Which brokerage should I use for my IRA?
Written By: Nick Nguyen | Read full profile
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Which brokerage I landed on for my IRA and why it doesn’t matter!
A comparison between: Schwab vs. Vanguard vs. Fidelity
This decision tormented me for months. After realizing that there was no time like the present in December 2019 to open a Roth and seeing how everyone had decided to go commission-free, it made choosing which brokerage to hold my accounts So. Freaking. Difficult.
But I was able to narrow it down to 3 big companies: Schwab, Fidelity, and Vanguard.
Now, yes, I know that there are a TON of companies out there like Merill Lynch, JP Morgan Chase, Betterment, Wealthfront, Ellevest, E*Trade, Webull, M1 Finance...etc. etc. etc… that offer IRA options. And honestly, I don’t have any issues with any of them. I’ll talk more about these in another post but for now, I want to focus on these three super common ones.
What made me focused on Schwab, Fidelity, and Vanguard was that I already had accounts with them - a checking & brokerage account with Schwab, a 457(b) with Fidelity, and a 401k with Vanguard.
When it comes down to it, you’ve got to decide what you want in a brokerage provider. For me that was:
Minimum cost to open and fees they charge.
Great and accessible customer service.
The ability to buy fractional shares. (because I’m broke)
① Minimums & fees
Remember, I’m a noob. I had no experience trading stocks and didn’t want to accidentally buy or sell 10,000 shares of something I didn’t have/couldn’t afford and screw myself over.
So after WAY too many hours of research, I decided on Fidelity for my Roth IRA.
A big part of me choosing Fidelity was because I didn’t have $3,000 at the time to pony-up and invest into VTSAX or VFIAX or else I probably would’ve kept it simple as JL Collins notes in The Simple Path to Wealth and just followed his strategy with Vanguard. (Little secret to you, Fidelity doesn’t charge fees for ETFs that they don’t manage, which is why I went with them over Schwab, who charges $49.95 at the time of this post. This is a great hack for buying Vanguard’s mutual funds in ETF form without having $3000).
...But I’m broke... and Fidelity had $0 minimums and was family run, so I took the plunge and signed up! I mean, I only needed a job and $1 to get started, so what was there to lose?
Well, I don’t regret my decision at all. I mean a great thing about me opening an account with Fidelity was that I was deterred from making too many impulse buys since it was in a separate account from my general financial workflow. It also had incredibly low expense ratios for their newer funds, FZROX for Total Market is 0%!
I watched a ton of videos and did so many retirement simulators that showed how much expense ratios can accumulate over time, and Fidelity did a great job marketing their ultra-low expense ratios compared to Vanguard and Schwab as you can see here.
Moral of the story? Always read the fine print. I learned just today that Fidelity charges anywhere from $0.01 - $2,000 for each sold transaction to cover the exchange fees. Something that isn’t really seen on Schwab or Vanguard too often and really hasn’t been more than $0.04 for me lately, so it’s a nominal loss.
If I were to rank these 3 brokerages based on expense ratios and minimum fees, it’d be (1) Fidelity, (2) Vanguard, and (3) Schwab.
② Customer Service
In terms of helpfulness, I haven’t had a problem with customer service agents from Fidelity, Vanguard, or Schwab! What’s different between them though is their availability.
Fidelity: 24/7 by Chat and Phone
Vanguard: 8:30 A.M. - 9:00 P.M. Eastern Time by Phone
Schwab: 24/7 by Chat and Phone
I’m an introvert at heart with an extroverted personality after I meet you (I guess that makes me an ambivert?) But what that means is, I HATE TALKING ON THE PHONE. Or talking to people in general. My parents and girlfriend still make fun of me because I have trouble walking up to someone and saying hi.
I feel like this stems from a childhood event where I was scarred because of stranger danger? But, I’m working on it thanks to my job as an educator and a junior scientist.
Anywho, I also prefer chatting because I can multitask and the fact that the chats were 24/7 were awesome because I’m a night owl.
This came in SUPER handy when my sister accidentally initiated a transfer of her Roth to be managed by betterment. That dreaded moment of fear at 12:05 A.M. when she asked me ‘um I tried to transfer money from betterment but it says it’s transferring my Roth TO betterment’ (This is the biggest reason why I HATE betterment for an IRA, the transfer buttons/user interface aren’t really clear).
Gen, Chris, my girlfriend, and I started freaking out as we tried to call betterment to cancel that request. Well at 12:05 A.M. there is nobody that you can call and there isn’t a chat function (at least at the time of writing this). The poor customer service agents at betterment were bombarded with a flurry of emails from my sister within a 5 minute timeframe.
ANYWAYS, Fidelity has 24/7 chat and phone support, so luckily because Gen had her Roth in Fidelity, we were able to give them a ring at 1:00 A.M. in the morning and a friendly representative quickly resolved the issue by blocking the request from betterment! *phew* Crisis averted.
I’ve also chatted and called Fidelity for numerous other issues with options trading, opening/closing accounts, and general help on how to transfer money/rollover IRAs, and I have NEVER met anyone snarky. In fact, they are quite personable and get the job done!
The same is true of the representatives at Schwab and Vanguard, so really if I had to rate them,
Fidelity and Schwab would be tied with Vanguard 3rd only because they’re not 24/7 and they don’t have chat support.
③ Fractional Shares
Again, I’m a 24 years old government employee who got himself back into debt with a house and was still recovering from blowing his entire emergency fund on Christmas gifts, Property Taxes, Home Insurance, and a Refinance… I. Am. Broke.
But I wanted to own Apple, Google, Amazon, Costco, Chipotle...you know all the crazy expensive super well-known stocks in the world? So, I learned about this neat thing called fractional shares, where I can buy $1 worth of the company just to say I owned it. And it really helped when I wanted to buy Vanguard funds, because I can buy a fraction of their ETF (not that I own any VTI or VOO anymore since FZROX is freeeeee!!)
At the time I was deciding, only Fidelity had fractional shares (you can only access it through the mobile version, and it’s still a bit clunky, but it works). Schwab RECENTLY rolled out their $5 fractional shares, which makes them a pretty great candidate too if you just prefer how Schwab looks. But Vanguard is slow to the game, without any fractional shares.
This made my decision easy - I picked Fidelity even though I was totally violating JL Collins’ and Ramit Sethi’s advice to keep it simple 😂.
Rankings for Fractional Shares: (1) Fidelity, (2) Schwab, (3) Vanguard
At the end of the day…
It doesn’t matter who you decide to go with. These 3 companies are powerhouses and each have different things that I like about them, which is why I still use all 3, just not for my Roth IRA. Schwab’s interface and research is the most sleek and easy to use compared to Fidelity and Vanguard. But Vanguard has the benefit of being owned by their investors (that means that each time you buy any funds/stocks that they manage, you’re also a very tiny owner of Vanguard!
But I made my decision to go with Fidelity because I only had $1, the fees were nonexistent, and I wanted to buy big companies for $1.
There are still many other pros and cons with each of these brokerages, but I do love them all! That’s why I’ve split up the very little money I have into each of those accounts! So if you want to know what it’s like to have an account with all of them, you can open regular brokerage accounts with all of them and just rollover to the one you like the most! Super easy to do and the customer service reps are super helpful about it! Just make sure you clarify what fees if any you’ll have to pay to do a rollover.
*Nguyening Lifestyles is not a registered financial service provider and does not give financial advice. All information in these posts are for entertainment purposes only. Nguyening Lifestyles is not liable for any actions or outcomes that transpired after your reading of the following post.
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