THE GLOBE AND MAIL'S ON-LINE BROKER SURVEY
ALWAYS EVOLVING BMO WINS AGAIN
By Rob Carrick
Saturday, September 10, 2005
In a rising stock market like we're enjoying right now, all investors are geniuses and one on-line broker is pretty much as good as another for getting a trade done.
In a declining stock market, things get a lot more complicated. One way to prepare for this is to take extra care in picking an on-line broker.
On-line brokers provide no advice -- that's why their commissions are so much less than full-service brokers. But if you choose your on-line broker wisely, you'll have the resources you need to invest successfully on your own through all market conditions.
BMO InvestorLine is just such a broker and that's why it came out on top in The Globe and Mail's annual on-line brokerage rating for the fourth consecutive year. Other top brokers this year are E*Trade Canada and TD Waterhouse. For this seventh annual survey, we've revamped the rating system so that brokers are evaluated in 10 areas that relate to their ability to serve the mainstream investor, which is someone who buys mutual funds and bonds as well as stocks, and is more attuned to goals such as a comfortable retirement than pure speculation. Direct-access brokers aren't covered here because they cater to active traders.
The 10 criteria are as follows.
Commissions: The ideal broker has reasonable fees for stock trading, charges zero commission to buy or sell most mutual funds and doesn't crush small investors with annual administration fees for their registered retirement accounts.
Research: There should be resources to help you choose stocks, funds and bonds that can't easily be found elsewhere on the Internet. Reports by stock and fund analysts are especially desirable as a source of second opinions.
Equity order flexibility: You should be able to do it all on your broker's on-line trading screen, from short selling to stop orders. The most highly developed brokers offer trailing stop orders, which are extremely useful for protecting gains and limiting losses.
On-line bond trading: On-line brokers sometimes pad the commissions they charge on bonds (you can't see this because the commissions are folded into quoted bond prices), but there's still a lot to be said for being able to sift through hundreds of government and corporate bonds for something that meets your needs.
Real-time account updates: There's something of the horse and buggy in those on-line brokers who don't update the daily changes in your account until several hours after the market closes.
On-line account maintenance: Forget calling your broker to take care of details such as ordering a cheque, transferring money, opening a new account or just posing a question. A well-run broker gives you a way to attend to these matters on-line.
Transaction history: Every credit and debit to your account should be listed from the date it was opened. The Internet offers this potential, but many brokers don't take advantage.
Account performance: Sure, your broker can tell you how much you're up or down in your various investments and portfolios, but what about the bigger picture of how you're doing annually or since inception? This is an area where no broker truly excels.
Website navigation: Clean and lean is best, but not all brokers understand this.
Value added: That totally subjective feeling of satisfaction you get from using your broker, whether it's from the whole package or just one thing done especially well.
Now for the ratings:
Rating the on-line brokers
A dozen brokers were poked and prodded to see how they scored in 10 key areas that are important to mainstream investors. Here are the scores:
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