Wednesday, July 28, 2010

Investment Broker Ratings - Best of 2010.

While the market crash of 2008 was the worst since the 1929 stock market crash, there is a silver lining for investors. When the market plummeted in 2008, panicked investors pulled out of stocks en mass. This left discount investment brokers hurting for customers, and one of the best ways to get new customers is to lower your prices. This has led to a discount broker commission price war, which leads to lower fees - maybe!

A joint SmartMoney/Synovate survey found that the number of discount broker customers willing to switch for lower commissions nearly doubled last year. So, it's no wonder that brokers are in a race to the bottom as they cut commission fees, but does this really result in lower investing costs? Sadly, no. Brokers also realize that if they give the house away on low commissions, they'll be out of business before too long. So, they pad offerings with new fees, or they cut their services.

The result is that often times investors may pay less in commissions, but pay more overall in other fees.

That's where this joint SmartMoney/Synovate survey comes back into play. They've analyzed the results and come up with the best investment brokers of 2010, each rated on 6 criteria, and formatted into an easy to read chart of the top 17 discount brokers.

I encourage the reader to read the full results at the SmartMoney website, since they provide far more detail on each broker and the results. But here's just a little taste of those results...

Best and worst of 2010.


1. Commissions and fees

BEST: USAA (http://www.usaa.com)
WORST: Banc of America(http://www.baisidirect.com)

 

2. Customer Service


BEST: TradeKing (http://www.tradeking.com)
WORST: Sharebuilder (http://www.sharebuilder.com)

 

3. Trading Tools


BEST: Fidelity (http://www.fidelity.com)
WORST:Wellstrade (http://www.wellstrade.com)

 

4. Mutual funds and investment products


BEST:Charles Schwab (http://www.schwab.com)
WORST: Sogotrade (http://www.sogotrade.com)

 

5. Banking services 


BEST: E-Trade (http://www.etrade.com) and Fidelity (http://www.fidelity.com)
WORST: OptionsXpress (http://www.optionsxpress.com)

 

6. Research   


BEST: Charles Schwab (http://www.schwab.com)
WORST: Wallstreet-E (http://www.wallstreete.com)

 

Final thoughts.


I think a list like this is a good place to start when looking for a new broker, but I don't think it's the only place to go. I suggest using it as a jumping off place, a menu if you will. Take the top 5 or so and research them in greater detail. It's also important to know what you're looking for. For example, I use Sharebuilder and it's ranked horribly, but for what I use it's been great. I don't need 24/7 customer support. I don't need access to hedge funds or the ability to purchase gold. I buy simple index funds and ETFs, on a regular schedule regardless of where the market is at that time. I'm dollar-cost averaging for the long term. I probably wouldn't choose Sharebuilder if I was a more active trader.

It's all about what suits you and your style, because you're going to have a difficult time finding a one-size fits all discount broker.

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