Charles Schwab started as a discount brokerage and is now a full financial services company

Charles Schwab is a publicly traded financial services firm that lets people buy and sell stocks, bonds, mutual funds, and exchange-traded funds (ETFs). The company also offers retirement accounts, banking products, and advisory services. You can open an account online, fund it, and trade through their website or mobile app.

The company was founded in 1971 by Charles R. Schwab as a way to offer lower trading commissions than traditional brokerages charged at the time. In 2020, Schwab completed its acquisition of TD Ameritrade, which was another major brokerage. Today, Schwab is one of the largest brokerages in the United States by assets under management.

Schwab makes money through several channels: trading commissions on certain products, account fees, interest on cash balances, and advisory fees for managed accounts. Most stock and ETF trades through Schwab carry no commission, but some products and services do have costs attached.

Key Takeaways

  • Schwab is a brokerage where you can open accounts to buy and sell investments like stocks, bonds, and ETFs.
  • The company offers retirement accounts including IRAs and rollovers from employer plans, as well as regular taxable brokerage accounts.
  • Schwab provides banking services such as checking accounts, savings accounts, and debit cards linked to your brokerage account.
  • You can use Schwab's research tools and educational resources at no extra cost, though advisory services and managed accounts carry separate fees.

What types of accounts you can open at Schwab

Schwab offers several account structures depending on what you want to do with your money. A taxable brokerage account has no contribution limits and no restrictions on when you withdraw money, but you pay taxes on gains and dividends each year. A traditional IRA lets you contribute pre-tax money (up to the annual limit set by the IRS) and defer taxes until withdrawal in retirement. A Roth IRA takes after-tax contributions but lets withdrawals in retirement come out tax-free if you meet holding requirements.

Schwab also handles rollovers from employer retirement plans like 401(k)s and 403(b)s. When you leave a job or retire, you can move that money into a Schwab IRA to keep it invested and avoid cashing it out. Schwab manages the paperwork with your former employer's plan administrator.

For self-employed people and small business owners, Schwab offers SEP IRAs and Solo 401(k)s, which allow higher contribution limits than standard IRAs. The company also provides custodial accounts for minors and trust accounts for estate planning purposes.

How Schwab's trading and investment tools work

Once your account is funded, you can place trades through Schwab's website or mobile app. Stock and ETF trades execute with no commission. Mutual fund trades may carry transaction fees depending on the fund family. You can set up automatic investments to buy a fixed dollar amount of a stock or fund on a schedule you choose.

Schwab provides research reports, stock screeners, and charting tools at no additional cost. The company also offers educational content including articles, videos, and webinars about investing, retirement planning, and financial topics. These resources are meant to help you make informed decisions but do not constitute personalized investment information.

If you want professional management rather than picking investments yourself, Schwab offers robo-advisory services through its Schwab Intelligent Portfolios product, which automatically builds and rebalances a diversified portfolio based on your goals and risk tolerance. This service charges no advisory fee but does charge underlying fund expenses. Schwab also offers traditional financial advisory services with a human advisor for accounts above a certain size, which do charge advisory fees.

Banking and cash management features

Schwab operates a bank subsidiary and offers checking and savings accounts directly. A Schwab Bank Investor Checking account comes with a debit card, check-writing privileges, and no monthly fees. The savings account pays interest, though the rate varies based on market conditions and Schwab's current offerings.

Money in your Schwab brokerage account that is not invested in stocks or funds sits in a cash sweep vehicle, which typically earns interest. Schwab automatically moves uninvested cash into interest-bearing products to maximize what you earn on idle money. You can link your Schwab brokerage account to an external bank account to move money in and out.

Schwab's ownership and regulation

Charles Schwab Corporation is a publicly traded company listed on the New York Stock Exchange under the ticker SCHW. This means the company is owned by its shareholders and must report financial results quarterly to the Securities and Exchange Commission (SEC).

As a brokerage, Schwab is regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). The company is also a member of the Securities Investor Protection Corporation (SIPC), which protects customer accounts up to $500,000 in the event of firm failure. Cash deposits in Schwab Bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor per account type.

How Schwab compares to other brokerages

Schwab competes with other large brokerages like Fidelity, E*TRADE, and Interactive Brokers. All of these firms offer commission-free stock and ETF trading, so the differences lie in research tools, account features, customer service, and advisory options. Schwab is known for its educational resources and user-friendly platform. Some competitors offer more advanced trading tools or lower fees for certain products.

Smaller or specialized brokerages may focus on specific investor types—day traders, options traders, or international investors—and offer features tailored to those groups. Schwab is a generalist platform designed to serve individual investors at all experience levels, from beginners to active traders.

Frequently Asked Questions

Is Schwab a bank or a brokerage?

Schwab is both. The parent company is a brokerage that lets you buy and sell investments. Schwab also owns a bank subsidiary that offers checking, savings, and other banking products. You can use Schwab for investing, banking, or both.

Does Schwab charge fees to open an account?

No. Opening a brokerage or bank account at Schwab carries no account opening fee. Some account types have minimum balance requirements, but there is no charge just to set up the account. Trading commissions and advisory fees explore only to specific transactions or services you choose to use.

Can I move money from another brokerage to Schwab?

Yes. Schwab handles transfers from other brokerages through a process called an ACAT (Automated Customer Account Transfer). You initiate the transfer from your Schwab account, and Schwab coordinates with your old brokerage to move your holdings. The process typically takes five to seven business days.

What happens to my money if Schwab fails?

Brokerage assets are protected by SIPC up to $500,000 per account. Cash held in Schwab Bank accounts is insured by the FDIC up to $250,000 per depositor per account type. Schwab is a large, well-capitalized firm, but these protections exist in case of firm failure.

Does Schwab offer investment information?

Schwab offers educational resources and research tools at no extra cost. The company also offers robo-advisory services with no advisory fee, and traditional financial advisory services with a human advisor for accounts above a certain size, which do charge advisory fees. The level of information depends on which service you choose.