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Charles Schwab vs. Vanguard

Vanguard and Charles Schwab are among the biggest investment companies in the world. You’ve almost certainly heard of both, and if you own exchange-traded funds (ETFs) or mutual funds in your retirement account or taxable investment account, there’s a good chance you own low-cost funds backed by both too.

Vanguard and Charles Schwab have much more to offer than low fees on mutual funds and ETFs, however. If you’re looking to open your first brokerage account or switch to a new online brokerage, either makes a fine choice. 

Read on to learn more about each company’s investment platforms, wealth management services, and value-added features and capabilities — and how they compare against one another.

Key Features of Vanguard and Charles Schwab

Vanguard and Charles Schwab both offer self-directed investing platforms for DIYers, automated and human-managed investment solutions for hands-off types, and various tools and resources to make you a more informed and capable investor.

Self-Directed Investing Platforms

Schwab and Vanguard are both built around DIY-friendly brokerage accounts that offer low-cost access to a range of market-traded securities. Both offer a variety of account types, including taxable accounts for general investing, retirement accounts like Roth IRAs and traditional IRAs, and education savings accounts like 529 college savings plans.

Charles Schwab Self-Directed Brokerage

Schwab One is Charles Schwab’s self-directed trading platform. It’s the place for DIYers to buy stocks, ETFs, fixed-income securities, options, cryptocurrencies, futures, and other types of investment instruments. 

Schwab One offers commission-free trading for listed stocks and ETFs. Option trading costs $0.65 per contract. Futures and futures options cost $2.25 per contract. Trading fees for other types of securities are variable but generally competitive with other major brokerages.

Schwab’s brokerage does not charge maintenance fees or impose investment account minimums. You can invest in fractional shares here using the Schwab Stock Slices feature, starting at $5 per slice.

Vanguard Self-Directed Brokerage (Vanguard Brokerage Services)

Vanguard Brokerage Services is Vanguard’s online brokerage for DIY investors. It’s designed to help self-directed investors build personalized portfolios featuring a range of securities:

You can purchase Vanguard mutual funds and ETFs commission-free through Vanguard Brokerage Services. Most stock trades are commission-free as well.

Non-Vanguard funds may carry transaction fees. Meanwhile, fixed-income securities typically cost $1 per $1,000 of face value, and options trading typically costs $1 per contract or less.

Vanguard Brokerage Services offers semi-personalized portfolio-building recommendations for novice investors. If you’re looking to create a diversified investment plan using Vanguard sector and index funds, this is a useful feature. 

Notably, Vanguard mutual funds can carry investment minimums that make them impractical for lower net worth investors. If you’re just getting started, look to Vanguard ETFs, which have no trading minimums.

Robo-Advisor Platforms

Vanguard and Charles Schwab both have automated investing platforms, also known as robo-advisors. These are appropriate for hands-off investors who don’t need personalized advice from human professionals or can’t meet the minimum investment threshold for that level of service.

Charles Schwab Robo-Advisor (Schwab Intelligent Portfolios)

Schwab Intelligent Portfolios is Schwab’s robo-advisor platform. It requires a minimum investment of $5,000 but does not charge commissions or advisory fees. The Schwab and non-Schwab ETFs that Schwab Intelligent Portfolios uses to build your portfolio do charge management fees and expenses, although these are low by industry standards.

Schwab Intelligent Portfolios is a fully automated investing solution. Using information you’ve provided about your financial goals and tolerance for risk, it builds semi-customized portfolios using a mix of low-cost index funds, sector funds, and other largely passively managed ETFs. 

Schwab Intelligent Portfolios automatically rebalances your portfolio from time to time to ensure your asset allocations remain on track and to reduce your tax bill. Depending on your stated risk tolerance, the platform may keep a portion of your portfolio in cash, potentially reducing your overall return.

If you’re looking to manage your account distributions in retirement, look to Schwab Intelligent Income, a robo-advisory service specifically designed for durable, tax-smart asset management in later life. There’s no additional fee for this service.

Vanguard Robo-Advisor (Vanguard Digital Advisor)

Vanguard Digital Advisor is Vanguard’s robo-advisor platform. Like Schwab Intelligent Portfolios, it’s a fully automated investing solution designed for hands-off investors that builds and periodically rebalances portfolios consisting of a diversified mix of low-cost Vanguard funds.

Vanguard Digital Advisor requires a minimum investment of $3,000 and carries a variable gross advisory and management fee that Vanguard claims won’t exceed $2 per $1,000 invested (0.20% of assets under management, or AUM). Vanguard waives these fees for the first 90 days your account is open.

Wealth Management and Investment Advice Services

Schwab and Vanguard both offer wealth management and investment advisory services to higher net worth customers. At lower price points, these services are hybrids that leverage the companies’ robo-advisor platforms with added advice and support from human professionals.

Charles Schwab Wealth Management Services

Charles Schwab offers several levels of investment advisory and wealth management services in-house. It also offers access to pre-vetted independent financial advisors through the Schwab Advisor Network.

  • Schwab Intelligent Portfolios Premium. This is Schwab’s hybrid managed investments option. It blends the relatively low cost and seamlessness of Schwab’s robo-advisor with direct, unlimited access to financial planning professionals and an interactive, personalized roadmap for your financial goals. The minimum investment is $25,000. Schwab Intelligent Portfolios Premium charges a one-time planning fee of $300 when you open your account, then a flat fee of $30 per month thereafter, making it a very good deal for higher net worth users.
  • Schwab Private Client. For clients with $1 million or more in investable assets, Schwab Private Client is a human-driven wealth management solution that leverages sophisticated, fully customized investing strategies to boost returns and minimize taxes. As a private client, you’re paired with a Schwab financial advisor to whom you have direct, unlimited access. Advisory fees start at 0.80% assets under management (AUM) and decrease at higher balances.
  • Schwab Financial Planning. Schwab has an in-house staff of financial planners who can help you with one-off or ongoing financial planning projects. Your initial plan is complimentary, although Schwab uses it as an entry point to sell you on managed investments.
  • Schwab Managed Portfolios and Other Bespoke Investment Management Services. Schwab offers several bespoke managed investment services built around specific strategies and objectives, such as maximizing income as you approach retirement or mitigating exposure to declining markets. Minimums range from $25,000 to $250,000, depending on the service.
  • Schwab Advisor Network. Schwab works with a network of independent financial advisors. Each has their own approach to financial planning and wealth management, giving you the freedom to choose a close fit. Advisory fees vary by advisor but the minimum investment is always $500,000.

Vanguard Wealth Management Services

Vanguard’s wealth management services range from Vanguard Personal Advisor Services — a hybrid solution — to Flagship Select, reserved for the company’s wealthiest clients. Eligibility is determined by investable assets.

  • Vanguard Personal Advisor Services. This hybrid service combines human-assisted financial planning and advice with Vanguard Digital Advisor. Basically, the robo-advisor manages your investments while your financial advisor helps develop and manage your personalized financial plan, provides ongoing investment coaching and advice, and tracks your goals in real time. The annual advisory fee is 0.30% AUM and the minimum investment is $50,000.
  • Dedicated Financial Advisor. Vanguard gives you your own dedicated financial advisor once your assets under management balance hits $500,000. This means you’ll have the same point of contact for all your investing and financial planning questions, possibly increasing your comfort with Vanguard’s services overall. 
  • Vanguard Flagship Services. Once your assets under management balance tops $1 million, you qualify for Vanguard Flagship Services. This service level comes with access to alternative investment opportunities and the option for Vanguard to manage your family trust if you have one. 
  • Wealth Management Team (Flagship Select). Vanguard’s highest level of service is reserved for clients with more than $5 million in investable assets. Here, you have access to a dedicated team of financial advisors offering priority service and bespoke investment management. You pay less for investment management as well — from 0.20% AUM for balances between $5 million and $10 million down to 0.05% AUM for balances above $25 million.

Additional Features and Capabilities

Schwab and Vanguard both have some notable additional features and capabilities.

Additional Features and Capabilities of Charles Schwab

Schwab has a nice lineup of investor education resources, advanced trading tools, and noninvestment products and services.

  • Bank Accounts and Services. Schwab has a banking division that offers checking and savings accounts. Neither require a minimum deposit and both pay modest interest rates on eligible balances. Charles Schwab Bank also offers home loans and lines of credit secured by portfolio assets.
  • Margin Trading. Schwab allows eligible clients to apply for margin trading privileges in their Schwab One brokerage account. You must have at least $2,000 in your account to qualify for margin trading.
  • Investor Research and Education Resources. Schwab offers a wealth of investor education and research resources, including premium reports from third parties like Morningstar and learning modules for novice and intermediate investors.
  • Schwab Trading Services. Schwab Trading Services is an optional free add-on to your Schwab One account. It comes with specialized trading platforms for desktop, browser, and mobile access, plus dedicated access to trading specialists to help you troubleshoot.
  • Advanced Trading Tools. Schwab brokerage accounts also come with advanced trading tools like Idea Hub, which you can use to map out trading strategies, and All-in-One Trade Ticket, which helps you build and execute up to three complex trading orders at one time.
  • Physical Branch Network. Schwab has several hundred branches scattered across the United States. If you choose to work with an in-house Schwab financial planner or wealth management professional, you may have a local point of contact based out of one.

Additional Features and Capabilities of Vanguard

Vanguard has some useful value-added capabilities for self-directed investors and hands-off money managers alike.

  • Margin Trading. To magnify your buying power on the self-directed investing site, you can apply for margin trading privileges in your Vanguard Brokerage Services account. This requires a minimum balance of $2,000, and approval comes at Vanguard’s sole discretion.
  • News and Perspectives. Take advantage of free stock market news, analysis, and opinion resources from a variety of reputable sources. You can access this information through your Vanguard account and use it to sharpen your investing strategy. 
  • Investing Tools and Calculators. Vanguard offers free retirement calculators, income and expense worksheets for retirement and education planning, and asset allocation guides. Vanguard makes these available to self-directed investors and wealth management clients. 

The Verdict: Should You Choose Charles Schwab or Vanguard?

Vanguard and Schwab both offer high-quality, low-cost investment products and services. They’re not exactly interchangeable though. Here’s where each shines relative to the other.

You Should Sign Up for Charles Schwab If…

Charles Schwab is a better fit if:

  • You’re an Active Trader Who Needs an Edge. Schwab has a more robust set of research and analysis resources for intermediate and advanced DIY investors. Its Schwab Trading Services add-on is a boon for active traders as well. And resources like Idea Hub and All-in-One Trade Ticket pair with real-time charting tools to give swing traders and day traders an edge over their competitors. Vanguard can’t match this lineup.
  • You Want an Extremely Cheap Robo-Advisor. Schwab Intelligent Portfolios charges no advisory fees, making it one of the cheapest robo-advisors around. You’ll still pay fund management fees on your investments, but the lack of an advisory fee is a definite advantage over Vanguard Digital Advisor.
  • You Want to Work With an Independent Financial Advisor. The Schwab Advisor Network is a central directory of independent financial advisors who manage investments through Charles Schwab. If you’re looking for a different perspective, this is a great place to find your financial advisor match. Vanguard doesn’t have an equivalent network.
  • You Want to Bank Where You Invest. Unlike Vanguard, Schwab offers consumer bank accounts, including checking accounts and savings accounts. You can also apply for a credit card, home loan, and secured line of credit here. Although Charles Schwab Bank isn’t known for super-competitive rates, it’s a convenient choice if you’re looking to keep some cash in reserve alongside your securities account.

You Should Sign Up for Vanguard If…

Vanguard is a better fit if:

  • You’re Seeking Personalized Financial Advice and Planning at Very Low Cost. Vanguard’s human-assisted financial planning services are extremely affordable by industry standards. As a Vanguard Personal Advisor Services client, you’ll pay no more than 0.30% AUM, not including fund fees and expenses. That compares to 0.80% AUM for Schwab’s comparable service and upwards of 1.00% AUM for many independent human financial advisors.
  • You’re a DIY Investor Who Needs Some Help Getting Started. Vanguard is happy to hold your hand if you’re new to the self-directed investing game. Take its portfolio construction recommendations seriously and you can easily build and manage a diversified portfolio that mirrors what you’d get with Vanguard Digital Advisor — without the advisory fee. 

Both Are Great If…

Both Charles Schwab and Vanguard are excellent options if…

  • You Want Access to Very Low-Cost Funds. Both Vanguard and Schwab stake their reputations on low-cost mutual funds and ETFs that largely match or exceed the long-term performance of relevant benchmarks. If your top priority is gaining access to a vast repository of such funds without incurring fees to buy or sell them, you can’t go wrong with either.
  • You Want to Invest in a Variety of Securities. Both Vanguard and Schwab let self-directed investors purchase stocks, ETFs, mutual funds, options, fixed-income securities, and other investment products through their brokerage accounts. Again, you can’t go wrong with either provider.
  • You’re Seeking Personalized Financial Planning Assistance. Schwab and Vanguard both provide several levels of human-assisted investment management and financial planning. Although Vanguard’s financial planning services cost a bit less than Schwab’s, the scope of service is comparable.

Final Word

Vanguard and Charles Schwab both offer lots of low-cost, high-quality mutual funds and ETFs for cost-conscious investors. Both stand behind low-cost robo-advisor services and offer varying levels of human-assisted investment management. Both make it easy for DIYers to buy stocks, funds, bonds, and other securities with low or no commissions.

Are Vanguard and Schwab all but identical then? Not even close.

Despite all they have in common, Vanguard and Schwab have some clear differences. And while Vanguard is a good fit for DIY novices and investors seeking human advice at very low cost, Schwab is a more well-rounded company overall. It offers more value for a wider set of would-be users.

And that gives it the edge in this head-to-head comparison. 

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.