THE GLOBE AND MAIL'S ON-LINE BROKER SURVEY

BMO tops list of on-line brokers

The winner of our fourth annual ranking of on-line brokers offers a lot of what mainstream investors need to be successful, ROB CARRICK writes

Given the abysmal state of the stock markets today, you might easily wonder why people would want to invest for themselves on the Internet.

Check out the on-line broker BMO InvestorLine and you'll understand.

The winner of The Globe and Mail's fourth annual ranking of on-line brokers offers a lot of what mainstream investors need to be successful.

There are tools for finding the right balance of stocks, bonds and cash for your needs, and there's on-line bond trading to help you build that diversified portfolio. InvestorLine's first-rate Web site lets you trade stocks quickly and cleanly, and it provides real-time updates on how your investments are doing. Most other brokers only update your account at the end of the day.

As you'll see from the ratings below, competition was as fierce as ever in this year's on-line brokerage survey. Right behind InvestorLine are TD Waterhouse, last year's winner, and E*Trade Canada. Other upper-echelon brokers are CIBC Investor's Edge and Qtrade Investor.

A total of 13 brokers are included in this year's survey, including newcomers Credential Direct and Disnat. Gone is Charles Schwab Canada, which was sold by its U.S.-based parent to ScotiaMcLeod Direct Investing (formerly Scotia Discount Brokerage).

Not included in this ranking are any of the new crop of direct access brokers, which cater to ultra-aggressive investors by offering cheap, lightning-fast trades and nil in the way of services for mainstream investors.

As always, brokers in this survey were evaluated strictly on the services they deliver over the Internet. The vast majority of on-line investors now use their broker's Web site, which is sensible because this is a much cheaper way to trade than over the telephone.

Now, let's look at the methodology used in each of the six categories that were considered for this ranking.

Cost:

Scores were based on five hypothetical stock trades as well as a broker's minimum stock-trading commission. Mutual fund commissions and annual administration fees for registered retirement savings plans were also examined. The cost category is especially important this year because a few brokers have raised fees or introduced new ones recently in response to declining trading volumes. (View the "Cost" rankings.)

The on-line experience:

The utility of each broker's public Web site was considered, but the emphasis was on how easy the internal Web site for clients is to navigate, and how much information it offers clients about their portfolios. (View the "On-Line Experience" rankings.)

Tools:

Ideally, a broker would offer research on stocks, bonds and funds that can't easily be found elsewhere on the Web, as well as financial planning tools to help with matters such as asset allocation. (View the "Tools" rankings.)

Trading:

Top marks went to brokers that allow you to sell stocks short and place stop orders on-line, that offer a variety of options for settling a trade, that offer on-line bond trading and that offer real-time account summaries. (View the "Trading" rankings.)

Electronic services:

Points are awarded for offering services such as electronic funds transfers between brokerage and bank accounts, streamlined on-line account applications and e-mail alerts and trade-fill notifications. (View the "Electronic Services" rankings.)

Customer satisfaction:

This score was based on the results of an on-line survey on Globeinvestor.com where people were asked to rate their broker as satisfactory or unsatisfactory. About 3,100 investors participated. (View the "Customer Satisfaction" rankings.)

View the results:

• On-Line Brokerage Report Card: A letter-grade ranking of each brokerage.
• On-Line Score Sheet: How each brokerage scored.
• Satisfaction Survey: Results of the Globeinvestor.com survey
• Download the survey results (the free Acrobat Reader is needed)

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Comments? Come on, everyone has an opinion about who the best and worst brokers are. Send your thoughts to rcarrick@globeandmail.ca