SmartMoney's Annual Broker Survey

IT'S BEEN 20 MINUTES and still the "live chat" option with online broker WallStreet*E has failed to respond. "Thanks for your patience," we are told often, before we give up. "An operator will be with you shortly." Still searching for strong service, we move on to OptionsXpress, which promises reliable phone reps to answer questions. But when we start asking questions, our representative is of little help. We are told to read more on the firm's Web site. Well, thanks.

You know the story. You love your broker; you hate your broker. You wonder if there's anyone better. And in the agonizing market of 2008, those feelings can swing as quickly as your portfolio, diving with each market swoon and stumbling back with each rebound. Indeed, by all accounts brokers are under more pressure this year — from the market, from spooked customers and from each other as they work overtime to swipe customers from rivals. And while subprime woes at E*Trade's banking unit gave that firm an extra dose of bad publicity, the entire group is under the gun. The industry says service is getting better — and can point to some surveys for evidence — but don't tell that to an investor stuck on the phone trying to get help with his account. "I made three phone calls and had to deal with three different customer-support people before everything was fixed," says Robert Killen, a computer engineer for AT&T.

Each year we take an in-depth look at the industry's performance, and it wasn't long before we noticed something new: a blurring of the lines between key players. For years online brokers could be divided into two camps — discount brokers known for cheap trades but not much else, and "premium" discount brokers with higher prices but more products and services. Now that's pretty much out the window. Scottrade may be a discount broker, but it's also opening new branches at a furious pace, giving it more outposts than Charles Schwab. And some traditional "premium" discount brokers now rival discounters when it comes to price: The average commission charged by discounters like Firstrade is about 15 percent less than that of premium players like Fidelity, down from nearly 50 percent just four years ago. "We're all in this arms race," says TradeKing CEO Don Montanaro.

This blurring of the brokers can give savvy investors more leverage. In San Diego Mark Kundinger says he likes his Charles Schwab account for its free checking that comes with decent interest rates on cash deposits. But the 32-year-old banking-software expert thinks some of Schwab's mutual fund selections are "mediocre" compared with those of another firm he uses — Schwab archrival Fidelity Investments. Meanwhile, he's on the hunt for a broker who will give him free trades in ETFs. He's not the only one with divided loyalties: Research firm TowerGroup has found a steady increase in the number of accounts per customer, to a current average of more than 2.5 for each investor. According to David Lo, director of investment services at J.D. Power, customers keep 62 percent of their assets with their primary online broker; the rest goes somewhere else.

For our 16th annual survey, we ditched previous groupings of discount and premium brokers and assembled one list of the best and worst online brokers. But since investors have specific needs, we came up with winners and losers in six categories, too. We didn't change our usual rigorous analysis, using a combination of outside research and our own. That includes our usual paces: opening accounts, noting how long it took to find certain information, and evaluating Web sites for their research, navigation and trading tools. And as WallStreet*E and OptionsXpress discovered, we also put customer service through the wringer by calling and e-mailing questions to each firm. The rankings and commissions we report are based on a customer who trades up to 20 times a year with $50,000 in a brokerage account.