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Andrew Greta and Amy Olmstead's Yahoo! Chat Transcript

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TSC's Andrew Greta and Amy Olmstead chatted on Nov. 17 about online brokers on Yahoo. The transcript follows.

TSCEllen

: Hello and welcome to today's Online Broker chat with Amy Olmstead and Andy Greta of TheStreet.com!

Andrew_TSC

: Greetings all! I'm chatting from my perch here on the Purdue campus. Let's rock & roll.

TSC_Amy

: Hi, I cover online brokers for TheStreet.com...

Andrew_TSC

: I'm a Contributing Editor for TheStreet.com, and 2nd year MBA student to boot

TSCEllen

: Thanks for being here with us! Could you give us a brief background into TSC's Online Broker Survey?

TSC_Amy

: It's a huge beat and one reason we did the Online Brokers Survey was to figure out what traders were interested in.

Andrew_TSC

: Go Boilers!

TSC_Amy

: We did the first survey last spring, six months after the brokers performed so poorly in October 1997. We wanted to figure out if the brokers had gotten any better and which ones were the best.

Andrew_TSC

: The idea is to get a real-world look at the online brokerage industry from the folks who matter most, you the readers

TSC_Amy

: In the spring, the brokers still had a lot of improving to do... and they talked a lot about imrpovements they were making over the summer... so this fall we figured we'd better do another survey to see if customers had actually noticed any improvement.

Andrew_TSC

: Overall, the results gave a stunning insight into the shape of the industry and suggested some things to look for as an online investor Technical problems with the questions folks, bear with us.

TSC_Amy

: The survey showed us that the brokers, overall, actually did improve.

saini9

: which online brokage co.has best record for fastest executions of orders

TSC_Amy

: Datek scored best in executions...

Andrew_TSC

: Ameritrade brought up the rear

TSC_Amy

: and remember, fast exeuctions aren;'t always the best, but speed is important

karenwhi

: would you invest in any of the online brokerage's stock offerings?

TSC_Amy

: We at TSC can't invest in stocks but Schwab's stock has performed really well this yeat

Andrew_TSC

: There's no doubt that the medium will dominate the field in years to come

saini9

: which online brokage company has the least break downs of the system. Which company has the best service and is cheapest

TSC_Amy

: DLJdirect got the best score for reliability... but all the brokers still have problems

Andrew_TSC

: Brown & Co. got the best score for commissions

TSC_Amy

: Fidelity also did well and for small brokers, which didn't gets tons of responses, Brown & Co did very well on reliability too

Andrew_TSC

: Schwab brought up the rear and earned a "stinker" award

TSC_Amy

: As for customer service... Fidelity came out on top in customer service Schwab and Waterhouse did well on customer service too --those traditional discount brokers seem to have an edge!!

Andrew_TSC

: with Brown & co's $5 trades, it's hard to beat, but they're restrictive on the types of clients they accept

janestj

: why are fees negotiable

TSC_Amy

: If you're talking about commissions... some firms offer cheaper commissions for active or high networth traders and of course, online trades are cheaper at firms that offer trading in person or trading on the phone

Andrew_TSC

: Bigger traders with more activity tend to get better deals

streethost

: This is a TSC editor. What was the most surprising result of the survey?

Andrew_TSC

: Overall, ratings really improved since last time

TSC_Amy

: For me, it was that about third of the respondents trade options, about the same amount that trade funds. But also, I thought it was surprising that about 27% use full service brokers as well as online brokers

Andrew_TSC

: Also the fact that commissions are less important than both reliability and execution.

TSC_Amy

: And since we didn't look at smaller brokers last time because we didn't have enough responses so Brown's strong perforamnce in several categories was surprise.

chadrock22

: Which online brokerage is the best for small investors who want to make large amounts of trades each day? At least from a commissions paid perspective?

Andrew_TSC

: Small traders usually want low commissions with minimal frills

TSC_Amy

: Small investors -- those whose av. trade was under $5000 -- favoured Waterhouse and E*Trade But the day traders liked Datek.

karenwhi

: So give us your picks for best online broker(s)...with the reason you'd pick them, please!

Andrew_TSC

: We didn't pick the winner, readers did They scored brokers in different categories Datek came out the overall winner but they did have some shortfalls in specific areas

katiegreatie

: are online brokers a good idea for new investors?

TSC_Amy

: sure some online brokers offer lots of educational material on the site but newer investors might want to pick a broker with a strong repuation for customer service

Andrew_TSC

: Be careful though, sometimes it pays to hire an actual person to review your decisions

TSC_Amy

: there's nothing like a helpful person on the phone when you don't know what to do

Fibinger

: Which broker, if any, enables trading online with credit cards?

Andrew_TSC

: None that we know of sort of an SEC thing there probably

Statto1

: what is your feeling about on-line forex brokers?

TSC_Amy

: we haven't looked at the foreign exchange brokers although there are some out there that focus on forex but it would be a good idea to look at in the future

laik

: You mentioned in the May articles that "TSC will be putting the top firms to the true test" on execution price, has it been done yet?

Andrew_TSC

: We'e had some delays Still intending to do that shortly noone has ever done it before, so stay tuned

saini9

: what were the overall rating for Brown co.

TSC_Amy

: we didn't give them an overall score because they had a very small sample size compared to, say, Schwab But we did look at how they did in specific categories

Andrew_TSC

: nevertheless They scored a "bull award" on commissions They really stank on research and tools & news

TSC_Amy

: they did well on reliability, exeuctions and confirmations

jim1147

: Who is best for option trading?

TSC_Amy

: Brown did best on options trading, but of the big brokers, Discover did best Datek did worst, because it doesn't offer options trading

Andrew_TSC

: But nobody scored very high. still room to improve

Fibinger

: Is trading online safe?

TSC_Amy

: Safe from a security perspective?

Andrew_TSC

: I haven't heard any problems of accounts getting hacked

TSC_Amy

: The big brokers take special pains to ensure security

Andrew_TSC

: firms losing your money is another story

TSC_Amy

: and secure technology is getting better all the time

newfie_pup

: How can an investor get their concerns heard by these firms?

Andrew_TSC

: Written complaints usually work well the SEC requires they respond and keep complaints in a file for audit

TSC_Amy

: but ultimately, if you're frustrated with the service you should find another broker

janestj

: what kind of rating did Quick & Reilly get

TSC_Amy

: Quick & Reilly didn't get enough resopnses to give an accurate rating...

CALIANDRE

: Who is the best for Mutual Funds???

TSC_Amy

: Fidelity, not surprisingly, did best Brown & company did worst Schwab and Waterhouse also did well

Andrew_TSC

: Brown & Co. failed the test

STG_42

: Where due you see the market ending the year (9,000 or higher)?

Andrew_TSC

: Yep!

newfie_pup

: What is your favorite Ben & Jerry's Ice Cream?

Andrew_TSC

: Cherry Garcia hands down!!

TSC_Amy

: I'm still a fan of cookies and cream

saini9

: for a heavy trader which co. do you recommend

TSC_Amy

: The day traders in our survey prefer datek

Andrew_TSC

: they seem to have a winning combination of commissions, confirms, & executions

TSC_Amy

: but active traders are demanding, and they can be frustrated by Datek's problems around the open

Andrew_TSC

: reliability is still an issue

chadrock22

: Andrew, why are you getting your MBA with this investor background already?

Andrew_TSC

: I'm into world domination

TSC_Amy

: Writing for TSC is the first step

karenwhi

: In what areas does Datek need improvement?

TSC_Amy

: Reliabilty, customer service, options, , phone orders are some categories that it didn't do well in

Fibinger

: Can I trade online in US from Europe?

Andrew_TSC

: If you have an account open with US dollars, you shuold be able to

TSC_Amy

: lots of brokers have customers abroad

Andrew_TSC

: depends on which country you're a citizen of though

TSC_Amy

: Schwab also has international services

Andrew_TSC

: I don't think Cubans are particularly welcome

janestj

: Who beside Etrade do you recommend for small investors

TSC_Amy

: Small traders also liked Waterhouse and Schwab... but the trade off seems to be between low commissions and good customer service if you get in a jam

KMA2080gpb

: Where is Jim?

TSC_Amy

: no where around here, thankfully

Andrew_TSC

: abusing his traders I'm sure

TSC_Amy

: :)

saini9

: which co. has the simplified statements easy to understand .

TSC_Amy

: I don't know, but Datek and Schwab scored best on account administration and portfolio tracking readers say to avoid ameritrade if you want top notch account administration, judging by the firm's score in that category

finman5

: How can Datek be so good it it needs all of those corrections?

Andrew_TSC

: Because all the other brokers need even more help Datek seems to do well in areas clients care most about

TSC_Amy

: And because we weighted the overall rankings to favour issues that were most important to respondents so if you are really into mutual funds, for example, datek might not be your top choice

janestj

: I find when I question fees I am always offered a discount - why

Andrew_TSC

: you must be one valuable client :)

TSC_Amy

: start demanding free trades! TSCEllen: Hey guys, can you explain the bulls and stinker awards? we gave stinker awards for companies that did far away better or worse than their competitors I mean, stinkers for poor performance, bulls for top performance

Andrew_TSC

: Stinkers: Schab for commissions, Ameritrade for reliability, Suretrade for customer service Bulls: Brown & Co commissions, Ease of use to DLJ Datek in Account Administration

saini9

: Which company has the maximum number of accounts?

TSC_Amy

: Sometimes, a firm came in at the bottom of a category, but their score wasn't that bad, like Fido's score of 4.0 for ease of use

Andrew_TSC

: Scwab is by far the biggest has about 1/3 of market in transactions e-trade rings in at 11% Fido does about 10%

janestj

: what is TSC Address so I can send for schoolhouse info

Andrew_TSC

:

www.thestreet.com, click on tools, then schoolhouse

TSC_Amy

TheStreet Recommends

: I don't know what we send out, but there's plenty on the site

koolgirl_98_98

: how old are you

Andrew_TSC

: 29

TSC_Amy

: I'm 25, going on 40

Andrew_TSC

: How old is Koolgirl???

janestj

: how did waterhouse do

TSC_Amy

: Waterhouse did well in commissions, order confirmation and customer service

Andrew_TSC

: Waterhouse scored in the 3rd tier overall with a score of 3.9 out of 5

TSC_Amy

: but it didn't do so well in reliability and options trading

TSCEllen

: What Online Brokers were most improved from the last survey you did?

Andrew_TSC

: They all improved somewhat

TSC_Amy

: Etrade was voted most impoved by its customers which is no surprise considering its brand new site and tech platform

Andrew_TSC

: The big surprise was Discover falling off in the rankings from 2nd to 4

TSC_Amy

: DLJdirect seemed to improve the least, but it scored well in the spring so maybe it didn't have as far to go Schwab also improved, according to respondents

Dolphina001

: What is the best investment for a 24 year old like myself for "savings" money?

Andrew_TSC

: Long term, go with a dollar cost averaged mutual fund just remember that they shoudl be long term funds if you' re looking to buy a house or something in a few years, keep it in cash also chaek out your employers 401k plan

TSC_Amy

: It's good to hear you're starting early!

janestj

: what do you mean by reliability

TSC_Amy

: Reliability is whether you can access the site or your account info when you want to in other words, if the site is down or the broker has tech problems

Andrew_TSC

: do trades go through? that sort of thing

TSC_Amy

: and you can't trade, that's a relability problem while brokers offer phone trading too that can take longer and most people want to trade online when they want not surprisingly

bassclef1

: can i avoid a capital gain on a stock sale?

Andrew_TSC

: Yes, never sell it!

TSCEllen

: What is your favorite online broker ad? Mine is for "My Discount Broker."

Andrew_TSC

: That one sucks!

TSC_Amy

: I have to say the Discover one with the guy in the two truck that should be tow truck

Andrew_TSC

: Me too.

TSC_Amy

: but they all seem to promise lots of riches

Andrew_TSC

: ironically they really tanked in preformance rankings

TSC_Amy

: flashy ad doesn't mean good broker, though

liquidity101

: What do you think about index funds. Is systematic risk the best way?

TSC_Amy

: Andy, you're so multitalented!

Andrew_TSC

: I like index funds for low cost, simple investing just remember that the amount you save has more to do with your overall wealth accumulation

TSC_Amy

: The funds reporters at TSC wrote about index versus actively managed funds last week, if you want to check it out.

Andrew_TSC

: than tiny performance differences

janestj

: how many participated in your survey?

TSC_Amy

: 3,379 people responded, which is a great turnout!

Andrew_TSC

: our biggest haul ever.

TSC_Amy

: plenty to make the results statistically significant

Dolphina001

: I recently left a company I worked for for a little over 2 1/2 years.....I'm now working for a new company......what should I do with my 401K from my previous company? IRA? And what should I invest in?? (I'm 24......)

Andrew_TSC

: several options. I'd say roll into an IRA account you get control over the assets, and preserve the tax benefits. just don't withdraw the money or you'll get a huge tax bite

TSCEllen

: Please note that the information provided in this chat should not be construed as investment advice or recommendations.

Andrew_TSC

: But I AM a former licensed broker

HoneyBabes1998

: Could you explain alittle about Brokers Survey for me? I would like to know basically what it is

TSC_Amy

: We polled our readers about what they looked for in a broker and how their brokers were doing

Andrew_TSC

: They told us what was important to them in choosing a broker then told us which firms are stacking up

TSC_Amy

: from that, we could figure how which brokers were doing best

pjludwig

: are the streaming quotes we get on DATEK online level II quotes?

Andrew_TSC

: I don't think so. Level II is the inside market you'll see which firms have outstanding bids and asks at what prices/

TSC_Amy

: brokers are constantly pushing their quote technology so be sure to ask your broker what they may offer in the next few months

Andrew_TSC

: Real-time is another story

TSC_Amy

: streaming real time Level II would be the ultimate

TSCEllen

: Do different types of traders favor different brokers? Is it consistent?

TSC_Amy

: Datek is still testing its real time streaming quotes service

Andrew_TSC

: Yes,

TSC_Amy

: overall, schwab was the most used

Andrew_TSC

: day traders have a different set of criteria than say the long term investor

TSC_Amy

: active investors and long term investors went with schwab mostly while day traders liked datek

Jwales_Finance

: Do the two of you think that the new economic policy announced by Japan yesterday will revive their economy or will they continue to crash and burn?

TSC_Amy

: japan has announced a lot of new plans over the past few years, no major results yet

Andrew_TSC

: Well, if they'd just read TSC, all their problems would be solved!

TSC_Amy

: yep, TSC has some japan experts

finman5

: How about trading options?

Andrew_TSC

: How 'bout it?

TSC_Amy

: Brown came out on top in options trading... of the big brokers, Discover did best not all firms (ie Datek) offer it yet but some firms specialise in options trading

TSCEllen

: Who would you say is the best value? Taking all features into account.

TSC_Amy

: value depends on what you're looking for if you're want great service and research and IPOs, then higher commissions are worth it

Andrew_TSC

: Datek had the best overall combination according to our readers

TSC_Amy

: but if you're just looking for fast and easy trading, a firm with low commissions but good exeuctions - like datek- is a good value

hitech511

: what do you think of zero caps

Andrew_TSC

: the fashion accesory of the season!

TSC_Amy

: Washington Capitals? Are they that bad?

Dolphina001

: What do you think of the recent cut of the interest rates??? What effect do you think it will have on the stockmarket?

Andrew_TSC

: The market was expecting it, so not much

TSC_Amy

: Dow bounced big after the announcement but still finished in the red

Andrew_TSC

: I think it was a good move though (and told Alan that myself)

janestj

: who did the readers pick

TSC_Amy

: The top broker emerged as Datek just like our first survey in the spring

Andrew_TSC

: Ameritrade landed at the bottom Readers told us what criteria were important

TSC_Amy

: we matched those with the brokers that readers said did best in those areas

Andrew_TSC

: Then we calculated a composite score.

TSC_Amy

: DLJdirect came in second

TSCEllen

: Why is it important to do the Online Brokers Survey? Do you ever hear from the companies involved?

Andrew_TSC

: Primarily, we do it for our readers.

TSC_Amy

: We contact all the companies as we analyse the results

Andrew_TSC

: To help them navigate the online brokerage landscape

TSC_Amy

: they're usually very interested in how they do, after they read the stories on the site

Andrew_TSC

: and to keep the companies on their toes knowing that we're ranking them and asking the tough questions

Dolphina001

: Where are you guys from?

TSC_Amy

: I'm from Fredericton, New Brunswick, Canada!!! That's about 1 hour north of Maine, for the geography impaired

Andrew_TSC

: I'm chatting from Purdue Univeristy, where I'm earning my MBA as well as working as a Contributing Editor for theStreet

TSC_Amy

: Right now, of course, I'm in New York City, just blocks from Wall Street

Andrew_TSC

: Purdue is in West Lafayette IN --- Go Boilers, Beat IU

janestj

: sorry I have to leave - most informative-next time have it after dinner hour

Andrew_TSC

: Mmmm, dinner.... Meatloaf Night!

TSC_Amy

: Make sure you check out more stories on the site this week on the survey, if you're interested

TSCEllen

: Thanks Andy and Amy for chatting with us today about Online brokers. Remember to catch the survey results on TheStreet.com.

TSC_Amy

: Thanks everybody for your great questions!

Andrew_TSC

: Thank you all for showing up! We'll have a transcript of the caht on our site if you missed anything

TSC_Amy

: I hope you enjoy the survey.

Andrew_TSC

:

www.thestreet.com

TSC_Amy

: Have a great evening everyone!

TSCEllen

: Make sure to catch TSC's Techinical analysis guru Gary B. Smith next Monday, Nov. 23 at 5 pm EST.

Andrew_TSC

: And keep on keepin on

TSC_Amy

: Feel free to email with suggestions for our next survey, if you want Ellen, you're the greatest host.

Andrew_TSC

: I'm at andrew_greta@mgmt.purdue.edu

TSC_Amy

: I'm at aolmstead@thestreet.com

Andrew_TSC

: Thanks Ellen and invisible Laura

TSC_Amy

: no spam please

TSCEllen

: If you'd like more information about TSC chat events on Yahoo!, send email to chats@thestreet.com.

TSC_Amy

: now we're just getting wacky

Andrew_TSC

: Bye

TSCEllen

: Thanks everybody for your great questions!