Investing has become more accessible to more people, but that hasn't made finding the right broker any easier. If anything, brokerage firms look more alike. Low commissions, for instance, are no longer a differentiator – all firms have low costs now.
Figuring out which broker is right for you depends on what you need and what you value. You may want a broker that has an array of no-transaction-fee mutual funds at the ready. Maybe you need technical reports on stocks or charting tools that let you slice and dice a stock's moves. If you're just getting started, you may want the ability to invest in partial shares of stocks. Or if you don't know much about investing, a firm with a good robo advisor may suit you best.
To help you choose, we rounded up data from 10 brokers who agreed to participate in our annual survey. Every year we invite a number of firms, but to be included, a broker must offer online trading in stocks, exchange-traded funds (ETFs), mutual funds and individual bonds. Half of this year's participants are well known: E*Trade, Fidelity, Merrill Edge, Charles Schwab and TD Ameritrade. Three are online brokers with affiliated banks: J.P. Morgan Self-Directed Investing (Chase Bank), WellsTrade (Wells Fargo) and Ally Invest (the online-only Ally Bank). The remaining two, Firstrade and Interactive Brokers, focus more on trading and are popular with active investors. Siebert didn't respond to our invitations; T. Rowe Price and Vanguard declined to participate.
Each participant answered dozens of questions in seven categories: commissions and fees; investment choices; smartphone app; tools; research; advisory services; and user experience. The user experience category measures how well a company interacts with customers, including via its website or mobile app. Scores in each category depend on information provided to us by the brokerages, vetted to the best of our abilities.
This is a year of transition for some of the firms in our survey. Schwab and TD Ameritrade completed their merger in 2020, but the process of combining their operations continues. By the end of the year, the vast majority of TD Ameritrade customers should be transitioned to Schwab. But because that process was incomplete at press time, the firms asked to be reviewed separately, except in the category of advisory services. E*Trade is also nearing the end of its operational merger with Morgan Stanley, but for the most part this did not impact its responses to our broker survey.
Also, the popularity of small brokerages that focus solely on stocks and ETFs is tough to ignore. For that reason, we conducted a truncated survey of firms that typically don't qualify for our broader survey – namely, Betterment, M1 Finance, Robinhood, SoFi and tastyworks. For more on how those firms fared against each other, see who are the best small online brokers.
Best online broker overall
Fidelity came out on top in three categories – smartphone app, advisory services and fees – but it won second or third place in every other measure except user experience.
E*Trade was an impressive second-place finisher. Though that is a step down from its first-place finish overall last year, E*Trade topped the charts in research and finished strongly in the investment choices, smartphone app, user experience and fees categories. Schwab came next, followed by Interactive Brokers and Merrill duking it out for fourth and fifth (the two firms' final scores differed by 0.1 point).
(Image credit: Future)
Online brokers with the best investment opportunities
More is definitely more in this category, which accounted for 20% of the final score. We asked the firms to pony up information on the breadth of investments they offer, including individual corporate and municipal bonds; how many mutual funds customers can buy without a transaction fee; and whether the firms offer fractional-share purchases of stocks and ETFs. Because interest rates are higher this year, we also asked about the income you can earn on cash. Interactive Brokers won the top spot overall in this category, but Fidelity and E*Trade weren't far behind.
Interactive Brokers offers access to markets in the U.S. and 150 developed and emerging markets. Customers can choose among 4,610 U.S. mutual funds and pay no transaction fee. (Schwab comes close to that, with 4,406; E*Trade offers 4,278.) But Interactive's fractional-share trading in stocks and ETFs stood out. The firm lets its customers buy fractional shares in thousands of stocks and 3,125 ETFs for as little as $1. (Fidelity offers similar access to fractional stock and ETF shares.) Interactive also offers the ability to set up recurring stock and ETF trades – much like regular 401(k) contributions.
Fidelity's sweep accounts (where uninvested cash sits) shone. Among the firms surveyed, the average sweep account interest rate was below 1.0% as of the end of May. Low rates from J.P. Morgan Self-Directed Investing and Merrill Edge (both pay 0.01%) and WellsTrade (0.15% for balances under $1,000,000), among others, were a drag on the average. But at Fidelity, the default sweep account paid 4.75%.
Highlights at E*Trade include a gigantic menu of bond choices. The firm reported it has more than 100,000 unique corporate and municipal securities on offer. E*Trade customers can also sign up for its automatic investing program for fractional purchases of 100 ETFs; the minimum recurring purchase is $25.
Firstrade doesn't offer partial-share trading or money market funds, which hurt its score this year because those criteria were heavily weighted. And its sweep account pays 0.45% in interest – not the lowest of the group, but below average.
Online brokers with the best tools
Calculators, charts and screens can make investing easier, more accessible and fun. They don't have to be graphically snazzy, but they do have to be informative. In this category, which accounted for 20% of the final score, Schwab and Merrill Edge ranked best. Fidelity came in third.
Schwab's breadth of offerings stood out. Schwab checked off nearly every box for the 30-odd questions in this category, from a risk-tolerance questionnaire to a monthly budgeting tool, a calculator for required minimum distributions and a tool to help build a ladder of certificates of deposit (CDs).
Merrill Edge and Fidelity offer hearty tools for screening ETFs, bonds, mutual funds and stocks. They each have crafted predefined screens for all of these securities, too, which makes it easier for investors who don't know which criteria to choose among the hundreds available. But, as in years past, Merrill Edge got extra credit for its Idea Builder tool, which helps investors winnow investment ideas for stocks (and sometimes funds and ETFs).
The laggards in this category were Firstrade, Ally Invest and Interactive Brokers. To be fair, Firstrade and Interactive Brokers have robust active-trader platforms, which we didn't include in our survey, that are packed with tools. But their main website offerings are more spare. Ally Invest caters more to novice investors. Its stock, ETF and bond screeners aren't as hardy as the screeners offered by the bigger brokerage firms. And it doesn't have a mutual fund screener, bond laddering tool or retirement account calculator for required minimum distributions, for instance, which are de rigueur at outfits such as Schwab, E*Trade and Fidelity.
Best smartphone apps from online brokers
According to some firms, brokerage customers check their accounts on a mobile app as often as they do on a computer. But can you do everything on your smartphone that you can do on a computer?
For instance, can you pay bills? Not at Interactive Brokers, Firstrade or J.P. Morgan, among others. Can you track your spending? Only at Fidelity, Merrill Edge and J.P. Morgan. Trade stocks and mutual funds? Not at Ally or Firstrade, and only on an Android phone at TD Ameritrade. We asked each firm about whether those transactions and dozens more could be done within their app. The firms that offered the most functionality fared well in this category, which accounted for 20% of the final score. Fidelity, Interactive Brokers and E*Trade earned the top marks.
A couple of differentiators: Fidelity customers can buy and sell CDs on its app. No other firm we surveyed offers this. And anyone looking to trade bonds using their smartphone app will be disappointed unless they have an Interactive Brokers account.
We gave extra points to apps with nimble portfolio-performance reporting – whether each account individually and in the aggregate could be compared with a broad-market benchmark. Only E*Trade, Fidelity, Interactive Brokers, Merrill Edge and TD Ameritrade measured up.
Schwab lost points in comparison with its peers because it doesn't have screeners for stocks, ETFs, mutual funds or bonds within its smartphone app (unlike Ally, E*Trade Interactive and J.P. Morgan).
Best online brokers for research
Having access to high-quality research can help investors make informed decisions. We tried to figure out how much accessible research was available to investors at each firm – from in-depth reports by analysts who pore over balance sheets and income statements and talk with company executives to easy-to-decipher technical and quantitative research. This category accounted for 15% of the final grade.
E*Trade's merger with Morgan Stanley helped E*Trade rise to the top of this category. Customers have easy access to any research report from the investment bank, from topics such as why India is booming to whether Apple's (AAPL) revenues are on the rise in emerging markets. You'll also get a current take on the market from Morgan Stanley's lead stock strategists and other "thought leaders," says an E*Trade spokesperson.
Schwab took second place here. A quick search for info on several stocks, including Apple, Goldman Sachs (GS) and Honeywell (HON), turned up a number of detailed reports from analysts at Argus Research, CFRA Research, Morningstar, Thomson Reuters and MSCI, among others.
Firstrade didn't make the grade in this category relative to the other firms, however. Its customers have access to Morningstar's thorough analysis for stocks and funds, but that was the only fundamental research available. And it doesn't offer any help with ESG (environmental, social and corporate governance) research.
As a subsidiary of Bank of America, Merrill Edge can offer its customers access to high-quality research from BofA Global Research, which gives the firm an advantage over all the other firms but E*Trade. But only certain customers get the reports. "Edge clients need to meet certain relationship qualifiers" to see the research, says a spokesperson. For instance, you qualify if you have at least $100,000 in eligible accounts and are enrolled in the bank's Preferred Rewards program (which is available to select banking customers with at least $20,000 in an eligible Bank of America account).
Best online brokers for advisory services
In recent years, demand for investment advice – from the all-digital kind to the old-school, dedicated-adviser kind – has climbed. And firms are jockeying for your dollars. The more robust the offerings, the higher a firm ranked in this category. Firstrade doesn't offer any advisory services, so it came in last. This category accounted for 10% of the final score.
Robo-advisory services made up the biggest chunk of this category's score. All firms offer one (except the aforementioned Firstrade), which we define as a service offering automated investment plans that use algorithms to create and manage a diversified portfolio – typically made up of exchange-traded funds – appropriate for your time horizon and tolerance for risk.
Half the firms, including E*Trade, Fidelity, J.P. Morgan, Merrill Edge and Schwab, have an enhanced tier of service that allows customers to talk to a human being if necessary – in many cases, a certified financial planner. And all but Firstrade and Interactive offer more-personalized, hands-on advice from a dedicated expert. This level of advice requires higher stakes – between $100,000 and $1 million in investments, depending on the firm – and typically involves a portfolio that holds individual stocks, bonds (including municipal bonds) and real estate investment trusts (REITs). We awarded extra points to firms with these types of enhanced advisory services.
Fidelity and Schwab/TD Ameritrade won the day in this category. The robo-advisory offerings from the two firms were standouts. Fidelity's automated investing offering, Fidelity Go, has a $10 minimum to get started, the lowest of the group, and an advisory fee of zero for accounts with less than $25,000 in assets (it charges 0.35% a year for accounts with more than $25,000). Schwab's robo product, Intelligent Portfolios, is free of annual advisory fees, too, but the minimum is a heftier $5,000.
Fidelity's armada of advisory services for clients with heftier assets lifted its score in this category, too. Schwab and TD Ameritrade's wealth advisory offerings (reviewed in combination) are equally robust. But the combined firm lost a little ground to Fidelity because its minimum required to have a dedicated adviser, $1 million, is considerably beefier than Fidelity's minimum, $250,000.
Fidelity had an edge, too, thanks to its direct indexing product, a managed account that seeks to replicate a stock index by holding individual stocks, while taking advantage of tax-loss harvesting (which involves selling a security at a net loss to reduce or offset capital gains taxes owed from selling profitable investments). Fidelity's Managed FidFolios has a low, $5,000 minimum and charges 0.40% or 0.70% a year, depending on the strategy selected. E*Trade, Interactive Brokers and Schwab have direct indexing programs, too, but you must work with an adviser to access them.
Interactive Brokers' robo-advisory service is different from that of the other firms. Rather than a traditional automated investment plan geared to your age and risk tolerance, it offers access to more than 70 digitally managed portfolios, run by outside investment firms and financial companies, that invest in either ETFs or a mix of stocks and bonds. Many invest with a theme – ESG Growth or Technology, for example. Others focus on an asset class – Global or Small Cap Broad Market, to name two. These portfolios vary by investment minimum – most require $100, though a few require upward of $10,000 – and by annual fees, which range between 0.08% and 0.75%.
Best online brokers for user experience
How easy is it to get help – by phone, online chat or email – when you need it? Is the website easy to navigate? Can you readily find a stock research report on the mobile app? Is it easy to figure out how to update your beneficiaries on the website? These are some of the functions we assessed in this category, which accounted for 10% of the final score. Merrill Edge emerged victorious. But J.P. Morgan Self-Directed Investing, another top finisher in this category, performed best in our tests to measure ease of use for each of the firms' mobile apps and their dot-com websites. (E*Trade came in second on those particular assessments, but fourth overall in the category.) The test-runs accounted for nearly two-thirds of the overall user-experience score.
Merrill Edge's platforms performed above average on our test-runs. But the firm got a leg up for other criteria, including its 3,900 U.S. brick-and-mortar branches (only J.P. Morgan, with 4,700, has more); Merrill Edge's affiliation with Bank of America helped. Merrill also reported the fastest stock-trade execution speed of all the firms – 0.006 second – well above the average of 0.08 second for the group. It won points, too, for having a live person on its chat service online. Schwab and Interactive Brokers also have a live person responding to instant-message queries on their websites.
Ally and Interactive Brokers lagged in this category, in part because neither firm did well in our test-drive of its website and mobile app. Ally's website is neat and uncluttered, but it's not as easy to navigate as the sites of some of the other firms we surveyed. And its CD screener, we found, was not very intuitive. (Ally suffered, too, because it's an online-only business – it doesn't have any branches.)
As for Interactive, its smartphone app has impressive functionality, but first-timers may find it difficult to navigate. To be fair, a chunk of Interactive's clients opt to download the firm's desktop platform, Trader Workstation, aimed at active traders. We didn't review active-trader desktop applications, which must be downloaded onto your computer.
Best online brokers for fees
The competition to charge the lowest fees is so fierce among brokers that the scores in this category varied by thin margins. We awarded points to firms with the lowest price to trade options, send a wire, buy on margin and get a broker to help with a stock trade, among other things. Fidelity and J.P. Morgan Self-Directed came out on top – the difference in their scores was 0.02 point. Close behind J.P. Morgan were Merrill Edge (by 0.52 point) and E*Trade (by 0.55 point). This is why, though low fees matter, the category counts for just 5% of the final score.
Firms that lagged got tripped up on whether there was a fee to buy and sell U.S. Treasury securities (yes at Ally, Firstrade and Interactive; no everywhere else). Another differentiator was payment for order flow. Payment for order flow can pose a conflict of interest because it means brokers are compensated for funneling trades to certain firms, called market makers, to fill orders. Fidelity, J.P. Morgan, Merrill Edge and WellsTrade don't accept payment for order flow; the others do. Interactive Brokers got half credit here. Trades on its Pro platform, where customers fork over a small commission for stock trades but pay lower interest rates to trade on margin, don't accept payment for order flow. But trades on the firm's Lite platform do.
A couple of developments are worth noting. E*Trade eliminated commissions and transaction fees on mutual funds; it even waives the front-end load for load funds available at the firm. Before the change in late 2022, the firm charged $19.95 to buy and sell shares in a mutual fund, unless it was a member of its no-transaction-fee network. And Ally customers can finally buy shares in no-load funds for free. The firm eliminated its $9.95 charge to buy and sell shares in no-load funds in February. Customers will still pay a sales charge to buy shares in load funds on its broker platform.
Best online broker for your specific needs
Best robo. If you're just starting out and want a modicum of help with investment advice, consider Fidelity Go. It has a low, $10 minimum to get started and zero annual fees for balances below $25,000 in assets. (For accounts with $25,000 or more in assets, it charges 0.35% a year.) Schwab's Intelligent Portfolios gets a nod, too, because the annual fee is $0 no matter how big the balance, but it requires $5,000 to get started.
Best for bond investors. E*Trade's platform has the biggest roster of unique issues for secondary-market corporate debt and municipal bonds—more than 100,000 each, which in some cases beats its peers by nearly twofold. E*Trade also has tools to help you build a ladder of bonds or certificates of deposit (a ladder is a portfolio of investments that mature on different dates). Fidelity, Schwab and TD Ameritrade also offer tools that help build bond and CD ladders.
Best for investors who want access to initial public offerings (IPOs). Based on past offerings, the best choice is Fidelity, which provided its customers access to 22 new offerings between the start of 2022 and May 2023; E*Trade came in second, with 11.
Best for high-quality research and market commentary. E*Trade customers get unfettered access to Morgan Stanley reports. If you're reading a recent report on, say, Apple and it cites a previous report—whether it was specifically about the company or why growth in India might fuel revenue gains at Apple—you can click on an embedded link and the report will pop open for you to read.
Best for options traders. Firstrade doesn't charge to trade options contracts. Every other broker has a fee.
Best for customers who want a bank-brokerage relationship. Connecting your bank to your brokerage firm is easy – all brokers allow you to set up an ACH or electronic funds transfer with an external bank, most of them with just a few clicks online. But it's another thing to have your banking and brokerage relationship at one firm. When weighed against the 10 brokerage firms in our survey, Merrill Edge stood out. If you have a Bank of America account, you can transfer funds instantly between your bank and investment accounts at Merrill Edge. The higher your combined average daily balance between the two firms, the bigger the perks, too. This includes discounts on annual fees for Merrill Edge's robo adviser (called Merrill Guided Investing), no fees on certain banking services, and an interest-rate boost on a Bank of America Advantage savings account.
Best for investing newbies. Fidelity wins for its robust fractional-share trading. Customers can buy and sell partial shares of nearly all U.S. exchange-listed stocks and exchange-traded funds for as little as $1 per trade. Interactive Brokers comes next, but its website and mobile app aren't especially friendly for beginners. Schwab offers fractional-share stock trading on any S&P 500 member for as little as $5 per trade, but no partial ETF shares are available.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you makehere.
Senior Associate Editor, Kiplinger's Personal Finance
Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.
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