Robinhood vs. E*TRADE

Order Types

Both Robinhood and E*TRADE offer the standard orders such as market, limit, and stop-limit orders. Only E*TRADE offers contingent, bracketed, one-triggers-the-other (OTO), one-cancels-the-other (OCO), one-triggers-a-one-cancels-other (OTOCO) orders that are not available on Robinhood. Here again, E*TRADE has a clear advantage in the order types available to its customers.

Trading Technology

When it comes to trading technology, the gap between the brokers isn’t as big as some of the other categories. Robinhood and E*TRADE both accept payment for order flow and use their own proprietary system for routing orders, but only E*TRADE provides any information about the effectiveness of their routing systems. The average time to fill an order at E*TRADE is between 0.11 and 0.19 seconds depending on whether a stock is part of the S&P 500 or not, with price improvement of $.0007 per share and $3.38 per contract on option orders. Neither broker offers backtesting of trading strategies. E*TRADE offers portfolio margining while Robinhood does not, but Robinhood allows for fractional share trading that E*TRADE only offers in its dividend reinvestment and robo-advisor offerings. Finally, while both companies have a stock loan program, E*TRADE shares revenue with the account holder and Robinhood keeps all of the revenue to itself.

In light of Robinhood’s lack of transparency on the effectiveness of its routing system and their generating the majority of their revenue from payment for order flow (PFOF), we believe E*TRADE has better trading technology for customers. Those with smaller account balances, however, may find Robinhood’s support for fractional shares appealing.

Costs

Robinhood and E*TRADE do not charge commissions for stock or ETF trades. For options trading, E*TRADE charges $0.65 per contract if less than 30 trades per quarter, and $0.50 if 30 trades or more, but Robinhood does not charge anything for options trading. There are no account opening, maintenance, or inactivity fees at either broker. Margin trading is more competitive at Robinhood, which charges a monthly fee of $5 for $1,000 of margin and market data and Morningstar reports, and just 2.5% interest on margin exceeding $1,000. E*TRADE’s margin rates vary between 8.70% on $10,000 balances to 5.45% on an account with a $1 million balance. 

Robinhood charges $20 to send a check, compared to $10 at E*TRADE, and Robinhood does not charge for domestic or international wires, where E*TRADE does not charge a fee for domestic wire transfers into an account and $25 for international wires and outgoing domestic transfers. Robinhood does not charge a direct commission for cryptocurrency trading, which E*TRADE does not have. Robinhood does not offer any of the following, but E*TRADE charges $6.95 to trade OTC, OTCBB, gray market, and OTC-traded foreign securities or $4.95 if the account has 30 or more trades per quarter. Further, E*TRADE charges $1.50 per contract per side for futures and $2.50 for Bitcoin futures. E*TRADE also makes live brokers available for a fee of $25 per trade that is waived during extended hours and overnight sessions between 4am and 7am Eastern.

If you are only looking to trade in stocks, ETFs, options, and cryptocurrencies, and are using margin, you would pay less at Robinhood because they don’t charge for options or cryptocurrency trading and have lower margin rates. However, if you want access to fixed income, mutual funds, the over-the-counter markets in addition to no commission stock and ETF trading, you need to use E*TRADE, whose rates are reasonable but not the lowest available. That being said, Robinhood has the edge as far as the lowest costs if you are satisfied with the more limited range of offerings.

Account and Research Amenities

This category is not close, with E*TRADE providing much more than Robinhood in the way of research and account amenities. Both brokerages provide news, videos, podcasts, and newsletters. Robinhood provides Morningstar ratings for stocks, but only to customers that pay a $5 per month to be Robinhood Gold customers. E*TRADE provides access to third party research from Moody’s, Thomson Reuters, Morningstar, MarketEdge, Trefis, and others free of charge. Both companies also have a dividend reinvestment plan (DRIP). Customers enrolled in Robinhood’s deposit sweep program pays interest of 0.30%, which is higher than the 0.01% offered through E*TRADE mutual fund sweeps for their managed accounts. 

While there were some comparisons above, there is a significant difference between the companies on research amenities. Robinhood does not offer any stock, ETF, mutual fund, options, or fixed income screeners, while E*TRADE has robust offerings for all of these screeners and the ability to screen for environmental, social and governance (ESG) criteria and socially responsible investing (SRI), as well as thematic screens, such as robotics or infrastructure. Finally, both platforms provide charting, but Robinhood’s offering is much more basic and doesn’t allow drawing or customization, while E*TRADE’s charting tools are much more robust. E*TRADE is the clear winner for research and account amenities.

Portfolio Analysis

E*TRADE has significantly better portfolio analysis tools than Robinhood, which only has very basic basic account information such as balances, percent gain, margin, buying power, dividend history, and tax reports. E*TRADE has all that and much more, including an extensive offering of account analytics, calculators, portfolio analysis, ROI, and multiple other tools. E*TRADE has a clear advantage over Robinhood for portfolio analysis.

Education

Robinhood offers educational resources to its customers, but its focus is more on providing news and content to make finance easier to grasp for newer investors. Robinhood’s educational content provides definitions and educational content about investment terminology as well as more than 650 published articles. E*TRADE has a lot of good information for new investors covering long-term investing, tax planning, and options and futures. E*TRADE also recently introduced Virtual Learning Environments, which are full-day structured online events with targeted learning objectives, such as beginner options.

E*TRADE has a more complete education offering than Robinhood because of their virtual learning environment, much more content on long-term investing and planning, and thorough resources for brand new investors.

Customer Service

Robinhood does not offer phone support, solely providing customer service through the app and website. E*TRADE offers phone support, but they have experienced a significant increase in hold times to get through. Getting someone on the phone with E*TRADE took 44 seconds to reach someone from 2017 through 2019, but the significant increase in customers and trading activity since the Covid pandemic has resulted in a 65% increase in inquiries that brought their average hold time to more than 11 minutes. E*TRADE is working to ramp up their capacity.

Even with the long hold times, having customer support you can call makes E*TRADE the winner in this category. E*TRADE has stated its intention to continue providing phone-based support and improve on hold times. While younger, tech-savvy investors may be more comfortable with just electronic means of communication, there are plenty of investors who want to speak with someone when they have questions about their financial accounts.

Security

Both Robinhood and E*TRADE offer two-factor authentication as well as face or fingerprint biometric login for their mobile apps. Many brokers, including E*TRADE, supplement Securities Investors Protection Corporation (SIPC) insurance with additional insurance policies. Robinhood does not offer any protection beyond the SIPC protection. Regarding account security, E*TRADE did not suffer any serious platform outages in 2020, but Robinhood suffered significant outages in February and March 2020 because their systems could not handle the stress of the increased activity on its platform. Robinhood has also suffered data breaches, including one in November 2021 that involved 7 million customers.

E*TRADE has better security because they provide insurance in excess of SIPC coverage and did not have outages or data breaches. Robinhood falls short in all three categories.

Our Verdict

While both E*TRADE and Robinhood have something to offer to their respective customers, E*TRADE is the clearly better choice for most investors and traders. They have strong offerings that support multiple markets, allow customers to customize their platforms, and find investment opportunities from extensive screeners. Robinhood’s limited offering of just stocks, ETFs, options, and cryptocurrencies pales in comparison to the breadth of offerings, analytics, and tools available on E*TRADE. While options do not have commissions with Robinhood, the lack of price improvement information from Robinhood on equities, ETFs, and options makes us question if commissions and a better, transparent fill may not benefit customers more. 

Overall, Robinhood’s offerings don’t match up well with many larger online brokers, including E*TRADE. While there is nothing wrong with simplicity as an approach, Robinhood will have to add to its offerings to be more competitive with the stronger brokers.