firsTrade Review
Our take: Firstrade is a good platform for global investors seeking US ETF access at minimal cost. But, being aware of the tax implications using US ETFs in your jurisdiction is critical to making the best use of this opportunity and avoiding costly tax bills including estate tax implications. Check your Double Tax Treaty with the U.S. The upside is an investment protection scheme way beyond schemes in Europe of $500k.
Our assessment: Firstrade scores 4.2 In its category, driven by its low cost and good range of features.
Is it suitable for you?
- Passive Investors: High ETF availability and zero commission mean investors following straightforward strategies may find Firstrade useful.
- Semi-Active Investors: Minimal cost and high ETF availability gives more adventurous investors the ability to build complex portfolios with the widest range of US factor or alternative tilt.
- Advanced Investors: Margin loans, options, share lending and the entire US ETF market make Firstrade an attractive proposition for active investors looking to avoid trading and custody fees.
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Pros & Cons and suitability
Pros & Cons
- Low cost: Zero commission & custody
- Large range of US ETFs
- International account availability
- $500k US Protection Scheme (SIPC)
- Significant PFOF reliance
- Private firm but mitigated by SIPC
- No tax advantaged accounts for international customers
- Only US exchanges available
Suitability
Suitable
Low-cost access & US ETF universe, but beware of tax implications.
Suitable
The range of US ETFs available is attractibe but be vary of tax implicationS.
Very Suitable
The available features make building factor tilt portfolios straightforward.
Availability
Firstrade is Available Internationally
Broker Snapshot
Why is Firstrade a Tier 1 broker?
Firstrade is a pure player in the brokerage space. Although they have no banking affiliation, Firstrade have substantial assets under administration and a singular focus on low-cost retail investment. We see them in the same category as HL in the UK or Swissquote in Europe. Some advanced features like options and margin loans are present and the core of the business is equity market access for individuals managing their own money. Unusually for a Tier 1 player, Firstrade has not pursued a stock exchange listing, but the scale and style of the firm separates it from newer app-based trading platforms on both sides of the Atlantic.
Longstanding, family-owned firm.
Firstrade has over 40 years in the business and survived the transition to web-based brokerage. The firm has avoided regulatory drama and interventions in the past decade. Firstrade remains owned by the founder John Liu and his family. Due to its status as a private firm, Firstrade limits the amount of publicly disclosed information about its operations.
Company Info
| Characteristic | Firstrade |
|---|---|
| Inception Date | 🛈 1985 |
| Headquarters | 🛈 New York, US |
| Key Owner | 🛈 John Liu |
| Bank Affiliated | ❌ No |
| Listed on Stock Exchange | ❌ No |
| Parent Rating | ❌ No |
| Net Profit (2023) | Unclear |
Regulation
| Feature | Firstrade |
|---|---|
| EU Entity | 🛈 None |
| UK Entity | 🛈 None |
| Key Regulators | ✅ US: FINRA, SEC |
| EU Regulator | N/A |
| UK Regulator | N/A |
| EU/UK Guarantee | N/A |
| US Guarantee | 🛈 SIPC - $500,000 limit |
Great Feature Set, Cost Effective
Firstrade gives you a gateway to all US listed ETFs as well as options trading, margin loans, security lending and fractional shares. This feature set all comes at a low cost, with no custody fees or trading commissions.
Features
| Feature | Firstrade |
|---|---|
| Key Base Currencies | USD |
| ETF Availability | ✅ Very High, All US listed ETFs |
| Multicurrency | ❌ USD only |
| Cash Interest | ✅ Yes |
| Margin Loans | ✅ Yes |
| Exchanges | ✅ US exchanges |
| Security Transfer | ✅ Yes |
| External PFOF Reliance | ⚠️At Least Medium |
Fee Structure
| Feature | Firstrade |
|---|---|
| Custody Fees | ✅ None |
| Inactivity Fees | ✅ None |
| ETFs Dealing Fees | ✅ None |
| FX Fees | 🛈 Not Available |
| Deposit Fees | ✅ None |
| Withdrawal Fees | ⚠️ 25 USD |
| Security Lending | ✅ |
I. Company
Firstrade Securities, established in 1985 by John Liu in Flushing, New York, is a prominent U.S. online brokerage firm. It offers commission-free trading across a diverse range of financial products, including stocks, ETFs, options, mutual funds, and bonds, catering to both domestic and international investors. However, investors need to be aware of possible US State tax implications.
Business Profile
Firstrade is a US Broker. The firm’s revenue model primarily hinges on interest generated from credit and margin balances, akin to traditional banking practices. Additionally, Firstrade earns income through arrangements with routing venues, sharing execution revenue to offset operational costs. In May 2022, Firstrade expanded its services by launching a cryptocurrency trading platform via Firstrade Crypto LLC, reflecting its commitment to evolving investor needs.
Ownership and Transparency
Firstrade was founded by John Liu in 1985. The firm has persisted for 40 years successfully including the transition to the post internet world of purely online trading. As the firm is not listed, attempts to understand its profitability would involve reverse engineering its annual accounts, which goes beyond the purview of this review. We can speculate that given its multiple decades of history the firm is financially viable so far, but without investor relations documents the precise financial position of the firm is opaque. Firstrade is a private and founder owned firm. Firstrade Securities Inc is owned wholly by Firstrade Holding Corporation, in which John Liu holds between 50 and 75% of the shares. FINRA paperwork indicates that other members of the Liu family hold the remaining shares. While writing this review we were unable to find well-sourced, credible information about the number of client accounts or value of assets under administration at the firm. PFOF plays a role in Firstrade’s revenues, but without more detailed revenue disclosures across the firm’s activities we can’t specify the proportion PFOF provides.
Safety Considerations
As a privately held company, Firstrade Securities Inc. is neither publicly traded nor rated by credit rating agencies, limiting the transparency and scrutiny typically associated with publicly listed firms. This lack of external evaluation makes direct assessment of its default risk challenging. However, Firstrade’s long-standing operation since 1985 suggests a sustainable and potentially reliable business model. Additionally, as a member of the Securities Investor Protection Corporation (SIPC), Firstrade provides account protection up to $500,000, offering an added layer of security for investors.
Regulation & Investor Compensation Schemes
Firstrade is regulated by the SEC and FINRA and is a member of the SIPC compensation scheme. This provides a guarantee on up to $500,000 of assets including up to $250,000 in cash.
Share & Cash Custodians
Apex Clearing Corporation have custody of your assets. Firstrade does not disclose which banks your uninvested cash is held with.
Reputation
Firstrade has a good track record, with only one recent incident of regulatory action. In 2013 the firm was fined $300,000 by FINRA for failings in anti-money-laundering compliance between 2008 and 2011. This appears to be an isolated incident as since 2013 no further regulatory action has been taken. The forty-year track record of the firm is positive, indicating that it has persuaded customers to stay with it for the long term.
II. Fee structure
Firstrade does not have custody or trading fees and it scores very well in the comparison with its direct competitors. However, it offers accounts in USD only FX fees adding complexity for non American investors and potentially conversion fees.
Platform fees
Firstrade does not charge custody fees for assets held on the platform.
Trading Commisions
Firstrade charges zero commission on trades into ETFs, mutual funds, shares and options. Fixed income securities (eg individual corporate or sovereign bonds) have commission charged on a net yield basis – FirstTrade’s cut is already represented in the listed yield of the security.
Overall Fee Simulation vs Competitors
Most of our readers have simple Index portfolios. Using our Broker Total cost calculator, you can estimate the total cost of holding ETFs throughout the investment period. For our simulated scenarios, Firstrade comes out as very competitive.
Fee Simulation For General Accounts
Firstrade is a cost-effective option for global investors who want a low-cost platform and some advanced features. Using our model, an investor based in Europe could use FirstTrade and come out well ahead versus using Interactive Brokers at 731 EUR or Swissquote at 8,785 EUR. These are peer firms with international availability and an advanced feature set including margin and derivatives.
Investor assumptions
| Model Feature | Assumption |
|---|---|
| Investor | International |
| Instrument | ETF |
| Account | International |
| Initial Investment | $ 100,000 |
| Monthly | $ 1,000 |
| Time Horizon | 20 years |
| Gross Return | 8% |
Total Fees
Currency Exchange fees
Firstrade does not have FX fees as all trading activity is conducted on US exchanges in USD.
Other fees
Wire transfers out of the account cost $25. This might be a cost barrier for those intending to make frequent withdrawals. If you have access to a US bank account, you’ll be able to use free transfers of funds in or out via the ACH system.
Firstrade charge a $75 fee for a full account transfer and a $55 fee for a partial account transfer when moving assets out to another brokerage firm.
For incoming transfers, Firstrade does not impose any fees. However, your current brokerage may charge an outgoing transfer fee. To assist with this, Firstrade offers a Transfer Fee Rebate: they will rebate the account transfer fee (up to $250) charged by another brokerage firm when completing a full account transfer of $2,500 or more (excluding mutual funds and fixed income products).
III. Platform & Features
Firstrade offers lots of features for traders. This is all very interesting, but for long term investors it is at best background noise and at worse a serious distraction. For wise investors, what would be good to get is automated investing, cash remuneration or family accounts. Advanced investors will find some products, though, including access to US ETFs.
Account Opening Process
Account opening is straightforward. You receive a verification code via text message and then upload passport ID for verification before filling out your profile with other details and choosing a method of funding the account.
account Features
- Modern Platform: The web platform is modern, uncluttered and easy to navigate.
- Mobile App: There are IOS and Android apps for mobile users.
- Large Range Of Securities: Firstrade has an excellent range of securities available, from mutual funds and ETFs through to fixed income products, options and fractional shares.
- Lack Of ETF Regular Investing Service: Firstrade has a regular investing program available for mutual funds, but not for ETFs and shares. Given the ongoing shift of retail investing towards ETFs away from funds this is an oversight.
- Advanced Options (including US ETFs): Advanced investors may appreciate that the broker allows you to invest on margin starting at the base rate + 1.75% for loans under $24,000. You can also engage in share lending to boost the yield of a portfolio of stocks. As a US platform you have access to the entire universe of US listed ETFs, but no UCITS ETFs or exchanges outside the USA. The possibility of holding US ETFs as an international retail investor based outside the US may be attractive to some, as the sheer size and competitiveness of the US retail investing market has crushed the charges on many ETFs down to low single digit basis points. But this opportunity comes with a sting in the tail: you’ll need to carefully investigate and understand the impact of holding your money in a US rather than UCITS ETF, especially when it comes to tax. Fortunately, we have two articles addressing these issues in detail
Internalisation and PFOF
With zero commissions and no percentage or flat account fee, Firstrade must earn its money somewhere. As an unlisted, family-owned firm disclosure of financial performance is more limited than we’d like but SEC rule 606 & Rule 607 disclosure shows that the firm receives hundreds of thousands of USD in revenue per month from market makers such as Citadel Securities. This may facilitate the minimal cost of the platform, but it is important to consider whether this is in your best interest. We’ve addressed this issue in this article:
Cash Interest
Firstrade pays a flat rate of 0.15% on all cash balances. This is more than nothing but holding cash at this rate for long will result in real terms loss of spending power. This is not a savings account.
Advanced Features
Firstrade provides you with access to US based ETFs. Margin loans and options and derivatives are available.
Features
| Investment Type | Availability |
|---|---|
| ETFs | ✅ |
| Stocks | ✅ |
| Bonds | ✅ |
| Funds | ✅ |
| Options | ✅ |
| Derivatives | ✅ |
| Futures | ❌ |
| CFDs | ❌ |
| Forex | ❌ |
| Crypto | ✅ ¹ |
| Commodities | ❌ |
IV. Taxes
Tax Wrappers
As a US broker, you won’t find EU or UK tax advantaged accounts here. You’ll need to weigh up how your investment plans could be impacted tax on your realized returns or income outside these accounts. You’ll also need to ensure whether tax treaties your country of residence has with the USA treat your US investing activities favorably.
Tax Reporting
Firstrade has helpful guides for international investors on W-8BEN and Tax Withholding For Non-U.S. Persons. The broker also provides statements of your trading activity and consolidated tax statements (aligned to the US tax system) which may be helpful in working out gains, losses and what you might owe the tax authorities.
Good Luck and Keep’em* Rolling!
(* Wheels & Dividends)
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