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Man using RobinhoodComparing TD Ameritrade and Robinhood is a little bit of an exercise in apples-to-oranges. TD Ameritrade is a full-service brokerage firm offering storefront advising, online and app-based trading platforms and robo-advisors. Robinhood is a highly streamlined, primarily app-based trading platform in which investors make their own decisions. Here’s how to evaluate these two services.

TD Ameritrade vs. Robinhood: Fees

From a user end, there are largely four types of fees to look out for in a trading platform:

  • Trading Fees – Any form of fee attached to each trade that you make. This can come in the form of a flat fee, or more often the broker will charge you what’s known as the “spread.” This is the difference, if any, between the buying and the selling price of an asset.
  • Trading Commissions – This is when a broker will charge you a percentage based on the volume or value of each trade.
  • Inactivity Fees – Any fees that the broker charges you for not trading, such as if it charges you for keeping money in a brokerage account.
  • Non-Trading/Other Fees – Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account or taking money out.

Robinhood arguably defined the modern fee structure, at least for online investing. The app famously charges nothing for investors to make trades on its service, a break from the previous business model in which brokerages made much of their money off trading fees and commissions. Robinhood charges no trading fees or commissions, no inactivity fees, no fees for moving money in or out of your account and very few non-trading fees.

Instead, Robinhood makes money by pocketing the small difference between the buying and selling price of an asset. This generates very little money, typically only pennies or less per share traded, but over millions of transactions those pennies add up.

Robinhood’s approach has drawn scrutiny from the Securities and Exchange Commission. In December 2020 it said that one of “Robinhood’s selling points to customers [between 2015 and late 2018] was that trading was ‘commission free,’ but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices.” Robinhood agreed, without admitting or denying the SEC findings, to a cease-and-desist order and to pay a $65 million civil penalty.

The service does charge $5 per month for an upgrade to Robinhood Gold, which allows you to borrow money starting at 5%  for margin trading.

TD Ameritrade, like most online brokerages, has followed suit, dropping its online trading fees to $0. This free trading covers equities (stocks), exchange-traded funds (ETF) and options traded over the firm’s website and app. However, as a full-service firm TD Ameritrade offers many features that Robinhood doesn’t, leading to a more complicated price structure.

More sophisticated options through TD Ameritrade can cost money. For example, broker-assisted trading will typically cost $25 per trade, while placing an order over the telephone involves a $5 trading fee. Some mutual funds (which Robinhood does not offer) will incur a $50 trading fee. Options can cost $0.65 per contract in some cases, while futures cost $2.25 per contract over this service.

TD Ameritrade and Robinhood will charge you the same $0 rate for most services, the only likely difference being the $0.65 charge incurred on some options contracts with TD Ameritrade. Beyond that, the services you will pay for with TD Ameritrade are generally those not offered at all on Robinhood’s platform.

TD Ameritrade vs. Robinhood: Services & Features

The main difference between Robinhood and TD Ameritrade is breadth of services.

Robinhood is a streamlined trading platform focused on its app, although it has also introduced a web interface. In keeping with its goal of appealing to new investors, Robinhood is feature-limited. You can trade stocks, ETFs, options and ADRs through its main service. Most notably this means an investor cannot purchase bonds or mutual funds. A recently introduced feature called Robinhood Crypto allows users to trade cryptocurrencies.

However, Robinhood offers little in the way of investor data or tool sets. For each asset you can pull up an individual page that gives the asset’s basic trading information (such as its current buy/sell price), five years of pricing history and basic statistics such as trading volume. The app offers no additional data, context or tools for technical analysis. This is by design as Robinhood is intended for users who have little, if any, experience in the markets. The goal is to avoid intimidating new traders with a wall of unfamiliar tools and data. But that also means traders have no access to such data either.

TD Ameritrade is a full-service brokerage that also has a web- and app-based trading platform. Investors can purchase virtually any mainstream security through this service, including equities, bonds, mutual funds, ETFs, currencies, options and futures. The most notable gap is that, unlike Robinhood, TD Ameritrade does not support directly investing in cryptocurrency at this time.

In addition to direct investment, TD Ameritrade offers a wide variety of tools, data sets and advising options for investors. This includes not only standard technical analysis, such as candlestick charts and extended pricing history, but also market analysis reports, tools for comparing the performance of various assets and asset classes, tools for projecting the performance of certain investments and more. TD Ameritrade also offers brokerage services, meaning that investors can get advice on their portfolio. This comes in the form of either robo-advising (finding automatically managed accounts build for certain performance metrics) or speaking with an actual investment advisor.

Unlike with Robinhood, though, many of these services can cost additional money to use.

TD Ameritrade vs. Robinhood: Online & Mobile Experience

Woman using a mobile trading appThere are two major differences in the user experience of Robinhood vs. TD Ameritrade. First, and most importantly, is customer support. Like many platforms, Robinhood thinks of itself as a technology company involved with finance. This defines its approach to customer service, which is limited to an FAQ and email address. While this works for a company selling Bluetooth speakers, many customers may want the option to talk to a human being when it comes to managing their money.

TD Ameritrade, on the other hand, has multiple channels for customer service, ranging from telephone and email all the way to physical branches you can visit if need be.

The other critical difference is scope and accessibility. Robinhood’s platform has been built around the core concept of accessibility. The company, in a very real sense, wants to make investing as easy as playing a game or swiping on Tinder. It has succeeded, for better or worse.

The Robinhood app (its primary interface) is intuitive and easy to use. Assets are listed in menus that you can quickly navigate and are grouped together with category tags that let you easily find other, similarly situated investments. Any given investment’s information screen is clean and understandable, and the app does a good job of making sure users can find tools that are there.

However, this ease of use comes at a cost. The interface is clean primarily because there’s relatively little in it, with investors able to access only limited information about any given product. It is, in fact, far easier to buy and sell a product than to actually learn more about how you’re spending that money. And a series of prompts at the bottom of each asset’s page will suggest additional assets that you can buy in a manner similar to how streaming services will prompt you to keep binge watching with similarly categorized TV shows and movies.

This degree of gamification can quickly obscure the very real risks involved with investing.

TD Ameritrade, on the other hand, certainly does not suffer from a surplus of simplicity. As an investment platform, this service offers two options: its basic app simply called the TD Ameritrade Mobile App and its app for sophisticated investors called thinkorswim. It allows you to create customized technical analysis, building data sets from just about any different group of indicators and assets according to your investment strategy. This is very useful for a specific kind of investor.

The TD Ameritrade app, on the other hand, is the company’s base line product. It’s intended for most investors, ranging from the fairly sophisticated to the brand new. It largely succeeds at this. The TD Ameritrade app is well designed and offers a generally intuitive layout. Even inexperienced investors will be able to find basic information such as price history, current trading prices as well as buy and sell commands. More sophisticated investors have access to analytical tools by choosing different tabs on an asset’s page.

As with all full-service platforms, however, TD Ameritrade’s ease of use has its limits. Particularly for the new investors targeted by Robinhood, the volume of information available on TD Ameritrade may prove overwhelming at first. It will likely take these investors some time to get comfortable with this platform, and they’ll be well advised to make sure they understand exactly what buttons they’ve pushed before committing any money.

TD Ameritrade vs. Robinhood: Who Should Use It?

TD Ameritrade is a better platform for virtually any investor.

Robinhood is designed to provide a streamlined experience for new investors. It does this by providing a stripped-down, feature-light trading platform that is easy to pick up and use regardless of your experience level with finance. Trading on this platform mimics the mechanics of app-based gameplay. It is, above all else, easy.

Yet inexperienced investors are exactly the demographic who should move a little more slowly. Compounding this problem, Robinhood is designed to steer investors into higher-risk choices than they otherwise might have made. Traders primarily buy and sell stocks on this app, a natural result of the low-information system which Robinhood provides, and prompts at the bottom of each asset screen suggest similar stocks that traders could buy in the same way that Netflix queues up new shows to encourage binging. On the downside, Robinhood emphasizes options, a high-complexity and high-risk asset class, to its crowd of neophyte investors.

For new investors, the more thorough, slower pace of TD Ameritrade will serve them well, even if it feels more daunting at first. Meanwhile, experienced investors will find Robinhood’s feature-light platform almost immediately limiting. TD Ameritrade’s full spectrum of customizable technical analysis tools and broad asset classes will serve even sophisticated investors well.

The Bottom Line

Man using TD AmeritradeBoth TD Ameritrade and Robinhood offer basic free stock trading, though each platform offers extras for a fee. That’s especially the case with TD Ameritrade, which lets users trade bonds and mutual funds, something Robinhood does not provide. TD Ameritrade also has a robust array of customer-service options, while Robinhood only offers email assistance. Also, TD Ameritrade’s thinkorswim platform is one of the industry’s most sophisticated resources.

Tips for Investing

  • The best way to start trading is by taking a step back and making a plan. That’s something that a financial advisor can provide critical insight into. With SmartAsset’s matching tool you can find a financial advisor in your area to help you make the right plan, no matter what trading platform you ultimately choose. If you’re ready, get started now.
  • One of the most helpful tools for investing – whether you use an online trading platform or not – is a free, easy-to-use asset allocation calculator. It will keep the “guardrails” up on your decision making so you’re more likely to stay on the road to reaching your financial destination.

Photo credit: ©iStock.com/andresr, ©iStock.com/Chaay_Tee, ©iStock.com/mixetto

 

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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