The stock market is at or near all-time highs, which means that brokerage firms should be seeing a lot more interest (for better or worse). Weekly business newspaper Barron’s just released their 2013 annual broker survey rankings. Here’s a snippet about their criteria:
We looked at eight categories of service, examining what can be traded online, how the tools work together across platforms, the design and capabilities of mobile platforms, educational offerings and customer service, as well as the nuts and bolts of placing and executing a trade. We closely scrutinized the various tools available for finding appropriate trades, including scanners and charts. When examining costs, we considered stock and options commissions as well as platform or maintenance fees, margin debt, and charges for transferring an account out.
Barron’s notes that overall, the online experience is improving with a growing number of brokers offering their clients real-time quotes, easier-to-use websites, and a better mobile trading experience. They also admit that their overall rankings are based on the needs of their subscribers – namely “wealthy, active traders”. As such, their overall winner was again Interactive Brokers, a broker designed for highly-active traders with an extensive feature set and low commissions. However, IB also has a minimum opening balance of $10,000, a minimum monthly fee of $10 even if you don’t trade at all, and customer service that does not cater to casual investors.
I am not an active trader, but I still like having real-time quotes, a nice user interface, and friendly service when I need it. Thankfully, Barron’s also ranked the brokers for the rest of us:
Top 5 Brokers for Novice Investors
- TD Ameritrade. Performed well in customer service & education, research tools, and mobile offerings. Free real-time quotes from NYSE, AMEX, and NASDAQ Level 1 and 2. When placing an order, the trigger price is automatically set at the midpoint between bid and ask.
- Fidelity
- E-Trade
- Charles Schwab
- Capital One 360 Sharebuilder
Top 5 Brokers for Long-Term Investing
- TD Ameritrade
- Fidelity
- Charles Schwab
- Merrill Edge
- E-Trade (down 1)
Top 5 Brokers for In-Person Service
- Scottrade. Scottrade has over 500 physical branches across US, so that when you call you reach a human in that local branch. Free in-person educational seminars are offered as well.
- Merrill Edge
- Charles Schwab
- Fidelity
- TD Ameritrade
Compared to the 2012 rankings, the top 5 for novice investors and in-person service remain the same. TD Ameritrade managed to bump Fidelity off the #1 spot for long-term investors, yet the article again chooses not to mention TDA’s 100 commission-free ETF list while mentioning Firstrade’s lesser 10 free ETF list? TradeKing is replaced by Merrill Edge in the Top 5, even though I think they improved since the Zecco merger. Vanguard’s brokerage declined to participate and thus was not eligible for the rankings.
Other notables? Capital One Sharebuilder lowered their real-time commissions to $6.95 per trade. Merrill Edge (Bank of America) has altered their commission structure with a program called Platinum Privileges that includes 30 free trades per month. To qualify, you must have an active Bank of America personal checking account and maintain at least $50,000 as a combined balance in your Bank of America deposit accounts and/or your Merrill Edge brokerage accounts. Previously, to get free trades you needed $25,000 exclusively in idle cash.
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I have trouble believing that one of their criteria was “maintenance fees” and they still called Ameritrade one of the top brokerages for long term investing. Their fees are insane, and any long term investor would be well served by pulling their money and putting with a brokerage whose fees won’t erode away your gains over time. I think Vanguard, Fidelity, Schwab and T Rowe Price are all FAR better options for the long term investor.
Saved, what fees do you mean? Ameritrade’s fees don’t seem that bad. $10 for a stock trade is higher than others but not exactly gouging.
Totally agree what TDAmeritrade is the best for novice trader.
I was with Thinkorswim before it was bought by TDAmeritrade. The service was top-notch…usually I could get a response within minutes of my E-mail. Other than a major hiccup during the migration from ToS to TDA (I can’t trade for like 3 days…), the service has consistently be good.
When I was a novice option trader a few years ago, I would E-mail ToS to ask simple questions. There was one time when I stupidly did not close an at-the-money SPY short call, and a ToS rep had to work with me on the phone after Friday closing. He authorized me go above my available buying power to buy the necessary SPY shares, so that I don’t have to worry about a short SPY position by Monday opening. He even explained to me why I don’t want to have unprotected short SPY position over the weekend (at least for a novice like me…).
For all that assistance, it only cost me the regular $5 stock commission. I didn’t pay any phone brokerage fee or interest for essentially using margin for one day.
Something people forget is that most brokerages will negotiate the commission structure as the trade volume goes up. I was able to do that to make my commission a bit more reasonable compared to IB. While one day I might still go to IB for its rock-bottom commission, I am very happy with TDA and would recommend it to others.
Darn…they should give me some free trades for this ringing endorsement….
I have Scottrade for my IRA
Scottrade does in fact have great in person service. Theres a branch a few miles from me and they have pretty good suppport there. I have been in their office a couple times and gotten good service with zero waiting. Their website isn’t the best in teh world but works well enough.
TD Waterhouse / Ameritrade used to have maintenance fees in years past, as did many other brokers from Vanguard to E*Trade. But the trend is towards lower fees with electronic statements.
I know a lot of people that liked ThinkOrSwim.
My local Scottrade office used to be downtown, and they would even validate free parking for an hour when you visited the office. It was very convenient to drop off a deposit check, get their current interest rates (back when they weren’t zero and didn’t show them online) and get other errands done downtown. You can also meet face-to-face the person that picks up the phone most times when you call.
I’ve been looking into IB due to their rock bottom commissions, but I’ve read time and time again that their customer service is typically very bad for many investors. Also read several complaints about their real-time margin algorithmns closing out people’s positions automatically at inconvenient times.
I’ve been relatively happy with Scottrade, although I would love a broker with lower commissions (especially on Options) and someone who permits the trade of option strategies other than covered calls and long options.
Scottrade has always been very helpful when I’ve needed to call them on the phone, and they have a ton of offices near where I live and work.
For me two things matter: (1) trade cost (including fine print fees) and (2) trade execution. Everything else if fluff. I’d say I am quite happy with Option House. They charge $4 per trade, which is not exactly at the rock bottom – Just2Trade charges $2.50 – but I believe their trade platform and execution and the lack of junk fees make if on balance the best choice for someone who can do their own homework on what they want to invest in.
Egg on my face. I must have been sleep deprived when I read and wrote my original comment. But for some reason I had “Ameriprise” on my mind when I wrote my comment. Apologies for the mistake. I still maintain that VG, Fidelity, and T Rowe Price are better for a long term investor. I didn’t mean to through TD Ameritrade under the bus, though.
Sorry!
I used to LOVE Scottrade, but i’ve been a loyal Just 2 Trade customer for two or more years now and i have to say their service and trouble shooting only gets better and less needed over time. Trades and Options are dirt cheap, dividends reinvest for free, no maintenance fees. The platform continues to improve.
@Graham – Dividends at Scottrade reinvest for free? Are you talking about mutual fund dividends? I have been complaining to Scottrade for years that I would enjoy automatic, free dividend reinvestment on equity/ETF positions.
I don’t own any mutual funds in either of my accounts, so I’m honestly not sure if the two asset classes behave differently. However, if they do, I may be tempted to switch a position or two, provided the management fees are reasonable.
@Graham – Nevermind, I had a slight reading comprehension failure. However, perhaps I should at least call Scottrade and ask how dividends are handled from mutual funds.
I’ve been enjoying optionsXpress for the most active part of my portfolio. Nice tools, good execution. Customer service has always been a good experience.
My problem now is that I need more tools for handling a larger portfolio going into retirement. I need something that can look at all my accounts and analyze for asset class risk, sector risk, currency risk, diversity, etc. I don’t see this at optionsXpress. I looked at Schwab, but I think their portfolio analysis tools contain a lot of useless noise. Maybe Fidelity is what I look at next.
Merrill Edge is listed as charging for trades, but they offer 30 free trades per month as long as you keep a certain balance with them, and this works perfectly for me. I wonder if other brokers offer the same deal/free trades, as so far I haven’t seen comparison charts that measure this factor.
The big problem with Merrill Edge is their mistakes rate and the fact that you have to hit them over the head for months to get them to correct their mistakes. No one there seems able to correct their own paperwork, even when I talk to managers. So I guess you get what you pay for (if you are lucky).
I have tried many online brokers over the years and I can share the following:
1. The worst Broker by far is Merrill Edge. Barbara is 100% right about errors. They made errors in “cost basis” for my positions and they never corrected them inspite of me providing them all the statements, etc. It is a nightmare of a place.
2. There is no single best broker, but over all I have liked TD Ameritrade, Fidelity, Scottrade.
I plan to try TradeKing next and find out how they fare.
Merrill Edge Customer Service lacks business acumen!
I received a form letter from Merrill Edge Pennington, NJ signed by **. At the end of the letter was the useless 800 number to Jacksonville, FL. So I did a bit of investigating and came up with (609) 303-6200. Dial that number, press 4 for the company directory. Then spell the person’s last and first name. So, when you get an unhelpful response form letter signed by someone, Enter that person’s name in the directory, get their phone number and ‘reach out’ to them!