Pick the Best Broker for You, 2019

(Image credit: THANANIT (THANANIT (Photographer) - [None])

published 26 August 2019

Ryan Ermey: I spent weeks crunching numbers to rank online brokerages and in the end fractions of a point separated our winner from the second and third place finishers. The truth is every brokerage has something to offer, depending on what kind of investor you are.

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Ryan Ermey: Eventually. In theory... So like for used cars there's Carmax, there's Vroom, there's Carvana. You can basically pick a car online, line up the financing, have it delivered to your doorstep. In theory you can do that with a new car, buy a new car online, but you have to have actual signatures on paper. Even if you use some of the services, you're still going to have to go down there and talk to somebody.

Sandy Block: Right. Right. Exactly. And you don't even have to finance it through them, even though they will, you know, strongly encourage you to do so. Oftentimes you can get a better deal on a car loan from your credit union or your bank, and right now interest rates are low and going lower, so I would definitely think it's a good idea to shop around. I don't know that the car dealer is going to offer you the best deal.

Ryan Ermey: But ultimately you can't beat free, which is what Firstrade is offering. They charge no commission to trade stock, ETFs, mutual funds or options. But a couple other brokerages offer good deals. It should be said that Merrill Edge will give you, depending on how much money you have combined in assets in a Merrill Edge account and in a linked bank account... You have to sign up for their Preferred Awards Program, you can get from 10 to 100 free trades per month. They just recently lowered the asset threshold for that, so something like 80% of trades on their platform are now made commission free.

Ryan Ermey: So we talked to representatives from all of the brokers in our survey. They come and they give presentations. We talk to them over the phone. We do webinars, whatever, to try to get a sense of what is important to their clients and how they're responding to it, and nearly all of them indicate that their clients are demanding to do more and more of their business on the go, so mobile investing, mobile brokerage capabilities, have become more important than ever.

Ryan Ermey: The way that we measure our scoring for the mobile category, which is one of seven categories that we include in our rankings, which takes up 25% of the total ranking, is based... It's not like a beauty contest. It's based on the number of functionalities actually offered on the mobile platforms, including being able to pay bills from a brokerage account, being able to deposit checks into your brokerage account by taking a picture using the app, and of course stock, bonds, mutual funds and ETF trading.

Ryan Ermey: So investors don't have to pay a management fee to be in one of Schwab's 36 different portfolios, and expense ratios on those portfolios range as low as 0.08%. Fidelity scores highly on this category as well because of the low barrier to entry. You only need $10 to open a Fidelity Go account. That's the name of their robo advisory, and they have a .35% management fee that includes expense ratios on the underlying funds.

Ryan Ermey: You know it was really an all around performance from E*Trade. Of the seven categories, six different brokerages took first place, and E*Trade didn't take first place in any of them, but it scores highly across the board, is what this ranking is ultimately about. There's all kinds of different investors with all sorts of different needs. Ranking brokers like this is a way to try to home in on the ones that offer the most things to the most kind of investors.

Ryan Ermey: So in E*Trade's case, they scored really highly for user experience. Me and the other investing writers all test drove the websites and the apps. We thought that E*Trade's platform was simple and intuitive and powerful. They have a robust list of high quality, low cost investment options, and their robo advisory... As well as their quote-unquote hybrid robo advisory, which involves an algorithm driven investment plan that is then overseen by a real life advisor who you can interact with, it's a really good option at E*Trade as well.

Sandy Block: So, Ryan, my last question, one thing that really strikes me about your findings is that unlike not all that long ago it's really possible for somebody with not a lot of money to open one of these accounts, they're so low and the costs are low. So if you wanted to just dip your toe in the water and learn about investing there are... You know, this is a great guide on how to do it. So let's say you are a beginner. What is your best option for a beginning investor?

Ryan Ermey: There are a lot of brokerages that offer a lot of good investor education. TD Ameritrade comes in highly on that one, but my favorite one for beginners is Merrill Edge, because they really... So first of all they are a top user experience brokerage. Everything about their platform is really easy to use, because in talking to them they really wanted to gear their platform to educating all different kinds of investors and really holding their hands and walking them down the path.

Ryan Ermey: This is really plain when you look at their various... They call them story modes. So like if you're researching a stock on one of Merrill Edge's platforms, you can enter the stock story mode and it will ask you all of these very sort of basic questions rhetorically about a stock. What kind of business is this? What do analysts think of it? And in each case... And this is true of finding investments, but also there's a portfolio story, so they'll analyze your portfolio and ask, you know, what sort of questions should you be asking yourself about your own investing picture.

Sandy Block: Right. What I'd like to revisit is the Equifax settlement which we talked about a couple of weeks ago with our colleague, Lisa Gerstner. You may recall that Equifax offered a $700 million settlement to people who were affected by the massive data breach a couple of years ago. We did the math on this in our October issue. You may have read that Equifax offered $125 to people who set up credit monitoring.

Sandy Block: To put that even more in context, in the first week that the settlement was announced more than 4.5 million people visited the official settlement website, so you're probably not going to get $125 or even $25 out of this. You may be eligible, and we explained this in our October story, for some reimbursement if you were affected, if you spent money protecting yourself, and we lay that out.

Sandy Block: The other thing I wanted to update listeners on is to be very wary of scams. When you get a settlement of this size people come out of the woodwork, and the FTC has warned people about lookalike websites that say that they will give you the $125. Things to watch out for is you should never have to pay to file a claim. I guess some of these people are telling people if you give me some money, we'll give you the $125.

Ryan Ermey: Yeah. The advice here is... When we talked to our friend Pam Capalad at Brunch & Budget, budgeting is something that we cover all the time, but... In the magazine anyway, and we've done a little bit on the podcast, but it's about creating a budget that you can stick to, building an emergency fund in case you come up against it, and not putting yourself in a position where you need an advance on your paycheck, whether Earnin is on the up-and-up or not.

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Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.