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USAA Investments Review & Rating USA 2021

Is USAA Investments Scam Or Legit?

USAA Investments is a financial offshoot of the United States Automobile Association that offers a comprehensive brokerage and investment service to both civilians and service personnel. Our USAA Investments review found that despite its military connections (one in four employees of the firm is either a veteran or military spouse), USAA Investments USA is popular with civilian investors, having provided a trusted and reliable service for over 40 years. However,  as of 2020, the brokerage service offered by USAA was sold to Charles Schwab.

USAA Investments had already established a good reputation based on its wide range of investment options. What’s more, the firm’s military values made it one of the nation’s most trusted brokers.

Since the sell-off, USAA Investments USA has seen its offering enhanced with more professional trading tools and benefitted from almost 50 years of financial expertise from Charles Schwab – which has long been recognized as one of the US’s top brokerage firms, alongside other major players such as those discussed in our Vanguard review and Wealthfront review.

This USAA Investments USA review aims to provide an overview of the broker, identify its pros and cons, and help you decide whether it is suitable for your own investment goals.

After the sale of USAA – We recommend M1 Finance as our top alternative. Read more about then in our M1 Finance review, or check them out in the link below

USAA Investments Pro and Con
  • Numerous account options
  • Excellent customer service
  • Strong educational resources
  • A large offering of no-transaction-fee mutual funds
  • Low default cash sweep rate
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Web Sitewww.usaa.com
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FDIC - Federal Deposit Insurance Corporation (USA - not governmental)
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Is USAA Investments Scam Or Legit?

Given its history, links to the military, and trusted reputation, it is safe to say that USAA Investments opinions are positive and the platform is not in any way a scam. Similarly, Charles Schwab is one of the most professional and highly regarded brokerage services on the market, especially when compared to smaller rivals, such as those found in our Zacks Trade review.

In fact, Charles Schwab is regulated by the most important financial bodies in America, namely the SEC and FINRA. Our USAA Investments review also found that Charles Schwab is registered under the Securities Investor Protection Corporation – which means that traders have additional insurance and can rest assured that, as with the USAA Investments open account, a Charles Schwab account is extremely well protected. Finally, Charles Schwab is also backed by Lloyd’s of London’s contingency policy, which offers additional insurance on top of that provided by the SIPC.

USAA Investments Review - Usability, Look & Feel

Since being acquired by Charles Schwab, our USAA Investments USA review found that there have been significant improvements to the trading tools, information resources and customization options available.

The Charles Schwab website offers a straightforward and easy to use interface, offering a good selection of basic trading tools and information resources. Users will find they can easily access charts, analyst ratings, financial education and account information via the menu bar at the top of the screen.

Our USAA Investments review USA was impressed with the information resources offered. Users have access to real-time news and earnings reports, a variety of research reports and market commentary authored by in-house experts.

In terms of its overall appearance, the USAA Investments USA website is well laid out with a pleasing color scheme. You might like to compare this with a couple of alternatives aimed at the newcomer or younger investor. Our SoFi Invest review and Stash review both offer a simple interface by way of a comparison.

USAA Investments Open Account

Opening an account with USAA Investments USA is now handled entirely by Charles Schwab. You do not need to be an existing member of USAA to open a trading account, though many of USAA’s other financial services, such as pensions and insurance remain available exclusively to military and service personnel. Clicking on the USAA investment open account tab on the USAA website will now redirect you to the equivalent page on Charles Schwab.

Whilst there were previously several USAA Investments open account options, Charles Schwab offers just two: a single brokerage account and a joint brokerage account. You do not need either an existing Charles Schwab checking account or a USAA Investments open account to start trading with Charles Schwab.

With a Charles Schwab account, you can trade all the same securities and assets you could with a USAA Investments open account, including:

  • Stocks
  • ETFs
  • Options
  • CDs
  • Bonds

Our USAA Investments review found that there are no additional services or products offered to USAA members through the Charles Schwab brokerage account.

If you had intended to open a USAA Investments open account, whether you are a member or not you may find that Schwab offers a superior service. You can follow the link to open an account on the USAA website, which will then redirect you to Schwab where you will be required to input a few details. The website claims the process can be completed in around ten minutes, provided you have the necessary documents to hand. To open an account, you will require the following:

  • Social security number(s)
  • Driver’s license
  • Employer’s name and address (if applicable)
  • Statement information for any assets or cash you’d like to transfer

Our USAA Investments review also notes that, once you have set up a broker account on Charles Schwab, you can access it automatically via the USAA website and link it to any other USAA Investments open account you may have.

Trading Platforms at USAA Investments

The original USAA Investments USA platform offered a pretty basic trading platform which, whilst offering plenty of functionality, had started to appear a little dated. Charles Schwab has effectively turbocharged the trading environment for former USAA Investments open account holders, by offering three distinct platforms to suit everyone from the novice trader to the seasoned pro.

The three platforms offered by Charles Schwab are the web-based CharlesSchwab.com platform, along with the industry-renowned StreetSmart Edge and StreetSmart Central. Each offers a different level of functionality, with StreetSmart Edge being the go-to choice for more experienced traders and StreetSmart Central being something of a middle ground. For this USAA Investments review, we will focus on the web platform, as this is the most accessible option and is unique to Charles Schwab.

Trading on the Charles Schwab trading platform

The web trading platform is clean and intuitive. It presents a large amount of information and all the tools that beginner and intermediate traders are likely to require, most of which can be accessed by the clearly labeled tabs along the top of the screen. There is plenty of support available and the interface is generally well-designed and easy to get to grips with.

Clicking on the ‘Trade’ tab will take you to the main trading screen. Here you will see the following sub-headings for the available assets and securities:

  • Stocks & ETFs
  • Options
  • Mutual Funds
  • Bonds
  • CDs
  • Futures
  • IPOs

The clearly marked tabs, combined with the omnipresent “Trade” button in the top right corner of the screen make executing transactions extremely simple – and quick.

Other features

The trading platform also offers quick access to Charles Schwab’s extensive research tools, guidance and information on trading itself, links to different products, and, of course, an account overview. Our USAA Investments review was also impressed that customer service contact options can be quickly accessed via the main trading screen.

Mobile App

USAA Investments USA mobile offering has also been greatly improved since it was acquired by Charles Schwab. The latter offers a consistent and innovative mobile trading experience and is of a similar design to the main web platform. However, our USAA Investments review notes that the mobile trading platform lacks alerts and quotes – which are somewhat important for more active traders.

Payments: Costs and Fees at USAA Investments

When it comes to fees, our USAA Investments review found that, once again, things have improved since Charles Schwab took the reins. Opening an account and depositing is now completely free and the high minimum deposit that USAA Investments USA once insisted on is no longer a requirement.

The lack of any minimum deposit requirements will appeal to novice investors, but Charles Schwab also boasts 0% commission for stocks, options, and ETFs, which will no doubt be a major draw for more active traders. That being said, there are fees associated with automated phone trades (up to $5) as well as for broker-assisted trades (up to $25). Charles Schwab also offers thousands of mutual funds that can be traded for free. However, there are some which command high fees of up to $49.95 per purchase.

There were also one or two non-trading fees, including $50 for full transfer out of assets and $25 for partial transfer of assets. All in all, our USAA Investments review found that the new platform offered arguably the most competitive fee structure on the market.

Customer Service

Customer service support is one area in which USAA Investments open account holders might have expected to see a decline after the brokerage was sold off – after all, USAA Investments USA has built its reputation around its military values and high levels of customer support. However, our USAA Investments review found any concerns to be completely unfounded, as Charles Schwab offers comprehensive service across multiple channels.

By Phone

The Charles Schwab customer service team can be contacted by phone  24/7, and in addition to English, the service is provided in Vietnamese, Spanish, Cantonese, and Chinese.

Web Chat

As is more or less standard these days, the platform also offers a convenient web chat service, which is also available 24/7. The chat tab is visible across most of the website.

In-Branch

Charles Schwab benefits from having several physical branches across the US, so users also have the option of receiving face-to-face support. The website provides a search function to find your local branch, which will also have details of opening hours.

Post

Finally, it is also possible to write to Charles Schwab the old fashioned way – by post. All postal addresses can be found on the website, although there is no indication of response times.

Regulation & Deposit Protection

Regulation and deposit protection is an important consideration and one that has naturally come under the microscope since USAA Investments USA sold its brokerage to Charles Schwab – after all, the former had a great deal of accountability and had a strong reputation for reliability. However, as we have already touched upon, Charles Schwab has not cut any corners when it comes to protection and safeguards for its users.

As with USAA Investments USA, Charles Schwab also offers numerous other financial services – including a retail banking service. This means that both are subject to regulation from FINRA and the SEC to ensure they abide by US regulations. This should offer plenty of peace of mind for potential users as to the security of their deposits and account funds.

Charles Schab is also backed up with a policy from Lloyd’s of London, which offers a maximum of $600 million insurance coverage on top of that already provided by SIPC.

Additional Offers

The provision of additional services is an area that requires a little more consideration. However, since USAA Investments USA sold its brokerage platform to Charles Schwab, there have been fewer practical changes for the average user than you might think.

Both platforms offer an array of different financial services, including pension schemes, insurance, banking, and real estate services. However, many of USAA Investment USA’s products were available exclusively to service personnel. In fact, it was something of an anomaly that the brokerage service was available to civilian investors.

Charles Schwab, on the other hand, offers its full range of services to all of its members. In addition, USAA members will still have access to all of their existing products. Schwab customers will also have access to the broker’s impressive educational resources, including comprehensive and reliable advice from a team of experts and the opportunity to attend investing workshops and seminars to build financial awareness.

USAA Investments Bonds

USAA Investments Bonds & CDs

Many existing USAA Investments customers who chose the broker based on its trusted reputation did so because they were looking for a reliable and low-risk way to earn a little interest. Fortunately, Charles Schwab offers plenty of options for the more risk-averse investor with its range of CDs and bonds.

Are CDs for You?

CDs – certificates of deposits – are interest-bearing certificates that are a suitable choice for those seeking a federally-protected investment with a reliable income. On the surface, CDs operate in a similar way to bonds, with a few subtle differences. The difference is that CDs are bank deposits that pay a stated amount of interest for a specified period of time, typically anywhere from 1 month to 20 years, and promise to return your money on a specific date. CDs are also issued by other regulated lenders.

There are a few reasons why a CD might be a good investment option. In a sense, they can be seen as a middle ground between a standard savings account and more risky investments, such as stocks or ETFs. They present a suitable investment for more risk-averse investors who value FDIC insurance, principal protection, a fixed rate of return, and are in a position to lock in cash for a specific term.

To give you an idea of potential returns on CDs, Charles Schwab currently offers the following rates:

  • 1-3 Month CDs – 0.2 %APY
  • 4-6 Month CDs – 0.2 %APY
  • 7-9 Month CDs – 0.1 %APY
  • 10-18 Month CDs – 0.2 %APY
  • 1.5-2.5 year CDs – 0.3 %APY

These products and others are available through Schwab CD OneSource and are a good option for more conservative savers – the main risk for most investors is that they will require their fund before the CDs mature. Whilst there is no fee for early closure, it does mean that potential interest is forfeited. For most CDs, there is no additional charge when you buy through Schwab CD OneSource, as the issuing deposit institution itself pays a distribution fee.

Should You Consider Bonds?

Bonds are backed by the government, corporations or agencies and are traditionally seen as one of the lowest risk forms of investment. When you buy a bond, you are effectively loaning your money to the relevant agency for an agreed rate of interest over a set period of time. This arrangement is mutually beneficial as it allows you to make a small profit with very little risk, whilst the government agency or corporation can use the additional funds for its own projects and investments.

Charles Schwab has several options available, all in all offering a much more comprehensive bond investment service than its predecessor, USAA Investments. Charles Schwab customers can choose from the following:

  • Treasury bonds
  • Corporate bonds
  • Municipal bonds
  • Agency bonds
  • Mortgage-backed securities

Each type has advantages and disadvantages, so their suitability will depend on the needs and goals of the individual investor. Most of the bond options have zero charges, but there are some exceptions, details of which can be found on the Charles Schwab website. In general, bonds are generally a safe investment and naturally, this means that the potential return is always lower than on other investments, such as ETFs, stocks, and forex.

USAA Investments ETF

USAA Investments ETFs

Exchange Trading Funds are funds that trade in a similar way to stocks and are usually tied a specific index. Investing in an ETF effectively gives you a selection of assets in one contract, which can be traded during market hours—this makes them ideal for more active traders who want to profit from quick changes in the markets but also want to mitigate risk. ETFs also typically have lower operating expense ratios OERs than actively managed mutual funds, which again makes them a good middle ground.

How to trade ETFs

Charles Schwab offers over 2,000 ETFs across a range of asset classes and fund companies, including 22 low-cost Schwab ETFs. There are also several options for how you can go about building your portfolio. The Charles Schwab platform offers a variety of tools, guidance, and educational resources for you to choose your own investments. Alternatively, you can use Schwab’s Personalized Portfolio Builder tool to simplify the process.

Cost of Trading ETFs

Whilst Charles Schwab does not charge fees for trading ETFs, there are nonetheless costs involved. For example, the operating expense ratio is a percentage of fund assets taken out annually to cover expenses. For example, if you have $10,000 in an ETF with a 0.25% expense ratio, you’re paying about $25 per year in expenses. The best practice is to find out the expense ratio of an ETF before making an investment, as these costs can add up.

Of course, as ETFs can be traded like stocks and other assets, there is also the spread to consider. That is the difference between the bid price and the asking price. The amount of the spread varies between different ETF products but is usually greater for ETFs with low trading volume.

USAA Investments ETFs Conclusion

ETFs are a good option for investors looking for both flexibility and security. Whilst USAA Investments had a slightly larger pool of funds on offer, Charles Schwab’s additional portfolio tools more than make up for the slight decrease in funds available.

USAA Investments Funds

USAA Investments Mutual Funds

Similar to ETFs, a mutual fund is an investment vehicle made up of stocks, bonds and other securities. This means that investing in mutual funds gives you a kind of ready-made, diverse portfolio in a single fund.

Types of Mutual Fund

Charles Schwab has a more robust mutual fund offering than its predecessor. The broker has a line up of over 50 funds, spanning a wide array of equity, bond and asset allocation vehicles designed to help you create a solid portfolio. The fund selection includes professionally managed funds, such as the core Schwab funds as well as giving users access to some of the world’s leading investment managers via its Laudus Funds products.

Options for the Schwab-managed funds include:

    • Equity funds – Which are low-cost equity index mutual funds and actively managed funds to suit numerous investment styles
    • Bond funds – Which are available as both taxable and tax-free investments and offer investors a wide range of choices across fixed income sectors and maturity levels.
    • Asset allocation funds – Which aim to provide either an all-in-one portfolio solution or simply an opportunity to further diversify an existing portfolio across asset categories.

There is a $100 minimum investment for mutual funds. However, there are zero commission fees for Schwab-managed mutual funds or those arranged through the Schwab Mutual Fund OneSource. The only time you will pay additional costs is if you opt for automated phone trades or broker-assisted trades, the cost of which will vary depending on the product.

USAA Investments Options

USAA Investments Options

The financial vehicles outlined so far are preferential for longer-term investors. However, when compared with USAA Investments, Charles Schwab also has more on offer for day traders and swing traders with its huge range of derivatives.

What are options?

Firstly, it’s important to note that, whilst trading options can yield big returns, they also inherently carry more risk. It is therefore crucial that you educate yourself on how trading works and avoid investing funds until you are familiar with the Charles Schwab trading platforms and charts.

Investing in options is different from investing in stock as you instead pay for a contract that gives you the right (but not the obligation) to buy or sell a financial product at an agreed-upon price for a specific period of time. When you purchase the option, you do not take ownership of the lying asset, but the value is linked to it, hence the term ‘derivative’. Options are available on numerous financial products, including equities, indices, and ETFs.

Should you invest in options?

One of the biggest advantages of options is that you can make a profit even if a financial asset drops in value with a put order – that is, by buying the option to sell an asset at an agreed price. The potential for quick returns is also a major draw for investors, especially day traders who look to make multiple transactions each day and capitalize on small movements in an asset’s value. Most day traders will maximize their potential returns by using leverage – however, this works two ways and can also make for bigger losses. Alternatively, you can also use options to hedge – for example, you can sell short on a stock you have invested in, so if that stock drops in value you can mitigate losses by selling the option.

In a nutshell, options are suitable for more experienced traders who are happy to take on higher risks for the prospect of greater returns than can be earned from bonds, stocks, or ETFs.

Overall Conclusion

Our USAA Investments review found that the move to Charles Schwab has been a positive one.

Whilst some loyal USAA members may have lamented the sell-off and the inevitable shift away from the military family ethos, civilian customers might find this deal to be a major plus point. Charles Schwab offers a complete brokerage service across a broad array of investments. However, the split from USAA means that there are few – if any – advantages for existing members. As such Charles Schwab should be viewed as a completely separate entity when it comes to brokerage services. If you’re looking for more comparisons, make sure to check out our Wealthsimple review.

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