Sunday, September 22, 2013

New Scottrade Account

Time to diversify brokers.

Although I will receive 3 free trades, this move wasn't meant to play broker favorites or attempt to benefit from bonus perks.  I am simply more comfortable diversifying my wealth across a variety of financial organizations.  Up to this point my wealth was divided between a taxable Fidelity account, tax-exempt Fidelity Roth IRA, taxable Lending Club account, tax-deferred Thrift Savings Plan account, and taxable bank account.  If one organization goes under, I want to be able to access capital from other sources while lawyers sort out the mess.  This is especially relevant to stock brokers where the bulk of my assets happen to be parked!

Enter Scottrade.  I was specifically looking for a second brokerage with the following characteristics:
-A reputable company that has been in business for a minimum of 20 years.
-Above average customer service.
-Low trading fees.
-Physical branches (minor consideration).

Scottrade has been in business since 1980 (33 years), has over 500 branches including one in my city, and offers exceptional customer service according to the reviews I read.  Stock commissions are very low at $7 per trade and compares favorably to my current broker at $7.95/trade (Fidelity).  I would note that I have had absolutely zero problems with Fidelity.  I highly recommend Fidelity and will continue to use their brokerage service for my Roth IRA.  Fidelity also has physical branches in my neck of the woods.   Honestly Fidelity's trading platform and research tools seem to be a few steps ahead of Scottrade, and I love quick responses to my questions they are happy to provide.  I can't speak highly enough about Fidelity!

The plan for my new Scottrade account:
-All new taxable deposits go here
-Funnel all taxable dividend & interest payments to this account
-Transfer the ~$6,000 cash left in my taxable Fidelity account over here
-Shares already held in my taxable Fidelity account are to remain in that account
-Treat all the accounts as one; don't need to rebuy companies I already own

It's going to be a pain when it comes time to update my blog.  However, I think this move will allow me to sleep well at night and be better prepared for the future.

If I happen to make a purchase the next few weeks, it will probably be at Fidelity.  The cash transfers are still pending!


  1. I need to get on this as well. No sense in not diversifying brokerages as well. Scottrade is probably number 1 for me although a Sharebuilder account might be in the works as well. Is there a certain level you're targeting before you would want to diversify to a 3rd brokerage? Ideally I'd have everything in one spot just for ease of tracking but that's just not practical because you never know what could happen and I'd hate to have a large chunk of my investments tied up while the legal issues are handled.

    1. The only real drawback to multiple accounts is the added complexity. Right now I can just log into my brokerage account copy/paste all positions into google docs when I update my portfolio page, it takes all of 3 minutes. With 2 brokers I'll eventually need to do calculations.

      I don't see myself needing more than 3 accounts. What are the chances two brokers are having problems at the same time? I think 2 accounts is pretty safe, but maybe a third if I end up with a large sum of money.

      I've looked at Sharebuilder and think it's a good setup, but mostly for high rollers. I typically invest $1,250 or $1,500 per month; sometimes more, sometimes nothing at all. I can't justify paying $12 a month at my current investment level. If you need to sell a position then buy something else Sharebuilder doesn't really help there. Now if I was a high roller putting gobs of money into the market it would make more sense.

      There are other reasons yet to choose a particular broker. Fidelity offers 60 transaction free iShares ETFs. I will probably put that to use sometime in the future when I start going heavy into bonds. $0 commission with those, but obviously it means being continuously raped with expense ratios till the end of time.

  2. I have been with Scottrade for about 15 years and have never had a problem with them. I think they're a great choice. I LOVE their dividend reinvestment program!

    1. Great to hear Steve! It's going to take a bit to get a decent dividend stream started in my new account. I may consider Scottrade's reinvestment program in the future. I have read nothing but positive reviews about it. Take care.

  3. CI,

    Nice choice! I've been a happy customer for over three years now. Hopefully you enjoy your new Scottrade account!

    I do wonder, though. How will you transfer the dividends received to the new account? Does Fidelity allow that at no charge? Scottrade charges to wire money to other accounts as far as I'm aware. I've often thought about this process when I do eventually decide to open another brokerage account (how to get the dividends over to build the new account).

    Best wishes!

    1. Fidelity lets me transfer money to my bank via an electronic fund transfer, it's free. I could go directly to Scottrade, but it would have to be via wire transfer. That has associated fees.

      I always deposit new funds to my brokerage account near the 15th day of the month. It will look like this:
      1)1st of month: EFT last months dividends from Fidelity to my bank account. (takes 1-2 business days)
      2)15th of the month: Deposit said dividends + regular deposit to Scottrade
      3)Purchase income paying securities
      4)Repeat every month
      5)The same thing we do every night, Pinky- try to take over the world

  4. This is a smart move. For my investing, my goal is not to have more than $100,000 invested per Brokerage account.

    I would much rather spend an additional 1 - 2 hours/year on my taxes, than have a heart attack when my hard earned money is frozen for an undetermined amount of time. If it hasn't happened before, doesn't mean it won't happen in the future. Also, keep your monthly statements saved up and ready..

    I think that many of the low cost brokerages might go under under the wrong circumstances..Possibly in tandem.. Especially those with the lowest trades like $3 or so..

    1. I also worry about some of the extremely low cost brokers. If I'm going to park my life savings somewhere it has to be a company with a good reputation. I'm willing to pay a higher commission for the extra comfort. I don't want to get fleeced.

      Good point about the taxes, for most it will cause extra work. One of my benefits is that the military tax center will file my taxes for free. I just print out the paperwork and let them figure it out.

  5. That sounds good! I was considering opening another taxable account if/when capital would allow me to and possibly taking dividends as cash. My ROTH and taxable accounts are both with E*Trade. Only other account is my 403b with Fidelity from work with no match. Scottrade does seem to be popular around here.

    Interested to hear what others think? Also thank you CI for adding me to the bloglist! I was following Dividend Mantra and you for quite awhile before finally starting this blog.

  6. This is something not talked enough in the retail investing circles.
    We talk of diversifying our dividend income across many company. Across multiple asset classes. Savings across multiple banks. But rarely across multiple investing brokers.

    Yes our accounts are insured but if something were to happen how long would it take them to sort out the mess? How long would you not be able to touch your assets and what if you were needing the money?

    I'm with TDAmeritrade, Sharebuilder, Fidelity.