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The best (and worst) online stockbrokers – with Blain Reinkensmeyer

The online brokerage space may look similar from the outside.

But when you start looking under the covers, there are a lot of differences in pricing, service levels, and tools that they offer.stockbrokers.com yearly broker review

StockBrokers.com publishes an annual survey of the best and worst of the online brokers. I invited the firm’s founder, Blain Reinkensmeyer to discuss this year’s results on Tradestreaming Radio.

I hope you find it enlightening…I did.

Listen to the FULL episode


About Blain Reinkensmeyer

founder of stockbrokers.comBlain is all over online finance. He is the founder of StockTradingToGo as well as StockBrokers.com.

Read the transcript

Announcer: You’re listening to Tradestreaming Radio, with your host, Zack Miller. Expand your mind, become a better investor with tools, tips, and technology from the smartest investors on the planet.

Zack: Welcome to Tradestreaming.com. This is your host, Zack Miller. This is the place where investors come to get tools, tips, and technologies to make better, smarter investment decisions.
Today’s guest is Blain Reinkensmeyer. He runs Stock Trading To Go, but he also runs StockBrokers.com, and I invited Blain to talk about the Online Broker Review of 2012, it was a scorecarding, a benchmarking of the best and the worst of the online brokers. I wanted to know a little bit about the individual brokerages, but I also wanted to learn about some trends that he was seeing in the industry. So this is a great episode if you are in the market to get a new stockbroker, to switch stockbrokers, or just to get a feel for what is going on in the online brokerage space.
I hope you enjoy the show. You can get this episode as well as all of my archives at my website, Tradestreaming.com. We will also have a transcript of this program as well as the rest of my episodes. You can also find this program on iTunes. Feel free to sign up for my free investment newsletter. I use that newsletter as a weekly tool to help bubble up what you need to know to help make better, smarter investment decisions. Whether it is tools, tips, or technologies, or just specific industry trends, sign up there, it is free.
I really appreciate your time and your energy. We are getting a lot of new interest in Tradestreaming, particularly in the podcasts. I really appreciate it, and hope to speak to you soon.

Blain: My name is Blain Reinkensmeyer, and I run Stock Trading To Go and StockBrokers.com.

Zack: We are going to be talking about StockBrokers.com, because you have an Online Broker Review that you just published?

Blain: Exactly.

Zack: Is that a yearly thing?

Blain: It is a yearly thing. This was our second year publishing our full review, and we covered 24 online brokers this year.

Zack: That is amazing. That is a free report you can get at Stockbrokers.com?

Blain: Correct.

Zack: Awesome. I like the way you broke it up into different categories. So commissions and fees, I see Lightspeed is ranked highest. What are you looking for there? Just the lowest commission, lowest fees across the board?

Blain: Yes. For commissions and fees, we are looking at what it costs to make, whether it be your regular stock trade or options trade, do they have miscellaneous fees? So we kind of dug in and said, hey, what is in this size eight font at the bottom of these pages? It might publish a specific rate, but is that really what I am paying for in the end when it is done? Then also, does it cost more to trade after hours, or what about penny stocks, OTCBB, all of those came in to play for commissions and fees.

Zack: Interesting. Have we seen the end of fee erosion? There was a time when – I remember when Zecco launched and they were doing this ad-supported trading and stuff like that. That seems to have gone away.

Blain: Yes, you are exactly right. There was a period of time when you saw the rise of the discount brokers – and Zecco would be a good example – saying, ‘We are going to have free trades for everyone’, and this whole movement, but what has really happened over time, and especially in the last year or two is these brokers are realizing that this is not just about cheap trading, there is the overall client experience as well, and that was one of the big themes for our review this year. So a lot of these discount brokers have raised their commission rates, even if it is a dollar or two over the last few years, but that allows them to put that extra capital into building out a good platform or offering more tools or research and increase the overall experience, because competition is very tough out there.

Zack: I can imagine. Is there somewhat of an inverse relationship…like you said, if somebody is really cut-throat on fees…so interactive brokers – I don’t want to besmirch them in particular – but they have a reputation for really great technology, really fast trading, really cheap, but not necessarily the greatest if you have any issues with your account. Is there an inverse relationship between fees and customer service?

Blain: There is and there isn’t, actually. When you talk about a broker like Interactive Brokers or even their competitors, whether it be TradeStation or Lightspeed, they are more or less in the active trader niche. So when it comes to customer support, actually we found that with these brokers, it is so competitive for quality, active trading clients, or heck, even institutional clients, that customer support is always spot on. But there are some of these brokers, like Interactive Brokers, you have to really dig in and see how much it really costs because they have a great discounted structure where you get $1 per trade, that is fairly common on a per share basis. However, for the average investor, you really need to spend $30 in commissions per month to negate. They have a $10 fee for real- time quotes, so there are two fees of that nature. So it’s like, hey, you have to spend $30 on commissions or you’re going to end up paying up to $20. That comes into play with these heavily discounted brokers, and that is something that we look for. If you have a straight-forward, flat-fee structure, then that is easy for the client to interpret, it is easy for them to look at and know what they are paying for and what they get, and we gave a higher score to those brokers because of that. It is all about transparency, right?

Zack: That is awesome. One name that is conspicuously missing from the best- in-class in terms of commissions and fees is a company that I remember using almost 20 years ago now, ShareBuilder, which was the easiest way for somebody to get involved. If they had $50 a month, you could take it off your credit card and put it in directly and start buying fractional shares of ETFs and stuff like that. It always looked cheap, it was almost like a subscription fee, but when you look under the coverage, it is not that way?

Blain: With ShareBuilder, we actually did some interviews and talked with clients to give us even a broader perspective on what they experienced themselves, and what we found with ShareBuilder was if you stick to their automatic investing plans, then you’ll get discounted trades. Their basic plan is $4 for every automated trade, which means that someone goes on and they will say, ‘Zack, I have my retirement account here and I want to buy this mutual fund, this mutual fund, Apple stock, or whatever it may be, every single month, once a month, and my deposits automatically come in, so I want this.’ Do you know what I am saying? So they can just build it for…

Zack: You’re automated.

Blain: Exactly. It truly is, literally, automated. So if you stick to just that, then it is great. But where ShareBuilder really makes their money is when someone says, ‘Wait a minute, I want to sell Apple right now!’ They have two different plans, and you have to sort through that, sift through that, and ask how you get the most discounted commissions. With ShareBuilder, it is auto- trading. Beyond that, they are just an average broker in the commissions and fees.

Zack: Okay. What about a trend towards a subscription fee towards trading? Are we seeing this anymore? I remember a few years ago there was talk about it, almost like an all-you-can-eat type fee?

Blain: Sure. We haven’t seen it. The movement we have seen has been more on the per trade, flat-fee structure. A lot of that in almost all of the big brokers utilize a flat-fee structure, and even down to your discounted brokers, even the active traders, they will say, ‘Hey look, it is a flat-rate and you get this direct market access.’ The trend has really been to just keep it simple, this is what it is. I think that the brokers realize too that if they say, ‘Hey, you just pay this much’ and then you get unlimited free trades, that they are going to limit themselves dramatically because they are going to get those niche clients. It is kind of like data plans, right? I think AT&T just said, ‘Even though you get unlimited data, we are going to cap it.’ They realized that there are those heavy-use people, and I’m sure that is what Zecco ran into, for example, you get these active traders that say, ‘Sweet! Free trades, I am in!’ Then the next thing that you know, Zecco can’t, or any broker, or AT&T, can’t make it. It is not a viable business model long term.

Zack: If we can move on to ease-of-use and some of the things you found there, in general, are you seeing that brokerage websites are becoming more customer friendly?

Blain: Yes, definitely. It is actually one of the most interesting and fun areas to watch develop, and we’ve only done this two years, but obviously we have been trading and utilizing brokerages beyond that. Ease-of-use we feel is very important, because whether you are an active trader, for example, and you want to go on and make a trade, how does that trade ticket work? Is it easy to use, et cetera? To the average investor that just wants to go in and check their portfolio and see a graph of how that has changed over time, some brokers are really bad at this where they will have very outdated websites and the whole kit and kaboodle, and then you have brokers who have easy navigation, it is an all-in-one trade ticket, they will have a site-wide, almost like a little bar that will float on the bottom that they can do quick quotes. Those were all things that we looked for when looking at ease-of-use, and that has been the trend.
One trend, for example, would be customizable home pages. One broker, E*Trade, they had a really cool one they call E*Trade 360.

Zack: I was just going to ask you about that. They just launched that, right?

Blain: Yes, they just launched it. When we were testing, it was in beta. You can log in, you have the drag-and-drop functionality, you can see – if you just want to look at your portfolio balances, my allocation, or do I want to look at latest news, so they allow this drag-and-drop functionality. It is really clean. It is really intuitive, so anyone can use it and find it simple. There are a handful of brokers that have added that, and some are better than others. E*Trade was one that stood out just for the simplicity of how it works. Again, it is how do we increase or enhance that client experience. Heck, if someone can log in and see their portfolio, and then there is a quote on Apple, alright, wow, it’s up another 10%, I want to get on this upward parabolic run, they can just easily place that trade, and the brokers realize that that overall experience makes a big difference in the end.

Zack: I also think that in some way, the online brokers have sort of maxed out in terms of the early adapters, the techies, the younger people, and the growth now is coming from people leaving old- school wirehouse brokers, people who are used to having full service. I think to attract those people, the websites have to become even more user-friendly. They have to be extremely powerful, but on the other hand, they can’t overwhelm. They have to give the impression that people are getting this automated, professional grade service that they are used to, but getting it through a website now. I feel like the brokers have sensed that over the past few years and have really designed their websites to become much more like consumer websites than trading websites.

Blain: I agree 110%. You are always going to have your niche brokers that specialize in one specific area, but when you are talking about the overall experience, that is what we looked for this year. We said, ‘Who is the best overall broker when you look across all categories.’ We looked at eight different categories. So all of these eight different categories, you’re spot on, Zack, there is definitely a movement and they are seeing so much value in that.
Even down to little categories, one we covered was education, the brokers that offer those articles, glossaries, some of them have quizzes, archived webinars, and what they are finding is that they look, if we can offer our clients education, if we can educate them on some of these more advanced trade types or options, that is a huge trend. If we can educate them and they are comfortable with it, then they are going to trade it and they are not going to – like Forex, the wild, wild, west – they are not going to take on this heavy margin and then blow up their accounts. Do you know what I am saying? All of these little niches come into play with building the overall broker.

Beyond education, the ties in would be we looked at platforms and tools, and there is a big movement right now and a lot of competition for an easy-to-use, streamlined, fast, efficient web- based platform, so something you can use in your browser. From the discount brokers to even your TradeKing, Zecco, OptionsHouse, to your larger well-known names like TD Ameritrade, E*Trade, Schwab, the list goes on and on, but there is a huge movement into this space. Several years ago when tradeMONSTER came out, they were known as the best of the best. They had a sweet platform. You could watch their awesome flash video that looked so cool. Now they are realizing that, whoa, wait a minute, TradeKing just came out with TradeKing LIVE last year, and Zecco just came out with their streaming platform, which they are going to continue to enhance. OptionsHouse is on OptionsHouse 2.0 now, and that is really easy to use.

Our winner this year that swept it was TD Ameritrade. They acquired thinkorswim several years ago, and thinkorswim was known for being the platform used for active traders, and I think bringing over that talent was a phenomenal move. So not only is thinkorswim -it’s desktop-based, you have to download it – but not only has that continued to evolve, but then you look at their new web-based platform, new as in the last year or two, it is called Trade Architect. Zack, when you play with this platform, it is just an unbelievable client experience. It is seamless between screens, you can watch CNBC, when you look at your real-time streaming quotes, it is not just the last price and volume, they have quote trends and how close is it to its 52 week high. It’s drag-and-drop friendly, and it is just really impressive.

There is a huge movement, and that is a big theme when we are talking about the overall client experience. But platforms and tools, it goes beyond ‘Here is your latest quote, and by the way, you have to click refresh to get a 15 minute delayed quote.’ Do you know what I am saying? That just does not cut it anymore. That is what we are actually pretty excited to see, because in the end, it benefits the consumer, it benefits us as clients, as investors, because there is always another broker out there putting a lot of money and time into building the next best thing, and so that is a hot area that we are really looking forward to seeing evolve here in 2012.

Zack: Blain, can we talk about the investor community? This is something that I have written about in my book that came out in 2010 about the social aspect of investing. It is also one that I think the hype was a lot greater than what the reality was, like most things are in life, I guess. What has happened there? You had Zecco and TradeKing, which were the next-generation of brokers that launched with communities, and that was a core part of their product. Are they still pushing that as much? Are customers looking for that type of thing? Are the bigger brokers getting in there?

Blain: That is a great question, you are spot on. Zecco and TradeKing really were the forefronters, if that is even a word, on the forefront of this trend when it kicked off.

Zack: It should be a word, actually. I am going to write it down. You heard it here first, folks.

Blain: TradeKing really launched with the community being a big part of their site, and it was the same thing for Zecco. They launched with zeroed out trades, but it was all revolved around this community of investors, so they have stayed in the game. I have seen the trend change for them, though, on whether it be raising commissions or tweaking commission rates to appeal to a wider audience. For example, TradeKing now has two structures for options trading. But on the community front, they have proven that it is successful because now you look at E*Trade, optionsXpress, even Fidelity ties in community sentiment, whether it be on the most basic level, ‘Hey there is X amount of people holding Apple stock’, to you go to a quote screen and it will say, ‘Do you think Google is going to go up or down tomorrow?’ So there has been a movement now from the bigger brokers that have said, ‘Hey look, these discount brokers are doing this, and you know what, maybe this is a trend that we should invest some capital into.’
But to your other question, is it something that is a game changer? Is this really going to say, ‘Hey look, I have the best investor community, here are all these new clients for me.’ I don’t personally think so. I think that it is something that adds an extra functionality, it adds that extra little uniqueness to when you log in and you are doing research, but you know, Zack, am I going to look at Apple and say, ‘Oh, 99% of owners on X site feel that it is a buy’, am I going to say, ‘Oh great, I need to buy Apple’? In the end, that is not the case, so I think it is limited. It is cool to see it, it is cool to use it for research, it is great to interact with other traders, but over the next several years, I feel that it is limited from a brokerage standpoint of really bringing in something so unique, something so game changing that it is just going to draw clients from all of their competitors over to them.

Zack: Interesting. I totally agree with you as well. First of all, to have launched TradeKing and Zecco with the community aspect, that was a differentiator. It set them apart from the big boys, it was a great way to get in, but as time goes on, I think they are still trying to figure out how that works, and yes, it doesn’t bring you a whole slew of customers right away, but I think there is value there and I think that they see there’s value there. It certainly keeps people engaged, regardless. If you own a community as a broker, if you look at brokerage as a commoditized service, it is one of the only ways that you own your community, right? It is a differentiator than other sites’ communities. I still think it will be important, you are right, but sort of as an ancillary thing.
One question I have is you don’t see Merrill Edge in here that much in terms of the top rankings. Why do you think that is the case?

Blain: Merrill Edge, actually, they have brought on some key people. I know that they have just hired someone away from E*Trade, I believe on the product side. Merrill Edge has made steps, and I should say they have made big steps, so this year…

Zack: To be fair, they ranked number 10 on your overall?

Blain: Yes, they are number 10.

Zack: They didn’t get into the top five for any of the categories that you tested for?

Blain: No, they were not a best-in-class finisher, but they have made significant steps in what we really enjoyed over this year versus last year. For example, when you log into the site, it is much easier to use, customer support has been kicked up a notch. They have really made good steps in all of these little niche areas, platform and tools, research, it has definitely been across the board. Actually, Merrill Edge is one of the – I don’t want to say surprises for us – but it was one of the brokers that stood out for the improvements it made when you look at a year-over-year trend.

Zack: Do you think they hit best-in-class next year maybe?

Blain: Maybe. We will have to see. We will see how this new E*Trade guy turns out for them. They are definitely investing in that right, so they are bringing in the right people to make that happen. It is going to be something that remains to be seen. They actually are one of the brokers that you can get free trades. I think it is like a $25,000 balance through Bank of America, you can link it to Bank of America, and they are one of those brokers that ties in really well with the banking side. It is an interesting offering overall, and it is definitely something that has improved. So they may not be best-in-class this year, we will see how they turn out next year, but they are significantly more competitive than they were a year or several years ago.

Zack: Very interesting. Are there any disappointments from your perspective? Any sites you think should have ranked higher but didn’t this year?

Blain: Well, that is a good one. I try not to [indiscernible 22:17] on this case.

Zack: You don’t want to pick on anyone? You’ve got to be friends with everybody, right?

Blain: Yeah, there you go. We definitely picked on brokers throughout the review, and for us, it is really cool because we are pretty hard on the brokers and what is great about it is that the brokers will come to us after this and say, instead of ‘what is this ranking?’, now they are coming to us and saying, ‘Let’s have a call. I want you to talk to XYZ. We want to find out how we can do better in these categories.’ It has actually been a pretty sweet evolution for the stock brokers that [indiscernible 22:57] brand, because now we are literally helping all of these brokers, if they want it. Some brokers just say, ‘Hey, we performed poorly, thanks for nothing.’ Do you know what I am saying? It is completely unbiased. It’s not like we go here and say, ‘Zack, do you want to go have a sandwich? Tell me about your website. Oh, this is great. Number one.’ That is not how we operate. Do you know what I am saying? We have very strict material that we look at and how we are grading, so in the end, we are helping all of these brokers get better with our interviews and reviews that are being conducted.

Zack: That makes sense. That is a great methodology.
I’ll ask one, I guess it is an easier question, I guess, not to put you on the spot. Charles Schwab ranks number five overall. Pretty good, four or five star rankings throughout. Okay price, commission and fees, they are not necessarily competing there, so they got a two star rating. What surprises me are the two stars in education for Charles Schwab. Have they not invested enough there? Is there an offering in the works that they are putting together to get better in the education piece? Why are they missing that? Does that make sense?

Blain: Yes, it makes perfect sense. On education, each category, and in looking at education, we look across the board. Do they have a glossary? Do they have articles? A big one for us is organization of content, if I can go to an education center, Zack, and see an old-school Yahoo homepage where back in the day there were ads everywhere, not ads, but content everywhere.

Zack: Like a big billboard?

Blain: Yeah. As a new investor, that can be overwhelming, and then immediately I click off that education center, I am not even going to mess with it. Do you know what I am saying, because it is so overwhelming to me? So we say, look, that is great that you do webinars or offer coaching, in some of these brokers’ cases – Schwab obviously has a great staff of professional advisors – but do you organize your content based on beginner, intermediate and advanced? The brokers who did the best this year, E*Trade and TradeKing, were two standouts there – they are always neck-and-neck each year – you can go on there and say, I want to watch a video for advanced traders on this concept, click, click, done, I am watching it. It is about that whole experience, and some brokers you can always get on the phone or you can always talk to them, but they don’t have a glossary, they don’t have in-depth articles, it is still limited in the end. So beyond each star score there is a point in the end, a bottom line numerical score. We look at two parts, do you have a glossary? Okay, how thorough is it? Okay, you get points. Then on the overall, and that is a big part that comes into it, when I go to that education center, how quickly can I find what I need to find and how confident am I going to end up? Am I going to end up coming back, like we talked about earlier, or do I just look at this and say, ‘Nope, it’s overwhelming, what is this? Options, covered call strategy, I can’t do it. Nope, I’m done.’
I guess Schwab, in that sense, they get two stars because they are missing that overall. If they could put more resources into making it more intuitive and helping focus on different skilled set investors, then they definitely can bump up that score. We invite them to talk to us because there are a lot of different third party providers that can really enhance that overall offering and make it better for their clients.

Zack: Awesome. One other question I have is you have 4 five-star ranking brokerages, 5 four-star rankings, and what we see are star ratings. How close in general are these companies to one another in terms of your scoring? I don’t need the exact number, but when somebody ranks higher than someone else, are we talking about just a little bit better, are there big gradations, big jumps? Or are we seeing clustering where they are all really good, and it is just a matter of little things here?

Blain: That is a really great question. It is actually a lot closer. It might be four to five stars, so we take all of these numbers for each category, and then we take a weighted score, we average all those out, so like commissions and fees, ease-of-use, platforms and tools, those are all 15% of the overall score. Then once we compile it all, we get an end numerical score which translates into a star rating. It is very tight. For example, TD Ameritrade and E*Trade this year, it literally came down to…

Zack: Neck-and-neck, right?

Blain: It was so neck-and-neck. The difference, TD Ameritrade literally won the show with Trade Architect. It was a web-based platform that gave them the extra few points, and that was that.

It can be extremely tight. In particular with these three-star brokers, too, it is hard because we do an overall ranking and you might look at a three-star brokerage and say, ‘Oh, it’s only three stars, I want to go with a five-star broker’ but that is not always the best choice. A lot of these three-star brokers specialize in certain areas, and they are fantastic choices.
We were talking about ShareBuilder with the auto-investing. If you want to auto-invest your money, ShareBuilder is a great fit. You are going to be a happy client. OptionsHouse was the only broker this year that got five stars for commissions and fees and five stars for ease-of-use. We love the platform for that, so if you want cheap trades and you want an easy-to-use experience, OptionsHouse would be a great fit. So even though they may have gotten three or four stars, you really have to dig in and see what do I want as a client, and as a result, these scores get really tight because some of these brokers are in niche areas and it can come down to customer support. We can get into that next, Zack, because there were a lot of funny calls we ran into…

Zack: When you say calls, you were actually picking up the phone, you yourself, or someone on your team, was calling support to get a feel for how knowledgeable they were or how useful they were?

Blain: Exactly, and we joke about it, we almost tease the brokers because we will call at random times, we will call on the weekend, we will call right when the market opens, we will call during the day. What was cool this year is that we upped the ante a little bit and so every single call, every single email, every single live chat…

Zack: Now did you disclose that you were testing them?

Blain: No. How it works with the brokers, we’ll say, ‘Hey look, we’re going to be starting our review, it is over the next several months, we’re going to be testing you guys. There is no heads-up on when we are doing these calls or doing these emails. We will go and open accounts and act as an actual client’. Zack, when I open an account with your brokerage, are you going to call me up? We would purposely leave out information. We would purposely leave out a license, for example. Are they going to follow up and say, ‘Hey, Blain. It was nice to meet you. Blah, blah, blah’. So we let the brokers know, ‘Hey look, over the next several months we are going to be conducting all of this in- depth research, et cetera. If there is anything specific that you guys want to make sure that we test…’, because every broker can go so in-depth with the tools, the research, et cetera. That is basically their one opportunity to say, ‘Yes, please make sure to test this tour. Please test this new platform,’ which we are going to test anyways, ‘Please make sure you look at this.’ Then from there on out, we joke that we are messing with the brokers because we will, no matter what time of day or where it might be, and it gets really picky and stringent on what we are looking for, and you either have it or you don’t. When it comes to review, there is no buddy-buddy. It really comes down to the wire. I’m a trader, what experience am I getting, and why do I want to choose you?
For customer support, for example, on the phone side we had some brokers who did very well, like TradeKing. It doesn’t matter if you contact them on customer live chat, email them, or call them at a random time, it is always like, ‘Hello, how is it going?’ You get an instant pick up, it is an overall, across-the-board, it hits the nail on the head. Then you have a broker like SogoTrade, it was the oddest phone call support we had where we called to test them and you get the standard, automated, you are going through the menu and then it says that you are waiting for a rep, you are caller number three in the cue. Okay, caller number three, that can’t take that long, right? So then every 30 seconds this machine would come on, it became pretty annoying, there was no music, it was just, ‘You are caller number three, you are caller number three.’ We got bumped up to caller number two, then we got bumped up to caller number one, and it said, ‘You are the next caller, be prepared for a rep.’ We thought, okay, cool. 30 seconds go by, and then it comes back on again, ‘You are caller number two.’ We were like, ‘Wait a minute!’

Zack: You got demoted!

Blain: Exactly! It actually happened twice, Zack, over the same call. So we got bumped back up to number one, and then we were back to number two, and it ended up taking 12 minutes. We tracked this down to the second, how long it takes us to end up connecting to a rep, and thank gosh, this rep was really helpful. They answered all of our questions, because we try to catch them there, too, Zack. We will say, ‘Okay, how much is this commission?’ Something simple, but then we will ask something like, ‘Well, can I place an advance order?’ One of the big things we were looking at this year, ‘Can I place contingent orders?’ The reps will, for the most part, be able to answer that, and then we will ask something even more detailed like, ‘On this platform, how does this tool work?’
We ask three or four questions on average, and really try to catch these guys to see how well they know their website or their software or maybe their commissions. It really gets peculiar, because some brokers are like, ‘Oh, let me go find that out.’ You can really dig in and see what they know by acting as a client and asking the tough questions to the easy questions.

Zack: Do you think – it is a good question, so I am not picking on SogoTrade – but I think obviously to be good at service, as a broker, you have to be able to connect with people where they want to be connected, whether it is email, phone, or online chat. Are there certain brokers that are funneling towards a certain communication medium? Like maybe they are good at phone, and they want you to call in through the phone because that is where they are staffed, and try to sort of push you away from other ones, other mechanisms? Does that make sense?

Blain: It makes perfect sense. The answer is definitely yes. Not all the brokers offer live chat support, and some of them don’t even want to. If you look at a broker like Schwab, TD Ameritrade, or E*Trade, Schwab really stands out to us. They always just blow us away with their phone support every year. You can call them whenever. I think we called them at 8 o’clock at night on a Sunday, and they were like boom, ‘Hello sir’. They’ll know your name, they’ll use your name. We even grade them on how well their exit is, are they friendly, are they saying, ‘Oh Zack, thanks so much for calling in, if you have any further questions, feel free to contact us. Have a wonderful evening.’ Do you know what I am saying?
A lot of these brokers will offer email. Email and phone is probably the most common combination you will see. There are definitely the brokers that you can tell, their number is throughout their site, they say, ‘Call us! Here is our number’. And when you call, if that was the case, and we could tell that the broker was centered around phone support or email, then we expected that experience and we graded them on it. So if I see Schwab’s number all over that site, and then I call it, and I can’t get the help that I need and I am waiting for 10 minutes to get connected, then what kind of user experience is that, right?
There are some brokers on the email side. There was a tie this year, it was TradeKing and Cobra Trading who had…

Zack: I have to admit, I have never even heard of them.

Blain: We try to include as many brokers as we can. Cobra Trading is a very small broker, not many people have heard of them. But Cobra Trading and TradeKing had the fastest email reply, it took 3 minutes. So when we clicked ‘send’, to getting a reply with an answer, with a template, a lot of these brokers have templates…

Zack: That is insane. That is what I was going to ask, if it was an automated reply?

Blain: Yes, they will usually give you an automated reply, ‘We have received your email and we will get back to you within 24 hours’ or whatever it may be, but to get the actual end result, and these two brokers tied for it. We were just like, ‘Wow!’
Then you get brokers who will take a week or longer to get an email back. SpeedTrader, I will pick on them. It literally was 14 days, 23 hours and 49 minutes to get back to us for one email. It’s not like we’re asking, ‘Can you tell me about the technology behind this?’ or ‘How does the execution process work?’ It was simple like, ‘What is this commission rate?’ or ‘Is this fee applicable for this?’ and ‘How do I get the platform?’

Zack: Wow! It is not even serious at that rate. They shouldn’t even offer email service.

Blain: Yes, to your point, they shouldn’t. We tell the brokers this. We try to emphasize that if you are going to focus on one support recommendation for brokers, and then do it great! Don’t put your eggs in all of these different baskets, don’t offer live chat if you know or are not confident that you can offer that feature-rich experience that your clients deserve.
You’ll see brokers that hone in on certain areas, and they either execute and are okay with it, or they don’t. That is why you see our best-in-class this year really executed well.
The last example will be Scottrade. It was so cool. If you call into their support during market hours, the automated thing asks for your zip code and then it immediately redirects you to your local branch office. I’m sure you’ve seen the Scottrade commercials, right, Zack, where the guy is on the rich boat and you want to talk to a broker. Through this experience, it was like, wow, they won the best overall client experience this year. We thought, wow, this is really what the emphasis is in their commercials because we get referred to our local branch office. The guy picks up immediately, and I felt like I was talking to a broker. He said to me, ‘Yeah, if you go to the Scottrade website, you can…’ It was like his own website. He said, ‘Our commission is this.’ It really made for such a unique client experience, and Scottrade was the only broker that went this specific route. They put all their weight on their branch offices to say, look, connect with them locally. As a client, it makes me think, wait a minute, number one, I have a local branch office close by, cool! You know what I am saying? It might incentivize me to open …

Zack: That is very good from a channel management point of view. Very smart.

Blain: Exactly. It is pretty cool when you really dig in and see what these brokers offer. You have to do it by testing. You have to call them, you have to chat with them, you have to call them at random hours and wait 15 minutes on cue to get a hold of someone to really figure out how good they are.

Zack: Blain, thanks so much for joining us today. This is Blain Reinkensmeyer, who runs Stockbrokers.com. You can find the 2012 Online Broker Review on your website, right? It is on the homepage as well?

Blain: Exactly, yes. Zack, thank you so much for having me on. It was a pleasure.

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  • http://abnormalreturns.com/tuesday-links-keynesian-investing/ Tuesday links: Keynesian investing | Abnormal Returns

    [...] Talking the best online brokers with Blain Reikensmeyer.  (Tradestreaming) [...]

  • Bob

    I have had three TD Ameritrade accounts for many years.  Two of them are IRA accounts for me and my wife.  Every spring, when we do our taxes, we make an IRA deposit for the previous year.    The process should be idiot proof – we print out a deposit slip via the online account and mail in a check.  This year, they told us that their system already had us down for a 2011 deposit and asked for permission to designate it as a 2012 deposit.  I told them that they did not have our consent and insisted that they deposit the check irrespective of their system records – I figured we would sort things out later with the IRS if they had concerns.  Instead, TD Ameritrade held the checks for over a month and then mailed them back to me after the April 15 deadline.  What surprised me is that they did not seem to be the least bit interested in investigating whether their records might be wrong.  WARNING- DO NOT USE TD AMERITRADE FOR YOUR IRA ACCOUNTS.  We are switching brokerages immediately.

  • stockdonator

    Feel nice after reading this blog. I feel that, now I can handle everything regarding stocks.

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Tradestreaming is a community of investors learning directly from experts. I’m Zack Miller, investor, entrepreneur, and founder of Tradestreaming.com and I literally wrote the book on how to invest in the age of Facebook and Twitter. Tradestreaming is the resource I’ve created to help me become a better investor.  I believe it will help you … Continue Reading