Scottrade Review 2012 Update: Low Fee, Commission Free ETFs, and Excellent Customer Service

Scottrade is one of the most popular online discount brokers. Formed in 1980, Scottrade is also one of the early self-service brokerage firms that let investors trade stocks at affordable costs. Winner of multiple awards, including back to back Highest in Investor Satisfaction with Online Trading Services by J.D. Power and Associates in 2001 and 2002, Scottrade has been a leader in the broker industry for providing customers with excellent services. It has been named by FORTUNE magazine as one of the “100 Best Companies to Work For” for three years in a row.

I have been a Scottrade customer since 2001 and have been actively using it to trade stocks and ETFs since then. For me, even though Scottrade doesn’t have the lowest commission rates among online discount brokers, I like it’s customer service, trading tools, fast money transfer, and convenience. Unlike many other discount brokers who do their business strictly online, Scottrade has 500 branch offices across the country. Wherever you live, the chance of having a Scottrade office near you is pretty good.

If you interested in getting a Scottrade account, here are some of my opinions regarding the discount broker. In this Socttrade review post, you will find information about the broker’s commissions, the process of opening an account, trading platform and tools, etc.

Scottrade Commissions and Fees

Scottrade has a very straightforward commission schedule for stock and ETF trades, though its commissions are not the lowest among online discount brokers. For stocks, the commission is $7.00 per internet trade, which has remained the same since I started to use Scottrade. The cost for trading options is an extra $1.25 per contract. Scottrade also offers investors a large selection of mutual funds. The commission for each mutual fund transaction is $17.00.  There’s no hidden fees at Scottrade and with Scottrade, you will not pay a fee for

  • Annual account maintenance
  • Inactive account
  • Transfer out/account closing
  • IRA termination
  • Online confirmations and statements
  • Dow Jones Real-Time News
  • Real-time streaming quotes and charts
  • Cost basis accounting
  • Incoming/Outgoing DRS (Direct Registration System)
  • DWAC (Direct Withdrawal at Custodian)

Scottrade Commission-Free ETFs

In March 2011, Scottrade launched 15 FocusShare ETFs that are free of commission fee for Scottrade customers. See Scottrade commission-free ETFs for more details.

Open a Scottrade Brokerage Account

Scottrade offers a number of account types for investors to choose from, including individual account, joint account, IRA account, and SEP IRA account. Opening Scottrade brokerage account is easy and the whole process can be done online in about 15 minutes. To open an account, you need to provide such standard information as

  • Name, address, and email address
  • Social Security Number or Individual Taxpayer Identification Number
  • Employer’s name, address and phone number
  • Beneficiary’s Social Security Number, address and date of birth

Following is short introduction of Scottrade to give you a better idea about features the broker. The minimum deposit required to open an account is $500. If you choose to fund your account by transferring assets from another broker, Scottrade will reimburse you up to $100 charged by other broker.

Fund Scottrade Account

When it comes to funding the brokerage account, Scottrade is quite unique, in the sense the the money transferred from bank to broker account can be used to trade stocks almost instantly. The system it uses, called Money Direct, is also an ACH system like what other brokers use (meaning that you have to follow the same procedure to setup the Money Direct as you do with ACH: bank routing number, your account number, etc.). However, with Money Direct, fund is available almost immediately and can be used to buy stocks that are priced $4 or more. This is one restriction on using the fund to buy stocks in cash account. If  you have a margin account and want to use the fund to satisfy margin sell letter, then you will have to wait for 3 business days, or if you want to buy stocks that are below $4.

Of course, you can also fund your Scottrade account by check (you can mail your check or drop it off at their local office near you) or wire. But Money Direct is the easiest way in my opinion once it is set up. Scottrade doesn’t have a minimum account balance requirement.

Withdraw Money from Scottrade Account

If you wish to move your money out of Scottrade broker account, there are a few ways to do so. To withdraw money, you can

  • Request a check;
  • Wire the money to bank account;
  • Use a Scottrade check card or check.

The first method is free but takes the longest time, while the second method is the fastest, but there’s an extra fee ($20 outgoing wire) involved. The last method is very convenient, but it doesn’t come automatically. To use check writing or check card (free) to transfer money (account minimum of $5,000 is required), you need to apply to set it up by submitting an application form to Scottrade local office first. Once the application is approved, Scottrade will provide the first 50 checks for free. The process will take some time to complete, but it’s a one-time task.

Scottrade Trading Platform

Socctrade’s web-based trading platform is shown below.

Scottrade interface

The feature that is most appealing to me on the website is that it shows the total market value of my account graphically, giving me a clear picture of how my portfolio has been doing, even though the graphic only covers up to 6 months. As far as I know, this feature is not available at at any other brokers I am using.

Scottrade doesn’t have charts on its homepage. Quotes are given numerically only, even though it does have a separate page where I can get plots and all the technical analysis tools. Trading from the main web page is easy: Enter the symbol in the Quick Quote on the left first then provide all the necessary order information (or click the Trade tab on the top). What I would like to see here is that a Trade button next to all the securities I am currently own (Under Positions in homepage). Now even for those stocks, I have to go through the same steps (enter symbol and order info) to make a trade.

Scottrade Real-time Streaming Quotes

While every discount broker provides its customers with real time quotes, not everyone offers streaming quotes for free. Scottrade is one of those does provide real-time streaming quotes to every customer. The tool,  called Scottrader Streaming Quotes, free for Scottrade customers, let you check up to 40 stocks in real time.

Scottrade Scottrader Streaming Quotes

What’s convenient with Scottrader is that you can trade stocks, whether they are securities you already own or want to own, right from the tool, eliminating the need to go back to the web trading platform to place an order, which is the only way to trade for many other discount brokers. With Scottrader, you can either view your positions, or create a list of stocks you want to watch (you can have up to 40 stocks in the watch list, which can be created at the web and imported into Scottrader).

But getting real-time streaming quotes isn’t the only function of Scottrader. You can also do research with it, even though you don’t have as many functions as you have with ScottradeELITE, Scottrade’s true standalone trading platform. With the Chart tool, you can draw charts with frequencies from 5-minute to monthly, add trend lines, and compare the price chart with such indicators as Simple Moving Average or Linear Regression Line, etc. If you want do more comprehensive research, you can also go back to your Scottrade web account from Scottrader to access more stock, ETF, or mutual fund research tools.

Scottrade Promotion Code for Commission Free Trades

Finally, if you are interested in getting a brokerage account with Scottrade, here’s how you can receive 3 commission free trades ($21 value) when opening an account

  1. Go to Scottrade.com
  2. Use the promotion code KGKP0724 to open an account. There’s no expiration date for the promo code.
  3. Make a deposit of at least $500 is required.
  4. Enjoy your commission free trades.