October 19, 2005
Scottrade ranks highest in satisfying online investors for a sixth consecutive time, according to the J.D. Power and Associates 2005 Online Investor Satisfaction Study.
Following Scottrade in the rankings are Vanguard, Fidelity Investments, ShareBuilder and Charles Schwab, respectively.
The study measures customer satisfaction with online investing firms based on performance in five areas: cost, trade execution, information resources, Web site capability and customer service.
Scottrade leads the industry in cost and trade execution -- the two most important factors in satisfying online investors. Scottrade also receives particularly high ratings from affluent investors.
"In todays online trading environment, where commissions across the board are declining, investors place substantial importance on the costs they incur from their online brokerage firm," said Jeff Taylor, director of brokerage services at J.D. Power and Associates.
"One of Scottrades most significant strengths is that it makes it easy for their investors to comprehend its fee structure, making its trading processes simple to understand and execute."
Charles Schwab makes significant improvements in 2005, increasing 18 index points from 2004. New to the study in 2005 is ShareBuilder, which receives strong ratings from customers in Web site functionality.
The study finds that trade activity among online investors is continuing to increase. The average number of annual trades performed by online investors is 36 -- up from 29 in 2004 and 22 in 2003.
Investors with five or more years experience are driving the increase in trade activity, nearly doubling their average annual trading volume from 28 trades in 2003 to 55 in 2005.
Nearly 55 percent of investors say they are "extremely" or "very" confident in the information provided by their primary online firm, with two-thirds of investors turning to their primary firm for investment information.
Only 13 percent of traders get investment information from an online firm other than their primary firm and only 9 percent seek information from a full-service firm.
Secondary resources, such as Dow Jones, Standard & Poors and The Wall Street Journal, are also respected sources of information by online investors.
"The typical online investor is more self-directed in nature than the typical full-service investor, but still relies on outside sources of investment information," said Taylor.
"Investors particularly value proactive investment information from their firm, such as price alerts, portfolio change alerts, stock/fund screening tools and news alerts. As online firms increasingly offer more in-depth investment information and services, which are traditionally reserved for full-service firms, those firms proving better information will have a competitive edge."
The study also finds that online investors tend to be highly loyal to one firm. Eighty-two percent of online investors have an exclusive account with their primary firm, and the rate of switching online firms has been declining for several years.
In 2004, fewer than 7 percent of investors switched from their primary firm to another firm, compared to 10 percent who switched in 2003.
The 2005 Online Investor Satisfaction Study is based on responses from 5,099 online investors who primarily invest with one of 19 firms included in the study.
