not with some random other person (the Schwab agent) listening in.
Counterparty was a family member, also on the phone line, and who provided their permission to both Schwab and their bank to do it. My point still stands. It was highly unconventional and Schwab didn't have to do it, but they did in order to help me out. I'm sure it's not standard practice, and I wouldn't count on another banker doing the same, though Schwab has a knack for being customer-friendly.
Jesus F Christ.. that's even worse than my original scenarios! Now you have a family member whose personal information has been compromised to a random Schwab agent and even to you..
To me this would be a huge red flag.. the fact that Schwab apparently allows their customer service agents to play loose and fast with sensitive financial PII.
Source: I worked at a Global Top 20 bank for many years and this would absolutely be a fireable offence and the employee would be lucky not to be dragged into court by the bank and the government.
It’s a balance of funds inquiry. Before you can discuss that kind of information about an account you need to identify the person as the account holder. I can’t call your bank and ask if you have enough funds to cover a cheque you wrote.
I totally understand where you're coming from, and it gives me pause when I think about it now, but I will say that in the moment it came across as a good faith effort and really did save the situation.
> If it was your own account, then during the conference call you had to give out your personal information to identify yourself as the account holder at the other bank
Not necessarily. Banks can call, using the account information on the cheque, to verify funds available. (The cheque writer's bank can then call the cheque writer, separately, to get consent.)
I did this to clear a paycheck to cash when a cash-strapped college student.
The drafting bank always tells the depositing bank if those funds are available, which is what they did here: it’s how checks work. You would discover the same information yourself, when it cleared or didn’t.
If you take a check to the drafting bank, they’ll check the funds in the account right then and there and either pay you or tell you there are insufficient funds.
All that happened is they did it on the phone rather than through a clearing house or in person, but the exact same information was exchanged:
1. The account number and amount on the check was reported to the drafting bank, which both the depositor and his bank knew from the check already.
2. The drafting bank confirmed those funds were available, which would have been revealed when the check cleared or didn’t through other means.
Having a bank call another bank to clear a check isn’t uncommon — I’ve had it done with payroll checks for the same reason, that I needed to pay rent.
Honestly, I just don't understand why people bother with traditional banks at this point. Pretty much all of the major brokers offer cash management accounts that are equivalent of online banking. Pretty much all with standard:
- No fees
- No minimum balance
- Free checkwriting (usually free physical checks for that matter!)
- ATM fee reimbursement (at least anywhere in the U.S., if not internationally too)
- Free debit cards
- Direct deposit
- Deposit paper checks by taking a picture with a phone app, etc etc etc.
The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check. But even then, it would simply take an extra day or two. And it's not like I'm closing on a new home purchase all that frequently.
Nevertheless, people that I talk to get weird and SCARED when I talk about it. Even my wife keeps a separate checking account at a physical bank, because she just likes knowing that a brick-and-mortar building is there. I don't get it myself, but human nature can be odd when it comes to money.
The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check.
Almost everything wrong with consumer banking in america is contained, or stems from the ability to refer to cheque as a neccessary and normal thing in modern day finance.
I tore up my last cheque book ten years ago, I have had to resort to Western Union three times now (once a year) to send money to Her Majesties Customs and Excise for my UK pension topup, its the only thing I still do that way, and if the UK stopped using a closed-loop domestic clearing house and opened up SWIFT I'd do this via the IBAN immediately.
Cheques are cool. They're also horrendously stone age and the "yes but..." are the collected history of insanity that is american banking.
Jimmy Stewart, holding the fort at the friendly credit union on christmas day...
The former is what you're describing. The latter is where the bank takes the funds from you then itself guarantees the piece of paper. Much more like an arbitrarily denominated bit of cash often used in large transactions in the States when (1) a seller doesn't trust the buyer too much or (2) the seller wants the funds to clear more quickly.
Also, regular checks are great. There's something about having to physically take time to spend money via a goofy little ritual that makes it easier to save the stuff.
Cashier's cheques are needed in the US because of fundamental distrust between financial institutions. Funds clearing more quickly... Because the process is locked to physical paper moments and could be milliseconds but no because cheques.
If there is so much distrust between buyer and seller,why hasnt western financial civilization in europe tanked by now?
I get cashier cheques aren't personal cheques but the underlying logic of why they exist is because of legacy reasons which are inefficient and reinforce bad behaviours.
When I bought my apartment in Spain, I had to get a Cashier's check for both the deposit and the final purchase.
There's apparently still some utility in them in parts of Europe. When I challenged it (I had to pay 80 EUR for the check!) I was told that a bank transfer could be reversed or canceled, and that Cashier's checks prevent that from happening.
I don't see this situation changing until the banks get together with the central bank and create a unified escrow system to replace Cashier's checks.
As of now, they don't see the benefits of changing to a new system outweighing the costs.
I'm not originally from America either so cheques do seem super ancient to me. That said, it's more convenient to pay my housekeeper and lawn guy with cheques instead of regular trips to the ATM. They're not venmo or google/apple pay kind of people either.
Why not wire transfer? Here bank transfers are very cheap (free for most people unless you do a lot) and usually take a few hours at most (at some banks are instant).
If someone requests anything else as payment for rent you can be fairly sure they try to evade taxes on it as wire transfer is both the most convenient, cheapest and the safest way to pay.
Wire transfers in the US are expensive for most checking accounts. In the $20-40 range per payment. Also people don't usually carry around their account numbers for receiving payments.
Are you talking wire transfers or ACH payments? ACH is typically a much slower method of transferring money (1-5 business days) though it is generally free to do so. ACH also carries all of the risks associated with checks save the risk of losing a piece of paper before you can deposit it.
Wire transfers can happen almost immediately but typically cost $20-40 for one, or sometimes both, parties involved.
Most banks allow you to transfer between accounts at the same bank for free, and faster than ACH transfers because they can settle it quickly when its internal.
Fair enough, but venmo/google/apple pay is even more convenient than wire transfers and they're not into those either. Checks/Cheques are just a cultural norm in America.
I got a cheque a few weeks back from HMRC and it was the first one I'd personally seen in over 10 years - it seemed like something from a different age.
If you have bank of america you can link your bofa and merrill accounts. They even give you bonuses on your credit cards of +25/50/75% cash back for balances over 25/50/100k in assets between both.
They increase the cash back by 75% of whatever it already was. So if you were getting 3% back (currently, for their Cash Rewards card, that can be 1 of the following categories: gas, online shopping, dining, travel, drug stores, or home improvement/furnishings), you'd now be getting 5.25% back.
Which is a complete rip-off. You could easily get 2% interest on that $100k you're leaving with them by just leaving it with a better bank. For that to be worth it, you'd need to get at least $2k cash back on that credit card. At 5.25% (which is only for that 1 category you chose!) you'd need to burn through $38k/year... i.e., you gotta $100 a day on that card.
Except even if you somehow were planning to spend $100/day on that one lucky category, your cash back would be an order of magnitude lower, because they'd only give you that cash back on the first $2,500 in purchase, i.e. you could only earn $131 at most. So you're losing out on at least $2,000 to earn at most $131. Terrific deal!
The more optimal method is to leave 1-3 months worth of expenses as cash and put the rest of the money in something like VTI. You don't want a market crash to erase half of your emergency fund at the exact moment you need it.
Emergency funds should be in FDIC insured savings accounts, that pay at least 50 basis points less than the fed funds rate.
Also, you should have a stash of cash you can find at home in case of power outage or network loss and you can’t get money from the bank. And guns and canned food and clean water.
You can still get 2% interest on that buy buying treasury ETFs, or 1.56% currently by asking them to open a preferred deposit account for you, which is essentially a savings account with a high interest rate. You dont have to keep it in cash.
Typically, brokerages don't give you any interest on checking. Now, banks haven't really either since 2008, but prior to that you could make a few dollars a year on checking interest.
Not sure where you're getting that from. My Fidelity cash management account sweeps any idle balance into a money-market fund. I don't have any first-hand experience with Charles Schwab, but their website indicates that their checking accounts likewise accrue interest with no minimum balance.
Of course, interest rates are currently so low that it's basically a moot point. And I hardly ever have let any idle cash sit around without sweeping it into a short-term bond fund, or something better than the money market default.
Fidelity's Cash Management account is really designed for folks who are keeping up to $1.5MM in their cash account, with the funds swept between multiple banks to ensure the entire balance is FDIC insured. The interest rate is appalling, but it's appalling everywhere.
I feel like I'm discussing climate change, where there are multiple perceptions of reality competing for attention.
Other people in this thread report that Schwab pays interest on checking account balances. Schwab's website clearly states that their checking account accrues interest. There's a footnote link there, but the fine print simply says that the rate can change over time.
Of course, just as I don't understand people using a traditional bank these days, I likewise don't understand letting a large cash balance sit in checking account. The best interest rate you're going to see these day is probably sub-1%.
So why leave excess money sitting around in a checking account, when sweeping it into even a short-term U.S. bond fund would provide 2x-10x the return with no additional risk? (i.e. if U.S. Treasuries default, then money market accounts are probably screwed too anyway)
How much are people keeping in checking accounts to make that worth it?
Realistically it's better to move as much as possible to a dedicated savings/investment/brokerage account instead, and if you're doing that then why not just write checks against a single combined account?
That normally is actually a better strategy. I love that Schwab lets you overdraft your checking account with no fees (if you choose), and they first try to pull cash out of your brokerage account before borrowing on margin.
I haven’t received a physical paycheck from an employer since 2004.
I haven’t written a physical check since probably 2007. But as noted, cashier’s checks are a completely different product.
I’ve had mobile deposit from my US bank since 2010.
And various banks have offered ATM fee reimbursement (capped at a certain amount) since 2010.
Maybe the issue isn’t that US banks are so behind, but rather the age/year of when folks entered the US banking system and were first exposed to these things themselves versus what they were taught in a classroom.
Most of my contractors (house) charge 2% more for visa/mc so I give them checks. I pay my car insurance by check in person because my bank and insurance company routinely lose automated payments of any kind. In person I usually pay with ApplePay or a chip CC, and routinely refuse to shop at places (looking at you Pei Wei) who refuse to accept Apple Pay or chip cards. The cash in my wallet sits there for months.
I moved to the US as an adult ten years ago and the banking system was surprisingly behind - I finally understood why PayPal existed, for instance. And I had to write my first check - lots of them!
Well, what if your broker goes out of business? Like, is FDIC insurance chopped liver? The head of the SIPC has stated publicly that your cash is not covered except if it is deposited to buy securities.
Your friendly broker really wants your cash, because at this point keeping most of the interest is their best source of income.
Cash management accounts are better for large balances than FDIC accounts at banks for the most part. Since the brokerage abstracts where the balances are actually stored they split your large balances over a number of FDIC accounts and you get up to $1.5M in FDIC cover at some places instead of $250K. If you’re thinking of Robinhood they just did a bad job of execution, and shockingly thought SIPC alone would do, and that’s what angered the SIPC head.
It's often true that the funds aren't covered until they're in the custody of the partner bank. This is the case for some of the neobank cash accounts. Not sure about Schwab tho.
You've described any bank worth being a customer of. Monthly fees are a huge red flag (even if you can avoid them with hoop-jumping). USAA (just for ex.) also reimburses ATM fees. I'm not a fan of "overdraft protection" in general, but maybe Schwab provides a relatively non-predatory version of it.
Citi's nickname is "shitty." I forget what put me off about Simple but in general debit cards don't enjoy the strong consumer protections that credit cards do in the US.
Agreed, my credit union does all those things and pays 10x more interest than Schwab (2% vs 0.20%). That being said, its easy enough to get ~2% in a money market as well, so there's no compelling reason to keep more than a few months expenses in a checking account.
If you're with one of America's 4 largest banks (Chase, Bank of America, Citigroup, Wells Fargo), expect a bad time.
First Tech and BECU both do this, pretty sure the smaller credit unions like Verity and People's CU also reimburse ATM fees and offer high yield checking & savings accounts.
First Tech does not reimburse ATM fees worldwide. Unless things have changed in the last year, they do add a 1% transaction fee for using a foreign ATM. For this reason, I now use a Schwab checking account for international travel.
While you are technically correct, I don't think you should be so dismissive... a majority of Americans are using banks that DONT offer those things, so pointing them out is a good thing for people to hear, and to demand of the bank they use.
I didn't intend to come across as dismissive; apologies. I understand how it reads that way.
I intended to make a more general statement about relatively good banking products, while GP's note only talks about Schwab in particular. I.e., yes, Schwab is a good option, and there are lots of other good options. (Lots of bad ones too.)
I totally agree that a lot of people don't know these things or have good personal finance knowledge in general, and agree that raising awareness of what constitutes a reasonable banking product is a good thing.
but maybe Schwab provides a relatively non-predatory version of it
They will pull from your brokerage account, if you have insufficient funds they'll take out a margin loan and I think the only fees there are interest.
ING did something similar where they'd only charge you interest for overdraft stuff.
>if you have insufficient funds they'll take out a margin loan
That's not my experience with them. I've had them as a checking/brokerage account for 10+ years. I tend not to keep much money in checking so I run into timing issues once a year or so - where a check I wrote will present before the funds to cover it arrive in my account. I've definitely had them pull from the brokerage cash, but not from savings. They have never opened a margin loan to cover it.
Also not my experience. Accidentally had a timing issue once, and was overdrawn for a week before an ACH more than covered the difference.
On day four they called me to make sure I was aware. I explained that I had already started a transfer several days earlier, and they said "no problem" and thanked me for being a customer.
No overdraft fees, no pulling from my brokerage account, no margin loan. Never heard anything about it ever again.
It's happened to me a couple times as I don't keep cash in my brokerage account. To cover the checking account, they'll pull from the brokerage account, and if there's insufficient cash in the brokerage account, they take a margin loan. vOv
Lots of smaller regional banks pay ATM fees, as they don’t want to run their own fleet of ATMs. And they have local branches when you need it, like for a cashiers check.
Their one and only flaw that is a killer for some is the ACH hold policy — they hold all incoming transfers for at least 4 business days in many cases.
You can get in a pickle if you don’t realize it and have a tight timeline to transfer funds at tax time or whatever.
As others have pointed out, you can call customer service and they can often get the hold cleared while you are on the phone. They will conference in the other bank to verify.
I only think that applies for accounts opened in the last 90 days and/or with limited assets. I have been a customer for years and have a substantial amount in my brokerage accounts with them and all my ACH transactions clear the next business day; rarely two business days.
The specific circumstance was that I initiated an external ACH transfer from a Schwab Bank Checking account, which pulled funds from a remote bank, there was a default 4 day hold.
I don't keep alot of money in the bank accounts, but have a non-trivial relationship on the brokerage side.
Other banks (Credit Union, Capital One) typically clear these in 24-48 hours. It's not a "deal breaker" for me, and Schwab is an awesome bank, it's just a gotcha that can be problematic in some circumstances. If you have a business and pull money from one account to another, etc your process needs to keep it in mind!
Can confirm, highly recommend! I spend a few months abroad a year and get hundreds in ATM rebates and even more in forex/transaction fee value. Though I wish I got more interest on cash balances.
EDIT: the biggest benefit though is the customer service. A US based person answers with no wait time and they deal with VISA for me. So much better and I'm not even high net worth by their standards!
However I also have a 'play' Robinhood account and if Schwab can roll out a better mobile app I would 100% move those equities over.
The Schwab mobile app has recently been updated (unsure exactly how recently), and it has got substantially better since I first tried it a couple years ago.
I can confirm Schwab banking is the real deal! No fees ever. Reimburse ALL atm fees (even those pesky international scammy ones that are like $10 a pop). Effectively wherever you are in the world, you are in network with Schwab ATM's. Used them as an exchange student all over the place.
The biggest plus IMO is if you travel a lot. You get, from what I have experienced, no currency conversion fees, and no mark up on the exchange rate. They basically give you the Visa official exchange rate which is very good!
One thing I love about Simple that I've never been able to do with Schwab is get notifications on every transaction in my checking account. With Simple that helped me catch some fraud immediately
This is the right answer. Credit cards offer much more protection than debit do. Much safer to use, and in the event of fraud you are out the money on debit until resolution but on credit you’re not.
If you don’t have the credit you can just keep paying the balance as quickly as you need to from your cash accounts (once a week or once every few days). If you have the cash to pay for things, then you have the cash to pay for the credit used to pay for things.
Totally. To put it in programmer terms a credit card is really just a queue that has a penalty for keeping items in the queue too long. You can pay it off as often as you want. The size of the queue in that case isn’t as important. But once you have a larger queue, you have more time/convenience to pay it down.
Schwab does have notifications for using the debit card. The issue is that credit card payments and other ACH transactions don't have alerts.
My other accounts notify for every transaction and even the interest credited at the end of the month.
And you can't pay everything with credit cards: landlords, the IRS, utilities, ... there are services like Plastiq but then you have to pay the overhead too.
While I will agree that Schwab is decent I, personally, would rate them about equal with Fidelity. That being said Schwab didn't want to be in this spot, they were forced. Robinhood, Webull, etc have pushed all of them to this end game. And now ETrade and the rest are stuck with slumped stocks and have no choice but to follow suit.
Robinhood et. al. can't hold a candle to the breadth and depth of what the others offer. I will concede the simple interface is very easy for complete amateurs to get started.
As far as challenger banks go I’ve found SoFi Money to be really good. 1.8% APY and unlimited ATM fee rebates worldwide as well. I haven’t found anything more generous, Schwab included given the APY.
Same experience for me, with some additional positive experiences when we bought our house. Had to go into a branch to wire money for escrow. Was pretty empty, and the person there was super helpful, walking me through everything and making sure I triple checked I was wiring the money to the correct place.
I will second Schwab as an amazing bank. I would also add Fidelity as a great option in this same space. I use them now, only because my employer 401k is there and it keeps everything in one place.
how was schwab better than simple? simple offers better checking interest by a lot, as far as i can tell; i'm tempted to switch because of that, keeping schwab for foreign ATM usage
I don’t use my checking account as an investment account. Yes Simple has a higher interest rate but my checking account only ever has whatever it needs to fulfill rent and bills. Everything else gets allocated elsewhere.
I’m also married so this is a joint account. Last time I checked Simple doesn’t provide joint accounts. That might have changed.
I've been using Charles Schwab Bank now for about 10 years, and I love it, as well. They had the reimbursement of ATM fees back then and still do, which is amazing.
Long answer: You can set up automated transfers to your investing account. In order to set up automated investments, you must submit a paper form, which can trigger recurring purchases from your account's cash balance, or from direct deposit.
Peper form, really. Is there anybody else from big boys that would allow to define a basket of ETF's and auto-invest deposited money to it fee free? I know only of m1finance.com
For some reason nobody does that. Vanguard can sort of do it with mutual funds only.
I would keep USAA, I've always had good experiences with them. They've even implemented a suggestion I had into their app (talked with customer service who said they would forward it to the appropriate team).
Also one time when I had an issue with MobileDeposit, the first person I spoke with immediately forwarded me to the right person who could see the image of the check I tried to submit and suggested I turn the check upside down and take the picture (that worked btw, the routing and account numbers were printed on the page border).
They also had Coinbase integration for several years now (fwiw).
USBank is awful, dump that shit. I don't have any quelms with USAA, but I happened to luck into their 2.5% everything credit card while it was still being offered and will stick with them as long as they don't discontinue that.
I have them for my business account because I couldn’t find anything better for a small business. The experience sucked from day one going to the branch but at this point I don’t want to waste time setting up an account elsewhere. I also receive wire transfers for most of my consulting work so going back and bothering all my customers to change routing numbers is a burden I don’t want to put on them unnecessarily.
That's simply not true. Find a credit union, for starters, that has unlimited no-fee and fee-reimbursed withdrawals from any ATM worldwide. This is better than any bank I've found in other countries I've been to or lived in.
Then find one that also has no-fee overdrafting on margin, etc.
The point is that while of course they do make money from order flow, it's usually actually a small part of their revenue. Most of the revenue comes from interest on cash deposits (and other things), so even dropping trade commissions to zero won't materially reduce their profits.
Schwab's total 2018 revenue was over $10B; I expect they're more worried about losing potential and existing customers to the likes of RobinHood than they are about 1% of that revenue.
If you want to recover the interest spread on Treasury MM funds for yourself, Fidelity makes it trivial to buy 4-week Treasury bills[1] which auto roll (repurchase at maturity). Interest is state income tax free and Treasuries are the safest place you can park cash.
It's essentially a "literally get the best (short term, stable) for your savings, always."
And it's cash-equivalent, so can be purchased and held in any cash management Fidelity account.
The only caveat I've found is that the online tools for interacting with orders can be a bit hit or miss. But just calling into their fixed income desk will get someone to do what you need ASAP. And that you have to schedule buys on Treasury's schedule. (Thursdays, so enter orders on Wednesdays, I think?)
But past that, just setting up several non-overlapping auto-buys is a great way to get good interest on a < 2 week liquid account.
And say to hell with all those "reward checking" criteria.
And probably also a lot on short fees on the securities they lend out. Cheap brokers lend out the securities you own to short sellers, short sellers have to pay interest for such privilege (there's essentially an OTC market for the % rate). Note that this is not much different from earning interest on lending out cash.
Respectable brokers pass at least some of the short fees to the investor. Interactive Brokers, which I use, pays back around 50%.
And probably also a lot on short fees on the securities they lend out.
That depends on the actual security.
Currently at Schwab it is free to short a very liquid stock or ETF, because Schwab has access to a very large supply. Which means Schwab only passes along a very de minimis amount to the lender. I assume they eat this amount out of their commission.
They do of course charge appropriate fees for hard-to-borrow stocks. Every stock has a different fee.
This will probably change once Schwab stops charging commissions. Their fine print on that announcement says "Stock Borrow fees still apply". So those fees will apply to more/all stocks going forward?
Does this mean that using those brokers means that I 'nakedly' own those shares? I.e. if I actually pick a successful share and the price explodes, the shorter or the broker cannot buy it back and I end up owning nothing?
With all the people shorting Tesla, who will own Tesla if Tesla succeeds and the price explodes?
No, if you short shares and the price rises too much, your account will go into a margin call and your broker will liquidate all of your positions. All brokers have complex risk management to protect their interests.
In the extremely rare case that you end up with a negative balance, the broker will cover the shares and collect the money from you like any other debt.
But the broker doesn't necessarily lend out the shares to his own clients. And even if he does, how does he get back the shares from the person who went long? The broker will have to buy other shares. But if the price of those shares is exploding, who is willing to sell them?
I'm not sure what you're asking. You only borrow shares if you're shorting. You just buy them if you want to go long.
The broker will handle finding shares to lend to you if you want to short. Liquidity is a separate problem, which is why you might have low spreads or not even be able to find shares to short in the first place. Your ability to short a stock is not guaranteed and up to the market conditions and broker risk. And like I described, if you borrow shares to short and the prices increases greatly, then the broker will margin call your account to buy them back forcefully.
I am not asking what happens if I short shares but if I lend to others my shares. If the broker cannot buy those shares back, I face the risk of losing them, don't I?
So I am wondering: does using those brokers come with the risk that I end up owning nothing if I pick a very successful stock?
The broker uses risk management, margin calls, market hedging, capital reserves and insurance coverage to ensure you always get your shares back. You're not really in any risk.
Capital markets are far bigger than you can imagine and unless you're holding millions of shares short (which is unlikely as a retail investor), it's not going to be an issue even with the most volatile penny stock.
In the miniscule chance that the shares are unable to be acquired for whatever reason, you would probably get reimbursed at the current market price, although I don't know the regulatory specifics around this and you should discuss the details with your specific broker.
No you can only lend out the securities of clients that are themselves on margin or have an explicit borrow agreement (which grants you a kickback of the money made from the stock loan).
Cash accounts without a margin balance cannot be lent out.
ETFs are treated like stocks. That's kind of the point. They can be lent out by your broker if you're on margin.
Mutual funds are opaque. It's up to the fund to decide if they want to make some extra money lending their securities out to speculators. As they're holding the stocks long term and standard securities lending is over collateralized, the risk profile is relatively low compared to the extra return.
Your shares can only be lent if you have a margin account and have a negative cash balance (or collateral placed with other parties in excess of your cash balance), or if you have opted into a securities lending program like the one at IB.
I've seen this oft repeated bit about only margin account holdings can be lent out to shorts. Do you happen to know the regulation or law that says this is the case? Or is this another instance of drinking 8 glasses of water a day?
For Bogle-style[1][2] total-market low-ER index investing, free trades of ETFs is nice -- slightly more of each purchase goes towards shares, and that compounds, over a few decades.
I happen to be married to Fidelity already. Their great support, even when I've been poor, means that I'll show some loyalty if I'm ever rich. But it's nice to know that Schwab, Vanguard, TD Ameritrade, etc. are also out there for people.
I recently created an account with Schwab after trying and failing to setup one at Fidelity. For some reason that I could never get a clear answer on, every single transfer I scheduled from my regular bank failed. This has never happened with any other institution and Fidelity's support was absolutely no help.
I finally gave up and asked them to close my account and was told a flat "No, that's not possible". I went back and forth with support on this for a while and was consistently told that it's literally impossible to close an account, even at a direct customer request for an account that has never held any funds. Overall it was a very poor experience with a lot of wasted time.
Schwab on the other hand made it quick and painless to setup and fund an account, and so far I have had nothing but good experiences.
Schwab is an ethical company, in stark contrast to most banks and other financial institutions, that view their customers as revenue opportunities to be harnessed for maximum profits. Happy customer for years.
I don't know that I personally would use the adjective "ethical" to describe Schwab---that word can be taken so many different ways.
They are certainly a much better company to do business with than, say, Wells Fargo, and have largely avoided being completely terrible. Of course there was that nasty fiasco with the YieldPlus fund a few years ago...
They're certainly one of the two best for-profit brokerages (the other being Fidelity). Vanguard is inherently customer-focused, unlike the for-profits. Schwab and Fidelity are great today, but a future CEO/board could come in and decide to squeeze customers, and then you're somewhat stuck. Moving funds is difficult and if ERs are bumped, you have to balance taking a capital gain against the ongoing ER cost.
I was a happy customer for a long time until they broke their web interface to the point I couldn't use it anymore. I tried everything. Finally I tracked down the bug to a particular line of javascript, emailed customer support with exact instructions how to fix it.
They did nothing. Never fixed it, so I had to move to another broker that had working software.
They also used to truncate passwords at 8 characters without making that clear to the user. If you are someone who uses a passphrase you might have set your password to "PasswordCorrectHorseBatteryStaple" and entered that whenever you logged in, but anyone could access your account by just entering "Password". I tried on multiple occasions to be escalated to or referred to someone who would care, but no luck.
Yeah, I still like Schwab, but their web interface has gotten much worse. Until about a year ago, it was spartan and blazing fast. For getting things done, it was way better than any other bank or brokerage website I'd seen. Then they moved to an AJAX laden monstrosity that makes a million requests to render a single page. It's slow and clunky, and in some browsers it doesn't work at all.
I've found that their website does just randomly break in a browser occasionally (like several times a year). As in, I will not be able to load even their homepage. It'll generally resolve itself within a few hours and in the interim, the iOS app works fine.
This is great news for small investors like me. I like to constantly buy, but the etrade fees were cutting into my margins. Their numerous tax integrations kept me attached to the platform. I won't be moving to RH
For an unsophisticated rube investor (not trader) like myself, who wants to put a little bit of every paycheck into equities, RH is a superior product.I can wake up the morning my paycheck posts, transfer funds, and buy a couple of shares in seconds using my phone/tablet while I am in bed. Clean, simple, easy.
I looked into other products, but felt that none of them addressed my particular use case. Felt like they were designed for someone very different than myself. Anyway, if there is some good alternative I don't know about (which is extremely likely), please suggest.
Just this morning when I woke up, I opened the Vanguard app, bought some shares of VTI, then got out of bed and went on with my day. You can do the same exact thing with the Schwab app (I have accounts at both).
One reason I dislike Robinhood is that it seems to encourage speculative trading behavior as opposed to a proven long-term investment strategies. I don't care about free commissions much, because the only equities that I care about (index fund ETFs) are already available for free. I don't care at all about buying individual stocks. I don't care about buying cryptocurrencies either. And I don't care about cash management (y'know Robinhood, I have a real bank account that is actually FDIC insured, unlike the half-baked "savings" accounts you tried to sell us on) So for me, I actually greatly prefer using a more traditional brokerage that offers me exactly what I want and has a proven track record.
This, exactly. The only "flaw" of Vanguard's admiral funds is the $3000 minimum. For many of my friends, that is a bit of a high hill to climb to get started. Then again, those same friends seem to think nothing about speculating on whatever the hipster cryptocurrency is, so perhaps they have a different set of issues they need to address.
The target date funds have a $1000 minimum and are quite reasonable options for retirement or general diversified investments. The expense ratio is slightly higher, but if you have less than $3000, the difference is miniscule.
Or you can buy ETF versions of Vanguard funds. Same expenses as mutual fund versions, but the minimum purchase is 1 share. Free to trade from a Vanguard account (or something like this Schwab account, since its exchange traded).
Your friends can start off buying Investor Shares in the fund(s) they like. Once they hit the Admiral Shares minimum, they can convert over to them[0].
Many of their funds also have corresponding ETFs, and I've found that most (all) have similar or lower expense ratios, and the minimum buy is a single share (of course, you can't buy fractional shares like you can with mutual funds, so that can be annoying).
Vanguard has gotten rid of a lot of their investor-share classes of mutual funds. VTSAX used to have a $10k minimum. Now it has a $3k minimum, which used to be the amount to get the equivalent investor shares fund.
$3000 is definitely a hill, but wouldn't they need to at least climb that hill to put away a safety buffer /before/ putting any post-tax money into equities??
Schwab makes it even easier if your paycheck goes into their bank account. You don't even have to wait for a transfer :)
I don't like their cash balance for their robo-investor. But then again most "robo-investors" are 100-500 line python lambda scripts that run on timer if a hypothetical trading api module existed
TDAmeritrade and Etrade also announced $0 commissions in response.
Both brokers also had severe drops in their stock price, with TDA losing about 20% in a day. Seems the entire retail brokerage industry changed within 48 hours.
I have been a Schwab customer for over 10 years. I can’t speak highly enough about their service. I wouldn’t think of using a different checking account. I have only had two issues
1. At least 5 years ago I had a 6 digit password. If I typed in my password plus some extra digits I was able to log in. That never felt right to me.
2. I had just gotten a new debit card and was traveling outside of the us. When trying to activate my debit card via there international number it wouldn’t pick up my key pad. The customer support person seemed to think it was a known issue. I couldn’t just read the number to them for some reason. It was very annoying.
Over all I have had an excellent experience with Schwab
Another strong recommendation for Schwab. The customer service has been stellar for years. I do hope they invest more into their UI and mobile app. That's the only thing that's slightly lacking. It's usable though. I've tried Simple and other "tech" banks and they've been terrible in comparison. Simple was a disaster there was a period where people couldn't login to access their accounts multiple times over a week because of their 2FA system having issues.
You know what the response was? Sorry you're locked out, we can't do anything about it, wait a few days.
It means the order is first sent to a HFT firm. They can either fill or pass the order on. HFT firm pays the broker for this priviledge.
These firms like retail order flow because it’s generally uncorrelated with institutional flow. Also the chance of getting steamrolled by buying before the rest of the orders hit and depress the price is a lot smaller.
For 99% of retail investors free trades in exchange for possibly worse execution is a good deal.
For brokers that sell order flow, you will never see price improvement based on changes in market conditions (naturally) after you submit your order. For brokers that don't sell order flow, it is still possible that you would see post-submit price improvement.
This effectively means that after you submit your order, you will never see price improvement, if you use a broker that sells order flow. This harms retail investors that may not actively be thinking about this sort of price improvement, but would still matter to them in terms of aggregate transaction costs.
> price improvement based on changes in market conditions
I'm not sure what you mean by this. Do you submit orders and expect them to sit around for awhile waiting for the price to get better? What if it gets worse?
> after you submit your order, you will never see price improvement, if you use a broker that sells order flow
This is completely false. Wholesalers regularly give price improvement to internalized orders.
I had to re-read the title a few times; the word "Commissions" is so far away from the verb I thought they were shuttering many of their business lines at first.
Etrade and Ameritrade did end up following suit and slashed their commissions to zero as well.
But yes, I expect they're afraid of losing customers to RobinHood. Given that brokerages typically make very little on commissions (the real money comes from interest on cash deposits), dropping commission fees is probably a great move.
Commissions were only 7% of Schwab’s revenue. The real money is in 1) net interest on money in settlement funds, and 2) payment for order flow. For details see e.g. Matt Levine’s most recent news letter.
Are we sure the PFOF money was as material as the commissions were? Are we sure PFOF is really how Robinhood makes their money? There are other weird side hustles that e.g. make Robinhood money based on how many of their users hold and trade meme stocks, for which they collect short lending fees.
Schwab discloses their PFoF in their annual reports. It is 1.4% of their annual revenue. Page 31 of their 2018 10-k or, if you want a search string, Ctrl-F for "Order flow revenue was $139 million during 2018, $114 million for 2017, and $103 million in 2016. "
In a similar vein, many people don’t realize that you can actually negotiate commissions with your broker. You can even negotiate margin interest rates. The higher the total value of the account the better a deal you can get. Just like cable companies, brokerages have retention incentives.
Cash and real estate. I realized after all the investing and while I did beat the market, I realized if I invested in myself I could get 1000x returns rather than 1.10x returns.
So I got out of the market, started a bunch of different businesses. A couple stuck and now I'm working on another one that will need a lot of cash in the near future, so that's where I leave it.
Of course not. That's 1) deeply illegal and 2) wouldn't even be profitable.
Edit: I love how I'm getting downvoted for stating the truth. Nothing gets people with no knowledge of financial markets as irrationally excited as HFT and payment for order flow.
I think you're pretty much completely on the right side of this and your other comments on this thread have been really strong, but this comment would be much stronger without the coda about downvoting, which (1) contravenes a guideline on the site and (2) really just invites spite voting.
So what is payment order flow at the ELI5 level? If I sell at a limit $10, what happens? If I buy at $10, what happens? Does that make me uninformed? Does someone buy my order and fill it because they have stock at 9.99 ? Is this a function of level 1 vs level 2 quotes or ?
Payment for order flow means that whoever is getting your orders (schwab/robinhood) is getting paid to send them to a specific market maker: https://www.citadelsecurities.com/
The Market maker is holding lots of securities that they want to sell. They also buy securities (to then sell.) They are trying to make money on the spread, meaning "buy low sell high". Market makers provide liquidity in that their whole goal is to not "invest" but to enable trading by being willing to buy and sell.
As for the actual execution of those trades, that's out of my depth, but someone else may be able to fill in the gap.
> Does that make me uninformed?
I don't think so, I think if you are trading on a strategy that competes with HFT approaches then you would be "uninformed" but to the "average" buy and hold or buy and sell in a few days, all of this shouldn't have a large impact on your bottom line, it should actually enable it.
In the technical, trading sense, retail order flow is all uninformed. One sense in which I understand the term is that what you're "informed" about is the next zillion shares in the position you're working to unload for the huge fund you work for, not whether you read the 10K.
I read the Bloomberg article. You should read it. Basically retail orders are sufficiently random to keep the HFT in the money vs <hush hush "front running" </hush hush> an institutional investor who breaks up their market order. That's it.
In some markets, nothing happens until a buyer and a seller both want to transact at the same time at the same price. Real estate is like this; you can't sell your house to the market; you have to wait until a specific person wants to buy your specific house.
Equities are not like this; there are "market makers" who will buy whatever shares people want to sell, and sell whatever shares people want to buy. For a given stock, like AAPL, maybe market makers are willing to buy shares for $218.38, and sell them for $218.79. The difference ($0.41) is called the spread. On a good day, they'll buy your shares for $218.38, and resell them a few seconds later for $218.79, pocketing the $0.41. Repeat over and over, and you'll make some decent money.
Those quotes are updated rapidly in response to events and changing supply and demand. When prices changes, a market maker can lose (potentially a lot) of money. If Apple announces terrible quarterly results, the "true" price of their shares might suddenly be $150; if you sell all your shares to a market maker for $218.38 before they realise, they'll be facing not a gain of $0.41 per share, but a loss of $68.38 per share.
Market makers work around this by 1) charging a big enough spread that they can eat the occasional loss and 2) by trying to react as fast as they can. Still though, it happens - you never know if the guy who just hit your quote is some guy day trading a few thousand dollars during his lunch break, or if this is just the first part of a hedge fund unloading a few hundred million dollars, so you have to be pretty twitchy, offering wide spreads, and updating prices quickly.
It also follows that if you could somehow be sure that your orders were coming from retail investors, then you wouldn't have to worry about any of that! The orders would be safe to execute, and could be profitable even at very narrow spreads.
US law says that everyone must get execution at least as good as the best posted price (the NBBO), but the NBBO has to take into account that the person on the other side might be a hedge fund; it'll never be THAT good a price. So if you found a source of guaranteed retail orders, you could offer them a private "better than the best" price; that's called "price improvement". Or alternatively, you could offer them the normal public best price (the NBBO) and pay the broker a rebate for sending you the orders (that's called "payment for order flow"). And then your broker might pass the payment for order flow on to you in the form of free or cheaper services, or they might just pocket the money.
So when your sell 20 shares at $10, what's happening is you're selling shares at $10.00 each to a market maker, who is confident that someone else is going to buy them back off them for $10.05 (or whatever). And in fact, although the best publicly available offer is $10.00 (which is what you got; you'll never get worse), if the market maker is sufficiently convinced you aren't secretly about to sell another 9,999,980 shares in the next millisecond because you're actually an algorithmic hedge fund scraping twitter feeds to find out financial news before anyone else, then they might be willing to pay $10.02 for your shares instead, because they don't have to worry about the price changing before they can flip it. Or they might pay $10.00, and kick $0.02 back to your broker, who will use that to offer you free trades, which may or may not be a better deal for you.
You're not. Market makers really like filling orders for small-time investors because it's really unlikely that a small-time investor knows more then the market maker. They don't like filling orders for big institutional investors because those guys might know more than the market makers, and the market makers might accidentally give them too good of a deal.
If you're doing anything other than passively buying index funds, you're probably screwing yourself, but your choice of broker is irrelevant.
As a small-time, retail investor, you are statistically guaranteed to make random, uninformed trades, and it is profitable for market makers to process them, in much the same way that it's profitable for a grocery store to sell you groceries. And much like the grocery store selling you potato chips, they make their money on volume, not on gouging you on the cost of staples.
Whether you should be buying those chips (or day trading AAPL) is a question for you and your dietician and/or investment advisor, but you don't need to worry about the price.
How are you guaranteed to make random uniformed trades? Moreover, you said above that you are only “probably” screwing yourself. And you’re right, unless you love investing and deeply care about making alpha, it’s probably not for you.
But the markets aren’t a random walk and even if you are just buying indices, you still have to actively manage them. Namely you have to decide asset allocation, leverage, industry, country exposure, etc. Also you have things like style exposure to consider as well. As such, there’s really no such thing as passive management.
Also, actively trading beta isn’t exactly the hardest thing in the world. Even though some players move extremely quickly over market news like Trump tweets, trade war announcements, etc, it still takes a couple days for all investors to react to the news. In fact, retail investors are often better positioned to quickly react as the slippage on their trades is non-existent for all but the most illiquid names.
In short, I wouldn’t recommend actively trading for most people. But those people are still going to need to choose some allocations and rebalance once in awhile. For those that are interested, retail alpha isn’t that hard to find, especially with leverage.
Think about it this way, as a small-time investor, you won't always get the best price. Your strategy should not be dependent on that. You should be building positions or trading appropriately to your scale. (Read: Buy and hold or trading at stop-loss prices, not market orders)
Said another way: The big guns will likely beat you, and you over time with LOTS of trading may lose a few % but for most small fries it shouldn't even matter.
That said, it looks like Robinhood is making more than most on their orderflow:
> In September 2018, Logan Kane, a contributor to Seeking Alpha, stated that Robinhood's payment for order flow generated ten times the revenue as other brokers receive from market makers for the same volume. Bloomberg has analyzed Robinhood's reports to the Securities and Exchange Commission (SEC), and calculates that Robinhood generates almost half of its income from payment for order flow.
> Think about it this way, as a small-time investor, you won't always get the best price.
As a small-time investor, you can trivially get a better price than larger investors. And you must, by law, get the National Best Bid and Offer (NBBO) which is, at least for some purposes, the "best price".
The deck is heavily stacked against retail investors trying to actively invest, but the issue isn't being unable to get good execution!
Robinhood is making more than most on their orderflow
Robinhood's apples weigh more than Schwab's oranges, because Robinhood encourages users to do options trading (and be more active on it) and Schwab does not. Spreads are wider in options, because they're less liquid, because they're (mechanically) larger trades [+], and because the degree of volatility in options prices is higher than therefore market makers have to charge higher spreads to justify the risk. High spreads mean happy market makers, so the amount you can charge a market maker for "Here's a retail order; would you like to collect the spread on it?" is higher.
[+] Options contracts represent, typically, 100 shares. The notional exposure of 1 options contract on e.g. Google at a strike price of their current price is high. If you measure the other way, by transacted trade size, the spread on a $500 order of Google should be denominated in pennies and the spread of a $500 order of Google options will could be hundreds of dollars for a sufficiently illiquid strike/date combination. (e.g. Consider a put on Google at a strike price of $100 in late October. Google currently costs ~$1,200 a share. If you believe it is likely that Google declines by over 90% in October, and want to express that belief in an instrument, the financial industry can assist you in doing that, but the spread on that particular product will probably be wide. Without checking the quotes at all, I'd predict no buyers at any price and ample sellers at 5 cents a share. If you put in a $500 order expressing that view, you are paying ~$0.01 for the instrument and $499.99 for liquidity.)
If your day trading millions of dollars of shares, it could matter. Retail rarely make trades that can’t be filled with one order. Even if your moving large amount of shares, you can always do limit orders .
People will give you all sorts of misinformed explanations. Matt Levine, the Bloomberg columnist, is a respected guy who understands the industry. Here's his take, a trustworthy take, on it: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...
(skip forward to the part where it says "Robin Hood", it's just part of his column that day)
tl;dr You're not getting screwed by Robin Hood (as a matter of fact, they're good for you), but Robin Hood is enabling you to make trades you shouldn't be making in the first place because you're probably unsophisticated.
I agree that I’m unsophisticated but not that I shouldn’t be trading. Most of my investments are 401k and passive index funds. But I keep a small amount of active trading capital to learn by doing. Sometimes I win, sometimes I lose. But it’s a hobby that I enjoy. And I’m becoming more sophisticated over time.
Ok, so after reading the Bloomberg article, your 401k is being negatively impacted by order payment flow. You as an individual retail investor is probably ok but your 401k is losing in aggregate.
If you have no idea what you're talking about, why even comment?
They don't sell the data, they sell the orders, and the people that buy the orders and execute them aren't front-running them either. You can only front-run an informed trade, and the entire reason they're buying the orders is because they're uniformed.
Nobody is front running some guy day trading AAPL on their lunch break. Not just because it's illegal and easy to catch (although it is both of those), but because it's mathmatically not even possible. If your trade is not, on its own, meaningfully moving the share price, you can't be front run.
There is no such thing as a free lunch. Marketing trades either by Schwab or others is extremely misleading since Schwab is one of the brokers that sells your order flow.
What's better- paying $5 bucks to trade or losing a % of your total order to someone like Citadel or routed to certain exchanges at a lesser price? If your trade size is even remotely decent in size you will lose a lot more on restricted order flow.
The SEC needs to require the disclosure of this practice because most people don't realize that in exchange for "free" they are getting nuked every single transaction all the while thinking they are skirting the system.
Like the old saying - if you look around the table and wonder who the patsy is-- you're the patsy!
Citadel wants your orders because they can safely quote you lower prices, since you’re retail and not Vanguard unloading a position that will blow through every price on the book and leave them holding the bag. So this complaint doesn’t make a lot of sense.
The rumor that the investor is getting fleeced has been debunked, and on the contrary, the investor is potentially getting better execution and price than otherwise. Schwab, Robinhood et al are registered brokers subject to Regulation NMS and have a duty to seek the best execution reasonably available for customer orders.
Your order is not changed, and no HFT is paying Schwab to be able to execute at worse than the publicly quoted price.
Schwab is heavily regulated as a broker and required to execute your trade at at least the National
Best Bid and Offer (NBBO).
Not true. Step 1- open accounts at Schwab and then IB. Put in say a complex butterfly order at the exact same time at both brokers and see the difference in price you get. It adds up to millions pretty quick.
Which is why I always use limit orders. If I pick a price I don’t really care if someone front runs it or not. I’m getting it for my target price so everyone’s happy.
The problem is the vast majority of people have essentially no sense of what they should pay other than the current price. You could ban market orders, but that doesn't completely solve the problem of not having an objective yardstick.
Payment for order flow (pfof) is demininis revenue for both sides.
Look at Schwab's income statement: pfof is less than 1 percent of it's $5bn 2018 revenue. On the other side, the traders or internalizers, they must pay to buy this order flow and it's a competitive landscape. The money they make on the flow barely covers what they pay for it. Markets have become very efficient.
My sources: Schwab annual report. Also I used to internalize trades at a big bank. I still know some people at the big shops who still do it.
Right they make all their money on margin. Most people are not trading a lot- but if you do- you will get fleeced- especially with any kind of a complex order.
Are there empirical estimates for how trades routed through Citadel and other intermediaries differ from trading directly on the exchange?
I've read elsewhere that a large volume of small trades lets them sell to large entities the ability to avoid all the HFT players. It's less about making money on the small trades.
I'm not sure what kind of differences you're asking about, but they're required to give at least as good of a price as the exchange is offering, and in many cases they give a better price
I've read it- It's very true profits at Schwab in aggregate are from margin loans often sitting in accounts with no activity but that doesn't have anything to do with what happens to people that trade. It's a totally different question.
Most people at Schwab are not trading a lot every month- usually their&L.
The way to properly do the analysis is run the same trades through a robinhood or a Schwab Vs IB which hardly does this nasty practice. If you have investments of any size the amount of money lost dwarfs anything in his analysis.
So while his analysis is excellent it doesn't have anything to do with the specific question at hand.
As other commenters have said, they make only a tiny amount of revenue from PFOF. If it was to the detriment of their customers, it wouldn't be worthwhile for them. But it's also possible that they don't care much about customers who do a lot of large trades, since they're making money from net interest.
The practice can pretty quickly add up to millions on a sizable account
Can you demonstrate this claim, with math? Within an order of magnitude, what would the size of that account need to be, what would its trading frequency need to be, what would its average trade need to be, and what would the average PFoF per trade need to be, to result in $1,000,000 of PFoF revenue incident to that account?
There are technologists who have an emotional relationship to the claim you just made. It feels correct. If it is correct, it should be amenable to analysis via numbers in the same fashion that other claims about numbers are amenable to e.g. multiplication.
Spoiler: There is no account which generates $1 million in PFoF fees [+]. Your estimate is off by at least 3 orders of magnitude, and more than that for e.g. typical HN users, including those who have hundreds of thousands or millions of financial assets, including those who trade relatively actively.
[+] There are plenty of accounts in the world which generate $1 million in net interest revenue; they are generally not owned by individuals but a company which doesn't have a treasury team and which doesn't execute aggressively could fairly easily do that if e.g. they raised +/- $100 million and kept it in the same place they kept their seed round.
Bid and ask spreads can be quite wide- up to a few % of the total trade size. So even tho you may be mid way within the range or even close to the bid or ask because certain exchanges never see your order - it gets filled at the bottom of the range- or worse never gets filled at all. The practice would be fine if there was transparency on it but most customers don't know what's happening and who is getting rebated and how much and that their orders are not going to all possible exchanges.
I'm a Schwab customer and concur w/ positive comments here about high-quality retail customer service, eg for relatively "normal" investors / account holders (ie, 6 figures AUM, not 7+).
But.
It's worth reading Michael Lewis's "Flash Boys: A Wall Street Revolt" [for several reasons] before nurturing too many warm-n-fuzzies for Schwab or Fidelity or any other mainstream big bank. Maybe you fellow HN readers are more aware than I was, but I'd guess when most of you hear "high-speed trading" you think about performance optimization and interesting technical challenges. It's mind-boggling how blatantly and comprehensively / systematically the financial "markets" have been captured by the interests of a tiny few, who literally steal from pension funds. To say it's rigged is an understatement. Must-read for anyone who thinks they know how Wall St works -- or cares to.
This is even more reason to love them.
I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab blows all of them out of the water.