Section 1: Web Site Functionality Rank
Different clients have distinctly different navigation experiences, depending on which E*Trade trading platform they use.
Those that qualify for the Power E*Trade platform (30+ trades per quarter) will be offered a powerful interface that makes many aspects of site navigation customizable. You'll be able to customize your pages and instantly pull up charts, news, or real-time level II quotes. You'll also have access to powerful technical analysis tools.
The majority of E*Trade clients use the regular website. It is cluttered, difficult to navigate and doesn't offer some of the perks that have become industry standards at competitor sites. E*Trade has been around longer than most sites, and unfortunately their base platform still looks like the original version from 1998.
E*Trade ranks very high in this category, they consistently win awards for dependability. E*Trade has no history of technical issues or service outages. Many sites offer features and tools that would be great if they worked properly but are simply an annoyance when they don't. With E*Trade, you will never have to worry about site crashes or broken research and analysis tools.
Customization options vary greatly between high volume and low volume traders. Low volume traders get access to a generic platform that doesn't offer much in the way of customization. High volume traders get access to Power E*Trade, one of the most powerful and customizable tools in the business.
Hopefully E*Trade will make Power E*Trade available to all users at some point because the regular site doesn't measure up to the base platforms offered by competitors.
E*Trade is one of the few sites with a guarantee. They promise that every trade will be completed in 2 seconds or less. This is very competitive by industry standards, the only two brokerages with a better promise are Fidelity and Schwab.com at 1 second or less.
Section 2: Trading Costs and Fees Rank
Intuitive Commission Structure?
No, E*Trade's commission structure is purposely tricky. They advertise that $6.99 per trade as if it's the transaction fee paid by the average investor but that's definitely not the case. Read the Stocks, Options, and Mutual Fund explanations below for details.
Minimum to Open an Account
$1,000 minimum and $40 maintenance fee per quarter if you don't maintain > $10,000 in your account and don't make a trade during the quarter.
This basically translates into a $160 annual inactivity fee… If you have a small account, make at least one trade per quarter to avoid this headache.
Internet Trades Tier 1= $6.99 if you make 1,500+ trades per quarter… How many people make 1,500 trades per quarter? Not many. This is our biggest E*Trade complaint. Please don't advertise $6.99 per trade if only .01% of your customers qualify.
Internet Trades Tier 2 = $7.99 if you make 150 – 1,500 trades per quarter. This is still a very small population of traders.
Internet Trades Tier 3 = $9.99 if you make < 150 trades per quarter but have > $50,000 in your account.
Internet Trades Tier 4 = $12.99 if you make < 30 trades per quarter and have < $50,000 in your account.
Tip: The cost per stock trade for the average E*Trade customer is somewhere between $9.99 and $12.99. It's unfortunate that E*Trade promotes the lower commissions when you consider that the vast majority of traders (and an even greater majority of successful traders) fall into Tier 3 or Tier 4 because they have fewer transactions.
Internet Trades Tier 1= $6.99 +$0.75 per contract if you make 1,500+ trades per quarter… seriously, 1,500???
Internet Trades Tier 2 = $7.99 +$0.75 per contract if you make 150 – 1,500 trades per quarter.
Internet Trades Tier 3 = $9.99 +$0.75 per contract if you make < 150 trades per quarter but have > $50,000 in your account.
Internet Trades Tier 4 = $12.99 +$0.75 per contract if you make < 30 trades per quarter and have < $50,000 in your account.
Tip: The cost per trade for the average E*Trade Option trader is somewhere between $7.99 and $12.99 + $0.75 per contract. It's unfortunate that E*Trade promotes the lower commission when you consider that the vast majority of option traders (and an even greater majority of successful traders) fall into Tier 2, 3 or 4 because they have fewer transactions.
No-Load No-Fee Funds = $0.00 Free trades, No commissions or transaction fees charged by the Mutual Fund or Ameritrade (985 available)
No-Load Funds = $19.99 transaction fee charged by E*Trade. This is pretty reasonable compared to competitors but they need a greater selection of No-Load No-Fee Funds. Many funds that cost you $19.99 to buy and another $19.99 to sell trade free of charge at brokerages like Schwab, Fidelity, or TD Ameritrade. (1,619 available)
Load and Fee Funds = Fees charged by mutual fund and possibly by E*Trade as well
Tip: Avoid any funds with loads or fees. With the vast selection of no-load no-fee funds offered by many of today's online brokerages, there's no reason to ever pay them!
Treasuries & Bonds
Treasuries & Bonds = $40 flat fee. This is high by industry standards.
Rates & Fees
Margin Rate: Tiered system. From as high as 7.24% for accounts < $50,000 to as low as 4.24% for accounts > $1,000,000.
Interest Paid on Cash (Sweep): E*Trade's checking account, which we assume you can use as a holding account for cash when it's not invested, currently pays a generous 3.15%. This is the best rate we've seen at any of the online brokerages.
Checking Available? Yes, $8.25 for each 75 check reorder.
Electronic Statements: Free.
Paper Statements: $5 each.
Section 3: Customer Service Rank
E*Trade has come a long way in this category. There are more complaints on the internet for E*Trade than for most other brokers combined, but they made big strides in 2007 and still appear to be making progress in 2008. Wait times can still be long but they are shorter now and still improving. TIP: Reps are available until midnight Mon-Fri, you will have no wait time if you call after 7PM.
E*Trade has nearly caught up to competitors in this category, they've obviously put a lot of internal emphasis on training and customer service in '07 and '08. The average rep is also a lot more knowledgeable nowadays, you are much less likely to be put on terminal hold while they research your question.
Online support is a little weak. E*Trade email responses are slow and they don't offer instant message chat support. Their FAQ section is comprehensive and easily navigable but it certainly can't measure up to a live rep. Pick up the phone if you have a problem. Phone support isn't great, but it's still a better option than the online support.
Advanced Support (Options, Funds, Bonds, etc.)
Unfortunately, E*Trade doesn't have specialists, they have what they call E*Trade Financial Advisors that may or may not be able to answer more complicated investing questions.
If your account is > $50,000, you qualify for a free session with an E*Trade financial advisor. This may sound like a hurdle to beginners, but $50,000 is actually lower than most competitors for portfolio guidance from a professional investment advisor. If your account exceeds $250,000 you qualify to participate in E*Trade's managed account programs.
At the $50,000 level you will only receive guidance, E*Trade Financial Advisors don't provide truly personalized advice. You will receive a cookie cutter snapshot of your portfolio and some generic recommendations spit out by Morningstar tools. These tools are actually available directly to the investor if you sign up for E*Trade's Complete Investing account.
Section 4: Research Tools & Investing Information Rank
While most of the market research available at E*Trade is pretty run of the mill, some of their analysis tools are cutting edge.
Our favorite features are:
- Free 12 Month Subscription to Morningstar.com Outstanding value! If you want to learn more about this feature, read our Morningstar.com: The Power of institutional investors at your fingertips guide.
- Intelligent Investment Optimizer: Allocate, diversify and measure risk with one click. More about this feature below.
- Global Trading: Buy foreign stocks on a foreign exchange using foreign currency. More about this feature below.
- Excel Manager: Love to do your own statistical, financial and technical analysis? This tool incorporates your trading platform right into an excel spreadsheet. More about this feature below.
Level II Quotes & Streaming Data
Both are available
E*Trade Complete Investing Account
If you are already an E*Trade member and you haven't signed up for this account, we highly recommend it. E*Trade has formed a partnership with Morningstar.com, and their investment research and analysis tools for Stocks, Bonds, Funds, and ETFs are the best available anywhere. This appears to be available to existing customers as long as they switch to an E*Trade Complete Investing account.
Power E*Trade: Those that qualify for the Power E*Trade platform (30+ trades per quarter) will be offered one of the most powerful platforms at any of the online trading sites. It's fully customizable and provides instant access to high quality charting, news, level II quotes, streaming data, and analysis tools. The best perk of the Power E*Trade platform is that you'll have a dedicated telephone support team available to assist you with questions or issues.
E*Trade Market Trader: The majority of E*Trade clients use this basic platform. It is cluttered, difficult to navigate and doesn't offer some of the perks that have become industry standards at competitor sites. E*Trade has been around longer than most sites, and unfortunately their base platform still looks like the original version from 1998.
If E*Trade decides to offer Power E*Trade to all clients or at least create a buy-and-hold investor version, they will certainly jump a couple spots in the rankings, it's a great tool. Unfortunately, Power E*Trade is currently only available to those that trade 30+ times per quarter.
Intelligent Investment Optimizer
This tool contains a lot of great features. You can analyze your portfolio's allocation and diversification, identify overlap, and estimate income potential for various types of investments. The most unique and powerful aspect of this tool is the risk analysis component. It allows you to see how adding or removing funds from your portfolio will impact your overall risk. You can also forecast a “worst case scenario” based on your current risk profile.
We were a bit disappointed with the generic “All-Star Portfolio” recommendations but we certainly give E*Trade credit for pushing beginners towards no-load and no-transaction fee mutual funds.
Section 5: Perks Rank
We'll provide a little extra detail in this section since so many investors are curious about Global Trading.
E*Trade is the first US online broker to offer Global Trading, a concept that will likely experience explosive growth over the next five years among the online brokerage houses. This feature allows investors to buy foreign stocks on foreign exchanges using foreign currency.
Marketing hasn't been a problem, E*Trade's pockets are deep and their commercials are hilarious and enticing so a lot of traders are signing up. While the concept is brilliant, implementation has been rocky. Global Traders complain that trades are difficult and expensive.
Transactions are cumbersome and time consuming. First, you have to figure out how many shares you can afford in a foreign currency. This is a necessary evil of global trading, but hopefully E*Trade is developing tools that can aid investors in calculating their purchasing power more quickly. Next, you have to choose a lot size. You can't just buy as many shares as you want the way you would on a US exchange, you have to buy in specific lot sizes, and these can be as large as 1,000 shares. Finally, you have to wait for currency to be converted from US dollars to the local currency before a trade can be completed.
Global Trading is very expensive compared to traditional online trading. It's difficult to pin down the exact expense since everything has to be converted to foreign currency, but Global Trading appears to be averaging about $30 per trade. You also have to pay about $10 for every currency conversion, so to buy one foreign stock, sell it, and then convert back to US $, you will spend about $80.
E*Trade is on the cutting edge with their Global Trading idea, but if they don't improve implementation, we expect to see a lower priced competitor in the market very soon.
This is another E*Trade product that is cutting edge and that has the potential to be a market leader. Any traders that prefer to do their own statistical, financial and technical analysis will love Excel Manager. It incorporates your trading platform right into an excel spreadsheet.
This tool would be handy to any data geeks regardless of strategy but it's currently only available to Power E*Trade members. Hopefully they'll make Excel Manager available to regular clients soon.
New Accounts: New accounts get 100 free Stock and Option trades.
High Volume Discounts Yes, the commission structure is volume based but it takes a LOT of volume to qualify for the lower $6.99 and $7.99 Tier I and II commissions. Most investors pay $9.99 or $12.99 because they fall into Tier III or IV.
Section 6: Product Offerings
IRAs, Roth IRAs and personal 401Ks
529, Custodial, and Education Savings Accounts
Yes. $250,000 minimum to participate.
Trust, Investment Club, Corporate (profit & nonprofit), Pension Plans for Small Businesses, Profit Sharing
Section 7: Security
Yes. SIPC protects securities in your account up to $500,000. E*Trade also carries insurance over and above the SIPC protection.
Firewall Secured and Fraud Protection
Yes. All of the major sites have dependable security. They can't afford to make mistakes, they wouldn't survive a year if they gained a reputation for mishandling money or for lax security.