How would you like $1,000 (or more) just for opening a brokerage account or putting money into one? That's just one of the best broker incentives up for grabs from online brokerages trying to lure you as a customer.
Competition is so fierce among online brokers, many are willing to pay you just to open an account or add money to an account you already have. And some of the bonuses are temptingly large.
"In the battle for investor dollars, promotional offers have become an important factor for self-directed individuals opening new accounts," said Kapil Vora, senior director of wealth intelligence at J.D. Power.
Incentives, discounts and pricing are among the attributes online brokerage customers value the most in Investor's Business Daily's 2024 Best Online Brokers survey.
At the top of this year's list of the Best Online Brokers are Ally Invest, part of Ally Financial; Fidelity Investments; Charles Schwab; and Merrill Edge. Merrill is a part of Bank of America.
Looking At Some Of The Offers
These best broker incentives are more than just the modern day equivalent of a toaster for opening a savings account. These perks matter to investors — and can be sizable.
"One in six new online brokerage customers cited promotional offers as the primary reason behind their (brokerage) firm choice in our latest data," said J.D. Power's Vora.
Between 17% and 20% of new account holders in 2023 said incentives played a big part in their brokerage decision, Vora said. That's up dramatically from the 8% to 10% in 2021 who cited promotions for driving the choice of broker.
Charles Schwab and E-Trade know this. And they're duking it out with big standing incentives.
Schwab, a perennial top performer in Investor's Business Daily's Best Online Brokers survey, is looking to win over new customers as it absorbs TD Ameritrade, which it bought in 2020.
Read The Full Special Report On IBD's Best Online Brokers List for 2024
You'll score a solid $1,000 bonus if you open an account and fund it with $500,000 or more. Don't have that much money you're willing to move? Schwab will pay you $100 for opening an account with $25,000. And it'll pay $300 to $500 for new accounts with $50,000 to $100,000.
Not to be outdone, E-Trade, now owned by Morgan Stanley, is offering similar incentives. It too pays $1,000 for a $500,000 account. And it's willing to pay you $600 for a new account with $200,000 to $499,999. Other bonuses range from $100 to $300 for smaller amounts.
Can Robinhood Steal Customers With Bonuses?
Want more of the broker incentives? Taking its role as industry disrupter to the incentives realm, Robinhood is now paying bonuses rivaling the big boys.
Until April 15, Robinhood will pay you a $405 bonus if you make your full 2023 IRA contribution at the online broker. The individual contribution for 2023 is $6,500. The catch is that you must be a member of Robinhood Gold, a monthly subscription that costs $75 a year. It will also pay 3% on IRA rollovers done prior to April 30. New clients also get money to buy a piece of stock in one of 20 top companies of their choice. The value of the reward ranges from $5 to $200, with 98% of people getting $10 or less.
To compete for newer investors, Schwab offers a Starter Kit. If you fund the account with at least $50, you get $101 in shares in the five most valuable stocks in the S&P 500.
Other Broker Incentives: Gifts Of Stock
Some online brokerages are using free stock as the carrot.
Open a new account at SoFi Invest, and you'll get some free stock to put into your account. This is something other brokerages including Robinhood have done. At SoFi, the amount of stock you get varies. You have a 0.028% chance of getting stock valued at $1,000. Most people get around $10.
WeBull also gives stock for new accounts, but with more variables. Open an account with $500 to $24,999 and you get 30 fractional shares of stock valued from $3 to $3,000. Plus, the online brokerage will throw in six months of free Level 2 market information. Put in $25,000 or more and get 75 free fractional shares.
Instead of stock, Ally Invest will pay $100 to Ally Bank customers who open a brokerage account. They need to make recurring deposit transfers of $50 for three straight months.
Ally Invest scored highest in overall customer experience in IBD's 12th annual Best Online Brokers survey.
Things To Watch Out For In Broker Incentives
Beware, though. These offers might not be as good as they look. Costs for switching might erode your gains.
For one, most brokerages charge fees if you transfer money out. You'll want to know about those fees before you move. Some brokers such as Ally Invest and Robinhood will reimburse you up to $75 for those fees if you move money into an account with them.
Additionally, you could trigger a taxable gain if you sell winning stocks before transferring them to another brokerage in a taxable account. Also, if you move $500,000 out of a savings account paying 4% to get a $1,000 bonus, you could have gotten $20,000 a year in interest instead.
Lastly, don't assume all brokers will pay you an incentive. Some don't. Interactive Brokers, for instance, has no publicly available offers at this time.
Only you can judge if the pain of switching is worth it.
"The online brokerage landscape is highly competitive," said J.D. Power's Vora. "Firms are increasingly struggling to differentiate from competitors, with each having relative strengths and deficiencies. But when taken in aggregate, there is a lack of significant differences in overall perceptions."
