7 Top Online Brokerages: Kiplinger

Kiplinger ranks firms based on commissions, investments, tools, research, ease of use, mobile access and advisory services

Who is the best online broker? Kiplinger’s Personal Finance has released its rankings of the Best Online Brokers of 2017.

The magazine surveyed seven major firms that offer online trading of stocks, exchange-traded funds, mutual funds and individual bonds, along with providing retirement planning tools and advisory services.

Daren Fonda, associate editor of Kiplinger's Personal Finance, explained how Kiplinger chose these seven firms: Some are “obvious choices because they’re so large and well-known,” some firms declined requests to participate, and other firms were excluded that focused primarily on active day traders.

From there, Kiplinger ranks the firms on seven categories: commissions, investment choices, tools, research, ease of use, mobile access and advisory services.

“In the areas of commission, it’s become extremely competitive,” Fonda told ThinkAdvisor. “With Schwab lowering its prices earlier this year and Fidelity then lowering its prices to undercut Schwab and then Schwab lowering its prices again to match Fidelity’s ... you’ve had a little bit of a price war breakout in the area of commissions.”

(Related: Ric Edelman: Free Trading Will Crush Commissioned Brokers)

In other categories, Fonda said there are bigger differences. For example, he said, Kiplinger really likes Merrill Edge for its breadth of research.

“Clients of Merrill have access to all of the firm’s stock research, which is pretty extensive and covers hundreds of big-name stocks along with smaller companies and MLPs and REITs and things like that,” he explained.

Other brokers, like E-Trade and TD Ameritrade, also fare well because they offer third-party research from firms like Credit Suisse and CFRA. However, Fidelity does not rank well in the research area.

“[Fidelity] provides very little stock research and bond research. Most of what they provide is technical analysis, which is of limited use in our opinion,” Fonda said. “That’s a key differentiator in that area.”

Here are the seven firms and how they rank, according to Kiplinger:

Ally

7. Ally

  • Minimum to open an account: $0
  • Stock commissions: $4.95
  • Total commissions score: 3.5 stars
  • Breadth of investment choices: 2 stars
  • Tools: 2.5 stars
  • Research: 2.5 stars
  • Ease of use: 2.5 stars
  • Mobile access: 2.5 stars
  • Advisory services: 2 stars

Overall score: 2.5 stars

Ally Financial, which got its start as an online-only bank, bought the TradeKing platform in 2016.

The brightest spot in Ally’s rankings is its commissions, according to Kiplinger.

“Ally’s base rate of $4.95 lands it on the leader board for stock trades, and the firm trims that rate to $3.95 for clients who make at least 30 trades a quarter,” according to Kiplinger. “Ally also charges a relatively low $9.95 to buy or sell mutual funds.”

However, Kiplinger notes that Ally doesn’t offer any no-transaction-fee mutual funds or ETFs, which it says is “a big drawback that could cost you quite a bit in fees if you buy and sell a lot of funds.”

Vanguard sign (Photo: AP)

6. Vanguard

  • Minimum to open an account: $0
  • Stock commissions: $7
  • Total commissions score: 2 stars
  • Breadth of investment choices: 3.5 stars
  • Tools: 3 stars
  • Research: 2 stars
  • Ease of use: 3 stars
  • Mobile access: 2 stars
  • Advisory services: 4.5 stars

Overall score: 3 stars

“There’s a lot to love about Vanguard’s fund offerings and low-cost approach to investing, but it’s harder to say good things about its usefulness as an online broker, particularly if you lean to trading stocks,” Kiplinger states.

Kiplinger cites pricey commissions and fees, and tools that aren’t user-friendly, as areas where Vanguard fails. However, Kiplinger notes that customers can “load up” on all Vanguard mutual funds and ETFs without having to pay sales charges.

Vanguard does rank high in its advisory services. According to Kiplinger, “if you’d like some guidance with your investments, Vanguard is eager to help.”

Kiplinger also ranks Vanguard as the best online broker for retirees.

TD Ameritrade CEO Tim Hockey

5. TD Ameritrade

  • Minimum to open an account: $0
  • Stock commissions: $6.95
  • Total commissions score: 2.5 stars
  • Breadth of investment choices: 4.5 stars
  • Tools: 3.5 stars
  • Research: 4 stars
  • Ease of use: 3.5 stars
  • Mobile access: 3 stars
  • Advisory services: 3.5 stars

Overall score: 3.5 stars

According to Kiplinger, TD Ameritrade ranked high for its research offerings and ample lineup of no-transaction-fee mutual funds and ETFs, many of which can be purchased without trading commissions.

“Customers can find plenty of investing ideas, thanks to access to Credit Suisse’s U.S. stock ‘focus list,’” Kiplinger says.

E-Trade office in San Francisco (Photo: AP)

4. E-Trade

  • Minimum to open an account: $500
  • Stock commissions: $6.95
  • Total commissions score: 3 stars
  • Breadth of investment choices: 4 stars
  • Tools: 3.5 stars
  • Research: 4 stars
  • Ease of use: 3.5 stars
  • Mobile access: 4 stars
  • Advisory services: 3 stars

Overall score: 3.5 stars

While all brokers that Kiplinger surveyed let customers trade stocks and deposit checks from their mobile devices, it determined E-Trade was the best online broker for “investors on the go.”

“Packed with handy features, E-Trade’s app lets you buy or sell stocks, mutual funds and options, as well as run screens, deposit checks and pay bills,” according to Kiplinger. “Stock research is also available, something most brokers exclude from their apps.”

E-Trade also scores high for its substantial roster of no-fee funds, according to Kiplinger.

Charles Schwab branch (Photo: AP)

3. Charles Schwab

  • Minimum to open an account: $0
  • Stock commissions: $4.95
  • Total commissions score: 4 stars
  • Breadth of investment choices: 5 stars
  • Tools: 4 stars
  • Research: 4.5 stars
  • Ease of use: 4 stars
  • Mobile access: 3.5 stars
  • Advisory services: 4 stars

Overall score: 4 stars

Charles Schwab came in third with its overall score, but it posted the highest score available for its investment choices. It’s also Kiplinger’s pick for those whose primary interest is investing in mutual funds and ETFs.

“Offering 3,976 funds with no loads, no transaction fees and investment minimums of less than $50,000, Schwab edges the competition,” Kiplinger says.

The firm offers the most commission-free exchange-traded funds as well, with 231, according to Kiplinger.

“Many of these ETFs have wafer-thin expense ratios, enabling investors to build a low-cost portfolio without paying a penny in trading commissions,” Kiplinger says.

Fidelity (Photo: AP)

1. (Tie) Fidelity

  • Minimum to open an account: $2,500
  • Stock commissions: $4.95
  • Total commissions score: 4.5 stars
  • Breadth of investment choices: 4.5 stars
  • Tools: 4.5 stars Research: 3.5 stars
  • Ease of use: 4.5 stars
  • Mobile access: 4 stars
  • Advisory services: 4 stars

Overall score: 4.5 stars

What put Fidelity at the top of Kiplinger’s rankings was not just the lowest overall commissions, but strong scores in all categories.

“If you like to use your brokerage more like a bank, Fidelity also shines as the best for managing cash,” Kiplinger said.

According to Kiplinger, customers can easily pay bills and see a complete picture of their financial life on Fidelity’s site, including mortgages and balances in non-Fidelity accounts. 

Bank of America Merrill Lynch (Photo: AP)

1. (Tie) Merrill Edge

  • Minimum to open an account: $0
  • Stock commissions: $6.95
  • Total commissions score: 4 stars
  • Breadth of investment choices: 3 stars
  • Tools: 5 stars
  • Research: 5 stars
  • Ease of use: 4 stars
  • Mobile access: 4.5 stars
  • Advisory services: 3.5 stars

Overall score: 4.5 stars

Merrill Edge tied for first place and did as well as Fidelity this year in overall scoring.

According to Kiplinger, Merrill’s standout qualities are its research and tools.

“Investors can see details on more than 1,300 companies covered by Bank of America Merrill Lynch analysts,” according to Kiplinger. “And along with top-notch screeners for funds and stocks, Merrill provides Morningstar’s powerful Portfolio X-Ray, a tool that can dig into your fund holdings and individual stocks and, among other things, analyze areas of overlap and market factors affecting your returns.”

Kiplinger also determined Merrill Edge was its favorite broker for active stock traders. Investors can qualify for 30 free trades per month by having at least $50,000 in combined balances at Merrill and parent Bank of America — and 100 free trades per month for a $100,000 balance.

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