Leave Schwab for Fidelity / Vanguard?

[nassau34]

I'm struggling to find a reason to keep a Schwab brokerage account. I was recently charged a margin interest amount I still don't understand for selling an ETF, and apparently buying another ETF before everything had settled. I called the next day and removed the ability to use margin from the account so that wouldn't happen again. I'm seriously considering transferring all the assets in this account to Fidelity and asking that Fidelity cover the transfer charges, in addition to possibly providing a transfer bonus (this is a well over a $1 million account). I also already have the ability to easily move money between Fidelity and Vanguard, so I would just continue to use the lower cost Vanguard money market funds for excess cash. Any thoughts?

[jebmke]

Having three brokerage accounts is two more than I need.

[nalor511]

If Schwab charged you margin interest, so would Fidelity. I wouldn't move for the reason you described. Fidelity and Schwab service is on par.

[Dufus]

Did you ask Schwab if they could credit back that charge? Fidelity has angered more than a few people lately with unannounced extended holds on deposits. I'm still with Fidelity but put the brakes on moving to them as a one stop shop. I'll keep a couple of credit unions.

[WonderWander]

I’ve sold and bought ETFs the same day with Schwab multiple times in the past few months and never seen the charge you described. For mutual funds, you do have to wait a day for the settlement.

Did you somehow go over the max funds available to you when you initiated the purchase? Agree with the other poster that you should reach out to Schwab rep and see if they can look into it and credit it back.

[Curly]

We don't have the margin feature enabled on any of our four Schwab accounts. Because of that, it doesn't allow any trade I might try* to make that otherwise would result in a margin charge.

If you are otherwise happy with Schwab, this might end up being your best solution.

* this would only be accidental or by oversight because I am not brave enough to do anything risky like trading on margin

[Kagord]

Well, at least you didn't get a violation, a margin account helps with that.

[gavinsiu]

Is the only reason a margin interest was charged? That could have happen at any brokerage. A similar issue occurred when my mom’s when her advisor pulled their fee and caused a margin loan because when the account was setup it defaulted to margin loan on. We turn it off no more problems

[Sagenick48]

I have had accounts at all 3 for over 10 years. Vanguard used to be the biggest account and now is the smallest. Every account is a little different, has slightly and research. And what was the best, Vanguard, is now the worst. It is a lot easier to keep something at each so you can move stocks etc around without the hassles of opening a new account.

[Sagenick48]

I have had accounts at all 3 for over 10 years. Vanguard used to be the biggest account and now is the smallest. Every account is a little different and has slightly different features, benefits and research. And what was the best, Vanguard, is now the worst. It is a lot easier to keep something at each so you can move stocks etc around without the hassles of opening a new account.

[nassau34]

If Schwab charged you margin interest, so would Fidelity. I wouldn't move for the reason you described. Fidelity and Schwab service is on par.

I guess the difference is that with Fidelity and Vanguard their clearing accounts pay a reasonable level of interest (Vanguard more so than Fidelity due to lower expense ratios), so I'm comfortable leaving a few thousand dollars in those clearing accounts which acts as a safety net. Whereas Schwab pays close to nothing on idle cash balances so I leave close to no cash there.

I also have a good relationship with my Fidelity advisor which has come in handy occasionally over the years, while my Schwab advisor proved pretty much useless the one time I reached out to him for assistance a couple years ago.

I did call the toll-free Schwab customer service line and got the margin interest charge reversed.

[nalor511]

If Schwab charged you margin interest, so would Fidelity. I wouldn't move for the reason you described. Fidelity and Schwab service is on par.

I guess the difference is that with Fidelity and Vanguard their clearing accounts pay a reasonable level of interest (Vanguard more so than Fidelity due to lower expense ratios), so I'm comfortable leaving a few thousand dollars in those clearing accounts which acts as a safety net. Whereas Schwab pays close to nothing on idle cash balances so I leave close to no cash there.

I also have a good relationship with my Fidelity advisor which has come in handy occasionally over the years, while my Schwab advisor proved pretty much useless the one time I reached out to him for assistance a couple years ago.

I did call the toll-free Schwab customer service line and got the margin interest charge reversed.

Fidelity is better for liquid/cma style purposes, yes. So Schwab gave you what you wanted. You'll potentially get a $1k/$1mil bonus at fidelity if that's what you want to do

[grok87]

Well, at least you didn't get a violation, a margin account helps with that.

what happens if you get a violation?

[grok87]

I have had accounts at all 3 for over 10 years. Vanguard used to be the biggest account and now is the smallest. Every account is a little different and has slightly different features, benefits and research. And what was the best, Vanguard, is now the worst. It is a lot easier to keep something at each so you can move stocks etc around without the hassles of opening a new account.

can you expand please on why "Vanguard is now the worst"?
honest question...
cheers,
grok

[dogagility]

I also already have the ability to easily move money between Fidelity and Vanguard, so I would just continue to use the lower cost Vanguard money market funds for excess cash.

I'd probably just use one brokerage for simpler management.

[MnD]

"Moving everything" and removing margin seems like a rash emotional decision versus a calm rational one.
Not good when it comes to investing.

Margin covers investor mistakes nicely with what is usually one-day interest before the investor corrects it.
If the brokerage made a mistake they should reverse the charge which sounds like what they did when you called.
If both were ETF's you shouldn't have gotten a balance subject to margin unless something else was going on.

Schwab often waives charges one should have paid for good customers. I'm still curious why exactly you got the margin charge.
Did they say it was their mistake or was something else going on besides the ETF trades like a held deposit or another trade that hadn't settled?

[rich126]

"Moving everything" and removing margin seems like a rash emotional decision versus a calm rational one.
Not good when it comes to investing.

Margin covers investor mistakes nicely with what is usually one-day interest before the investor corrects it.
If the brokerage made a mistake they should reverse the charge which sounds like what they did when you called.
If both were ETF's you shouldn't have gotten a balance subject to margin unless something else was going on.

Schwab often waives charges one should have paid for good customers. I'm still curious why exactly you got the margin charge.
Did they say it was their mistake or was something else going on besides the ETF trades like a held deposit or another trade that hadn't settled?

I agree with you. People often get upset when they do something incorrect because they don't understand the rules and then blame someone else. Sometimes it is best to just step away for a while before making a decision. I've learned my lesson and recall many years ago an older manager telling someone they should just take a walk outside before doing anything else.

Personally I don't care for Vanguard and had a lot of issues with dealing with inherited accounts and would avoid them (never really used them much except when I had to with companies I used to work for) and found TD Ameritrade (no longer around), Scottrade, and Fidelity all much easier to contact via phone to deal with issues. And I'm not one who calls except when I have to. Fortunately around where I live there are Scwab and Fidelity offices within 10 minutes. Never been in the Fidelity office but we had to go to the Schwab office to deposit a roll over check (the app wouldn't accept it).

[nassau34]

"Moving everything" and removing margin seems like a rash emotional decision versus a calm rational one.
Not good when it comes to investing.

Margin covers investor mistakes nicely with what is usually one-day interest before the investor corrects it.
If the brokerage made a mistake they should reverse the charge which sounds like what they did when you called.
If both were ETF's you shouldn't have gotten a balance subject to margin unless something else was going on.

Schwab often waives charges one should have paid for good customers. I'm still curious why exactly you got the margin charge.
Did they say it was their mistake or was something else going on besides the ETF trades like a held deposit or another trade that hadn't settled?

I consolidated down to three brokerages last year (Fidelity, Vanguard and Schwab). Since then I've been questioning what benefit Schwab actually provides in my specific case, and I can't name one. So I've been thinking about consolidating the Schwab account into Fidelity for a while.

I also electronically transferred funds from Schwab to my bank over the same period last week, so it's possible the transfer rather than the ETF purchase triggered the margin interest charge.

I didn't get down in the weeds as to what caused the charge with the woman who answered the Schwab customer service line, as she didn't seem like the right person to talk detailed debits and credits with.

[whodidntante]

If you sell an ETF and use the proceeds to buy an ETF on the same trading day, and those are the only trades you did, you will not be charged interest. Schwab is not likely to have basic issues like you described, and probably Fidelity or Vanguard would also have charged you margin interest. Vanguard would have had the bonus frustration of not having a clue and being difficult to reach due to banker's hours. Check your trades, post them here, or ask customer service to explain it to you. This stuff is straightforward to figure out if you invest like a Boglehead and aren't day trading or something.

Margin interest accrues daily but posts monthly. Your question should be what you did to cause margin interest to accrue. You have to look at the whole month, not just the day before margin interest posted. Do you know if margin interest is still accruing? You might want to check.

[whodidntante]

I also electronically transferred funds from Schwab to my bank over the same period last week, so it's possible the transfer rather than the ETF purchase triggered the margin interest charge.

Ah. This might be the issue. ACH pull transfers are slow to settle at Schwab, and if you transferred out unsettled funds from a recent sell, that's a margin debit.

[jeffyscott]

I consolidated down to three brokerages last year (Fidelity, Vanguard and Schwab). Since then I've been questioning what benefit Schwab actually provides in my specific case, and I can't name one.

Reasons that I remain (mostly*) at Schwab are:
In cash accounts, which all of ours are, Schwab give me more trading flexibility with mutual funds than Fidelity (not sure about Vanguard in this regard).
Schwab gives me better pricing on small quantities of treasuries and TIPS than either Fidelity or Vanguard.
Schwab charges me no transaction fees to buy available Vanguard, Fidelity, or Dodge & Cox mutual funds.
Schwab gives me better and more accessible customer service than Vanguard.

If I used only the standard index mutual funds and/or ETFs, then I think none of my reasons would remain.

Fidelity's advantages over Schwab are easier cash management (as you have noted), a better credit card, and slightly lower ERs on their index mutual funds (and more of them).

*We're now in the US Bank Smartly program for the 4% credit card rebates and better interest rate on cash (for bill payment purposes, not investment account cash). We also do still have HSAs at Fidelity, which we no longer add to but will take a few years to use up.