Hi Saul, I have been using a financial planner for the last 9 years and do all my trades through him presently. However, I now feel enough confidence to make a transition to using an online broker myself.
I was just wondering which on line brokers you are using and how happy you are with their services. I probably won’t trade frequently so I’m more interested in the ease of use and functional capabilities.
Please let me know what you think and Thanks much, Brian
I did a survey early this year which looked at a number of reviews and surveys. I have ticked you for a private reply and if you answer it, I am happy to send you a copy. While there is some likely bias by my own interests, it covers a lot which would also provide information on other interests.
Clearly, there are some which are appealing based on price, but for a small number of trades, that is unlikely to matter.
Some appeal based on a particular type of transaction, i.e., options, but for someone who is just doing a few regular purchases and sales, that is irrelevant.
Some are appealing on the breadth of their services. There are clear standouts there, notably in number of no commission ETFs and MF, but again that may or may not interest you. This includes other services like checking accounts, bill pay, and credit card. Access to international exchanges is another area of differentiation and possible interest or disinterest.
All provide a browser interface, some have optional software. In some cases, one needs to qualify for the software, e.g., by trade volume.
The base of my data comes from this Barron’s review
http://online.barrons.com/articles/SB50001424053111904628504…
but there are 7 others I got some data or rankings from.
CB:
The choice of broker really is a minor issue in the big scheme of things. Your time is better spent just worrying about the actual stock selections unless you are a trader. Otherwise, the per transaction costs are so low now that if you are following Saul’s methodology, there isn’t likely going to be such a difference that it is worth the hand wringing or surveys.
That said, in this prolonged bull market largely the result of the Fed’s rather dramatic and unprecedented money expansion, why are you now confident that you do not want the benefits of your advisor? Have you invested through a prolonged bear market as yet? Does your present advisor beat the market averages consistently?
I’ve got an opinion and some experience in this matter. Long ago I traded through a “full service” broker. They charged exorbitant transaction fees which they justified by providing mostly worthless research. These firms are largely a thing of the past, but there are some firms that still charge an arm and a leg for trading individual stocks because they want to keep you captive in their preferred mutual funds. Edward Jones would be one of these firms. I can’t recommend strongly enough that you stear clear of this or any similar firm.
As for “discount brokers” they are now the prevailing model. Virtually all of them charge roughly the same per stock trade, around $7. So it really comes down to the user interface and information provided for free. I was a Scottrade customer for a long time, but when I decided I wanted to be more active with options they encouraged me to open an account in their associate brokerage firm Options First. Scottrade was OK, with $7 trades, but they did not provide very good free research information (my opinion, others may differ). Options First provided even less information, but they did support more sophisticated trades especially geared to options traders. For reasons unknown to me, Options First recently shut their doors and migrated their clients to Interactive Brokers.
IB has very low commissions ($5 per trade) and a number of interfaces, in my opinion all of them are user hostile. They provide information by subscription which means you have to pay for the same information that is provided for free almost everywhere else. BTW, nearly all firms also provide access to various subscriptions if you want to pay for “superior” information. So far, the most informative and high quality information I’ve found anywhere is right here on this board. And the price is right. The one shining light for IB is that their account reporting tools are stellar.
I ended up consolidating my 5 accounts maintained at three separate brokers to Fidelity. They web based user interface is easy to use. They provide every transaction type you are likely to want to use. The research information they provide is somewhat superior to what I was getting from Scottrade (again, an opinion). Their commision is $7.95 per trade. Unless you plan on a lot of transactions, a buck or two should not be the thing that drives your decision.
From what Saul has said, I’m quite sure he’s with Schwab. I don’t think he provides endorsements, it’s just an historical fact. Schwab was one of the first discount brokers, he probably started there long ago and is comfortable.
One other thing you might want to consider is if there are restrictions on certain equities. A few of us on this board recently traded AIOCF. Scottrade and Fidelity allowed trades on this issue. IB and Options First did not. I’m not sure what the problem was, something about electronic trade access or what all. This is kind of an obscure issue, but if you think you might trade pink sheets or foreign issues it’s worth asking some questions before signing up.
I think most brokers let you kind of dry run the service before you have to open an account. My advice is visit a few different brokers and see if any stand out for you. Feel free to call and ask questions. Most will be happy to address any questions. If they don’t treat you well as a prospective customer, move on. There are lot’s of brokers who will welcome your business, even if you are a “small potato”.
Does your present advisor beat the market averages consistently?
Given that most advisors don’t, the question might be, is this advisor special enough to want to keep. To be sure, if one it is very easy for an individual to do worse than an advisor, even an ordinary one. But, it seems that few really have anything to offer someone to do their own due diligence.
I was just wondering which on line brokers you are using and how happy you are with their services. I probably won’t trade frequently so I’m more interested in the ease of use and functional capabilities.
Hi Brian, I use Schwab and have been very happy with them and see no reason to change, but I have never used another so I have no basis for comparison. Not sure that this helps.
Saul
Does your present advisor beat the market averages consistently?
Hi Duma, this may be a biased view, but financial advisors don’t beat the market averages. That’s just not what they do. In the experience of people I know, they allocate your money according to formulas they’ve been taught, with considerable money in bonds often, and little effort at stock evaluation. I don’t really think beating the market is their goal. It’s just being conservative so no one can ever accuse them of taking a risk.
JMO
Saul
Saul:
They do beat the market and one can interview any number of them that do. Depending on the services required, they can manage entire portfolios inclusive of home, mortgage, retirement planning, kids college funds, etc.
As pure stock portfolio management, they charge typically 1% of portfolio and even after deducting for this fee, they should beat the market as mine has done over the past 10 years or more and every year.
While I do my own investing as well, I also use a professional who manages a portion of my total portfolio. It’s simply a diversification method I use to make sure I never get overly confident as can happen with such enormous gains we have had since the meltdown of 2008.
I mention this only in response to the poster that plans to go it alone after years of using a financial advisor (he didn’t say broker). This may be appropriate if one has serious financial experience particularly through a couple bear markets because I do not believe many of your readers are prepared for a 70% clipping of their portfolio should that happen again such as in 2000 and 2008.
Many of your present stocks have beta’s of 2, so a down market may just be a soul searching time for those who have enjoyed the allure of a 7 year bull courtesy of Fed money policies. And while you have the first mover advantage and financial maturity to act/react to market dynamics, a less experienced investor may be caught a bit short.
Just my 2 cents…and a word of caution.
IB has very low commissions ($5 per trade) and a number of interfaces, in my opinion all of them are user hostile. They provide information by subscription which means you have to pay for the same information that is provided for free almost everywhere else. BTW, nearly all firms also provide access to various subscriptions if you want to pay for “superior” information. So far, the most informative and high quality information I’ve found anywhere is right here on this board. And the price is right. The one shining light for IB is that their account reporting tools are stellar.
Perhaps you left IB a while ago. IB trades cost about $1.00, not $5.00, unless you trade in extremely large lots. Their subscription only kicks in if you don’t trade to the level of the fees. My subscription costs about $12.50/month for market data. I need nothing else.
I had Fidelity as my only broker. However, they didn’t want my business any longer, because of my overseas residence, which is why I moved all of my brokerage accounts to IB. They started restricting what I can and cannot do in my account (no more margin & some other limitations) and their customer service representatives treated me poorly when I inquired about why they started restricting my accounts. I had somewhat of a nostalgic attachment to Fidelity, because I’ve been with them since the early 90s.
However, I left my IRAs with Fidelity (I don’t have many transactions in these). The research is great, especially the ability to pull historical prices, which I’ve used a lot recently. They also have a nice tool that allows you to look at your performance over various fixed time periods.
IB’s interface takes a while to digest. But I find it really good. Also, my trades execute at better prices than with Fidelity. My purchases usually get executed for less than my limit price, and Fidelity’s transactions usually hit the limit price. The lower execution prices, combined with the $1.00 trades make the break-even for me 1 or 2 transcastion.
As you mentioned, the reports are really good. They are far superior to anything I’ve seen from Fidelity. I can run transaction reports, which are important to me, as well customized statement. They even calculate my period returns for me.
I wish I found them earlier.
DJ
I have had an Ameritrade (TDAmeritrade) account for nearly twenty years. Have always been pleased and can say it’s improved over the years. I’ve always found the customer service very helpful when needed.
I also had a Fidelity account and was also pleased with them.
Thanks duma for the words of caution. They are always good to have.
Saul
Financial advisors have many clients who should not be taking risks with their money.
In fact one of financial advisors main functions is to keep people out of bubbles or from acting on tips or what their shoe shine boy says.
Statistics show mutual fund investors have far worse returns than the funds themselves. As Saul mentioned they all went to the same kind go colleges and were taught the same kind of courses. Most are smart, very few are brilliant. Few stray from the mainstream. And there is always the possibility of being caught in a Ponzi scheme.
I have a friend who was hot for getting in the Florida real estate bubble near the very top , on advice of a high school friend. I talked to him for at least an hour. I don’t know if it did any good, I suspect not, because he has never brought the subject up again. He probably owns a Florida condo worth half what he paid for it. If he had a paid advisor he would have been more likely to listen.
So look for a financial advisor to help keep you from following a fad. Hopefully not following them on his own. Not to “beat” the market.
It is easy enough taking risks on your own. The problem is finding risks where the odds are on your side.
It is not hard to at least equal the SP500 with less risk following some simple timing methods. Or just by investing in RSP rather than SPY for an index. Discipline is the key.
Which is easier said than done.
re Duma remarks - for relatives I do suggest a small percentage of portfolio in hands of an advisor, and for the same reason . Tactical diversification. But I make sure that the stocks are kept in a brokerage account that can be verified. No Bernie Madoff .
But don’t expect too much and remember that past performance could be entirely due to luck. You have no way to tell the difference, neither does the advisor in most cases. Beating the market by very much involves either luck or taking greater risks.
A long bull market tends to make people think they are better investors than they actually are.
DJ,
Actually, I moved my account from IB about a month ago. Could be I was paying $5 a trade because my account was originally migrated from Options First. May have been that a couple of companies were reaping a commission from each transaction so my IB experience might have been atypical. But if you don’t place a lot of trades, a couple of dollars one way or another
User interface friendliness is a matter of opinion. I spent 30 years in IT. During that time I designed a number of UIs. The people in the various business units I worked with liked my designs. I was credited with improving operational efficiency because the panels I designed were easy to use and generally required minimal training. I say this only to assert that I have more experience than most folks when it comes to man-machine interaction.
In my opinion the UI panels provided by IB are designed from the perspective of an IT professional rather than that of a common person who wants to place a trade. I’m sure that in time it would become a non-issue. After you use it, you get used to it. So it’s am issue, but a transitory one.
Probably it boils down to what research information is available and how easy it is to access and use it.
I use Schwab and have been very happy with them and see no reason to change, but I have never used another so I have no basis for comparison.
Brian,
I also use Schwab and will tell you the one thing I love best about them which might also be important to you, especially since you are entering into new territory with the whole online broker experience and self-directed investing.
Schwab has superior customer service. Anytime you have a question about anything regarding or related to your online account or how to use it, you can call them, will quickly be connected to someone live, and in most every case, that person will be knowledgeable, friendly, helpful and will give you the information or help you need or be able to direct you to someone who can.
This has been consistent throughout the years I have invested through them and this alone (although I am happy with the service itself as well), has contributed significantly to earning my loyalty.
okapimoon
I’m fairly happy with E*Trade after a little over a year of use. The $9.99 trade fees should be lower, but I’m not a very active trader so the fee% is tolerable. The tools and research available is great, and I’ve had good experience with customer service, even got some personalized education on how to execute some combination trades (+options) in a different way so they’d be cheaper fee-wise. They also called me recently to let me know they’d improved their password security, because I opened a ticket months ago to inquire why I wasn’t able to use any special characters in my password.
While I do my own investing as well, I also use a professional who manages a portion of my total portfolio. It’s simply a diversification method I use to make sure I never get overly confident as can happen with such enormous gains we have had since the meltdown of 2008.
<<
I have a long-time advisor (Ameriprise, formerly American Express Financial Services) as well. He and I have had…tension…over the years, but I’ve come to appreciate that tension for many reasons, including the tactical diversification you mention above and because it acts as a check/balance against my own views, which tend to be more aggressive than the average. He and I have had several heart-to-heart conversations, and in the last one he admitted that I was probably his most annoying client (I tend heavily toward making data-driven decisions), but he said it also pushed him to provide better service to his other clients. He takes 1% across the board (which is the greater part of the tension I mentioned)…
When my employer moved their ESPP/RSU/Stock Option stuff from Fidelity to E*Trade about 2 years ago, I opened up a brokerage account there to be able to set up a ‘play money’ trading account. My advisor knows about it, and I have a Google Spreadsheets doc that tracks ALL of my accounts (the ones he manages as well as my own). He can see the ‘play money’ returns against those he’s managing, exactly what I see.
On a 1Y basis, the numbers are not in his favor (5.2% vs. ~15.3% at this very moment) – and several of the high-gainers inside my advisor-managed IRA and brokerage accounts were at MY request (CALM went above 50%, GILD is close to 20%, REGN is about 14%), while most of the bigger losers were provided by the ‘big research team(s).’
That said… I grit my teeth at the 1% advisor fee quite often, but there are intangible benefits to this deal:
Wife 1.0 doesn’t like to talk about money. At all. She’s in the majority that “just wants it to be taken care of” (like the majority of my advisor’s clients, and why I irritate him so much… 
Having an advisor forces those regular conversations with a third-party, and that’s been immeasurably good.
Having someone look at a wider picture/scope is very helpful – insurance coverage, longer-term planning and goal-setting such as college, retirement, estate planning, and other investments like real estate. There is peace of mind in knowing that if anything happens, we’ve provided the right level of Plan B for each other or our family.
I go back and forth constantly about whether to dump him and go it alone. I am very certain I could, and would definitely get better returns on investment, but I would also have to spend a LOT more time on stuff than I do today (which is already 1+ hours a day). At some point, the value of my time is worth far more than 1%…
Just my $.000002, invested in NHTC and stated as future value once they crumble.
5.2% vs. 15.3% at this very moment…At some point, the value of my time is worth far more than 1%…
Hi hlygrail, It looks more like over 10% in six months. If you want to convince yourself to stay with him, you better quit doing so well in your self managed accounts.
Saul
Hi Everyone, First and foremost, thanks for all the helpful ideas. It does appear to me that is probably isn’t that material which one I choose, but it was good to see all the comments.
My financial advisor only charges 0.58% so he isn’t one of the more expensive and I do believe him to be a very honest person. His style is very different than the one that I have been developing since I started doing more myself in 2012. He is more into safety rather than growth, which is becoming more opposite of my personal style. When I analyzed the total portfolio performance since I started with him in 2006, it wasn’t very impressive (a couple of % over inflation basically). Since I have been transitioning the results have been much better.
I do realize that I haven’t been through any Bear markets, making all my own decisions. But I have been in the market since the 80’s so I got to experience them even though they weren’t really my decisions.
I do value different opinions especially when things aren’t going great, but I am hoping that I can get that through TMF services (especially this board).
My kids are already out of college and I have retired and paid off everything, so I’m not really interested in all those planning functions.
Thanks for all the assistance. All the best, Brian
Schwab has superior customer service. Anytime you have a question about anything regarding or related to your online account or how to use it, you can call them, will quickly be connected to someone live, and in most every case, that person will be knowledgeable, friendly, helpful and will give you the information or help you need or be able to direct you to someone who can.
I use Schwab and can vouch for the above.
Hi hlygrail, It looks more like over 10% in six months. If you want to convince yourself to stay with him, you better quit doing so well in your self managed accounts.
Saul
I agree Saul…if your advisor is not beating the market consistently, you need a new advisor. There is no need to get locked into a single advisor just as there is no need to get locked into a single stock.
But you will most certainly need to invest time identifying and interviewing several before chossing.