If readers of TheStreet.com ranked online brokers the way baseball scouts ranked prospects, the firms would spend another year in the minors.
It's not that brokers don't understand the game or have some great skills. And it's not that they haven't improved over the past season. It's that they have holes in their games, some bigger than others. One can field, but can't lay down a bunt. Another can hit them out of the park but can't hit the cutoff man.
Online Broker Survey 2000
In Today's Package | | | |
In other words, the talent is still pretty uneven. Two brokers that have similar overall scores --
Charles Schwab (SCH Quote) and
DLJdirect(DIR Quote), a unit of
Donaldson Lufkin & Jenrette (DLJ Quote), for example -- rate differently on particular components of their service. Investors should pick their brokers depending on what's important to them, rather than flock to those with the highest score.
We've taken a closer look at nine features that respondents say are most important. As the two most important features,
reliability and
real-time quotes are treated separately. This piece examines the first four of the remaining seven: fast order confirmation; easy account administration and portfolio tracking; customer service; and best execution price. In a separate
piece, we review ratings of brokers on complex trades, low commissions and real-time market and company news.
Throughout, we discuss performance by both our League A brokers, the ones who received more than 650 votes each, and our League B brokers, who received plenty of votes, between 72 and 312, though the results from this pool don't have quite the same heft as League A. (For more on our methodology, see our separate
story.)
Fast Order Confirmation
There's little that bugs a trader more than not know if an order has been filled. It can mean the difference between a loss and a gain, a great buy or a waste of time. What if for some technical glitch the order didn't go through?
"Timely confirmations are crucial," said one unhappy respondent. "I don't know when and if I have been filled."
As it did in the last survey in late 1998, League A leader
Datek did the best job keeping its customers happy. Its score on confirmations was a firm "good." With an execution guarantee of one minute for market orders, confirmations are prompt. "That's all part of the trade itself," said Datek spokesman Michael Dunn. "Getting the trade done as quickly as possible -- it all relates to the technology that our people have put in."
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| Broker | Score | | 1. Datek | 23.16 | | 2. Fidelity | 22.11 | | 3. DLJdirect | 21.42 | | 4. Schwab | 20.39 | | 5. Ameritrade | 17.30 | | 6. E*Trade | 17.11 | | 7. TD Waterhouse | 14.00 | | Scale of 0 to 30. League A brokers received more than 650 votes each. League B brokers received between 72 and 312. | |
Readers seem to agree: "Like Datek the best. ... Quick confirmations and if marketable order not executed in one minute it's free, and they do it w/o asking."
Fidelity also scored well. In the past year, it has spent considerable time and resources to monitor trade execution quality and reporting, said spokesman Jim Griffin. It has worked closely with internal and external partners, including the ECN
Redibook, which Fidelity invested in to make improvements.
Spear Leeds & Kellogg and
Charles Schwab (SCH Quote) are also investors.
League B's leader,
Dreyfus, scored firmly in the "good" range, too. It has worked to make its execution time and reporting to customers as competitive as possible, said Jeffrey Nachman, chief executive officer of
Dreyfus Brokerage Services, a unit of Dreyfus. And a relatively low level of technology problems -- judging by Dreyfus' survey-topping
reliability score -- also promotes timely order confirmations.
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| Broker | Score | | 1. Dreyfus | 21.54 | | 2. Brown & Co. | 18.74 | | 3. Merrill Lynch | 18.30 | | 4. Vanguard | 18.13 | | 5. ScoTTrade | 18.11 | | 6. NDB | 17.38 | | 7. MSDW | 16.57 | | 8. Quick & Reilly | 14.10 | | 9. AmEx | 13.19 | | 10. Suretrade | 13.06 | | Scale of 0 to 30. League A brokers received more than 650 votes each. League B brokers received between 72 and 312. | |
Down at the bottom,
TD Waterhouse (TWE Quote) ranked well below its peers and worse in comparison to our late 1998 survey. "Slow confirmation of trades," wrote
Jo Foulk,"and trades that I thought I had canceled will show up as a buy later in the day."
The broker contended it is working with its partners to speed up routing order information back to customers. "To the best of my knowledge, today that does not exist as a problem," said John Chatal, executive vice president of
TD Waterhouse Group.
The League B bottom-dweller is
Suretrade, a unit of
FleetBoston (FBF Quote), ranking just above "average." The broker continues to struggle with growing trading volume, and order backlogs sometimes occur, said a spokesman. But he maintains he isn't aware of a particular problem with confirmations.
Our readers certainly are. "Don't place a market order," one reader said. "It takes them up to 15 minutes to get a confirmation." Said another reader who transferred his account: "Extremely delayed reports of executions."
American Express (AXP Quote), which launched online trading in November, scored almost as low as Suretrade, and recognizes confirmations are an issue. "We've been having growing pains," said Amex spokesman David Kanihan. "We're taking it very seriously and working hard to correct that." The broker said it is adding more capacity and more people to deal with the volume.
Easy Account Administration and Portfolio Tracking
The secret to happy brokerage customers may well be erasing unnecessary hassles. There's nothing like easy account administration and top-notch portfolio tracking to smooth things over. Many brokers received scores in the "good" range. Schwab and Datek of League A are brokers that readers say really deliver.
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| Broker | Score | | 1. Schwab | 22.64 | | 2. Datek | 22.49 | | 3. DLJ direct | 21.36 | | 4. Fidelity | 21.26 | | 5. E*Trade | 19.98 | | 6. Ameritrade | 15.94 | | 7. TD Waterhouse | 15.80 | | Scale of 0 to 30. League A brokers received more than 650 votes each. League B brokers received between 72 and 312. | |
Schwab's services include online account transfers, portfolio tracking with links to charts and news and an asset-allocation tool kit that lets customers compare their portfolios with sample allocation models. Datek's longtime secret is a portfolio tracker that updates automatically in real time. The same goes for League B's Dreyfus, which has enjoyed lots of positive feedback on that feature from customers.
"Love my one E-Dreyfus account," wrote one reader. "Web site very fast and most information needed on one page. Real-time portfolio updates." Added a Datek customer: "Datek real-time portfolio updates are awesome."
Again bringing up the League A rear was TD Waterhouse. "The worst thing about TD Waterhouse is the lack of real-time portfolio updates," wrote
Daniel Ralls. "I have to wait until tomorrow before I can see the value of my account."
The broker said it's bringing out what it considers a vastly improved portfolio tracker in several weeks, although it declines to give details.
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| Broker | Score | | 1. Dreyfus | 21.41 | | 2. Merrill Lynch | 20.80 | | 3. MSDW | 20.42 | | 4. NDB | 20.09 | | 5. Vanguard | 19.20 | | 6. ScoTTrade | 19.17 | | 7. Brown & Co. | 18.58 | | 8. AmEx | 16.39 | | 9. Quick & Reilly | 15.10 | | 10. Suretrade | 13.68 | | Scale of 0 to 30. League A brokers received more than 650 votes each. League B brokers received between 72 and 312. | |
League B broker
Quick & Reilly joins its sibling Suretrade (both are owned by FleetBoston) on the bottom. "I find it hard to believe that anyone would stay with Suretrade," said a survey respondent who recently switched his account. It "does not give you an updated balance and portfolio after each trade (get out your own calculator until the end of the trading day) ..."
The problem with these two brokers is that their portfolio trackers don't update until the end of the trading day and orders have to be added by hand. But the two brokers say they are making improvements. Soon, the portfolios will update on a 20-minute delay and sales and purchases will be registered automatically, they say.
Customer Service
Judging by the more than 2,000 reader comments received in the survey, there is no more sore point in this industry right now than customer service. The days of "Internet brokerage means less service" are over. When something goes wrong or when questions pop up, investors expect help, quickly. While some firms rate highly, many brokers don't deliver, even after years of customer complaints. Only four received an average score of "good."
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| Broker | Score | | 1. Fidelity | 22.98 | | 2. Schwab | 22.76 | | 3. Ameritrade | 17.47 | | 4. Datek | 17.18 | | 5. DLJdirect | 17.13 | | 6. E*Trade | 14.18 | | 7. TD Waterhouse | 13.56 | | Scale of 0 to 30. League A brokers received more than 650 votes each. League B brokers received between 72 and 312. | |
As in
TSC's previous broker survey, Fidelity and Schwab of League A led the way. Fidelity has broker reps available around the clock as well as 77 investor centers, and last summer, it introduced natural language capabilities to its phone service.
"Whatever aggravation I've suffered using Fidelity Investments for online trading, the comfort I have in knowing they're completely professional and safe overshadows 100 to one any inconvenience I might have experienced," said one respondent.
Schwab also earned some raves for its service, like this one: "The Schwab customer service is helpful, PLEASANT and dedicated to facilitating my trades." Like Fidelity, Schwab offers staffed phone lines 24/7 and more than 300 branches. It also has priority phone service for select clients and consultations with investment specialists.
It's no surprise that League B's
Merrill Lynch (MER Quote) brought in strong customer-service reviews in its first survey. As a full-service broker, Merrill said customer focus is one of the principles behind its business.
And a note on Datek -- while middle of the pack on service, readers hate its email customer-service system. "The email customer support offered by Datek is rarely helpful to anyone but the novice user," said
Andrew Becker. "They may be 'award-winning' in someone else's book, but not mine."
Datek admitted it didn't ramp up staffing in that area as quickly as it should have, but said it has the main problem solved. Most times of the day, emails are answered in less than two hours, although that can creep up to four. Its goal is to get all response times under two hours.
Even customers who like TD Waterhouse dislike its service: "The only problem I have had with Waterhouse is that some customer-service people are rude," said
Lori Garris. "Everything else has been good so far." Said
Jigar Patel: "I dread calling the customer-service number at Waterhouse because my hold times have averaged 15-20 minutes."
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| Broker | Score | | 1. Merrill Lynch | 22.32 | | 2. Vanguard | 21.73 | | 3. ScoTTrade | 19.39 | | 4. MSDW | 18.91 | | 5. Dreyfus | 18.85 | | 6. Brown & Co. | 18.46 | | 7. Quick & Reilly | 17.10 | | 8. AmEx | 16.39 | | 9. NDB | 15.79 | | 10. Suretrade | 13.32 | | Scale of 0 to 30. League A brokers received more than 650 votes each. League B brokers received between 72 and 312. | |
"We've done a lot and we're doing more," said Chatal. For example, it added 300 seats in its call center in San Diego, is in the process of staffing a 700-seat call center in Chicago and is adding an 800-seat center in New Jersey this summer. Service reps will increase by one-third by the end of the summer, and technology will be put in place so it can better handle call volume.
Suretrade of League B is in the basement for the second survey in a row. And while it trumpets its
