Trading Platform Bleg

I have been using the traditional broker/financial adviser model for trading stocks and bonds and other financial products for some time now. I don’t have a problem with it, but I am trying to be as diverse as possible so am thinking about opening my own account for trading.

I typically am an investor, not a trader. I have long time horizons and study my investments carefully before I jump in so I don’t do a ton of trading. I am interested to hear what platforms/companies you folks use.

My main things needed are ease of trade executions, and efficient tax reporting. I would also like access to things like corporate paper, muni bonds and the like but honestly have no idea if you can do any of this with simple platforms like Fidelity, Schwab and the other retail outlets.

Any information is appreciated.

17 thoughts on “Trading Platform Bleg”

  1. Dan – I have had a broker for many years. For most of us that model is outmoded as most brokers just churn your account – they make money if you buy and sell. And what they recommend – why? Is it through careful research or just something their company wants them to push?

    Some years ago know of a retired woman who trusted her broker from Prudential – and said broker churned her account – most of her life savings – into nothing over a few years.

    The current model – one that I don’t care for, is “asset management” – where a broker will manage your portfolio for a fixed percentage of the value each year – again, winning or losing, they win regardless.

    If you can find a broker on the old model a good one will have been in for years and won’t constantly tell you to buy and sell. My aunt used to have one in OH – who made hera paper millionaire just buying good stuff – undervalued stuff – and holding onto it for decades.

    If I have any complaints about mine it is that I am not called enough – maybe once a year to review things.

    Over the years I look back and know I could have done a lot better – heck – some stocks in years past did well but for many years were in the basement – with no chance of recovery – should have dumped those.

    But then hindsight is….well, you know the rest ;-)

    Of course too buy good stuff – like P & G – Pfizer – and hold on to them.

  2. For equities I’ve used Vanguard. Their execution is good, the website is intuitive, and trading costs are minimal ($7 a trade). Their year-end statements are very good, too.

    I’ve also used Schwab for my self-directed 401k, which is also good in execution and has low trading costs. However, since it’s a 401k, I’ve never seen what their year-end tax reporting looks like.

    In terms of bonds, the market (other than Treasuries) is still rigged against individual investors, in that pricing is opaque unless you have a Bloomberg terminal. More transparency is coming to the market, but it still has a way to go.

    I believe you can trade individual bonds on Schwab if you are committed to this course of action. However, I argue ETFs are the better way to go here. Even better, either State Street or Blackrock is developing target date ETFs where all the bonds in the ETF mature in the same year. That way, you can make targeted duration bets while still getting a diversified portolio. The costs, IIRC, will be around 30 basis points annually.

  3. Fidelity is pretty good in offering a range of services. When my 401k got moved over to them I set up Roths as well and the overall cost on funds/stocks is quite reasonable ($7.95/trade for stocks and ETFs) and the reporting is good. Bonds are more work because of the nature of the market, but they have good search and filter features and fees are $1/bond ($1000 face value). Everything you need is there. I also work with Morgan Stanley, which is more of a broker relationship, and their on-line research tools are functionally pretty similar, as are the year-end reports I get for taxes. Trading is actually easier if I know what I want to do – I can put in a order on Fidelity faster than I can call my broker, much less get him to actually execute it. I would expect Schwab etc to be similar, as it’s a pretty competitive market.

    If you haven’t dealt with bonds before be sure you understand what you’re looking at as far as callability, risk and insurance – all of which can really impact the price. Personally, if you’re not looking to invest at least $100k I would be inclined to stick with a broker – to do this right really requires a good bit of time, both educating yourself about the market and finding the issues that fit your needs. The universe of individual bonds is huge.

    That and bond yields just suck right now (PA munis of decent quality yield under 2% out 10 years right now. Bleh) I don’t know how the bond fund guys raise money at all now (seriously, 1% management fees on bonds that return 2%?) Still, it’s probably a nice time to learn the market and bond ladders are a great cash flow tool for an income portfolio. If you have the money to invest it is well worth your time.

    Hope that helps

  4. For broker above read help – I agree ETFs with reasonable fees are a good way to get that. But pay close attention to the fees.

  5. One last remark – I used to have my 401k at Vanguard, and very much liked their site. Never had a personal account there though.

  6. @Anon – my FA/broker is actually a pretty good guy, there is very little churning. I keep a very close eye on things, trying to check in at least once a day on what is going on. Thanks to the rest for the comments, much appreciated, hopefully there will be more.

  7. @Anon – “If you can find a broker on the old model a good one will have been in for years and won’t constantly tell you to buy and sell.” – this is what I have, luckily. I think that if he leaves I will probably depart the firm and end up doing the whole thing myself.

  8. etrade is pretty good on tax reporting and fees. Schwab seems OK. Scott Trade has a second-rate web interface. Interactive Brokers may be worth considering, though I have no experience with them.

    There isn’t any downside to opening multiple accounts at different brokers, and I think it’s a good idea to do this in case one broker has an outage. But maybe this isn’t an issue as you don’t trade much.

  9. One complaint about Schwab: I’ve been looking at pure timber plays, and two of the companies I’ve ID’d – West Frazier Timber and Phaunos – are traded in Canada and London, respectively. Schwab doesn’t offer the capability to buy these in my 401k.

    I suppose I could find a broker who could do so, but it’d then be in my taxable account, and with currency conversions and assorted tax filings, my accountant would strangle me with my own entrails.

  10. “There isn’t any downside to opening multiple accounts at different brokers, and I think it’s a good idea to do this in case one broker has an outage. But maybe this isn’t an issue as you don’t trade much.”

    I am more afraid that some of them will start to implode so I am just starting to diversify my holdings across different companies.

  11. Dan, we have a fee-based financial planner that handles our investments for us, as I don’t have the time, knowledge or inclination to do work necessary to keep up with the various markets. I thought I’d try that after I retired, but it was like a full time job with a lot of stress. Our guy uses TD Ameritrade for all his clients. They have a $9.99 commission and no other fees on stock trades.

  12. I have accounts at Schwab and they have lots of bonds and CDs, but they are through the Independent Investment Adviser Program. In that program the IA is responsible for the interaction with the Schwab platform, so I do not know about the mechanical details. It works for me though. And it works as well as my accounts at Morgan Stanley Solomon Smith Barney, etc., which are completely gumwadded up because they cannot get their COBOL based mainframes to work together.

  13. Glad I’m not the only one who hates MSSB; I oversee my sister’s account there, and the website and graphic layout would make Edward Tufte weep. She closed one of her accounts, and the resulting paperwork is damn near impossible to follow. All this, and the highest commission costs I’ve seen, too.

    Avoid them like the plague.

  14. @Percy – believe it or not, the new MSSB platform they just rolled out after the merger between Smith Barney and Morgan Stanley is WAY better than is used to be. Still ridiculous, but much better. That is how bad it was.

    I have a feeling this company is so old, and that their client base is also so old that they just don’t care. I am not asking them to put a man on the moon, just come out with a decent trading platform.

  15. I have a lot in Vanguard. Vanguard is the one that has a different model than everyone else in that they are owned by their shareholders in their funds. I am probably saying that wrong but basically they are a non profit and it would take a lot to take them down.

    One thing about spreading it around too much is that after a while you get big discounts on trading and access to lower fee products, at least for Vanguard. But since trades are cheap anyways it probably is a wash.

    I can trade CD’s through vanguard and stocks from US and I am about to start overseas exchanges. Their tax reporting is pretty good.

    I also use eTrade. They have probably a more sophisticated interface than Vanguard. You probably can do more things with eTrade. They f’d me on a deal and I am still a bit enraged at them but it was 2007 so everyone got screwed I guess.

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