There are dozens of stock brokerage houses in the United States. But three major firms stand out because of their name, offerings, total amount of client assets, and the number of clients they serve. They are often referred to as the "big four brokerages." Each of these firms—Charles Schwab, Fidelity Investments, and E*TRADE,—comprise the top in terms of customers and assets.
This article provides a short analysis of each brokerage's products, services, and fee structures. They are listed in no particular order.
Key Takeaways
- Charles Schwab is a leading U.S. stock brokerage firm with $8.56 trillion under management and 35 million active brokerage accounts.
- Fidelity Investments has $3.9 trillion in discretionary assets, 40 million active brokerage accounts, and is a good choice for customers who want to invest in Fidelity ETFs and mutual funds.
- E*TRADE is an online brokerage pioneer, well-known for its full-featured mobile apps, top-notch options trading tools, and customizable user experience.
Charles Schwab
- Assets under management: $8.56 trillion
- Number of accounts: 35 million
Charles Schwab was founded in 1971 and is based in San Francisco. It is one of the leading investment brokerages and IRA custodian firms in the U.S.
As of Feb. 14, 2024, Charles Schwab held $8.56 trillion in client assets, with a total of 35 million active brokerage accounts. It also operates Schwab Bank, one of the largest banks in the United States, which allows its brokerage clients to link their trading accounts with a checking account. The company boasted 1.9 million active banking accounts.
The firm offers clients a variety of investment products including stocks, mutual funds, exchange-traded funds (ETFs), money market funds, fixed-income products, options, futures, insurance, and annuities. Clients can invest in both Schwab's proprietary products and other third-party investments.
Charles Schwab's Fee Structure
Schwab, the country's first real discount brokerage, has consistently been rated one of the cheapest brokerage firms in the United States. In October 2019, Schwab cut commissions from $4.95 to $0.00 for all U.S.- and Canadian-listed stocks, ETFs, options online, and mobile trades. Online options trades have a standard $0.65 per-contract fee.
The operating expense ratio (OER) fees for actively managed mutual funds can range from 0.22% to 1.25%. Fees for passively managed mutual funds can range from 0.02% to 0.39%. Annual portfolio management fees at Schwab start at 0.80% for the Schwab Private Client account. These fees decrease for clients with higher asset levels.
The firm also offers clients a worry-free, passive approach to investing through its robo-advisor service called Intelligent Portfolios. The online platform provides clients with an automated experience, giving them access to a series of ETFs that rebalances per the client's investment goals. The service requires a minimum $5,000 investment and comes with no advisory or commission fees.
In 2019, Charles Schwab announced the acquisition of TD Ameritrade in a stock transaction valued at approximately $26 billion. TD Ameritrade clients had their accounts migrated to Schwab by the end of 2023.
Fidelity Investments
- Assets under management: $12.6 trillion
- Number of individual investors: 50 million
Fidelity Investments is the one of the nation's largest keepers of 401(k) retirement savings plans. Founded in 1946 as Fidelity Management & Research, the company is based in Boston.
According to the company's website, Fidelity had $12.6 trillion in customer assets as of December 2023, with 50 million individual investors.
Fidelity is the best choice for brokerage clients who also want to invest in Fidelity ETFs and mutual funds. The firm also offers investments in third-party products.
Fidelity Investments' Fee Structure
Fidelity touts its zero account fees and no minimums to open a retail brokerage account, including IRAs. Following Schwab's lead, Fidelity also offers commission-free stock, ETF, and options trades. Options trades also have $0 commissions, plus a standard $0.65 per-contract fee.
There are no minimums to invest in Fidelity mutual funds. Fidelity does not charge an expense ratio fee for certain proprietary mutual funds and offers hundreds of other funds with no transaction fees.
Portfolio advisory service fees range from 0.50% to 1.50% based on the amount invested. Minimum investments range from $50,000 to $500,000 based on the investment options. For its automated Fidelity Go service, the firm charges a 0.35% advisory fee for balances exceeding $25,000 but requires no account minimum to open an account.
Through its mutual funds and other advisory services, Fidelity has tens of millions of non-brokerage customers, something the others cannot claim.
E*TRADE (Morgan Stanley)
- Assets under management: $360 billion.
- Number of accounts: 5.2 million.
Founded in 1982, E*TRADE began as a holding company and has transformed into a leading online discount brokerage service. The company was hit hard during the 2007-2008 financial crisis because of high exposure to subprime mortgage portfolios. Its stock dropped 86.7% in 2007 before the company implemented a comprehensive turnaround plan.
The turnaround worked and E*TRADE has become a leading financial firm for its mobile accessibility, online trading tools, and customizable user experience. As of February 2020, E*TRADE had more than 5.2 million retail brokerage accounts with more than $360 billion in client assets.
Just like the other top brokers, E*TRADE offers clients access to ETFs, mutual funds, stocks, options and fixed income products. The firm also offers two checking accounts and a savings account with $500,000 in FDIC insurance. Clients can also choose a prebuilt portfolio, which gives them a diversified portfolio of mutual funds or ETFs built by an investment strategy team.
E*TRADE's Fee Structure
In 2019, E*TRADE joined Schwab and Fidelity in offering no-fee trading. E*TRADE cut commissions on stock, options and ETF trades to $0 each, while options contracts are charged $0.65 each ($0.50 with 30+ trades per quarter).
On February 20, 2020, investment banking firm Morgan Stanley announced it would acquire E*TRADE in an all-stock transaction valued at approximately $13 billion. The acquisition closed in October of 2020.
Vanguard
- Assets under management: $8.2 trillion.
- Number of accounts: 50+ million.
Started by John Bogle in 1974, Vanguard's business model is unique in that it is owned by its investors. Those who invest in funds managed by the firm become owners of the company. Well-known for its role in creating indexed mutual funds for individual investors, the brokerage was quickly mimicked by other firms.
Vanguard was among the first to adopt an online portal for investors in 1995, allowing investors access to accounts, services, and educational materials.
Vanguard's Fee Structure
Vanguard has always been proud of its low fee services. It offers ETFs and mutual funds with no fees for online transactions, although there are various expense ratios for managing the funds.
Options exercises and assignments are $1 per contract for accounts with less than $1 million, $0 for the first 25 trades and $1 for all trades after that (accounts of $1 to $5 million). Accounts with more than $5 million are charged $0 for the first 100 trades, and $1 per contract for all following contracts.
Top Brokerage Houses, Ranked
Based on this information, the largest brokerages in the United States are as follows:
| Top Brokerage Firms by AUM and Number of Accounts | |||
|---|---|---|---|
| Rank | Firm | AUM | Customer Accounts |
| 1 | Fidelity Investments | $12.9 Trillion | 50+ million |
| 2 | Charles Schwab | $8.56 Trillion | 35 million |
| 3 | Vanguard | $8.2 Trillion | 50+ million |
| 4 | E*Trade (Morgan Stanley) | $360 billion | 5.2 million |
What Is a Brokerage Account Used for?
A brokerage account is used to buy stocks, bonds, shares of a mutual fund or index fund, and other securities.
What Is the Best Brokerage Account?
While it is impossible to recommend any one brokerage, the most popular brokerage providers are Charles Schwab, Fidelity Investments, and E*TRADE. These companies provide brokerage services to millions of clients.
What Is a Self-directed Brokerage Account?
A self-directed brokerage account is one where the client has complete control over their assets, and can invest in any asset they wish. This is different from an employer-sponsored retirement account, where the number of possible investments is more constrained.
The Bottom Line
While there are many brokerage houses in the United States, the largest are companies like Charles Schwab and Fidelity. These are huge asset managers with millions of customers investing assets worth hundreds of billions of dollars. Before investing, it is important to understand the potential fee structure and the risk of loss.
