Is Charles Schwab Safe and Legitimate Broker? Is Charles Schwab Account Free and Insured?

Is Charles Schwab Safe?

We are being asked a lot of questions on a daily basis on various investment related topics. Some of our readers expressed the following concerns:

- Is Charles Schwab a scam?
- Is Charles Schwab safe company to keep money and investments?
- Is Charles Schwab account FDIC/SIPC insured?
- Is it a member of FINRA/SIPC?

First, we have to point out that we get these questions for ALL brokerage houses, big and small, and Charles Schwab is not an exception. After all, it's a company where 11.5 million of people keep their savings and investments, and after 2008 collapse of many investment banks (which some people mistake with online investing firms such as Charles Schwab) a lot of people are nervous about the health of financial companies in general.

The short answer to all of these concerns is yes, Charles Schwab is a legitimate, very safe brokerage house that has been in business for over 35 years. We have had account with them since 2002. We did have some issues with company's order executions in the past but no questions about legitimacy or safety of the company ever existed. In fact, Charles Schwab is one of the three largest and best-known brokerage houses in the United States. The firm is reviewed every year by major financial magazines and it always gets high scores.

Thinkorswim is an online brokerage firm that got acquired by Charles Schwab. The Thinkorswim brand is kept alive because its trading platform became the most recognized in the business. It is now one of the most widely used trading platforms among active traders. Read more about it in 2024 Thinkorswim review here.

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Is My Money Safe at Charles Schwab?

In the article What happens if a brokerage becomes bankrupt we explain what happens to customers' money and investments if a brokerage firm goes into bankruptcy. Basically, all Charles Schwab customer brokerage accounts are insured by SIPC in a very similar way that bank accounts are insured by the FDIC. In case of broker failure, customers will get back up to $500,000 each, including up to $250,000 for uninvested cash. This should ease the fears of investors nervous about the safety of their nest egg at the brokerage firm.

Charles Schwab IRA Trading Fees

The broker's regular commission schedule applies to retirement and non-retirement accounts alike. The cost of trading ETFs and stocks is $0. A human broker is available to help clients complete a trade over the phone. Using this service is $25. Alternatively, traders can place a trade over the broker's automated phone system for $5.

Charles Schwab offers a list of approximately 4,200 mutual funds that carry no load and no transaction fee. These NTF funds offer retirement savers some good investment products, such as inflation-protected bonds and REIT's. There are more than 11,000 mutual funds in total at Charles Schwab. Transaction-fee funds carry a $49.99 charge, which is applied to purchases, sales, and exchanges.

NTF funds with Charles Schwab must be held at least 180 days, or the broker will consider the sale to be a short-term trade. In this case, there is a $49.99 fee. However, ProFunds and Rydex fund families are exempt from the short-term trade policy.

Target date mutual funds are available at Charles Schwab. These funds are designed for retirement savers. Investors can choose from several different fund companies, including Vanguard, T. Rowe Price, and Wells Fargo. Some of the target date funds have no load and no transaction fee.

Retirement savers will also find that all exchange-traded funds (or ETFs) at Charles Schwab are free to trade. Many of these free-to-trade funds have expense ratios below 1.00%. Some are below 0.10%. There are several that have portfolios that would be ideal for retirees, such as investment-grade bonds and blue chip stocks.

Is Charles Schwab Legit?

Charles Schwab IRA Fees

Charles Schwab offers its clients no-fee IRAs This promise of no fees includes no setup fee, no annual fee, no inactivity fee, no account maintenance fee, and no low-balance fee. All Charles Schwab IRAs, including custodial IRAs, have the same fee-free structure. There is no fee to close an IRA, and there is no minimum opening deposit requirement for any retirement account.

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