Vanguard and Charles Schwab have both made their names as retail firms that offer personal financial services and investment advice. While both continue to sell financial and investment management as their flagship products, they have also gotten into the online trading platform game. Each offers clients a web- and app-based portal for trading. Although they are similar in many ways, there are a few key differences. We cover these companies’ online platforms (not their retail financial or other offerings).
Vanguard vs. Charles Schwab: Fees
An online trading platform will generally charge four types of fees:
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Trading Fees – Any fixed charge attached to each trade that you make. This is typically either a flat fee or it is based on the so-called spread, when your broker charges you based on the difference between the buying price and the selling price of an asset.
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Trading Commissions – This is when a broker will charge you for each trade you make based on a percentage of the volume or value of each trade.
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Inactivity Fees – Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account or holding assets.
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Non-Trading/Other Fees – Any form of fee for using this platform not covered above. For example, a brokerage might charge you for making deposits into your account, taking money out of it or signing up for additional services.
Like most major trading platforms, Vanguard and Charles Schwab offer similar fee structures. Both offer $0 trading for stocks and exchange-traded funds, a relatively recent departure from the traditional business model of most major firms, which historically relied heavily on equity brokerage fees.
However, unlike many platforms, Vanguard has made an effort to distinguish its fee structure from the mainstream. It offers more expensive options trading, with Charles Schwab charging $0.65 per contract and Vanguard charging $1.00 per contract to trade. (Investors with more than $1 million in assets can receive a number of options trades free on Vanguard’s platform.)
Charles Schwab charges $50 to trade mutual funds that are not on the firm’s no-fee list, a collection of several thousand mutual funds which the firm allows you to trade for zero cost. Vanguard offers considerably cheaper trading in mutual funds. All funds managed by Vanguard itself are free, as are several thousand funds on the firm’s no-fee list. For all others Vanguard charges a $20 fee. While these are dramatically different fee structures, it should be noted that the no-fee lists for both Schwab and Vanguard are extensive enough to meet virtually any investment portfolio strategy. Unless you have specific funds you’d like to purchase, the average investor will likely pay nothing to trade mutual funds on either platform.
As with options, Vanguard offers reduced trading fees for mutual funds to investors with more than $1 million on account.
Neither platform charges inactivity fees, and neither charges non-trading fees for basic transactions such as depositing or withdrawing money. Neither require a minimum balance to open an account.
Vanguard vs. Charles Schwab: Services & Features
As trading platforms Vanguard and Charles Schwab offer generally similar products. Both are full-service brokerages, meaning that investors can trade in most mainstream securities and will have access to most mainstream forms of data. Both Vanguard and Charles Schwab offer a full suite of information and technical indicators for investors, supporting research from basic data such as price history to sophisticated information such as company profiles and real-time updates.
However, in terms of services and features, Charles Schwab has several areas where it pulls ahead of Vanguard.
For sophisticated investors, Schwab supports trading in both futures contracts and foreign currency markets. Vanguard does not support either of these assets. This is not a loss for the average investor, who should likely not trade these high-risk assets. However, it may impact more sophisticated investors who have the experience and the finances to trade in these markets safely.
For average investors, Vanguard tends to build its prices to more aggressively favor large investors. Fees on products like mutual funds and options contracts fall off for individuals who have $1 million or more invested with the company. This is not necessarily a problem for ordinary investors, as Vanguard’s prices are not prohibitively high to begin with. (Indeed, the only meaningful difference is that Vanguard charges a little bit more than Schwab to trade each options contract.) However, it remains true that the best deals on Vanguard’s platform are reserved for the wealthiest traders.
At the time of writing, neither platform allowed direct investment in cryptocurrency and, contrary to some reporting, both platforms support trading in fractional shares.
Finally, Schwab offers two branded platforms on which to trade. For most investors the firms standard platform, available by website and app under the “Charles Schwab” brand, is more than sufficient. Its second platform, known as “StreetSmart,” offers a more complex trading environment for sophisticated investors. StreetSmart offers some tools for high volume, semi-professional traders that neither Schwab’s base brand nor Vanguard effectively offer, including the ability to respond to real-time market changes.
This brand will do little for average investors, in fact it will be prohibitively complicated for an ordinary investor. But StreetSmart does have a lot to offer the particularly experienced investor.
Finally, Schwab offers a significantly wider range of order types than Vanguard does. Schwab’s platform supports complex interactions, such as conditional orders and triggers. Vanguard’s platform offers far fewer complex order types; however, it does offer all of the basics such as stop-loss and limit orders.
Vanguard vs. Charles Schwab: Online & Mobile Experience
Charles Schwab offers a generally more robust and well-designed user experience than Vanguard. As full-service brokerages, both platforms offer many ways to contact the firm if you have questions or need support. You can call, email or chat with either Vanguard or Schwab. However, Schwab’s contact information is more prominent and easier to find, taking several steps out of the support process. This is not necessarily a dealbreaker but, particularly given how stressful it can be to need help accessing your money, Schwab’s more customer friendly support structure is noteworthy.
Of the two platforms, Schwab’s apps are particularly better designed than Vanguard’s. Through both the Charles Schwab and the StreetSmart app it is generally easy to find information, research stocks and make a long-term plan. Vanguard’s app is not poorly designed. You can easily access your portfolio, find a given asset and see that asset’s basic information such as price and short-term price history. However, it can be difficult to find more sophisticated information. In fact, often Vanguard’s app does not support some of the more in-depth technical analysis that investors might want.
The firm’s website offers considerably more depth than its app does. Even here you will find that your options are rather more limited than they are in Schwab’s trading environment, but it is fairly easy to navigate via tabs to technical indicators and analysis.
That said, Charles Schwab’s trading platform may confuse inexperienced investors. In particular, both the firm’s flagship brand and StreetSmart rely on what is known as the All-In-One Trading Ticket. This is the screen where users actually execute trades that they have lined up, allowing you a complete view of all the changes you plan to make to your market position. While this has potentially quite a bit of value for highly experienced investors, it also removes your trading from the actual assets you planned on purchasing. (That is, before you can make a trade you must navigate away from that asset’s price information and onto a different screen entirely.) New investors may find the All-In-One confusing, with a wall of options presented in one place, while experienced investors may find more hindrance than help.
Vanguard vs. Charles Schwab: Who Should Use It?
Long before brokerages got into the trading platform game, Vanguard made its name primarily as a dealer in mutual funds. It is clear that this is where the firm’s identity still primarily lies.
The Vanguard platform heavily favors investors who are likely to move slowly and hold assets for a long time. Funds are easy to trade and far cheaper than on almost any competing platform. Trading options are relatively few, the platform does not support more exotic assets such as foreign exchange and futures, and Vanguard offers fewer streams of data than many modern investors may look for. All of this speaks to a platform built for traders who want to buy and hold their investments for a long period of time.
If you are an active investor, Vanguard may not be for you. You will likely find its interface frustrating and its options limited. However, most investor should not be active investors. The odds of a retail investor beating the market are quite low. (In fact, few professional investors ever beat the market.) If you want to buy and hold assets for a long time, and particularly if you want to concentrate your investments in mutual funds then the Vanguard trading platform may be just the right choice for you.
And let’s be honest, unless you’re a day trader, you probably should concentrate your money in mutual funds and hold mainly long-term assets.
For sophisticated, high-volume traders, the Charles Schwab platform may be the better choice. In particular its StreetSmart brand offers a wealth of data and responsiveness that is very well tailored to active, semi-professional, and day traders. While this reviewer finds the All-In-One ticket unnecessarily difficult, by and large this platform will do well for investors looking to move fast on complicated positions.
Bottom Line
Both Vanguard and Charles Schwab have attractive features and distinctive qualities. Investors who want to concentrate on mutual funds and long-term investments will find a lot to like about Vanguard, and will save some money in the process. Highly active investors or those taking complicated positions will prefer Charles Schwab, particularly its StreetSmart brand. Another factor to consider: Charles Schwab’s 2020 acquisition of TD Ameritrade may expand opportunities for its clients.
Tips for Investing
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Once you’ve decided how you’re going to trade, now it’s time to figure out what to do with that platform. SmartAsset’s matching tool can help you find a financial advisor near you to help build a strategy around your money, whether you’re investing for retirement, long-term plans or just wealth. If you’re ready then get started now.
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Now that we’ve compared these services, let’s get into the details. In our review of Vanguard we dive into the nitty gritty of their trading platform, while you can learn all about Charles Schwab in our review here.
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