Barron’s Top Online Broker Rankings 2012

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Weekly business newspaper Barron’s recently released their 2012 annual broker survey rankings. A change from last year is that now the quality and availability of mobile apps for smartphones and iPads are now part of the criteria, as well as more attention paid to the ability to place transactions directly on international exchanges.

Barron’s admits their overall rankings are based on the needs of their paying subscribers – namely “wealthy, active traders”. As such, their overall winner was Interactive Brokers, which has an extensive feature set with low per-trade commissions but also requires a minimum opening balance of $10,000, a minium monthly fee of $10, and is lacking customer service especially for smaller investors.

I am not an active trader, I would say I do less than 50 trades a year mostly using ETFs. Based on no data whatsoever, I would guess that most readers here are also not active traders and don’t need a full-service terminal with real-time streaming charts and complex options order-entry capability. (Although I know some of you are.) Now, I still like having real-time quotes, a nice user interface, and friendly service when I need it. So thankfully Barron’s also ranked the brokers for other investing styles:

Top 5 Brokers for Novice Investors

  1. TD Ameritrade. Notes above-average costs, but more features and good mobile app. Curiously, no mention of the 100 commission-free ETF list.
  2. Fidelity
  3. E-Trade
  4. Charles Schwab
  5. Capital One 360 Sharebuilder

Top 5 Brokers for Long-Term Investing

  1. Fidelity – Notes good mix of reasonable cost, research tools, and overall usability.
  2. TD Ameritrade
  3. Charles Schwab
  4. E-Trade
  5. TradeKing

Top 5 Brokers for In-Person Service

  1. Scottrade. Notes over 500 physical branches across US.
  2. Merrill Edge
  3. Charles Schwab
  4. Fidelity
  5. TD Ameritrade

I found it weird that they mention Scottrade’s meager list of proprietary commission-free ETFs that nobody hardly uses, but completely ignore the fact that TD Ameritrade includes 100 of the world’s largest and most heavily traded ETFs on their commission-free list. I guess they really are laser-focused on daytraders and people trading on Asian exchanges in the middle of the night.

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  1. Novice investors going to places like Ameritrade or E-Trade will immediately be suckered into trading using their “advanced tools” and be well on their way to transferring most of their wealth to Wall Street. Vanguard should be the top brokerage of choice for 95% of investors, and certainly all novice ones. Of course Vanguard doesn’t give Barron’s nearly the advertising revenues that other guys do, so you won’t hear much about it.

  2. I currently love Wellstrade PMA….no fees at all if you keep a certain balance between all your accounts. Also 100 free trades (not just index funds) per year.

  3. Thinkorswim was the best in my experience (out of the three discount broker I used)… they were acquired by TD Ameritrade, and the transition was just a fiasco. I couldn’t trade for a couple days and even after than it often shows the wrong buying power for the next couple weeks.

    However, I was happy to see that TD Ameritrade kept the fee structure and most importantly the trading interface of the TOS. The customer service is still top-notch (i was told the same service team answers question for TOS customers, not the TD Ameritrade staffs)

    I just pray that the day will never come when I get an E-mail that tells me they decide to “fully integrate” TOS into TD Ameritrade…

  4. If you use Wells Fargo and sign up for WellsTrade they give you 100 free trades a year, if you link your WellsTrade account to a PMA account. If you have a qualifying balance (which can be across multiple accounts), your PMA account is free from annual fees.

    Not sure if other banks do the same with 100 free trades… anyone know?

    The drawback to Wells Fargo, their interest rates on checking/savings are among the worst right now, even with a PMA account, which is supposed to give you better interest rates.

  5. I agree with Long Term Returns, why isn’t Vanguard in there. IMHO, the last thing a new investor needs is a 100 free trades.

  6. What’s the drawback to a 100 free trades?

  7. There is no drawback. But I guess the argument can be made that new investors cant make decisions on where to put their money. Hopefully they come to that conclusion themselves and use those 100 free trades to trade within index funds….but its good they have the choice between index and regular stocks.

  8. redlenses says

    +1 to WellsTrade. 100 Free trades a year per account is very nice.

  9. The drawback of WellsTrade is that you will not get the fastest order execution out there and you cannot use these trades to purchase individual stocks valued less than $5. If your an active trader, this might matter.

    I have 4 different accounts within my PMA portfolio so I get 400 free trades a year. Good deal. But there have been times where the execution lagged, especially on foreign securities.

    If you have a mortgage with Wells Fargo, not hard to have a PMA qualifying balance.

  10. Merrill Edge is giving 30 free trades per month if you carry certain balance in either bank of America or Merrill edge accounts. My emergency funds are at bofa and hence I already qualify for the deal. I average about 70 trades a year; even at $7 per trade, this will save me about $500 an year. When they decide to stop the free trades deal, I will move back to my regular brokerage account.

  11. Not What it Seems says

    TD Ameritrade is very effective at the sell, and pretty poor when it comes to execution. With three ways to trade, ( the basic website, the middle ground trade architect and the “pro- think or swim”, they can give you conflicting answers.At the end of the day their trading platform ThinkorSwim,(TOS) does not match the numbers you will see in your TD Ameritrade account ( one uses average price, other uses last trade of the day), In 2012, TOS has gone down for as long as a week for some users, ( an update to the system was bad) It misreports your average purchase price when you sell half of your position for the rest of the day At the beginning of the day for options, when the market is closed, and your P&L for the day should be zero. (trading day has not started yet,) you may show gains and losses, when there has been no trading,This error, once started will stay with the position until its closed. Repeated phone calls go to very nice people, who can give you no answer and do not provide any follow up. They are clear in their disclosures that ” we are affiliated companies but not responsible for the others actions” but in the end they will all often point you towards the same unreliable platform.
    Caveat Emptor

  12. Clinton Dawkins says

    Not What it Seems, exactamente. I recently started frequent trading and noticed the very same problem. What would you recommend?

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