What Type of Brokerage Firm Is for You?

Physician's Money Digest, March 2006, Volume 13, Issue 3

Smart Money

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Selecting a brokerage firm is avery personal experience, andinvestors can be very finicky.According to a recent articlein , researchfirm Towers Group estimates that20% of clients leave their broker everyyear. Because of the increased competitionamong full-service, premium discount,and discount brokers, brokerageshave added more services and features,and lowered minimum thresholdsfor higher service levels. How canphysicians choose the right broker fortheir needs? A surveyoffers some valuable insight.

Full-service Brokers

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Weighing services, products, andresearch, the surveyplaced Merrill Lynch (800-MERRILL;www.merrilllynch.com) at the top of itsfull-service broker list. Respectablefunds, a broad array of products, andfive-star research tools are part ofMerrill Lynch's strong lineup. But theseservices don't come cheap. Investorsshould make sure to utilize enough ofthe services to justify the fees.

Based largely on the performance ofits stock selections, Wells Fargo (866-243-0931; www.wellsfargo.com) finishedsecond in the survey among full-servicebrokers. The firm recentlybeefed-up its training, and the effortappears to be paying off. Right behindwas Morgan Stanley (866-742-6669;www.morganstanleyindividual.com),offering a catalog of products from coffeefutures to no-load funds to initialpublic offerings. Rounding out the topfive in the full-service broker categoryare UBS (888-279-3343; www.ubs.com),with solid scores across most categoriesbut the highest commissions in the survey,and Smith Barney (800-221-3636;www.smithbarney. com), which offersfive-star service with fees to match.

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For the second year in a row, Fidelity(800-544-6666; www.fidelity.com)ranked at the top among premium discountbrokers, with a top-notch Website featuring 17 different news andresearch feeds. considersits customer service beyond helpful, andany client can get free investing advice.The firm's fees are high, but the surveyanalysts believe that Fidelity is worth themoney for many investors.

E*Trade (800-387-2331; www.etrade.com), which did not offer any onlineinvesting advice last year, finished secondin the survey. Analysts note that thefirm has a great Web site, free online billpaying, and relatively low commissions.The firm recently lowered the expenseratio on its S&P 500 index fund to atenth of 1%, which is even lower thanVanguard. Charles Schwab (866-855-9102; www. schwab.com) came in third.If you have at least $50,000 to invest,the firm has a lot to offer and providesthe best customer service.

Discount Brokers

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According to the survey,these brokers focus on providingindependent investors with an efficient,hassle-free trading experience, with allthe research and tools needed to manageyour own portfolio at a rock-bottomprice. At the top of the category by awide margin is Options Xpress (888-280-8020; www.optionsxpress.com), aChicago-based brokerage firm thatstarted in 2001. The firm does notcharge fees, and its customer service isflawless. But what analysts appreciatedmost were the thoughtful touches. Forexample, when you register for an accountonline, you can download a preprintedshipping label that allows you toFedEx your check for free.

Following behind are Muriel Siebert(800-872-0444; www.msiebert.com),featuring great research and data; TDWaterhouse (800-934-4448; www.tdwaterhouse.com), with a broad productand service offering; and Ameritrade,which analysts report is reliable,fairly priced, and offers features tomeet the needs of both new and experiencedinvestors.

The key to making a selection is to doyour research, know what you're payingfor, and don't pay for services you don'tneed or use. After all, people are veryparticular about the doctor they trustwith their physical and mental health.Why shouldn't investors be just as particularabout who's minding their financialhealth?