SmartMoney 2010 Broker Survey

Mutual Funds and Investment Products

Best: Charles Schwab
Worst: SogoTrade

We look for discount brokers that offer a wide array of investment products. But when do they risk information overload? TD Ameritrade, which offers more than 15,000 mutual funds, says a recent survey of its customers found that nearly half who invest in these products think there are too many. Sandy Motusesky, TD Ameritrade’s director of mutual funds and ETFs, says that to help investors narrow the choices, the firm recently updated its list of recommended funds, focusing it on specific investment strategies, such as generating income or hedging against inflation.

TD Ameritrade is among a trio of five-star brokers in the investment-products category, which also includes Charles Schwab and Fidelity. This year Schwab edged out last year’s winner, Fidelity, in a photo finish. Schwab has all the investment products we were looking for, including a Coverdell account—an education-savings account similar to a 529 plan—something that Fidelity does not offer. (Fidelity says its customers are more interested in 529 plans than in Coverdell accounts.) Like Ameritrade, both firms sell about 15,000 mutual funds. But about half the funds on Fidelity’s site come with a sales charge, while fewer than 4 percent of the funds on Schwab’s site are load funds. A Fidelity spokesperson says the company wants to give investors a wide range of choices.

Of course, some brokers don’t want to be all things to all people. Dave Whitmore, SogoTrade’s president, says he has no intention of offering CDs, bonds or mutual funds anytime soon. “Our strategy is to remain price competitive for the active trader,” he says.