Finding the best online broker isnt easy. Information is incomplete. To complicate things even more online brokers
arent forthcoming on basic information like cost per trade, fees, cash
interest rates, and other critical information.
Authoritative sites give conflicting reviews and
ratings. For example, the top rated
online broker for JD Power in 2007 is the 12th place loser for Smart
Money. To make things worse there are so
many online brokers to choose from that even the reviews couldnt decide whom
to review. Its common for some
reviewers to completely leave off companies that received high ratings from
another reviewer. Another problem is
that some reviews are 2 to 3 years old.
In the information age youd think someone (coughcough
Consumer Reports) would have the solution, but they dont. There are too many factors to make a final
judgment on the best broker. The type of
trader, account size, activity, research provided, customer service, and the
amenities offered make each company fundamentally different.
In a way, rating online brokers is a lot like looking at
vehicles. A dump truck is fundamentally
different than a motorcycle. The dump
truck reviewer will rank the motorcycle as a flimsy cheap vehicle that cant
haul more than a couple people. The
motorcycle reviewer will discredit the dump truck as heavy, clunky, and a
complete waste of gas. So which is
better, the dump truck or motorcycle?
Just like many things, it depends.
To find the best reviews try to find similarities in each
review. Is there a company consistently
in the top five? These brokers will
likely be one of your top candidates as well.
Another tip is to make sure the reviewers are comparing apple to apples.
It happens regularly so be careful.
Try to find out the criteria for the review of each broker.
One review might give your perfect broker a low score because they dont offer
check writing. If you didnt care about
check writing and that broker has everything else you want you might have
missed them because of a poorly written review.
Another tip for finding a great broker is to know whats important to you. Are you interested in Mutual Funds, are you
an active trader, do you want to get into options, will you have a lot of cash
sitting in your account, will you use margins?
There are many things to consider.
Some brokers will be very good in some areas and not so good in others. Knowing what areas are important to you will
help you narrow down your search quicker.
The final thing to remember is spending more doesnt always mean you get
more. Most of these discount brokers
went through tough times after the internet bubble burst. They had to become competitive while lowering
prices. As they did this the tools,
research, and service provided started to even out. You dont need a premium broker to make money
anymore. In fact, the big banks and
investment firms have a lot more overhead than many smaller companies. Dont believe the marketing that youll be
getting more by spending more. Its not
always true.
Hopefully finding your broker will be fun and easy. Most likely it will take some work and good
old-fashioned research. Good luck and
happy hunting.
Additional Resources: Best Discount
Broker Comparison from Money Tip Central
