Smart Money, a leader in the personal investing community, has always done an excellent job in rating the best online discount brokers available to consumers today. This year’s report opens with a reminder: read the fine print. With competition among discount brokers steadily growing, the price wars get fiercer and fiercer. Some brokers advertise dirt-cheap trades of under $3, but make sure you read the fine print for hidden fees. Companies that just a year ago charged almost $20 per trade now charge less than $8. As much as 22 percent of discount traders are considering moving their funds to another broker, simply because they can obtain cheaper trades. It’s evident that with a down economy, saving a few bucks here and there is as important as ever.
Smart Money offers the best and worst brokers in the following six categories:
- Commissions and Fees
- Customer Service
- Trading Tools
- Mutual Funds
- Banking Services
Commissions and Fees
BEST: Just2Trade comes out on top, with trades for just $2.50. Options trades are similarly cheap, although like many firms, Just2Trade does charge for paper statements. You may not be to familiar with Just2Trade but with this low a commission fee, you will be soon enough.
WORST: Banc of America, the discount arm of Bank of America, with trades at $14 each. If you’re in need of broker assistance, those type of trades cost as much as $54. Representatives say that customers with less than $25,000 can qualify for cheaper trades but give no specifics.
BEST: TradeKing wins yet again! Smart Money reports quick and courteous responses to customer service calls and emails and while other brokers also had fast response times, TradeKing was just a touch faster
WORST: ShareBuilder came in way behind the pack because the folks over there took an average of over three minutes to respond to calls. Once ShareBuilder upgraded the phone system, the response time was cut in half so they shouldn’t be as bad next year.
BEST: Fidelity leads the pack in trading tools, offering high standards from among top brokers. A full set of trading tools, from streaming quotes to stock screening research applications are provided to all traders and additionally, Fidelity supports a free application for the iPhone and iPod touch. Fidelity also boasts a four second time from sign in to trade.
WORST: WellsTrade has a website that lost because of extremely slow loading speeds. Compared to Fidelity, it can take more than four times to login and make a trade.
BEST: Charles Schwab sets the mark on this one, inching out TD Ameritrade and Fidelity. Schwab has all kinds of products available, including the educational savings Coverdell account. All three firms offer around 15,000 funds, but fewer than 4% of Schwab’s are load funds: you can find and trade thousands of funds with minimal fees that won’t cut into your earnings.
WORST: SogoTrade loses because they don’t offer any bonds, CDs or mutual funds. The good news is that SogoTrade likes it this way because the company aims to be cost competitive for the active trader, and has no intention of expanding its product line.
BEST: E*Trade and Fidelity top the list of banking services for their online banking options. Online bill payments, savings and checking accounts, debit cards and precious metal storage are just some of the options that each of these brokers provide.
WORST: OptionsXpress just can’t compete with the big boys and they don’t even try. Energy over here is focused on trade execution, research and tools.
BEST: Charles Schwab is the broker of choice if you’re a self-directed trader and your research can make or break your bank. The firm offers fast searches, and research from outside firms, including Argus, Ned Davis, and Standard and Poor’s.
WORST: WallStreet-E earns the worst research mark with little to no tools to help consumers. Add a black mark for its slow site and hard to find fee schedule and this online discount broker may not be around much longer.
All things considered, Fidelity snags the top of the list for its five star ratings in each of the mutual funds, banking services, trading, research, and customer service categories along with its competitive $7.95 per trade price tag. E*Trade comes in second thanks to slightly worse mutual fund offerings and research capabilities, and a more expensive $9.99 trade price. TD Ameritrade wins the bronze for its five star ratings across the board, except for a three star rating in mutual funds.
Published or updated December 8, 2012.