We rate Datek Online
Michael Abramowitz

Attention online investors! Bankrate.com recommends you make a date with Datek.

For 1999, we selected Datek Online as our "Best Pick" online broker. Now our in-depth review will explain why we feel Datek Online is "heads and online shoulders" above their e-competitors -- Ameritrade, Charles Schwab, E*TRADE and Fidelity Investments.

Datek's performance was as impressive as Mark McGwire's home run swing. During our test, their system didn't reject our trade orders, gave us free real-time quotes, news and information about companies that we wanted to trade, immediate current account balances after making a trade and instantaneous e-mail confirmations of our online wheeling and dealing.

In August 1999, Datek Online became the first online brokerage to add after-hours trading through Island ECN (Electronic Communication Network), a computerized securities trading system. Datek insists that after-hours traders use limit-orders, which we feel is a must for this environment because the market is smaller and less liquid after the closing bell than it is during the day.

After-hours trading is not for everyone at this point in the e-trading game, which is why we praise Datek for requiring its account holders to purposely subscribe if they want the service.

Also, we love the $9.99 commissions. They aren't the lowest in our cyber group -- Ameritrade earns that honor with a dirt-cheap $8 per trade. But Datek's promise of 60 seconds or less for transactions on stock trades, or they're free.

They also give rebates to customers on any fees that a market maker pays to their brokerage.

Datek's site is simple to use. The graphics and color scheme are easy on the eyes, and the terminology on the site is easy for the "mom and pop" investor to understand. Datek gets a gold star for functionality.

The company offers free mutual funds and no-fee IRAs to its customers. But we'd also like to see IPO access for the individual investor, as offered by rival E*TRADE.

However, we love Datek's free real-time quotes. For the turbo-investor, the company offers Island's book viewer and also a free real-time stock streamer. This is valuable information for a customer concerned about stock prices.

"We think we're in the quote business," adds Mullin. "Customers can't act without real-time data."

The brokerage plans to give customers the option of receiving an e-mail-only stock trade confirmation, rather than receiving a copy in the mail. We advise against selecting that option. Heaven forbid you need a confirmation for Uncle Sam's Schedule D (capital gains tax form) 10 years from now, and you've lost that e-mail or your e-mail has accidentally been deleted.

Rather, we always recommend that investors keep every piece of stock trading information in their paper records as long as Congress and the IRS continue to require investors to keep track of every trade.

Checks and balances

Datek's funding requirement to open an account is average: $2,000. It's free if you transfer stocks from another brokerage. We'd prefer no minimum at all, the policy of one of Datek's competitors, DLJ Direct (not reviewed in our study). We're stingy here at Bankrate.com.

Nevertheless, it took only six days for our funding to go through and our account to be set up. This beat the competition field by four to eight days.

Datek honcho Mullin tells Bankrate.com that the funding time frame will soon decrease to as little as three or four days, mail carrier permitting.

"People want to see executions of trades right away," Mullin said. "People don't want to call and wonder when the money is going to be deposited."

Datek's customer service is excellent. The company provides a toll-free number for around-the-clock assistance.

Datek's partnership with "SmartMoney" University provides an excellent way for the average online Joe and Jane to learn the terminology of the stock market and plan for the future.

We note that Datek was censured and fined by the Securities and Exchange Commission for accounting irregularities during 1998. Henry Klehm, a SEC attorney on the case, has assured us that Datek's management structure and financial backing have changed significantly since that dark period.

For example, in October 1999, Jeffrey Citron, a Datek co-founder accused of money mismanagement, agreed not to work for the firm for the next two years due to the financial scandal.

With that in mind, Datek truly outclassed the competition and earned their e-commerce stripes. They've definitely designed a site with the average online investor in mind.

-- Posted: Sept. 3, 1999