As part of our broker survey each year, SmartMoney looks at full-service brokerages -- firms that often provide a more traditional, face-to-face relationship with customers, and often at a higher price. This spring, trouble in the Middle East and Japan roiled the markets, creating a climate where clients appreciate the hand-holding that full-service brokers provide. To gauge how well they fill that role, we looked at a wide range of factors and talked to consultants and analysts who follow the industry. Among other things, we weighed data on the performance of the stocks they recommended, pored over studies on customer satisfaction, and consulted experts who study important intangibles like the user-friendliness of their account statements and websites. Here's how six major firms ranked.
1. Raymond James
Raymond James and Edward Jones have been flip-flopping between #1 and #2 for years. The main reason Raymond James took the top spot this year is because it had much better stock picking in 2010.
Headquarters: St. Petersburg, Fla.
Toll-free number: 800-248-8863
2010 ranking: #2
Number of Brokers: 4,500
Number of Branches: 1,600
Noteworthy: Stock picking
Raymond James vaults back into the top spot this year, switching places with Edward Jones. Raymond James customers had additional reason to be happy in 2010: The firm was one of only two in our full-service survey with model portfolios that beat Standard & Poor's 500-stock index for the year. One glitch: The St. Petersburg, Fla., firm gets relatively low marks for its online presence from Corporate Insight, a consulting firm that tests websites for ease of use. Chet Helck, chief operating officer of the 49-year-old firm, says he thinks the site, which was updated last year, is in "pretty good shape."
2. Edward Jones
Edward Jones lost the top spot because its stock picks didn't beat the market last year.
Headquarters: St. Louis, Mo.
Toll-free number: (888) 891-1491
2010 ranking: #1
Number of Brokers: 12,000
Nunber of Branches: 11,000
Noteworthy: High customer satisfaction
For the second year in a row, Edward Jones ranked highest in customer satisfaction in a poll of full-service-brokerage customers by J.D. Power and Associates. That survey hailed the firm's emphasis on clearly communicating to clients the reasons for investment performance, something brokers often neglect to do. That probably helped clients last year, when Edward Jones's stock picking trailed the S&P 500 (a factor that led the brokerage to slip out of the top spot). Jim Weddle, the managing partner of this St. Louis based firm, attributes the shortfall to its "conservative investment philosophy" being out of favor in 2010: "Over a full investment cycle, our research will perform well."
3. Wells Fargo Advisors
Wells Fargo moved up a couple of notches because it has done a better job than the other firms in digesting a mega-merger, particularly integrating client statements and Web sites.
Headquarters: St. Louis, Mo.
Toll-free number: (866) 224-5708
2010 ranking: #5
Number of Brokers: 15,200
Number of Branches: 1,400
Noteworthy: Ranks first in client trust.
To gauge these brokers' strengths and weaknesses, we looked at a wide range of factors. Among other things, we weighed data on the performance of the stocks they recommended, pored over studies on customer satisfaction, and consulted experts who study important intangibles like the user-friendliness of their account statements and websites.
Half of the brokers in our survey are still digesting megamergers that were forged during the financial crisis two years ago. Wells Fargo is the furthest along this path. It bought Wachovia, which included a full-service brokerage, and those clients already have a new website, along with brokerage statements that ranked among the best in independent surveys. The wheel of fortune didn't favor the firm's stock pickers, though; its model portfolio came in last in a 2010 ranking of brokers by the research firm Zack's, trailing the S&P 500 by seven percentage points. The company says emphasizing energy stocks early last year hurt its performance.
UBS drops slightly because of its website, which third party research group Corporate Insight found lacking.
Toll-free number: (800) 354-9103
2010 ranking: #3
Number of Brokers: 6,800
Number of Branches: 300
Noteworthy: Clear broker account statements
Things have calmed down somewhat at the U.S. arm of this Swiss financial giant. After selling 56 U.S. branches to Stifel Financial two years ago, the head count and number of branches was relatively steady last year. Still, the firm has some ground to make up on the technology side: Corporate Insight panned its website, finding its navigation and keyword search lacking. Jason Chandler, a managing director for private wealth management at UBS, says many of the firm's financial advisers have their own sites from which customers can link to their account information. The firm gets good marks in customer satisfaction, and the financial research firm Dalbar says its brokerage statements are clear and intuitive.
5. Merrill Lynch
Merrill moved up one notch because it had by far the best stock picking in 2010. However, it didn't rank higher because it ranked last in Forrester's survey of "customer trust."
Headquarters: New York
Toll-free number: (800) MERRILL (637-7455)
2010 ranking: #6
Number of Brokers: 13,900
Number of Branches: 700
Noteworthy: Ranks last in client trust.
After Bank of America scooped up Merrill Lynch in early 2009, hundreds of brokers left, prompting the firm to go on a hiring spree last year. And some clients are clearly wary of all the changes. In a poll by Forrester Research, two out of three Merrill Lynch customers disagreed with the statement "My financial provider does what's best for me, not just its own bottom line." John Thiel, the cohead of private wealth management, says Merrill's internal surveys show greater customer satisfaction. One thing clients could trust last year was the firm's stock picking: Merrill trounced all the other full-service firms in our survey, beating the market by eight percentage points.
6. Morgan Stanley Smith Barney
Morgan Stanley Smith Barney moved down two notches because it lags all of the other firms that made mega-mergers two years ago in integrating its customer service, Web site and brokerage statements. It also ranked last among the full service firms in our survey in stock picking last year.
Headquarters: New York
Toll-free number:( 888) 932-6772
2010 ranking: #4
Number of Brokers: 18,000
Number of Branches: 900
Noteworthy: Stock picking fell short.
After Morgan Stanley bought Smith Barney from Citigroup two years ago, thousands of brokers left the combined firm; last year the company closed nearly 100 branches. Craig Pfeiffer, the broker's marketing chief, says the closures were due to the firm's effort to consolidate branches after the merger. The broker's stock picks also underperformed the S&P 500 last year, though Pfeiffer says the recommendations from its global investment committee do well against a broader range of indexes. As the merger continues, the company does have strengths to build on: Reviewers give high marks to the separate Morgan Stanley and Smith Barney websites.