Choosing your broker

This is Day 15, the start of M1 W3. After two weeks of foundation, this week is where you start getting set up to actually trade. By Friday you should have a working broker account, or be confident in the one you already have.

THE FIVE THINGS THAT MATTER

In rough priority order:

1. Order execution quality. When you place a trade, does your broker actually get you the best available price, or do they route to whichever market maker pays them the most? This is the most important variable, and it's the hardest to evaluate from the outside. As a proxy, look at SEC Rule 605 reports, every broker is required to publish quarterly statistics on price improvement, fill rates, and execution speed. Brokers with better Rule 605 numbers (Schwab, Fidelity, IBKR) give you better fills than brokers with weaker numbers (some app-based platforms).

2. Account types supported. Can you open the kind of account you actually need? For most beginners, that's a taxable individual brokerage account. For longer-term retirement-oriented investing, a Roth IRA or Traditional IRA. For some readers, joint accounts, custodial accounts (for kids), or trust accounts. Most major brokers cover all of these. Some app-based platforms cover only taxable accounts, fine if that's all you want, limiting if you also want tax-advantaged retirement accounts under one roof.

3. Tools and platform quality. Does the broker provide the charting, screening, and research tools you'll actually use? Most major brokers offer reasonable charting. Some (IBKR, ThinkOrSwim from Schwab) offer professional-grade tools. Some (Robinhood, Public, M1) offer simplified interfaces that are great for getting started but can become limiting as your trading gets more advanced. A note: you don't need professional tools as a beginner. You need clean charts, a working watchlist, and the ability to place limit orders without confusion.

4. Cost. Most U.S. brokers eliminated commissions for stock and ETF trades in 2019. Today, the meaningful costs are: margin interest (if you trade on margin, most beginners shouldn't), options contract fees ($0.50–$1.00 per contract is typical), foreign-exchange fees (if you trade ADRs of foreign companies), and the spread itself (which we covered on Day 10). For most beginner trading, costs are essentially zero. Don't overweight this variable.

5. Trustworthiness and stability. Can you actually get your money out when you want to? In normal times, this is a non-issue. In stressful times, broker insolvency, trading restrictions on a single stock (remember January 2021 and GameStop), platform outages on busy days, broker quality matters a lot. Established brokers with deep capital reserves and long operating histories are safer than newer app-based platforms when conditions get unusual.

THE MAJOR BROKERS, BY USE CASE

The U.S. retail brokerage landscape has consolidated significantly over the last 5 years. The brokers worth considering, organized by who they're best for:

For most BiST readers, Charles Schwab. Schwab acquired TD Ameritrade in 2020 and now offers ThinkOrSwim, one of the best retail trading platforms ever built, alongside Schwab's own banking and brokerage services. Schwab is large, financially stable, has solid Rule 605 execution numbers, supports every account type a beginner might want, and the cost is essentially zero for cash equities. If you're not sure what to choose and you're U.S.-based, Schwab is the conservative recommendation.

For more active traders, Interactive Brokers (IBKR). IBKR has the best execution in the industry on many measures, the lowest margin rates, and the most professional tools. The user interface is busier than Schwab's; the learning curve is steeper. If you plan to trade frequently or trade foreign markets, IBKR is worth the additional friction. For a beginner placing a few trades a month, it's overkill.

For investing-only with some automation, Fidelity. Fidelity is similar to Schwab in many ways, large, stable, solid execution. They have stronger retirement-account products (the IRA experience is excellent), and their Active Trader Pro platform is good though less powerful than ThinkOrSwim. If you're focused mainly on retirement-oriented investing rather than active trading, Fidelity is a strong pick.

For the new-trader-with-modern-UI feel, Public. Public is a newer platform with a clean modern interface, no payment-for-order-flow on stocks (they explicitly route to deliver price improvement), and a community feel. Smaller and less battle-tested than the giants. Reasonable pick if you value the UX.

Brokers we suggest avoiding for BiST-style trading:

• Robinhood, popularized commission-free trading, but the platform's gamification (confetti animations, push notifications urging trades) is structurally aligned with encouraging frequent trading rather than disciplined trading. The 2021 GameStop trading restrictions also raised genuine concerns about platform reliability under stress. If you're already on Robinhood, you can stay; if you're choosing fresh, prefer Schwab or Fidelity.
• Webull, similar concerns to Robinhood plus weaker U.S. customer service infrastructure.
• Most app-only platforms aimed at beginners, generally fine for getting started, but you'll likely want to migrate to a more capable broker within a year. Better to start with the destination.

THE STRUCTURAL CONFLICT IN "FREE" BROKERAGE

When commissions went to zero in 2019, brokers had to find a new revenue source. Most found it in payment for order flow, the practice of routing customer orders to wholesale market makers (Citadel Securities, Virtu, Jane Street) in exchange for per-share payments.

This is legal, disclosed, and regulated. It's also a small structural conflict: your broker has an incentive to route to whichever market maker pays them the most, not necessarily to whichever venue gets you the best fill price. The price-improvement rules baked into the regulations mean retail traders generally get filled at or better than the National Best Bid and Offer, but the system isn't fully neutral.

Practical implication: for liquid, large-cap stocks (the kind we'll feature in this newsletter), the structural conflict is mostly invisible, execution quality is excellent across all major brokers because the market is so liquid that price improvement is easy. For thinly-traded stocks, it can matter. Public and IBKR have explicitly chosen to forgo or minimize payment-for-order-flow, which means more consistent execution for less-liquid names. This is one reason to prefer them if you'll be trading small-caps.

A PRACTICAL DECISION FRAMEWORK

If you don't have a broker yet:

• U.S.-based, value simplicity, conservative pick: Schwab.
• U.S.-based, value retirement-account quality: Fidelity.
• Active trader, value execution and tools: IBKR.
• New trader, value modern UX, smaller account: Public.

If you already have a broker and it's not on this list, that's fine, especially for getting started. The cost of switching brokers is non-trivial (transferring positions, re-entering watchlists). Switch only if the broker is structurally limiting you (no IRA support, persistent platform reliability issues, or you're moving into trading patterns the broker doesn't support).