SmartMoney’s 2008 Best Discount Brokers

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It’s always fun to see discount broker rankings. Last week, I wrote about a little preview to the SmartMoney 2008 Broker Survey in which SmartMoney released some preliminary results from their annual ranking of brokerage firms. SmartMoney has published the full details of their report and I’m sad to say that TradeKing did not retain the top spot they enjoyed the last two years (third place isn’t bad!).


SmartMoney changed the way they listed their rankings a little this year. Last year, they separated “discount” and “premium” brokers. Compare the tables from 2007 versus the tables from 2008, they went from three (premium, full-service, discount) to one (umm… everything).

Of the 2008 top 5 (they were, in order, E*Trade, Fidelity, TradeKing, TDAmeritrade, Charles Schwab), only TradeKing came from the 2007 Discount Brokers bracket and they took the third spot (so one could argue they are still reigning champs of the Discount Broker conference?), the rest came from premium brokers.

The Winner: E*Trade

E*Trade snagged the top spot this year with nearly five stars across the board. They also shared a nod for the best trading tools with TD Ameritrade and topped the list for best banking services (sharing that one with no other brokerage). When you can offer an interest rate of 3.25% on your holdings and not require thousands and thousands in the bank, it’s no surprise they were given the nod there. I personally enjoy using E*Trade for my stock trading because of this convenient link between the bank and brokerage.

Incidentally, in 2003’s rankings, E*Trade scored 9th in the “basic discount broker” category because of their $22.99 a trade commissions. It’s amazing what five years and “listening to feedback” can do for you.

TradeKing: 2007’s #1 Discount Broker

Tradeking - Discount Online BrokerThey probably got hosed this year by the rejiggering of categories (they had to update their little award picture!) since they were the only one of the top five to have come from last year’s discount category. Of the top ten, they were the second cheapest to Interactive Brokers (a firm I hadn’t heard of before this year’s survey) by a significant margin (after TradeKing, second cheapest was Firstrade at $6.95, a 40% difference). TradeKing did score a ribbon for best customer service and were the only firm to earn five stars in that category.

Click here to open a TradeKing account today!

The Top 5

Looking strictly at stars, not much separated the top five. While the criteria were not equally weighted, each one scored five stars in at least two categories and a minimum of three stars in each (in fact, only TD Ameritrade had two three-star categories, every other broker had only one).
Here were the concerns (and my comments) about the top five:

  1. E*Trade: None listed, they are so perfect. 🙂
  2. Fidelity: Commissions were on the high side, at $10.95, I agree. Though I don’t really consider Fidelity a discount broker (in 2007, they were considered “premium”).
  3. TradeKing: Weaker fund selection, though they were noted for low commissions ($4.95 a trade).
  4. TD Ameritrade: No negatives listed, though they only gained three stars in banking services. Their interest rate on cash of 0.1% was the lowest of all the sixteen listed brokers by far (second lowest was #9 Scottrade at 0.5%)
  5. Charles Schwab: Is Schwab really a discount broker? Commissions run $12.95 a pop, hardly “discount” prices, but they had only three-stars in customer service.

Zecco: 14th of 16th – Ouch!

What about #14 Zecco with their free trades? (they get a lot of blog press) They scored very weakly across the board for each of the five categories (one star in Trading Tools, Research, and Customer Service) though they received special citation for the worst customer service of the bunch. The $0 per trade offer is a compelling offer but if you’re looking for some hand holding, you won’t get it. Tou get what you pay for ($0). If you only need a broker to enter your trade into the market, Zecco is a good deal; if you’ll ever need to talk to someone about anything… you might as well slide up the commission price chain and go with someone like #6 Firstrade ($6.95 a trade) or #3 TradeKing ($4.95 a trade). You shouldn’t be trading so much that much anyway (though Sharebuilder, the epitomy of buy and hold, took dead last). 🙂

There you have it, another year, another brokerage survey from SmartMoney. If you’re looking for a bank and brokerage in one, I personally recommend E*Trade because they make it easy to link up the two (open up one account and you can open the other within minutes online), which can be a good or a bad thing. 🙂

Source: SmartMoney’s Annual Broker Survey [SmartMoney]

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8 Responses to “SmartMoney’s 2008 Best Discount Brokers”

  1. AndyS says:

    Great analysis. I use TD ameritrade myself and my only complaint would have been their low interest money market account as well. Is it woth having multiple brokerages?

  2. jim says:

    I believe you should have as many as you need to accomplish your goal. Some brokerages give you access to better research, some have cheap trade commissions, etc. For example, I have a Vanguard mutual fund account because I like Vanguard mutual funds, a TD Ameritrade because they offered cheap trades when I moved my Roth IRA there three or four years ago, an E*Trade because I wanted their high interest savings account, and then I just opened a TradeKing account to review it.

  3. Steve says:

    I use optionxpress, my big complaint is the length of time they take to credit my deposits to use for trades… Is there a better broker that credits faster and makes funds available quicker to make trades…

    Also can anyone tell me how to transfer my IRA to one of these brokerage firms, is it easy? DO they walk you through? ALso what would be the best one to use… and can I transfer my account with optionxpress to any other broker without any problems?

    Thank you

  4. jr1185 says:

    I am to my wits end with E*Trade. To sum it up, about 3 months ago, I opened up an account with etrade, and set up online transfer to transfer funds from my bank account. Made the transfer, and waited. After a week of no money in my account, and no word from E*Trade, I contacted customer service. They told me the funds should clear within 7 business days. 7 business days passed, and still no funds, so I called back, and they said the funds were returned and there was a “hold” on my account, and I needed to lift the hold by faxing them a form of government picture ID. I faxed them the ID, and tried to make a deposit again. Again, the funds were returned after 2 weeks, and I was charged a $25 fund return fee. I called customer service, and they said that because of the hold, I needed to sent a personal check, and they couldn’t give me any reason as to why my direct deposit wasn’t going through. I had the correct account number, and info for the account, but E*Trade wasn’t accepting it. I’ve set up multiple direct transfers before with other companies, and E*Trade is the only one I have had a problem with. I even “verified” the account with E*Trade before attempting the transfer, and it was shown as “verified” under my etrade account. Frustrated, I sent E*Trade a check to start up a new account. After they received it, it took 2 WEEKS to clear. In short, it took me almost 2 months just to get funds in to my account. I should have withdrawn my money and closed my account, but I decided to give them another chance. I optimistically thought that once I got the funds in to my account, E*Trade would function properly. I was wrong. I made a few trades (never got the “100 free trades” etrade was offering with a new account because they said it was only valid for the first 30 days the account is active. They had a “hold” on my account for the first 2 months!) and things were going fine, until last week when I checked my E*Trade account, and my net assets have completely vanished! $0.00 . I called customer service immediately, and they said they were just having technical issues with their online account, and to give it “24-48 hrs”. At this point I am fed up with the “24-48 hrs” line. I give it a WEEK and my net assets are still at $0.00, so I call them back today, and I’m informed that there is a “hold” on my account. I asked to speak with a supervisor, waited on hold for 20 minutes, and the same lady came back on and told me that the supervisor told her to send an email to one of their different accounts, and it would take “24-48 hours”. She said they would either lift the hold, or they would need me to fax in a form of government picture ID. I asked her what I could do with my existing portfolio, and the answer was “NOTHING”. I have thousands of dollars in a portfolio that I cant even see. I can’t buy, sell, or even check my balance. I can’t close the account, I can request a stock certificate and cut my losses, I can’t do a thing. I’m at the mercy of the incompetent customer service of E*Trade. I once heard someone say that “stupid people learn from their own mistakes. Smart people learn from the mistakes of other”. Be smart, and STAY AWAY FROM THIS COMPANY. You will save yourself TIME and FRUSTRATION.

  5. zecco sucks says:

    IMHO, Zecco sucks bad. Like the old saying goes, you get what you paid for. And Zecco is proof of that. My story is way to long to post here. Just search for “zecco sucks” and you’ll see what I mean.

  6. JK Campbell says:

    Interesting (and horrible) experience that you have had with eTrade.

    I have an account with them, too, and it seemed to take forever to get them to okay the funds, despite my having sent them a cashier’s bank check. Their website is more difficult to navigate and to understand than TD Ameritrade’s, too. Since their research appears to be a little better than TD Ameritrade’s, I just keep a small account with 3 stocks with eTrade so as to keep better informed. The majority of my money is with Ameritrade and UBS although I am phasing out the UBS one – they have become arrogant, difficult people and I say this after having had an account with them since the early 1980’s! The Ameritrade people treat me like “gold”. I do wish that I could have received all of my 100 free trades but still, at less than $10 per trade, their prices are reasonable enough. One thing that I have noticed is that sometimes their quotes are a LOT different than the eTrade quotes for the same stocks – differences by 20 cents or more! However, whenever I have a question, no matter how “stupid” they may think it is, they always show a lot of patience in answering me until I fully understand what they are saying or writing. While I am still thinking about opening another account so as not to have all of my money at the whims of some incompetent customer service rep as described in your article, I am very satisfied with Ameritrade…less so with eTrade, despite all of their good ratings that I keep reading about.

  7. Etrade no good no more says:

    I am looking to move away from etrade after nearly 10 years. I have tried THREE times to have several securities moved to them. It has been a nightmare…each time the answer is the same (“sir I will personally followup”). The last time they actually did only to tell me “you need to fill out another form and do the transfer again”.

  8. Robert says:

    I have several accounts opened with different brokerage firms.
    1. Scottrade: Platform good, easy to use, good customer service. But,less short stocks. Never let you short uder $5 stocks. If stock drop 30%, they think that is the problem stocks, you have to call in to place an order. Waste time, and I don’t feel it is necessary.
    2. TD-ameritrade: Screening tools, Streamer are easy to used. News and research system are weak. After put into orders, have to go to another screen to cancel/change it, it take time. But the major wait problem is when stock sell off to cover incerficient fund, they probably not to call you. They will do what ever you want to sell the stock. Last year Mar 16, when Bear Stern announced bankrupcy, overnight the stock was down from around $50 to $2, Scottrade kept the stocks, ever the assets was negtive. But TdAmeritade sold it already right after market opened. In the claim, Td-ameritrade says ” To best protect your and the Firm interest”, they have the right to do any sell off. If stock was down to $2 already, what is the best interest for the firm? —The stock will go to Zero?
    3. Fidelity– Research system is good. But Active trading Pro is not for Active traders. You bought a stock today, you cannot see it in the Position screen which I feel ridiculous, it won be showed the stock price/price change right away. You ahve to wait until tomorrow.Scheme design for trading is not good. Screening for stocks is never worked for me. International account offer no margin, plus with comfirmation mail in letter form. I don’t understand why they don’t want to change to E-mail form of comfrmation.Why waste money and time to mail it?

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