Finding the Best Broker

Survey compares commissions, fees, and fund offerings.

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Competition for your business is heating up among brokers—including the traditionally higher-end ones. According to SmartMoney's 2008 broker survey, the average commission charged by discount brokers (like Charles Schwab and Firstrade) is about 15 percent less than that of premium brokers like Fidelity. The gap was nearly 50 percent four years ago. Unfortunately, it's tougher to decipher and compare commissions these days, because they vary by frequency of trades, number of shares, and sometimes price of shares. Here are a few highlights from the survey:

• Some brokers, like TradeKing, charge a set amount no matter how often you trade, while others use a tier system that offers discounts for frequent trades. Read the fine print, though: Although TradeKing charges a flat $4.95 per trade, it also charges a penny a share for stocks priced under $2.

• A few brokers offer free trades if you meet certain requirements. For example, as long as you maintain an account balance of $2,500, Zecco offers 10 free trades of stocks or exchange-traded funds each month. If you link a bank and brokerage account at Banc of America Securities or WellsTrade (Wells Fargo's brokerage), you get up to 360 and 100 free trades per year, respectively. Otherwise, commissions start at $14 at Banc of America and $19.95 at WellsTrade.

• Although Zecco deserves brownie points for the deal offering 10 free trades, it scored low in both the customer service and research departments. (For another perspective, check out My Money Blog's review of Zecco here.)

• If you're a mutual fund investor, you care about how many no-transaction-fee funds a broker offers (look for "NTF" funds when browsing a broker's fund selection). Although Fidelity offers a much larger overall selection of funds (15,186) than Schwab (13,021), Schwab has more no-load (no sales commission) and no-transaction-fee funds on its list.

• Watch those extra fees. Banc of America can charge a $100 inactivity fee on taxable accounts; meanwhile, a handful of brokers charge fees ranging from $10 to $50 to transfer money to another firm.