1. Lower fees

Brokers compete on cost — a lot. When Interactive Brokers and Charles Schwab debuted no-cost stock and ETF trading in 2019, the rest of the commissioned brokers followed. With that major cost out of the way, individual investors can now focus on comparing brokers on other fees.

For example, the best brokers offer thousands of mutual funds with no transaction fee, while many others offer reduced costs. Schwab and Vanguard are leaders here, while Fidelity Investments offers its own totally free funds – no transaction fees and a zero expense ratio, too.

You’ll also want to consider other fees, including the routine fees that many brokers still charge. For example, some brokers still charge an IRA close-out fee. While it may be relatively small, there’s little reason it should go into their pocket if it could just as easily go into yours.

When it comes to these nickel-and-dime fees, two of the best brokers – who also don’t sacrifice customer service – are Fidelity and Charles Schwab. You’ll be able to quickly reach customer service, and you won’t be relegated to searching for an answer on a website.

What to Look For In a Brokerage Account

If you’re comparing multiple brokerage accounts and want to decide which is best, there are a few things you should compare.

The first thing to look at is the tools and features the brokerage provides.

What’s useful for you depends on your investing strategy.

Mutual fund investors won’t benefit as much from powerful stock screeners and research tools as compared to active traders. Look for tools and features that fit your investing style.

Another thing to consider is fees.

This includes the fees charged by the brokerage and the fees charged by the mutual funds it offers. Investment fees can have a massive impact on your portfolio’s returns.

Look for companies that charge lower fees and expense ratios for their funds, or that offer ways to avoid the fee entirely.

You should also think about the history and reputation of the brokerage.

  • Older, established companies with long histories tend to be more stable and often have better customer support and are more reliable.
  • Newer brokerages may have more technical issues or have trouble handling certain situations.


Brokerage Accounts vs. Retirement Accounts

Brokerage accounts and retirement accounts both can help you save for the future by providing a way to invest your money in the financial markets. However, there are big differences between these types of accounts, especially when it comes to the range of investing options they offer and tax treatment.

Brokerage Account Flexibility

Brokerage accounts lack the rules and restrictions that govern retirement accounts, like 401(k)s and IRAs, among others. Annual contributions to retirement accounts are capped, there are strict rules on when you can withdraw funds and some retirement accounts may offer a limited choice of investable assets and securities. The latter is especially true in 401(k) accounts.

Brokerage accounts offer much greater flexibility. You may deposit as much money as you want in a brokerage account, and you can invest in any of the assets or securities offered by your broker. “You can put the money in whenever you want, take the money out whenever you want,” Boersen says. “And there’s really no limit on what the investment options are.”

Brokerage Accounts and Taxes

Brokerage accounts and retirement accounts are taxed differently. Contributions to traditional IRAs and regular 401(k)s are made before you pay income taxes on your salary, the balance grows tax-free over time and you pay taxes when you withdraw money in retirement. With Roth IRAs and Roth 401(k)s, contributions are made after you have paid income taxes, the money grows tax-free over time and you pay no taxes when you withdraw funds in retirement.

With brokerage accounts, when you sell an investment for a gain, you pay capital gains taxes. Generally, if you’ve held the investment for more than a year, you’ll pay the long-term capital gains tax rate on the proceeds and if you’ve owned it for less than a year, you’ll pay the short-term capital gains tax rate.

You will owe taxes when you receive income from investments held in your brokerage account, such as dividends or interest, or when cash in your account earns interest. If a stock you own pays out cash dividends or qualified dividends, the proceeds may be taxed. Taxes on interest income from bonds are more complicated.

One tax strategy available to investors with a brokerage account is called tax-loss harvesting. Under certain conditions, when you sell an investment for less than you paid for it, you may use some of the loss to offset other taxable gains in your portfolio.

If you invest strategically using your brokerage account, you can minimize the taxes you’ll owe. “For some people, the brokerage account may be equally as beneficial as some of the retirement accounts, if managed correctly from a tax standpoint,” Boersen says.

Questions to Ask

Asking questions will help you to invest wisely and avoid problems. No matter what your level of investing experience, don’t be shy or intimidated—it’s your money. Here’s a list to get you started.

  1. Is this a margin account or a cash account? Can you explain the differences between the two?
  2. What choices do I have regarding cash sweep programs? What are the different features, including interest rates and federal insurance coverage? If the firm offers both bank deposits and money market funds, what are the advantages and disadvantages of selecting one over the other?
  3. Who will control decision-making in my account?
  4. How often will I get account statements? Who will provide the statements and will they be online or in paper?  

    Tip: The firm that you open an account with may not be the one that sends your account statements. You may open an account with an introducing firm, which makes recommendations, takes and executes your orders and has an arrangement with a clearing and carrying firm, which is the one to finalize (“settle” or “clear”) your trades and hold your funds or securities. There are also firms that take and execute orders and settle trades. If you work with an introducing firm, you may receive statements from the clearing firm. Find out what type of firm you open an account with and who will send you the account statements. You will receive an account statement at least once every calendar quarter.

  5. Will my securities be registered in my name, or in the name of the firm? Can you explain the differences between the two?  

    Tip: Whether the securities are registered in your name or in the name of the broker-dealer firm can affect how soon you receive your dividends and interest, the ease with which you can sell your securities and the types of communications you receive directly from the issuer of the securities, among other things. For more information, see “Holding Your Securities—Get the Facts” on the SEC’s Web site at .

  6. What are all the fees relating to this account? How much are commissions? Are there any other transaction or advisory fees? Fees for not maintaining a minimum balance? Account maintenance, account transfer, account inactivity, wire transfer fees or any other fees?
  7. What services am I getting with this account?
  8. Who do I contact if I have a question or concern regarding my account? What are the different ways I can contact my account representative or his or her manager? Phone? Email? Local branch office?

How to Choose a Brokerage Account

Brokerage accounts are typically used for either on-demand trading of securities or as an extra retirement vehicle. A normal retirement account, like a 401(k) or IRA, has a specific purpose and is much more restricted in how and when you can withdraw. However, they do feature incredibly important tax benefits, which makes brokerage accounts best served as ancillary retirement nest eggs.

When comparing the usefulness of a savings account to a brokerage account, you’ll probably want a traditional brokerage account. This will enable you to withdraw or change your investments at any time.

When opening a traditional brokerage account, you can choose between a cash or margin account type. A cash account is just as it sounds, with the value of the cash or securities in it being the total dollar value that you can withdraw or trade. A margin account means you can borrow money to invest, but this isn’t the type of account that you’ll likely want if you need to keep cash on hand.

Choosing where to open your brokerage account can depend on a number of factors. Here are a three important items to consider when looking for a new brokerage account:

  • Commissions and trading fees: Every time you make a trade with your brokerage account, your broker may charge a fee or commission. If you plan on trading a lot, then this can add up quickly. However, many brokers charge no fees at all for stock and ETF trades, with bonds and options coming with marginal fees.
  • Fund selection: The number of investment opportunities might be important to you if you have a lot of money to invest or if you’re not yet sure where you want to invest your money. A financial advisor can help you determine the types of investments that will benefit you, but you may want to find a brokerage account that has access to as many mutual funds as possible.
  • Account minimums: Many brokerage accounts will require certain account minimums to keep in your account at all times. If you’re just wanting to put your money into an account to earn a return while you wait to use it, then a no-minimum account will probably be very important to you.

Pricing and fees


  • Stock and ETF trades (excluding penny stocks) made online and through our automated phone system are $0
  • No-load, no transaction fee mutual funds: $0 
  • No-load, transaction Fee mutual funds: $35


A $30 Household Annual Fee applies. You can avoid this fee with one of the following as of June 30 each year for all accounts in your WellsTrade household:

  • Enrollment in only electronic delivery for statements, trade confirmations, other documents, and shareholder communications (excluding tax documents/1099s)
  • Linkage to the Portfolio by Wells Fargo program
  • $250,000 or more in household balances
  • SEP IRA accounts-only households
  • Wells Fargo Private Bank accounts

Fee will be charged in September of each year.

Please see the WellsTrade Commissions and Fees for complete information.

Additional Information

$30 per WellsTrade household. A WellsTrade household is comprised solely of WellsTrade accounts with the same ownership or address. Households comprised solely of one or more WellsTrade IRA accounts are subject to a $30 IRA Custodial Fee in lieu of the $30 Household Annual Fee. If a Household Annual fee is due, the highest-value account in the client’s household that is eligible to be charged a fee will be debited in September of each year. IRA accounts will be charged only if there are no eligible non-IRA accounts in the household. If an IRA Custodial Fee is due, clients will receive a remittance notice with several payment options. If a payment option is not selected, the fee will be automatically deducted from the IRA in September of each year. Note: In the event that an annual fee results in a debit balance in the account, Wells Fargo Advisors may liquidate securities in the account to satisfy the debit, without prior notification to the client.

All accounts must be enrolled in electronic delivery to receive the following documents online only, including statements, trade confirmations, other documents, and shareholder communications, excluding tax documents/1099s. Please note that if a client elects to turn off paper delivery of these documents, they will receive these documents only via Access Online.

Refer to the Wells Fargo Bank Consumer Account Fee and Information Schedule for further information about the Portfolio by Wells Fargo program and applicable bank fees. Some brokerage accounts are not eligible to be linked to a Portfolio by Wells Fargo program, and they will not receive Portfolio by Wells Fargo program benefits. The Wells Fargo Bank Portfolio by Wells Fargo program has a $25 monthly service fee. The fee can be avoided each fee period with $20,000 or more in statement-ending qualifying linked bank deposit account balances (checking, savings, time accounts (CDs), FDIC-insured IRAs) and investment account balances (brokerage available through our brokerage affiliate Wells Fargo Advisors, Investment & Fiduciary Services, annuities, and foreign exchange). For more information, call Wells Fargo Bank, N.A. at 1-866-245-3452. Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.

Wells Fargo Advisors:

  • Brokerage products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
  • Certain brokerage accounts are not eligible.

Insurance and annuities:

  • Products are offered through non-bank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.
  • If the annuity becomes annuitized, or a periodic payment schedule has been established, the remaining balance will no longer be eligible for qualification.

Your total household value includes all assets listed in your WellsTrade account statements, except for those shown under the “Other Assets/Liabilities” section. The grouping of accounts into a household is based on account eligibility and family relationships such as children, parents, domestic partners, and others. Certain accounts cannot be included in a household. Please call us at 1-800-TRADERS for more information and to determine whether all eligible accounts have been included in your household. It is your responsibility to ensure that all eligible accounts are included in your household.

2. Open an IRA

If you’ve hit your max contributions for your work-sponsored retirement plan or you don’t have one available, open up a retirement account. 

Individual retirement accounts, or IRAs, are best for people who either don’t have a 401(k) option at their company, are self-employed or are looking for more ways to invest their cash. The two most popular are traditional IRAs and Roth IRAs (named for Sen. William Roth, the principal sponsor of the 1997 legislation that established the mechanism). The main difference is how you’re taxed. For traditional IRAs, contributions and earnings are tax-deferred, but your distributions are taxed when you retire. Required minimum distributions kick in when you turn 72 years of age, which is when you’re required to make minimum withdrawals from your account. Roth IRAs are taxed upon contribution, or when you add funds to your IRA, and your earnings and distributions are tax-free. Roth IRAs don’t have RMDs, so you don’t need to withdraw unless you want to.

While you can have as many IRAs as you want, you can contribute only the annual maximum. For 2020, the maximum is $6,000. Roth IRAs are also subject to income limits. For 2020, your modified adjusted gross income needs to be less than $124,000 if you’re filing singly ($196,000 if you’re married filing jointly) in order to contribute the full $6,000. If you’re above the earning threshold but still want a Roth IRA, you can open a traditional IRA and then convert it. This is called a backdoor Roth IRA.

Will You Use the App or Website?

If you plan on doing a lot of your research or trading online, be sure to visit the website of the brokerages you're considering. The feel and usability of the site will be almost as important as the other benefits and services offered.

Some brokerage houses have been notorious for site outages during periods of high market volatility or trading. Others send brokerage account owners through a maze of recorded messages before reaching a live person on the phone.

If you're more of an app user, be sure a brokerage's app works with your device and that it is comfortable and convenient to use.

Managed Portfolios

E*TRADE Capital Management offers a range of portfolios to help meet your needs – choose from our fully managed accounts or our automated investment portfolios. 


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