Compare Charles Schwab versus Vanguard - IRA, commissions, fees, trading tools, differences, pros and cons. Which online broker is better?

Overview

Price-conscious investors can find great deals on brokerage services at Vanguard and Charles Schwab. They do have different strengths and weakness in a variety of areas. This article will pit the two firms against each other in important categories and try to determine which broker is the better choice.

Commissions and Account Minimums

Schwab traders pay a very low $0 for purchases and sales of stocks and exchange-traded funds. The broker-dealer includes a money-back guarantee at this price. Options cost an extra 65 cents per contract. There are no discounts for active traders or large accounts.

An investment account at Schwab comes with no annual fee, and there are no other bothersome charges, such as low-balance or inactivity fees. To open a securities account, customers must deposit at least $1,000 or open a Schwab bank account with the trading account.

Vanguard has a more complicated commission schedule, although customers with large balances will find it very attractive. Accounts under $50,000 pay $7 for the first 25 stock trades in a calendar year. Trades after the 25 are $20 each. Larger accounts pay lower rates on equity trades, with some accounts getting 100 free trades per year. All customers pay $1 per option contract plus either $2 or $7 for a base charge.

Shwab's commissions are actually very good. Only few brokers charge less: Firstrade is at $0 for all products and Ally Invest is cheaper for many mutual funds.

Unlike Schwab, Vanguard has a yearly $20 brokerage account fee. It can be circumvented by enrolling in electronic statements or maintaining $50,000 in account assets. Also unlike Schwab, Vanguard does not have a minimum deposit requirement to open a trading account.

The victory in this category is awarded to Schwab for having a simple, flat commission schedule.

Mutual Funds...

Traders at Schwab can buy and sell more than 5,700 mutual funds. Over 3,400 of them are OneSource securities. These are funds that carry neither transaction fee nor load. Transaction-fee funds cost $76 to purchase, although they are free to sell. The broker-dealer imposes a short-term redemption fee of $49.95 if an NTF fund is liquidated less than 90 days after purchase.

Vanguard customers have a larger list of total mutual funds (approximately 7,200); although there are fewer no-load, no-transaction-fee funds (less than 3,000). Vanguard’s transaction fee for non-NTF funds is $35, and it’s applied to both purchases and sales ($70 round-trip, less than Schwab’s figure). Vanguard clients are also charged $50 for selling an NTF fund within two months of purchase.

While Vanguard used to be widely known for its low expense ratios, Schwab has matched it and even beat it in some cases. For example, Schwab’s S&P 500 mutual fund (SWPPX) charges a 0.03% expense ratio, while Vanguard’s equivalent fund (VFINX) charges 14 basis points.

Pretty close here.

...and ETF's

Schwab clients can trade 252 ETF’s without paying a dime in commissions. This is one of the largest lists in the brokerage world. Even better, there are no short-term redemption fees for these commission-free funds. For all funds, Schwab offers an advanced screener, a Schwab report card, and profiles with plenty of detailed information.

Like Schwab, Vanguard manages its own lineup of ETF’s. Unlike Schwab, Vanguard doesn’t offer any non-Vanguard funds commission-free. Vanguard offers all of its own ETF’s with no trading fees, and there are about 70 of them. Vanguard’s ETF section has less information on it than Schwab’s.

Schwab wins once again.

Trading Technology

Vanguard’s website is where all the trading action takes place, as the broker does not have a desktop platform. It also does not provide a browser-based one. Orders are placed on simple web pages. The website is fairly simple, and it can be difficult to find information sometimes. Using a search field that appears in the upper-right corner makes navigation a bit easier. In addition to the failures already mentioned, the website doesn’t have a trade bar.

Charting on the Vanguard site comes with a few technical indicators and chart styles. A graph cannot be displayed the width of the monitor. Ford’s price history can be displayed up to 10 years, which certainly isn’t all of the company’s history.

Charting on Schwab’s site offers much more, including more technical indicators and graph styles. There are also drawing tools available, which Vanguard doesn’t offer. A graph can be detached into its own window, although it can’t be shown full-screen.

Charles Schwab versus Vanguard

Besides its better charting, Schwab offers a trade bar on its website. Lots of important trade data is shown on it, and a small graph can be displayed from it.

There is a simple browser-based trade system available at StreetSmart.com, which can be accessed from the Schwab website after logging in. However, it doesn’t work with all browsers.

Next up is Schwab’s flagship technology, StreetSmart Edge. This is a sophisticated desktop platform, and the broker no longer maintains any account minimums to use it. It offers Market Depth, which is similar to Level II quotes, and live CNBC. Both are free of charge.

Vanguard loses again.

Vanguard versus Charles Schwab

Mobile Applications

Vanguard improves its technical suite with its mobile app. It has a check deposit feature and a nice portfolio analysis tool. Also available is a watchlist and market news, including a few videos.


Vanguard mobile


Despite its improvement, Vanguard doesn’t quite measure up to Schwab here. The latter broker-dealer offers live streaming of CNBC, for example, including European and Asian versions, free of charge. Schwab’s app also allows the trading of non-Schwab mutual funds. On Vanguard’s app, it’s only possible to trade Vanguard mutual funds. Schwab’s mobile charting is also much more sophisticated than Vanguard’s.


Vanguard vs Schwab


Another victory for Schwab.

Customer Service Options

Schwab has representatives on the phone 24/7. There is also a chat function on its website that operates around the clock. The broker offers several languages besides English, and there is a phone number for investors outside the U.S. The brokerage firm operates a nationwide network of branch locations, with a few offices outside America.

Vanguard does not have online chat, nor does it provide 24/7 phone service. The brokerage house is open from 8 o’clock in the morning until 10 o’clock in the evening; and we emphasize brokerage house in the singular here because the company has only one location.

Another loss for Vanguard.

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Managed Accounts and Financial Advice

Schwab clients who don’t want to manage their own investments can sign up for the broker’s automated trading service called Intelligent Portfolios. It is free of charge. Customers who want a financial plan and personal guidance from an investment advisor can pay 0.28%, although a $25,000 minimum is required for this service.

The broker-dealer also provides traditional management in a variety of packages, starting at 90 basis points, dropping to 0.20% for balances above $1,000,000. Equities and fixed income are available in some of these packages.

Vanguard offers traditional management services. It does not yet have a robo-advisory service. The brokerage firm charges 0.30% for its service and requires a $50,000 minimum deposit. Some of Schwab’s packages require $100,000 to start, while others require only $25,000.

Because of its robo selections, Schwab wins here.

Education and Research

Vanguard provides equity reports from MarketGrader and Argus free of charge. There are decent screeners for stocks, ETF’s, bonds, and mutual funds. Financial news and commentary are available; some of these resources are in article format, while others are videos. Market indexes from around the world are displayed in a map format, and there is a U.S. economic calendar as well.

Schwab’s website offers even more, providing information not just on securities, but other financial topics, such as estate planning, taxation, divorce, and planning for college. The broker-dealer provides free stock reports from more than two analysts (IBM has seven reports). The broker’s investment section has articles and videos on all major securities.

Schwab takes another victory.

Banking Features

Besides its investing services, Schwab also operates an FDIC-insured bank. A checking account comes with free checks and a Visa debit card. The broker reimburses ATM fees worldwide, a very generous policy. The checking account has no regular fees and requires no minimum balance.

Vanguard offers a hybrid securities-bank account it calls VanguardAdvantage. Unfortunately, the brokerage firm requires customers to have $500,000 in assets before they can apply for the account. On top of this rather unpleasant policy, Vanguard charges a $30 fee for the account (maintaining a balance of $1,000,000 will evade the charge). ATM withdrawals at PNC Bank locations are free of charge. Because Vanguard’s account can buy and sell securities, margin can be added to it. Schwab’s account is strictly a bank account.

Most investors won’t have half a million dollars to qualify for Vanguard’s account, so Schwab wins the last category.

Vanguard vs Charles Schwab Judgment

Charles Schwab (review) won every category except one where there was a tie. Vanguard (review) used to attract fund investors for its low fees, and now it can’t even boast that advantage in all cases.

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