The people best qualified to judge the best brokers for online trading — their own customers — have named their winners.
X From thousands of reader responses, IBD’s sixth annual Best Online Brokers survey finds which firms are serving their clients best, how they’re doing it and where even some of the best stock brokers are falling short. That’s quite an account from the ones on the inside, and their reviews can help investors compare and shop for new brokers.
For the fourth year in a row, Fidelity Investments earned the top Customer Experience Index rating — and it seems to be just getting better. Fidelity has increased its overall customer experience score almost every year of the best brokers survey.
Also recognized in the top five in IBD’s 2018 Best Online Brokers list based on their high customer experience scores are Charles Schwab (SCHW), TradeStation, TD Ameritrade (AMTD) and Interactive Brokers (IBKR).
What does it take to be one of the best brokers? In part, it’s the bread-and-butter functions such as excellent trade execution, websites that never crash and commissions that are attractive.
Low Commissions & Fees, Trade Reliability and Site Performance were crucial performance categories to investors in the survey. But investors identified other broker features that were also important — 14 categories in all.
Features Of Best Brokerage Firms
The survey identified the five best brokerage firms in each category. So a beginning investor can scan the lists to find the best brokers that are especially strong in, say, Educational Resources and Customer Service. An active, self-guided trader might look for the best Equity Trading Tools or Options Trading, while another investor might seek the best brokerage account for Low-Cost/Free ETF Trading and Investment & Retirement Planning Tools.
Not surprisingly, the top-scoring brokerages did well in most of the categories.
Fidelity’s overall customer experience score this year is the highest achieved by any of the best stock brokers since IBD started polling readers. The company’s customers also crowned Fidelity with the top score in nine categories and gave it ratings that put it among the best brokers in all the categories.
Charles Schwab, a pioneer in discount brokerage, also placed among the Best Online Brokers in every category.
TradeStation came out in the top three overall, after earning Honorable Mention in 2017. Its customer experience number was the company’s highest in the best brokers survey’s history. TradeStation earned one of the highest ratings for Site Performance, and it fared best in Equity Trading Tools. Its score not only paced the field, but the brokerage has repeatedly beaten its rivals in this category.
TD Ameritrade, whose services include the analysis-packed thinkorswim trading platform, separated itself from rivals in the Options Trading category. It’s an area where TD Ameritrade has pulled away from the competition year after year.
Interactive Brokers earned especially high marks for Low Commissions & Fees. The firm uses a two-part commission structure in which fixed-fee trading is a half-cent per share (or 50 cents if you’re buying a typical lot of 100 shares), or customers can use a volume-based pricing system. That’s helped Interactive earn the highest score in the category every year of the survey.
Best Brokerage Accounts: Why Switch?
While customers don’t hop from broker to broker much, it’s becoming more common. Competition to retain customers’ brokerage accounts and attract new ones is fierce.
This year 25% of survey participants said they switched brokers within the past five years. In the first year of the survey, only 18% had switched brokers in that time frame.
And why did they switch? Nearly 40% said it was costs, far more than any other reason.
Besides their usual rivals, even the best brokers face a new wave of competition from services such as Robinhood that let investors trade stocks, ETFs and sometimes options for free. No-fee trading platforms are popular with millennials, who also tend to give traditional stock brokers lower scores than older investors do.
Last year saw the industry break out into a price war. Schwab, Fidelity, TD Ameritrade and E-Trade slashed commissions from about $8 to $10 per trade to $5 to $7.
In fact, Fidelity and Schwab saw sharp improvement in their commissions ratings in the latest survey.
Many brokerages also offer certain ETFs that customers can trade at no charge. That’s assuming trades are done online. If you call a broker, a stock, ETF or mutual fund purchase can cost you 10 times more than if you trade online.
Best Brokers Survey Details
Investor’s Business Daily and its polling partner, TechnoMetrica Market Intelligence, surveyed 5,052 investors for this year’s best brokers special report. The research started last summer with a Phase 1 survey to determine which broker attributes mattered most to investors. In a Phase 2 survey in the fall, readers were asked to rate their main brokerage for its performance in the 14 categories that comprised the study.
This year’s report includes one new category, Trade Ideas. Customers gave their brokers low scores in the category across the board, indicating an area where stock brokers may seek to improve in the future. In fact, asked what actions they’d like their broker to take in the next year, investors put better buy lists third on the list, following lower fees and better research.
Two categories were relabeled in this year’s best brokers survey. ETF Choices was renamed Low-Cost/Free ETF Trading. Mobile Platforms/Mobile Trading Opportunities was renamed Mobile Trading Platforms.
Investors Polled On Best Stock Brokers
The typical investor in the IBD survey is not a high-frequency trader. Only 15% said they average more than 25 trades in a month, and more than half trade no more than 10 times during an average month. Nearly 10% made no trades at all in the month they answered the survey.
Stocks are the overwhelming choice of the best stock brokers survey participants, with 93% owning equities. More than half (55%) own ETFs and 48% mutual funds. Options are a smaller market for these investors, with 30% owning stock options and 10% index options. And 4% own cryptocurrencies such as Bitcoin.
Want to read more about the top five brokers, the latest commission trends and more? Check out the full IBD Best Online Brokers special report.
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