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From the Editor

How We Picked the Best Online Brokers and the Rest of Our Annual Best List

The effort we put into our broker survey extends to picking all the winners across dozens of categories of personal-finance products and services.


When I told senior associate editor Nellie Huang that I wanted to get the backstory on how she compiled our comprehensive survey of online brokers, she showed up in my office bearing a purple folder bulging with spreadsheets and pink Post-it notes. This, Nellie told me, was the stripped-down version. Because the major players have become virtually full-service financial firms—offering everything from banking services to mortgages to budgeting advice—she decided to simplify and update our survey to focus only on “all the things you need to be a good investor.” So, for example, we rated the brokers’ mobile applications as a separate category this time around, reflecting the fact that so many people are getting information, and even trading, on their mobile devices. At the same time, says Nellie, fees have come down so much that they’re not an issue anymore. So she was able to streamline that part of the survey to include only trading commissions and any regular fees, ignoring miscellaneous charges for such things as transferring an IRA.

SEE THE SLIDE SHOW: Best Online Brokers

Even so, each broker was asked to respond to more than 130 total questions in eight categories. Vanguard declined, but Nellie says most firms were eager to participate, and most accomplished the task on time—even though she had to nudge some companies several times to clarify their answers.

Once all the data was in hand, Nellie analyzed spreadsheets in each category and scored the responses on a scale of one to five. Scores were weighted, with investment choices given the highest weighting, followed by the brokers’ tools, Web site design, mobile apps, fees, research and advisory services. Sometimes scoring was easy (a yes or no answer received either a point or no point), but some things were harder to quantify. For example, Nellie was impressed with Scottrade’s Web site because “it was so nice and simple.”


And she wasn’t able to include some nifty features in the ratings. Merrill Edge, E*Trade and others offer cash incentives if you open a new account. And Fidelity issues a credit card that gives customers a 2% rebate (on all purchases), which you can direct to your IRA or brokerage account.

So which broker is best for you? To get a quick answer, see our Best Online Brokers slide show and decide which matters most to you. Do you invest mostly in mutual funds? In ETFs? Do you make use of mobile platforms? Are there enough free options for you to minimize costs? How much do you value the convenience of having all your money in one place so that you can easily follow your portfolio? “Each of these firms offers something,” says Nellie. “It all depends on what kind of investor you are.”

Top job. The effort we put into our broker survey extends to picking the winners for our annual Best List. Take, for example, our top choice among prepaid cards, the Bluebird from American Express and Walmart. To arrive at that one selection, contributing editor Lisa Gerstner sifted through more than 30 cards. She gave the nod to Bluebird based on its low fees, ease of loading and access to cash. Other features that Lisa looked at include convenience (online bill pay, mobile apps, check-writing and user subaccounts), security and safety (whether a card provides a list of transactions to help you spot unauthorized purchases). It’s all in a month’s work here at Kiplinger’s, and we’ll do our best to top it next month.