I am in the research stage of setting up a custodial investment account for a child.
After doing a ton of research on which brokers to choose (including the brokers I personally use), I found some answers that might help the community if they are in a similar situation.
I want to buy simple, low-cost ETFs for the long term and will go with the invest-and-forget it mindset. I plan on making one purchase a month until the child grows up. I do not need fast executions, options, margins or Bloomberg Terminal-type research access.
- company must offer custodial accounts
- company must offer free or low cost commissions per trade
- company must allow dividend reinvestments
- company must not charge monthly fees
- company must not have account minimums
- company must allow for fractional share purchase
I checked the traditional companies such as Etrade, Fidelity, Merrill, IB, Vanguard, etc… as well as the “new” disruptive companies such as Robinhood and Stockpile.
First, I looked at the traditional companies.
We all have our favorite brokers and we could create custodial accounts using our existing relationships. The commissions range from $0 to $9+. Getting these commission rates requires a relationship, which may mean maintaining a certain minimum account value. Some of these brokers don’t allow fractional share purchases.
I’d do a comparison chart here but it would be outdated quickly. You can easily compare brokers by doing searches like these (please note that these sites probably get kickbacks for their links):
Next, I looked at the disruptive companies.
I compared Robinhood to Stockpile as both companies seem similar at first glance. I found that they cater to folks seeking free to low-cost commissions with none of the bloat found at most traditional brokers. Both companies have simple, no-frill interfaces and are simple to set up. Robinhood offers free trades and Stockpile offers trades for $0.99. As of now, Robinhood does not offer custodial accounts. They are out of the runnings for now.
As a bonus, Stockpile offers a unique way to buy shares for others: stock gift cards (both physical and electronic). Stockpile seems to be the best choice for me and my needs at this time.
If I make one trade a month at $0.99, I will pay $11.88 in commissions a year. As a bonus, I will be dollar-cost-averaging the purchases throughout the year.
If you are able to use your existing relationships with your brokers, by all means go for it. I think that for someone who is starting out or for someone who doesn’t have a relationship with existing programs, Stockpile might be a good place to start. I’ll post any updates if there are any to report.