SmartMoney Best Discount Brokers of 2012

I have followed SmartMoney Maganize’s annual survey of online discount stock brokers for some time, writing the first post about the survey in 2009. In the past, when I looked at the ranking of best and worst brokers, there were always some surprises, especially when brokers I have never heard of were thrown in the mix. For those names that I already knew, the survey didn’t provide much new information because I have personal experience with few of them, so I knew what it feels to be a customer of a particular broker and the pros and cons. However, the 2012 survey, which was released last week, did come with some unexpected results to me, particularly on how TradeKing and Zecco are ranked so close to each other in the overall rating (TradeKing #6 and Zecco #7).

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I have an account with both TradeKing and Zecco and I have written about them quite extensively here. From my experience, the two are far apart in terms of customer service and usabilities. The two popular discount brokers charge the same $4.95 commission for online stock and ETF trading, but that’s about the only thing they share as far as I can tell. When Zecco was first launched in 2006, it had an identify in the brokerage industry as the only broker that allowed customers to trade stocks without paying any commission. However, after series of changes since then, it has become just an online discount broker with nothing special that could distinguish it from its peers. That’s exactly the reason I pretty much abandoned Zecco. TradeKing, on the other hand, is a regular winner in SmartMoney magazine’s annual survey and has a better track record and reputation. Even though I haven’t used Zecco for a while, I still log into my account about once every month and from what I saw, I didn’t notice any significant change on their website that signals improvements in user friendliness. The web interface remains almost identical to what I used a couple of years ago.

There’s no doubt that Zecco is still not on par with TradeKing in Customer Service (TradeKing has the hightest 5 Stars rating, while Zecco gets 4 Stars, which does seem to be a huge improvement in this area). What really surprised me is that Zecco receives 3 Stars in the Research category, one more than TradeKing’s 2 Stars. According to SmartMoney, research tools include not only the broker’s “market commentary, news alerts and fund reports”, but also “educational offerings such as video libraries, webinars and client discussion forums” and social media presense. Not knowing exactly how the ratings are calculated, it’s a little bit odd for me to see Zecco outranked TradeKing in Research, which is not in line with my own experience. What is even more weird is that in the comments tegother with the ranking, SmartMoney said Zecco “Doesn’t have risk-assessment or automated asset-allocation tools.” And that still makes Zecco better than TradeKing, which does have asset-allocation tools, in Research?

Of course, picking which broker to use is more than about looking for the one with better customer service or more comprehensive research tools. You will also need to consider commissions and fees, investment options, and trading tools, etc., and, then, select the broker that best meets your needs (see my Stock and Options Broker Compare page for more detailed review and comparison). In the latest SmartMoney survey, the magazine looked at different categories that concern investors the most and found the best and worst brokers in each category:

  • Commissions and Fees: Best – Scottrade; Worst – WellsTrade
  • Customer Service: Best – TradeKing; Worst – WellsTrade
  • Research: Best – Fidelity; Worst – WellsTrade
  • Trading Tools: Best – Fidelity; Worst – WellsTrade
  • Mutual Funds and Investments: Best – Fidelity; Worst – ShareBuilder
  • Banking: Best – Merrill Edge, Fidelity; Worst – Zecco

While there may not be THE best broker, which one you may want to stay away from is pretty clear :) You can find the complete ranking here.

Photo credit: jpellgen

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