Best Online Discount Brokers
If you visit the E*Trade homepage, you’ll see a big yellow star that names E*Trade the #1 premium broker of 2007 by Smart Money magazine and “Best of the Breed” in Money Magazine in August 2007. If you visit the Scottrade homepage, you see a blurb about a J.D. Power and Associates Award for “Highest in Investor Satisfaction with Online Services” award. And if you visit Zecco homepage, they don’t have any awards posted. Does that mean E*Trade is better than Scottrade and Scottrade is better than Zecco? Maybe, maybe not! So I wanted to match up all the awards and ratings and come up with my own ranking of the best online discount broker.
The List: I started with all the Premium and Discount brokers from Smart Money 2007 Brokerage Ratings page and then removed anyone with commissions greater than $10. That left me with E*Trade, Banc of America, TD Ameritrade, WellsTrade, Scottrade, Firstrade, WallStreet*E, SogoInvest, TradeKing and then I added Zecco, simply because they offer $0 trades, and Sharebuilder, because they offer a unique discount purchasing program. I removed Banc of America, WellsTrade, and TD Ameritrade because they’re affiliated with larger banks, I wanted standalone brokers.
TradeKing
TradeKing was named #1 Discount Broker by Smart Money magazine in 2006 and 2007. Barron’s gave it four stars in its rating system. At $4.95 a trade plus a very competitive money market sweep account and low options fees ($4.95 a trade and 65 cents a contract), there are good reasons to list TradeKing first. When it comes to discount brokers, TradeKing appears to be the one with both cheap prices and enough performance clout (see the awards) to give me confidence that the low prices don’t mean poor service.
E*Trade
E*Trade, one of the priciest of the online discount brokers, with a $9.99 trade commission, has won several awards in its own right. #1 premium broker of 2007 by Smart Money magazine and “Best of the Breed” in Money Magazine in August 2007. One startling ranking was one for Kiplinger’s in 2006, where E*Trade was rated 9th (the only other online discount broker on the list was Firstrade at #4 - #1 was optionsXpress but their trades cost $14.95).
Scottrade
Scottrade was rated the highest in investor satisfaction by JD Power & Associates and beat out all other comers on the list, including E*Trade and TD Ameritrade, which is amazing considering trades cost a mere $7. While the scoring for this was for satisfaction and not scope of offering (though it does include information resources and trade execution), which many other awards are based on, it still speaks volumes about the happiness of Scottrade customers.
SogoTrade
SogoTrade, once known as SogoInvest, is as bare bones as you can get, running the caboose of the discount broker train according to Smart Money magazine. To be honest, you can’t expect much at $3 a trade and you don’t get more than the ability to trade. I looked for awards but there were none to be found.
Zecco
If SogoInvest is the caboose, where does that leave Zecco and it’s zero cost commissions? Not a single award to go on, Zecco does offer ten free trades a month if you have a balance over $2,500 but there have been rumblings about problems with Zecco.
Sharebuilder
Sharebuilder isn’t really a discount broker in the traditional sense because you pay $4 a trade but it has to be done on a schedule, meaning the following Tuesday. So in a sense you can buy stock at a cheap price but you have less control over it. Sharebuilder was recently acquired by ING Direct and they’re also, currently, the only broker to offer promotion codes for free money.
The Awards Sites
Below are links to the award pages I could find:
Smart Money 2007 Brokerage Ratings - The rankings from 2007 listed TradeKing as the number one discount broker, their second in a row. The full ratings, in order from best to worst, were Scottrade, Firstrade, OptionsXpress, Muriel Siebert, WallStreet*E, SogoInvest.
2006 Kiplingers Ratings - For a $50,000 account, the rankings were: optionsXpress, Muriel Siebert, Wells Fargo, Firstrade, Fidelity, Vanguard, TradeKing, Schwab, E*Trade, Scottrade, and TD Ameritrade.
For JD Power & Associates, I invite you to search on their site.
7 responses to “Best Online Discount Brokers”
Jon @ The Money Mythos responds:
Posted: May 8th, 2008 at 7:23 am
Can you share the rumblings you’ve heard about Zecco? I use them and have recommended them to countless people, but I’d like to be aware if other people are having problems.
jim says in reply:
Posted: May 8th, 2008 at 8:35 am
A lot of people leave comments on this article asking whether Zecco’s a scam… a lot of upset people. I know Cap has heard the same.
Jason R responds:
Posted: May 8th, 2008 at 9:17 am
I use both Zecco, and TradeKing. Zecco for an investment club I am in, and Tradeking for my personal stuff (including an IRA). The service at Zecco is more or less non-existant. I had an issue with them where a company I owned shares in got bought for cash, and it took me about eight weeks to get the money in my account. It took about two days in my TradeKing account.
Also, and this is much less important Zecco’s website is clunky.
Jim responds:
Posted: May 8th, 2008 at 3:22 pm
I had an E*trade account a few years ago and I was very unsatisfied with their customer support. Maybe they’ve improved since then, or maybe not. Either way I won’t be returning to them.
I’ve got a Scottrade account right now and they’ve been just fine. Plus they have local branch offices which is pretty handy sometimes. However I haven’t done much real trading with them thus far so my experience is limited. And their website isn’t the best design IMO. Overall I’m pretty happy so far.
Jim
budgets are sexy responds:
Posted: May 8th, 2008 at 7:25 pm
The only one i’ve tried was E*Trade and it was pretty bad a$$ - at least for a few trades a year i needed it for. Trades went through smoothly, customer service was cool, and it met my tiny needs.
Of course, this was a good 4-5 years back when I used to work for them (not in that dept. though) but i’d def. recommend them for a “beginner”. Everything is just so freakin’ easy to do.
David responds:
Posted: May 8th, 2008 at 11:44 pm
Can someone help me out? Ive read alot about all the online brokers but people keep refering me to discount brokers like interactive brokers.
I’m pretty new at this so when I downloaded the trial program it looked to complicated. Also I don’t expect to be glued to my moniter from 9:30 till 4:00.
Does anyone have any suggestions as to which service I should use?
John responds:
Posted: May 12th, 2008 at 5:26 pm
While I’ve heard that Zecco is working to improve customer service and performance problem, I’ve found the site to be much more interactive and social than any investing experience I’ve ever had through TD Ameritrade or Schwab. I think Zecco will only improve over time and with free trades and a vibrant online community it is already an amazing service.