Meme stocks, Reddit traders and cryptocurrencies shook up markets this past year. But one thing stayed the same: You need a best online broker you can count on. And that's where Investor's Business Daily's 10th annual Best Online Brokers survey comes in.
In an era in which choosing an online broker is more nuanced than ever, the IBD 2022 Best Online Brokers survey can speed you to the right one for you. It can also help you decide if another online broker might have updated its offerings to the point that its time to leave your current broker.
Gone are the days you can simply pick one charging the lowest commission. They all offer free stock trades. Now, your individual trading style or financial goals dictate which online broker is best for you.
And who better to say which broker is best for you than other investors using them already?
Finding The Best Online Broker For You
That's what sets IBD's Best Online Brokers 2022 list apart from other rankings. You'll find which online brokers win the most kudos and fans from actual individual investors who count on them. The analysis asks real investors, both new and seasoned, to rank their primary online broker on 15 key metrics. The top six attributes account for 55% of the ranking and they're most important to investors: trade execution, website security, equity trading platform, site performance, customer service and research tools.
Those ranking high with investors included Fidelity, which took the No. 1 overall spot. It had top scores in 12 of 15 performance characteristics, including Trade Execution Speed/Price, Web Security and Site Performance. Fidelity has been named a Best Online Broker for all 10 years of the IBD ranking, which included five best brokers some years. It ranked fourth the first year and No. 1 or 2 every year since then.
Rounding out the three Best Online Brokers for 2022 were perennial top-tier finisher Charles Schwab followed by E-Trade, which made the top three for the first time.
This year's crop of best online brokers understand the key role they play in investors' lives.
"Events of the past (nearly) two years have proven to be a powerful catalyst for new investors — many of them young — to rise up and make their finances a priority," said Scott Ignall, head of retail brokerage at Fidelity Investments.
Battle Of Best Online Brokers Heats Up
If you're not delighted by your online broker, it might be time to rethink your choice. Most investors are satisfied with theirs, so if you're not, that's a sign to move.
More than half, 58%, of respondents told IBD they are very satisfied with the overall service they've gotten from their online broker in the past six months. And upward of 90% are either very or somewhat satisfied, says Raghavan Mayur, president of TechnoMetrica Market Intelligence, who conducted the survey.
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"In order to stay in this industry, (brokers are) willing to invest in themselves to compete to their best," Mayur said. "And that is a trend that I have seen over the past few years. That still continues."
Online brokers are fiercely competing with each other for your business. Some tout advanced trading platforms to help you pull off your investing strategy. Others are mobile-first. And still others look to offer good broad offerings across the board. That way you'll get the financial services you need over time. All, though, are pitching the idea they're your ally no matter your financial goals or financial strategy.
"Investors are increasingly bombarded by information from numerous sources including social media," said Mike Foy, who analyzes online brokers for J.D. Power. "We see the single biggest driver of online investor satisfaction with their broker is trust."
Best Online Broker: What Happened During The Year?
Veteran investors have long sought the best online broker to fit their demanding needs. And in many ways, this cadre of veterans called the shots in what online brokers offered. But, a surge of new investors is pouring into the market. All need information and service they can count on from a trusted brokerage partner. Their needs don't always mesh with what more experienced traders looked for.
That's exciting for the industry. But it also poses risks for all investors looking for the best online broker for them. Vets don't want "dumbed down" trading apps, while newbies might be put off by some of the advanced tools meant for more seasoned traders. The clash is leading to some dissatisfaction by all.
"The influx of new investors ... coupled with near universal free trading and increased mobile adoption have combined to massively increase transaction volume and drive up the number of problems reported by investors," Foy said. The percentage of U.S. investors suffering at least one problem with their online broker in 2021 doubled from the prior year to 11%.
The dissatisfaction doesn't seem to be at crisis levels. Just 4% of investors told IBD they were either somewhat dissatisfied or very dissatisfied with their broker's service in the past six months.
Still, IBD found customers aren't afraid to switch online brokers if they think they can get better service elsewhere. More than a quarter of respondents said they changed their primary brokers one or more times in the past five years. Cost was the No. 1 reason for switching, cited by a quarter of the investors who did it. But convenience or a bad experience at another broker were also common reasons for moving.
What's Important To Online Investors
Just as trading strategies vary, so too does what investors look for from the best online brokers.
And that's why IBD's Best Online Brokers looks at several dimensions. The rankings are based on two phases of survey research by IBD and polling partner TechnoMetrica Market Intelligence that together involved more than 5,000 investors.
Phase 1 identified 15 broker attributes that were most important to investors. In Phase 2 customers rated how well their primary online broker performed on each of the 15 attributes.
Eight top brokerages qualified for the survey analysis: Fidelity, Charles Schwab, TD Ameritrade, Interactive Brokers, E-Trade, Vanguard, Ally Invest (part of Ally Financial) and Robinhood Markets. To qualify, at least 125 of the broker's customers had to take part in the survey.
Choosing The Best Of The Best
IBD recognizes the top three brokers in Overall Customer Experience as the Best Online Brokers. We also recognize the best three brokers in each of the 15 performance characteristics: trade execution, website security, trading platform, site performance, customer service, research tools, investment research, portfolio analysis, mobile trading, trading outside of regular hours, pricing, options trading, trade ideas, availability of account types and educational resources.
For John Dori, a veteran trader of 15 years, options trading is most important. That's why he sticks with E-Trade, even after it bought TradeMonster and itself was bought by Morgan Stanley in 2020.
"E-Trade's active trader platform is generally stable, robust and reliable, and, especially, that it lends itself to retail options trading in a way that only three or four brokerages really do," he said.
And with so many investors actively engaged in markets, it's only natural for them to look for unique capabilities from brokers, says Stephen Biggar, analyst at Argus Research. "Online investors are requesting greater platform tools and products, including ways to trade crypto, access to IPOs, improvements to mobile apps (and) platform stability."
Best Online Brokers Battle It Out For Investors
New brokers are jumping into the fray. And tougher competition is prompting the big brokers to up their game.
Just in the Google Play app store, you'll find new online brokerage apps like Webull going head-to-head against players like Fidelity, Schwab and even Robinhood, says Devin Ryan, analyst with JMP Securities, a Citizens company.
More than 15 million new investors plowed into the market in 2021, topping the prior record of 10 million in 2020, Ryan says. "2021 was a record year for the industry, record in terms of trading activity and a record year of new customer growth," he said.
At Fidelity alone, investors opened 7.1 million new accounts in 2021 through the third quarter, Fidelity's Ignall says. And investors age 35 or under opened 40% of those.
Mobile trading continues to be an area where investors demand excellence, J.D. Power's Foy says. "We also have seen a significant increase among established brands in terms of investment in improving the digital and mobile user experiences, which are in part a response to mobile-first fintech brands like Robinhood," he said.
Big players aren't sitting still. Ignall said Fidelity is "actively investing in the business while looking for new opportunities to expand and explore additional product innovation and digitization of service." It's also ramping up "educational content and engagement opportunities that best serve our customers."
What's Next For Online Brokers?
It's now an open question on what investors will demand from the best online brokers. And it's unclear whether the smaller startups or most established players will build the killer app, first.
Foy thinks that now that most trades are free, attention is on mobile apps. But customers will next demand better access to cryptocurrency trading and wallets. He also thinks some customers might gravitate to brokers who make it easy to put their personal values on social issues in their portfolios.
Investors will ask for "more tools to help them develop and execute investment strategies that are informed by their personal values," Foy said. That includes "getting more transparency around the components of ESG."
Given the record number of new companies listing shares, Argus' Biggar thinks access to initial public offerings will be more important to investors. "Online brokers like E-Trade, owned by Morgan Stanley, have an advantage here," he said.
Right now, though, investors just want brokers to get the basics on price and execution right, Mayur said. Access to cryptocurrency trading, fractional shares, futures trading, robo-investing and alternatives might be trendy, but none ranked among the most important broker attributes to traders recently polled by IBD, Mayur says.
Building The Best Online Broker For All
But JMP's Ryan figures investors will demand an all-in-one refuge from the swirl of multiple new asset classes, apps, social media information and brokers. He says the best online brokers are flush with cash and will use it to step up their game. Investors will demand a single app for online trading, banking, crypto, financial advice and credit. If investors aren't demanding a single app to handle all their money matters, they will soon, he says.
Right now, investors put up with dealing with "trading in one app and banking in another app," Ryan said. "I think ultimately the end consumer is going to want to be able to manage their entire financial life in one place."
Follow Matt Krantz on Twitter @mattkrantz
