SmartMoney magazine has released the results of their Annual Broker Survey in its June 2012 issue. Check out the attached article for additional commentary and insight into rankings and methodology. You’ll find my own commentary on their findings below.
SmartMoney 2012 Top 10 Overall
- Fidelity
- Scottrade
- TD Ameritrade
- E-Trade
- Schwab
- TradeKing
- Zecco
- Merrill Edge
- Capital One 360 Sharebuilder
- WellsTrade
Best in Commission & Fees Category (5 stars)
Scottrade doesn’t have a rock-bottem per-trade commission at $7 a trade, but it’s lower than average and they still win overall due to lower fees elsewhere – such as annual fees, inactivity fees, fees to use a phone, or close out an account.
- Scottrade
- Capital One 360 Sharebuilder
Best in Customer Service Category (4 stars+)
One important factor here was speed of reply in addition to accuracy, and per the article all of the brokers surveyed now offer Live Chat online except for WellsTrade. I think TradeKing was the first to offer this feature?
- TradeKing ($50 opening bonus link)
- Scottrade
- E-Trade
- Zecco
Trends
- Prices are still dropping, although more slowly. SmartMoney reports that in 1994 the average commission price surveyed was $28. Last year, $8.27. This year, only $7.96. Note that every single one of their top 10 brokers have per-trade stock commissions of under $10. I suppose anything higher would just seem greedy now.
- Banking. More firms are adding banking features like debit cards and billpay to make it more likely that you’ll keep all your money there, joining firms like Merrill Lynch (Bank of America) and WellsTrade (Wells Fargo) which are already closely aligned and owned by big banks.
- Smartphone and iPad apps. These are indeed cool, but the brokers really love them because they increase your trade activity.
Omissions
SmartMoney mentions the the Merrill Edge BofA deal, where you can get 30 free trades a month if you hold a combined $25,000 as cash in your *deposit* accounts only at Bank of America. However, they don’t mention the WellsTrade deal which offers 100 free trades a year if you hold a combined $25k across acounts including your brokerage balance, but instead requires a PMA checking account that you have to keep active with “in-person” activity like writing a physical check at least once a year.
WellsTrade and Zecco enter the top 10 this year, but Vanguard and OptionsXpress were bumped out. Vanguard was #7 in their 2011 rankings. There was no mention of what happened… I’d like to know if they were notably worse in some area or were simply excluded? OptionsXpress was bought by Schwab last year, but still runs an independent site.
Finally, there was no mention of the quantity and quality of the commission-free ETF lists offered by the majority of these brokers. If anything, I thought that was more important to mention than smartphone apps that scan product barcodes at the grocery store.
Finding The Best Broker For You
Don’t forget to compare these results with the Consumer Reports 2012 Rankings and the Barron’s 2012 Rankings. The key is to drill down to see which broker satisfies your personal set of needs the best, as there is a lot of fluff in there. This is why I’d rather look at specific sub-rankings more closely than the big headline “Top 10” rankings.
Take the “Banking” category, which included as a criteria but some brokers just don’t offer banking services and I don’t think they should be penalized for it. Another area I don’t care about is “Research” tools. I’ve ever used a broker for research. Morningstar offers me everything that I need, otherwise I just look at Google/Yahoo quotes and look for related news and blog articles. I don’t see how a discount broker would have the time or resources for unique analysis. Just give me cheap trades with good fills, solid customer service when I need it, and track my capital gains and tax lots accurately.
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Re: Wellstrade and the “in-person” activity. Simply making a deposit into the PMA should count, as well as the PMA debit following a stock purchase, or the credit to the PMA if you get a dividend (This all assumes that you are using the PMA as your sweep account, RATHER than a checking account outside of Wells Fargo to automatically make transfers to/from the Wellstrade brokerage.)
Also re: Fidelity….don’t they have an AMEX card that can be paired in which the equivalent of 2% of your purhcases is deposited to the brokerage when you reach certain dollar amount increments?
@Erik – I don’t have an account to verify, but I’ve read multiple reports that ACH/online transfers don’t count as activity. You must perform a in-person activity like deposit a check or use the ATM card. Yep, there is a 2% cash back Fidelity AmEx.
It never seems to come up in the discussions, but I’ve been pretty happy with Firstrade for the last several years. No IRA account management fee, $6.95 trades, free dividend reinvestment with partial shares. http://www.firstrade.com/content/en-us/pricing (Their list of commission free ETFs is kind of lame and doesn’t include any of the ETFs I actually use.)
Are there any online brokers that accept paypal as a funding source? I use paypal a lot because they have great online security. I dont want to give away my bank account information to every online broker, because I think the least people who know that information is better for me.
I was just wondering if online brokers ever accept paypal, and if they dont, why not?
It looks like Zecco and TradeKing are merging. Maybe that will make room for Vanguard.
I use Vanguard for all of my ETFs because there are no trading fees, but use Zecco for my fun money account to trade individual stocks.
I wish it noted that Zecco didn’t send out 1099s until March 15th this year (and then sent revised ones post April 15). Was infuriating for all of us who wanted to do our taxes before then.
With Zecco, you get what you pay for – I switched everything to ETrade shortly thereafter. A slightly higher commission structure is worth the reliability.
why is there no vanguard?
ah, sorry, just read the lower half of your piece. confusing to me. i would think vanguard/fidelity are tied for #1
Just got an email today from both Zecco and Tradeking that they are merging (I think TradeKing bought Zecco). Should be interesting to see how that changes things. They claim everyone will still get $4.95 trades, same options pricing and now access to Forex which previously only Zecco had.
What are your thoughts on Live Chat customer service for finances, would you ever use it?
@ Jenna
I’ve used Live Chat with Tradeking quite a bit, usually for general questions that can be answered in a few minutes without me having to give out all my personal identifying info for every little question. Live Chat works well for many issues.