3 Retail Brokerage Stocks to Buy Now

The retail brokerage industry has gone through quite a few important changes over the last few years. With the rise of the internet, online stock trading and investing quickly picked up steam and helped entirely new generations get involved in the markets. Many of these companies traditionally relied on commissions to generate revenue, until Robinhood came along and essentially forced retail brokers to move to a commission-free trading model. Now, many of these companies have turned to payment for order flow as a key source of revenue.

While there will surely be additional changes to come for the retail brokerage industry, the fact that more retail investors are trading than ever before is a good sign for the future of these companies. Investors should be excited about the prospects of retail brokerage stocks, especially given all of the market enthusiasm we are seeing among younger demographics. That’s why we’ve put together a list of 3 retail brokerage stocks to buy now to give you some insight into the best ways to profit from the rise of the retail trader. Let’s take a deeper look below. 


Charles Schwab Corp (NYSE:SCHW)

This company is a strong option to consider as it combines an online securities brokerage with wealth management, banking, custody, and other services to individual and institutional clients. That’s exactly the type of diversified business model that investors should be on the lookout for. Charles Schwab also recently acquired TD Ameritrade which resulted in creating the largest self-directed brokerage in the U.S., with $7.4 trillion in client assets. This strategic move should result in strong cost and revenue synergies for the company going forward, and investors can also expect nice earnings growth thanks to Schwab’s massive scale.

What’s truly compelling about Charles Schwab is that it’s a brokerage that appeals to a variety of different investors. The company attracts everyone from retail traders at the beginning of their investing journey to sophisticated high-net-worth clients, which says a lot about the company’s brand. Keep in mind that Charles Schwab generates substantial interest-rate related revenue, which could be promising as higher interest rates come into play in the coming months. In Q1, the company reported record earnings per share along with a record 3.2 million new brokerage accounts and 8.4 million daily average trades, which confirms that the current market environment is working in Schwab’s favor.

Futu Holdings Ltd (NASDAQ:FUTU)

If you are interested in a retail brokerage stock that offers international exposure and strong earnings growth, look no further than Futu Holdings Ltd. It’s an investment holding company that offers a fully digitized brokerage and wealth management platform to clients in China. Futu also recently launched a digital trading platform in Singapore, which has seen its number of paying clients surpass 100,000 in a few short months. Both China and Southeast Asia are high-growth potential markets that could deliver strong returns to investors over the next few years, especially if the heavy trading activity continues.

With triple-digit growth for five consecutive quarters, it’s safe to say that Futu is attracting plenty of new clients. The company recently reported strong Q1 earnings including total revenues of $283.6 million, up 349.4% year-over-year. Futu also saw its total number of paying clients increase 231% year-over-year and total client assets increase 367.6% year-over-year, confirming that the company's platform has become a hit overseas.

Morgan Stanley (NYSE:MS)

This company is one of the largest financial services firms in the U.S., with operations in investment banking, securities, and investment and wealth management. While Morgan Stanley isn’t the first name that comes to mind when you think of retail brokerages, the company's 2020 purchase of E*TRADE Financial is why this stock should be on your radar if you are interested in exposure to the industry. This acquisition should help Morgan Stanley benefit from a greater scale in wealth management services and adds an intriguing new element to the company’s business model.

Morgan Stanley is also a strong financial stock to buy given the company’s leading position in global capital markets and investment banking. With equity underwriting and IPO activity expected to remain high for the foreseeable future, the company is poised to have a strong 2021 with regard to this aspect of its business. There’s also the fact that the Federal Reserve recently authorized share buyback programs and dividend increases for banks following the stress test results that will be released later this month, which could be a strong catalyst for the stock going forward.