Barrons Best Online Brokers
In its recent release of the best online brokerage houses for 2017, the financial newspaper Barron’s has ranked Fidelity as #1. A close second is
Interactive Brokers, followed by TD Ameritrade. In fourth place is OptionsHouse. Let’s compare and contrast these four companies, and see what their
Barrons #1 Brokerage Firm
In the top slot is Fidelity Investments. Barron’s was impressed with the broker’s transparent order execution. After every order, Fidelity shows a report that analyzes the improvement in price that its trading engine delivered. The financial publication noted that Fidelity’s average savings on executions for orders above 500 shares is $10.25, more than double the broker’s $4.95 commission.
Fidelity also received top marks for its technology, receiving 4.7 stars out of 5. The broker has tried to create similar platforms so that users have the same experience, whether they’re on a tablet or phone or desktop. Its ETF screener now has a technical search system that’s powered by Recognia.
The financial publication also liked the fact that Fidelity has made an effort to attract the millennial generation. This approach includes adding educational content on its mobile app and launching a new robo-advisory service.
Barron’s awarded Fidelity 4.9 stars for its mobile app, the highest ranking of any broker in the survey. Fidelity also received 4.9 for research tools and portfolio analysis. In the customer service arena, it received only 4.8 stars, surpassed by Schwab.
Fidelity’s lowest score was in the expense category, surprisingly receiving only 2½ stars out of 5. The broker recently reduced its commission from $7.95 to $4.95, so its poor performance here is a little unexpected. Perhaps its mutual fund transaction fee and automated phone system charge are responsible for the low score.
Barron’s thought Fidelity was a good choice for in-person service, although the broker was beat out by Merrill Edge. Fidelity also received 4½ stars for
beginner investors, although again it was surpassed by TD Ameritrade. It did not reach the top
five for option traders or active investors.
Fidelity promotion offer: 200 free trades for new and existing customers.
Interactive Brokers at #2
Fidelity’s total score was 35.6. Interactive Brokers is a very close second at 35.5. IB performed worse than Fidelity in the mobile category, receiving just 4.3 stars. It also underperformed in research amenities, garnering 4.4 against Fidelity’s 4.9. IB also underperformed the top broker in usability with a score of 4.4. In costs, however, Interactive Brokers did better, obtaining 4.2 stars. IB performed equally well in trading technology and portfolio analysis and reports.
Barron’s also ranked IB the top broker for option traders with a score of 4½ stars. For some reason, no broker ever seems to get 5 stars from the publication.
IB was also graded as the best firm for frequent traders, as its commission schedule is geared toward accounts that trade often. Barron’s was particularly impressed with IB’s advanced desktop platform Trader Workstation, which now incorporates a helpful artificial intelligence.
The broker did not place in the top five for in-person service. With no emphasis on brick-and-mortar locations, the broker failed here. Barron’s also did not find much to admire with IB’s offerings for novices, long-term investors, or financial education.
Despite IB’s poor showing in some areas, its strengths earned it 4½ stars overall.
Interactive Brokers promotion offer:
Open account to get as low as $1 per trade rate.
TD Ameritrade in Third Place
TD Ameritrade received a total score of 34.1, placing it behind Interactive Brokers. Barron’s was excited about TDA’s new robo-advisory offering called Essential Portfolios. The model investments are recommended by an independent third party.
The newspaper also liked the ability to sync information and watchlists across devices. And the broker has several trading platforms. Barron’s awarded TD Ameritrade 4.9 for the mobile category, its highest ranking. It also received a 4.9 for portfolio analysis.
For investor education, TD Ameritrade ranked third, behind Fidelity. Barron’s considered TDA as the
best firm for both long-term investors and beginners. The broker was a close second for derivative traders, behind IB.
TD Ameritrade promotion offer: Trade free for 60 days + get up to $600.
OptionsHouse at Fourth
In fourth place is OptionsHouse with a score of 33.7, which translates into four stars overall. The broker did especially well in the mobile category. Barron’s liked a recent redesign that allows the app to be operated with just one hand. The newspaper also thought option chains worked well on all the broker’s platforms.
OptionsHouse received 4.3 for customer service, education, and security—a rather low ranking. It did better in usability and portfolio analysis and reports. In the cost category, the firm received 2.6 stars, which is a little surprising given its $4.95 stock commission and 50¢ option fee. However, the broker does charge $20 for all mutual fund trades.
Despite the firm’s emphasis, it lost to both TD Ameritrade and IB in the option trading category.
OptionsHouse promotion offer: Open and fund an OptionsHouse account to get up to $1,000 in free commissions for 60 days.
Interactive Brokers is a great choice for frequent traders who plan to buy and sell a lot of equity shares. Its sophisticated desktop platform is ideal for professional traders, although it could be hard to learn for average investors.
For less frequent traders, OptionsHouse has no account requirements, a free trading platform, and a low $4.95 commission.
Beginners would be better off with Fidelity or TD Ameritrade, both of whom have excellent resources on their websites. TD Ameritrade lowered its
commission recently as well to $6.95. TD Ameritrade has excellent resources for fund traders, which OptionsHouse and Interactive
Barron's Online Brokers - Final Thoughts
This year’s Barron’s list surprisingly didn’t show a lot of changes from 2016, despite a recent price war over commissions. Remember that every broker has strengths and weaknesses, and the ultimate value of a broker is determined by your own investment needs.
Updated on 3/29/2017.