GRADES FOR BROKERS IN THE SURVEY

Let’s look at the overall results: the grades in a tabulated format.  I hope you enjoy some of the names of the different firms.

These grades were initially assigned as of December 31, 2011.  During the course of the year, as things change, the survey will be revisited; if important new information is found about a broker, a grade will be reassigned.  In fact, one of the articles below includes a current list of the top ten brokers, from best to worst, using the approach adopted in this survey.  As of New Year's Eve, four companies earned an A grade; seven companies are currently graded as a B; a total of 11 companies merited a C, while 26 companies received a D.  Finally, 15 companies were awarded a failing grade: an F.  Keep in mind: they failed as brokers for long-term investors; the definition of such investors was discussed earlier.  A brokerage firm that earns an F for a long-term investor, could well merit an A for a trader.  One company, SureTrader, was not graded for reasons disclosed in the discussion section for that company.

For completeness, two active firms were excluded from this year's survey.  Questrade is a Canadian discount broker: while it trades on American exchanges, it doesn’t accept accounts from US customers.  optionsXpress is now a subsidiary of Charles Schwab & Company.  The commission and fee schedule of OX is in flux and rapidly morphing into that of its parent.  optionsXpress didn’t look enough like a separate entity so was excluded from the 2011 survey.  By the way, thinkorswim, a subsidiary of TD Ameritrade, is headed down the same path.  It hasn’t traveled as far as optionsXpress, so continues to be included in this brokerage survey.  SureTrader was not assigned a grade.  The company appears to want US-based customers, but it is not based in the United States and does not appear to be a member of FINRA.

Before opening a new account with a broker, there’s one simple thing you can do: check with FINRA.  It’s not a guarantee that you’ll avoid problems, but if you see too many issues with a broker relative to its size, it may be a red flag.  Click on this link for the FINRA website BrokerCheck service.  Keep in mind that many of the brokers in this survey are owned by another entity; the name of the parent entity, which must be used in the BrokerCheck search, is provided in the discussion section for the company.