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Ranking the online
brokerages
By Bob
Dunn • Bankrate.com
 To
concoct our online brokerage survey, we dialed, we surveyed, we
tabulated.
So, how'd all our dialing and charting finally
end up?
Well, as with most things in life, that which
offers the best service for you might not be best for someone else.
Consider the types of trades you'll likely be making, how often
and in what amounts before choosing the one that best suits your
needs.
Take Brown & Co., for example. The firm
scored big points on our listing for trading stocks, fulfilling
market orders for a fee of just $5 and limit orders for only $10
using their automated touch tone system (and doing the same with
a real person for only $17 and $22, respectively). Not bad.
But hold on a minute.
The firm's $15,000 account minimum and the degree
of expertise of its customer service representatives tells you that
Brown & Co. is courting savvy market speculators rather than
those just stepping into the fray. In other words, Brown & Co.
is a great online broker for some, a bad fit for others.
Overall excellence
Just because one size does not fit all investors doesn't mean some
online brokers don't stand head and shoulders above their peers.
Here are the five that shine most brightly in our general excellence
category:
1. Scottrade: Fulfilling
online market orders for just $7 and online limit orders for only
$12, Scottrade is a bargain -- especially if you're making block
trades, as there's no share limit. And its $500 minimum to open
an account should be in range for anyone considering the investing
plunge.
The brokerage also offers a respectable mutual
fund group, and charges just $17 per fund transaction. Their response
time was excellent for e-mailed queries, averaging just four hours
in returning our inquiries, and if the online operation is experiencing
problems, they'll fulfill your order via a live broker for the
same low Internet price. The company's phone reps also provided
solid information that was on a par with more full-service brokerages,
such as Fidelity and Merrill Lynch Direct.
2. Ameritrade:
Although the company initially made its mark with the day-trading
crowd, this is a brokerage that works smoothly for any investor,
regardless of investing expertise. Ameritrade has lowered its
minimum to $500 as a promotion, but it will revert to $2,000 come
the first of the year. Still, it sits at $500 for the moment,
and even a couple of thousand isn't asking too much when you can
get online market orders fulfilled for just $8 and limit orders
for only $13. And it's only $18 to trade mutual funds.
While phoned inquiries were researched by
Ameritrade personnel, the overall level of customer service expertise
did vary, and was just enough -- combined with the dollar extra
on most transactions -- to push it second behind Scottrade, even
though e-mail responses came in a remarkable two hours.
3. Brown & Co:
Bar none the best value out there for stock investing, Brown &
Co. will fulfill market orders online for as many as 5,000 shares
for just $5, and will do limit orders on the same terms for just
$10. The brokerage charges $19 to buy, sell or exchange mutual
funds. The firm falls just shy of Scottrade and Ameritrade because
of its larger $15,000 account minimum, and its fees being based
on trading up to 5,000 shares (trades of more than 5,000 cost
more).
Also, mutual fund orders can only be placed
through a broker -- there's no touch-tone option -- and the company
doesn't offer, or at least we couldn't find, an e-mail response
vehicle for non-customers.
4. Datek: At
just $9.99 for an online market order for as many as 5,000 shares
-- and the same low price for a limit order, which is a rarity
for that preferred method of placing a trade -- and with no minimum
to open an account, Datek is cheap and accessible. What's more,
the brokerage charges the same $9.99 to buy or sell mutual funds,
and features no charge to exchange mutual funds within the same
fund family (i.e., there's no commission if you sell your Janus
Fund shares to fund the purchase of Janus Growth and Income).
The company's e-mail response time was good
-- within five business hours -- and the e-mails themselves were
clear and to the point. The drawbacks, however, are that Datek
charges $25 to put a trade through using a real, live person,
and offers no touch-tone option should the site be down.
5. Suretrade:
At first glance, Suretrade looks like it should be duking it out
with Scottrade and Ameritrade for the top spot, what with its
low $1 minimum to open an account, and fulfilling online market
orders for just $7.95 and online limit orders for just $9.95.
This division of Quick & Reilly charges a $25 fee to buy or
sell a mutual fund, which doesn't put it too far out of the ballpark
of some of the other finalists.
But trading by phone with Suretrade was a
confusing experience -- if not all that expensive, at $11.95 for
a market order and $13.95 for a limit order -- and if you have
to enlist the help of an actual broker, it's going to cost you
a steep $32.95 for a market order and $34.95 for a limit order.
Brokers for stock traders
If you think mutual funds are strictly for the weak or the infirm,
then you're probably more interested in the top performers in our
stock-trading category. These winners include:
1.
Brown & Co: Hey,
if you're ready to take on the market, then the $15,000 minimum
shouldn't be a big deal at all and if you're fixing to put Ivan
Boesky to shame with your account activity, then the five clams
it takes for an online market order should keep a smile on your
face.
2.
Scottrade: With only
a $500 minimum and just $7 and $12 for online market and limit
orders, respectively, Scottrade comes off a bit like the Little
Caesar's of the brokerage world -- giving a whole lot for not
much in return. (Broker transactions cost only $17 and $22 for
market orders and limit orders, respectively; the same as Brown
& Co.) Still, their customer service passes muster and with
119 branch offices there's a better than decent chance you might
be able to locate a real live rep in your area. Make note, though,
that the touch-tone trading system was a bit inconsistent.
3.
Suretrade: As mentioned
above, Suretrade makes a strong showing when you ignore the mutual-fund
aspect of investing. Stock trades are cheap -- although they become
decidedly pricier when you deign to get a human to put your transaction
through for you ($32.95 market order, $34.95 limit order). Also,
if you're planning on spending a lot of bonding time at your brokerage,
then Suretrade is definitely not for you, as it has no branch
offices.
4.
Ameritrade: Even
with its plan to return to a $2,000 required minimum balance,
Ameritrade's $8 for a market order is a good deal; the five bucks
more for a limit order is in line with the top three, but just
a wee bit more expensive. The company's customer service level
varied, although they were really quick with e-mail responses.
And much like Suretrade, walk-in offices are far from abundant
-- two in this case.
5.
A.B. Watley: It's
not often that you encounter a brokerage firm willing to fulfill
both market and limit orders for the same price, but that's what
you have with A.B. Watley. And it's a sweet $9.95, provided you're
moving fewer than 5,000 shares.
The firm's minimum to open an account is $3,000,
and you can do a touch-tone trade for $11.95, while dealing with
a broker will run you $23.95. Customer service was prompt in response
to e-mails -- within one day -- but it took several additional
e-mails to clarify the response.
Our top 10 list for stock trading was rounded
out by Datek, TD Waterhouse, Mydiscountbroker,
Bidwell & Co., and National Discount Brokers,
all of which will fulfill an online market order for $14.75 or less
and most of which responded to e-mail queries within one business
day (the exception being Mydiscountbroker, which responded by e-mail
telling us to talk directly to one of its brokers).
Honorable mention should also be given to DLJDirect,
which offers the lowest flat fee for placing a limit order through
a broker -- just $20 -- and for its overall quick response time
to our e-mail queries, just one day (although it took several additional
e-mails to clarify their response), and to Web Street Securities,
the representatives of which provided clear and consistent responses
to queries, via both phone and e-mail.
Mutual-fund friendly brokers
But maybe the pounding the market's taken in 2000 has got you thinking
more about diversity than you were back during the glorious boom
of 1999. The security afforded by investing in a professionally
managed vehicle that has interests in a variety of companies can
go a long way to keeping the gray hairs away. If that's a concern,
then the following list of mutual-fund friendly brokerages is for
you:
1.
Web Street Securities:
If you're looking to buy relatively large blocks of mutual funds
-- we're talking more than $500 worth -- then Web Street might
not be a bad place to set up shop. They charge no transaction
fees for the larger purchases. However, if you're not planning
to hit that nickel mark, you'll fork over $14.95 per purchase
or sale. Clearly stated, quick responses to e-mailed questions
also speak well for Web Street.
2.
Merrill Lynch Direct:
You knew one of the titans of the brokerage world had to make
the list eventually, right? Well, the bull has finally made its
presence known, albeit in the mutual-fund category. Much like
the U.S. government, Merrill is strongly pushing a buy-and-hold
mentality. If you keep your funds for at least six months, you
won't get knocked with any fees, but if you just can't hold 'em
that long, it's going to run you between $50 and $250.
3.
Datek: You're not
going to avoid a fee no matter how big a block you purchase, but
at $9.99 to buy or sell a mutual fund, Datek offers investors
a pretty good deal. And again, it won't cost you a thing to exchange
a fund within the same fund family, so the new breed of "mutual
fund day traders" can enter and exit sector specific funds
with little friction.
4.
Scottrade: Continuing
the flat-fee theme, Scottrade comes in at just $17 to buy, sell
or trade a fund within the same fund family.
5.
Ameritrade: Same
deal as Scottrade, but just a dollar more at $18 to buy, sell
or exchange.
Rounding out the top 10 for mutual funds: Brown
& Co., which charges a relatively cheap $19 to buy or sell
funds, although they can only be purchased through a broker; National
Discount Brokers, which offers a $20 flat fee to buy or sell
no-load funds and no charge on load funds, although the level of
expertise of their customer service reps was hit or miss; Dreyfus,
which is a separate operation from the mutual-fund group but still
lets you buy and sell for $20; TD Waterhouse, $24 to purchase
no-load funds, no fee for load vehicles; and E*Trade, which
charges $24.95 to buy or sell whether or not there's a load.
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