2010 SmartMoney Broker Survey

SmartMoney magazine has recently published its 2010 Annual Broker Survey. In the survey, SmartMoney evaluated a number of brokers, including both online discount brokers and full service firms, in the areas of Commissions & Fees, Customer Service, Trading Tools, Mutual Funds, Banking Services, and Research, as it did in the past. The evaluation is based on survey responses from brokerages in the study, consultation with research firms that follow the industry, and SmartMoney’s own customer service tests.

Though the magazine didn’t name a single broker as the best overall broker, it did rank the brokers studied in the survey in each of the categories mentioned above. In addition, it also noted recent fee cut at firms such as Charles Schwab and Fidelity (Vanguard also cut its commission early this month) and the impact of the price change on investors when they decide which broker to use. The report acknowledged that while commissions and fees play an important in selecting a brokerage (see discount broker comparison for details about broker commissions and fees), there are other factors that have to be considered as well, because “as investors focus on saving a few bucks, they might end up paying in other, less obvious ways.”

The following is a quick summary of winners and losers in each of the categories.

Commissions & Fees

• Best: USAA I know USAA’s other services but have never heard its brokerage. SmartyMoney chose USAA as the winner in this category because customers “pay just $5.95 for online stock trades” and it “doesn’t charge customers for things such as paper statements and trade confirmations.” If you ask me, then $5.95/trade is definitely not the best you can get for commissions and many other fees can be avoided without much efforts at other brokers.
• Worst: Bank of America It’s nice that BofA also offers free trades, but the bar is probably too high for most people to even think about using it as a broker.

Customer Service

• Best: TradeKing is picked as the winner in this category because it “had swift and courteous answers to our (SmartMoney) e-mails and phone calls.” TradeKing is one of the brokers I am using. I contacted them once for some minor issues and my experience was pretty positive.
• Worst: ShareBuilder Who is using ShareBuilder anyway?

Trading Tools

• Best: Fidelity won this category because it “has before-hours and after-hours trading and a free app for the iPhone and iPod Touch”, which I don’t think these are unique to Fidelity. Also it took an average 4 seconds to “sign in and place a trade”.
• Worst: WellsTrade, on the other hand, took customers more than 4 times as long to complete the same process. Well, as far as I know, there are brokers take much longer than 16 seconds to sign in and place a trade.

Mutual Funds

• Best: Charles Schwab because Schwab “has all the investment products”, “including a Coverdell account” an education savings account that’s similar to 529 account.
• Worst: SogoTrade Since SogoTrade doesn’t even offer mutual funds, I am not surprised that it was ranked the worst. But, the question is, Should it be ranked the worst just because it doesn’t offer mutual funds?

Banking Services

• Best: E-Trade and Fidelity I am not sure how big a deal it is for a broker to offer banking services, such as checking and savings account. I would rather use a bank for banking services and use a broker for trading stocks.
• Worst: OptionsXpress I can’t believe that optionsXpress was named the worst because they have “decided not to compete with the banks.”

Research

• Best: Charles Schwab The reason that Schwab came out as a winner in this category is that it was “among the fastest Web sites to navigate and provides research reports from many outside firms, including Argus Research, Ned Davis Research and Standard & Poor’s”.
• Worst: WallStreet-E I don’t know much about WallStreet-E, but I know Zecco, which, along with WallStree-E, was the worst in the category in 2009 SmartMoney survey, shouldn’t be too far away from the bottom. It looks like that one year didn’t bring too much change at both WallStreet-E and Zecco in providing more research tools for their customers.