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IBD Best Brokerage Firms

Investor's Business Daily has released its annual broker ratings. Based on interviews of more than 4,700 traders, the results put TD Ameritrade, Fidelity, and Charles Schwab in the top three. Let's take a detailed look at the survey and see who received honorable mention.


IBD Broker Survey Criteria

The rankings are based on a survey conducted with the polling firm TechnoMetrica Market Intelligence. Investors of various brokerage firms were asked questions based on thirteen issues—topics such as fees and commissions, trading tools, site performance, educational resources, options trading, and mobile platform. In previous years, IBD required responses from at least 125 clients for a broker to be considered for analysis. This year, however, the publication looked at companies that had just 85 customers responding, and ranked these firms in a small-broker division.

The categories that were important to traders changed somewhat this year, compared to previous surveys. The areas that saw an increase in importance were investment education, portfolio analysis tools, commissions, and ETF availability. Surprisingly, website and mobile trading saw a decrease in significance. Traders also showed less interest in options trading and customer service.

Secondary brokerage services, such as bonds, tax help, and banking also were described as low on the importance scale by the participants in the study. Even more surprisingly, the presence of brokerage firms on social media was not regarded as an important service.


Broker Performance

Fidelity placed either first or second in every single category, which is why it took first place overall. Schwab took second place, followed by TD Ameritrade.

Investors in the survey picked Fidelity more often than Schwab and TD Ameritrade primarily because of cost. They viewed TD Ameritrade's commission schedule to be too high and convoluted. Schwab's commission schedule was also pricier than Fidelity's.

Besides price, research amenities, website performance, trade reliability, stock tools, and ETF availability were the other categories that mattered most to investors. Fidelity, Schwab, and TD Ameritrade were chosen because they performed well in these areas.

Customer service was another important category ranked by the participants in the study. Scottrade actually outperformed TD Ameritrade here, while Fidelity and Schwab remained in the top three.

Options traders also liked Fidelity and TD Ameritrade in the survey. It actually was their first year to appear in the top five in the derivative category. Interactive Brokers beat Schwab for a spot in the top three.

Other categories surveyed where Fidelity, Schwab, and TD Ameritrade were all in the top three include mobile trading, planning tools, educational resources, and portfolio analysis. Despite Fidelity's victory in the overall category, Schwab took first place in the ETF division, trade reliability, site performance, and customer service.

TD Ameritrade was victorious in equity trading, mobile platform, and options trading. Equity trading and mobile platform were TD Ameritrade's first year in the top five. Portfolio analysis and reports also saw TD Ameritrade for the first time.

The IBD investigation saw a sharp distinction between the top three brokers and the rest of the field particularly in the areas of research tools, educational resources, and investment research.

Despite Schwab and TD Ameritrade's outperformance, they do not appear in the top three in fees and commissions. Scottrade and Interactive Brokers replaced Schwab and TD Ameritrade in the fees & commissions group. Scottrade also placed in the customer service division, beating out TD Ameritrade. Interactive Brokers found a place in the top three among derivative traders, displacing Schwab.


Small Firms

Besides the larger brokers, Investor's Business Daily this year also looked at smaller firms with fewer traders. Three of them were selected for honorable mention: ZacksTrade, Merrill Edge, and Vanguard.

TradeStation performed the best on the thirteen primary categories, within the small brokerage category. It did especially well when judged by stock trading tools. It also took first place in mobile trading. The lowest the firm ranked was third—in retirement planning, options trading, and pricing schedule.

Second was Merrill Edge. A division of Merrill Lynch, this low-cost online broker did well in the categories of research tools, reports, and investment research. Its relationship with Merrill Lynch probably helped there. In total, the broker had good ratings in eleven of the thirteen groupings.

Vanguard rounds out the top three. The broker showed strong performance in retirement planning tools and pricing. It also earned high marks in the categories of customer service and trade reliability. However, the firm did poorly for its trading platform and research tools.


IBD Online Broker Ratings Final Thoughts

Investor's Business Daily has done a good job of analyzing and ranking the major brokerage houses. Keep in mind, however, that this is just one company's analysis. Other groups, such as Barron's, have their own rankings, which could differ.


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