Best of the Online Brokers, 2016

published 23 September 2016

Investors can pocket a few hundred bucks just by opening an account with an online broker these days. But don’t let a signing bonus sway you. Low commissions to trade stocks or exchange-traded funds can save you more money in the long run. Whether you’re a stock jockey, a saver or a retiree, finding a firm that suits your needs is far more valuable than even a $600 bonus (Merrill Edge’s current inducement if you open an account with at least $200,000). So what makes for a first-rate broker? It depends on what you value. Low fees may be critical for active traders, but buy-and-hold types may want an array of no-transaction-fee mutual funds. Brokers with unbeatable prices may lack the retirement-planning tools or advisory services you need.

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On all sites, basic facts about stocks, bonds and funds abound. But only a few firms supplement the standard data with more information from major Wall Street investment banks. Schwab and TD Ameritrade provide comprehensive stock research from Credit Suisse to all brokerage clients. E*Trade customers can access Credit Suisse reports, too, but only if they maintain at least $100,000 in assets with the company. Fidelity doesn’t supply any comparable stock research, although it does offer reports from some small research firms, along with S&P Capital IQ. Scottrade and Vanguard provide minimal stock and fund research.

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If you want bond research, though, you’ll have to look elsewhere. Ratings reports on individual companies aren’t accessible on Merrill’s site. By contrast, E*Trade, Schwab, Scottrade and TD Ameritrade furnish company reports from credit-ratings agency Moody’s. One hot new tidbit: social-media signals. E*Trade shows bloggers’ sentiments on individual stocks. On Fidelity and TD, customers can see how a stock is trending on sites such as Twitter.

Brokers aim to make their sites user-friendly. But some are so convoluted—packed with news, charts and data—that they can strain your eyes. For overall ease of use, Fidelity racks up the highest marks. A horizontal task bar at the bottom of the site’s accounts page lets you place a trade with a few clicks, streamlining the process compared with other sites. Paying bills, researching funds and analyzing a portfolio are all relatively simple on Fidelity’s site. Investors can also personalize the site in a number of ways, such as tracking their portfolio’s performance against a custom set of market benchmarks (something Schwab doesn’t allow).

Fidelity does trail the competition in some areas. Merrill Edge customers can use Morningstar’s X-Ray tool to compare their portfolio’s asset mix against more market benchmarks than Fidelity’s analytical tool allows. Merrill customers can also see how closely stocks, bonds and funds in their portfolio move in sync with one another, and they can track their portfolio’s hypothetical growth against a wide variety of market benchmarks—features that Fidelity doesn’t offer.

One useful tool on E*Trade is a roundup of Wall Street analysts’ opinions and price targets for individual stocks, showing how the analysts’ recommendations rank (a feature unavailable on other sites). E*Trade also shows more details about stocks, such as how many shares are being purchased or sold by company insiders. Vanguard’s site looks sparse in comparison, with fewer trading and research tools. For its part, Scottrade packs scads of charts and data on its site, but it doesn’t offer as many planning tools or screeners.

One other element that’s part of this score: customer service and branch availability. Schwab and Merrill both report hold times for phone service averaging 31 seconds or less, beating Scottrade (42), Fidelity (58) and Vanguard (60). Scottrade scores well with 495 offices, more than every firm except Merrill, which provides brokerage services through 2,000 Bank of America branches. (Vanguard doesn’t have any branches.)

The larger your account, the more customized and personal investing advice you’ll get. But aside from Scottrade, which doesn’t offer advice, every broker will help you figure out an investment mix, set up a retirement plan and steer you to a professionally managed account (functions that Scottrade farms out to external advisers). Fees for managed accounts typically start at 1% of assets annually, though they may be negotiable. Without prompting, a phone rep from E*Trade offered to knock 0.1 percentage point off the firm’s standard 1.25% fee for managed accounts when we called to inquire about them.

Fidelity and Vanguard earn the top spots in this category, trailed closely by Schwab. Fidelity racks up points for its menu of managed accounts, including one that focuses on muni bonds and another on income-oriented ETFs. Minimum investments start at $200,000 for most types of accounts, and management fees range from 1.7% to less than 0.6% for diversified portfolios with higher balances. Fidelity is also rolling out an automated (or “robo”) managed-account service that invests in ETFs; it requires a minimum investment of $5,000 and charges annual fees of 0.35% to 0.39%, including underlying fund fees. E*Trade and Schwab offer robo services, too. But E*Trade’s isn’t priced as competitively, and Schwab requires clients to hold sizable cash balances, which can drag down long-term returns.

At Schwab, customers need just $25,000 to get into a managed portfolio of mutual funds or ETFs—one of the lowest bars in the business. Schwab also offers robo ETF accounts, free of charge, with only a $5,000 minimum. Merrill and TD lack robo services and steer clients into managed accounts that charge at least 1% annually, depending on portfolio size (plus the fees of underlying funds in fund-based accounts).

For its part, Vanguard doesn’t provide a robo service or managed accounts holding individual stocks or bonds. But customers with at least $50,000 in assets can tap into the firm’s Personal Advisor Services, which let you slide into a managed account that charges just 0.3% in annual fees. The accounts hold only Vanguard funds that mainly track market indexes. But that’s not a bad thing; clients can get Admiral share class funds, with expense ratios of less than 0.07% for U.S. stock and bond funds. With most active managers failing to beat their benchmarks, sticking with broad-market index funds can be a good way to pocket more money in the long run.

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Daren joined Kiplinger in July 2015 after spending more than 20 years in New York City as a business and financial writer. He spent seven years at Time magazine and joined SmartMoney in 2007, where he wrote about investing and contributed car reviews to the magazine. Daren also worked as a writer in the fund industry for Janus Capital and Fidelity Investments and has been licensed as a Series 7 securities representative.