The best online brokers provide real-time quotes, abundant company research, stock screens and all manner of graphing tools. But if you're looking for investment ideas, you might be disappointed.
Many investors today want their brokers to take it one step further and furnish investment ideas. That's the take-away from this year's IBD Best Online Brokers study, which found broad dissatisfaction among investors in this area. Trade Ideas was one of 15 categories of broker performance rated important by the investors surveyed. But even top-rated brokers such as Fidelity and Charles Schwab had unimpressive scores when it came to giving clients ideas. (Learn how we calculated the broker ratings.)
To be fair, most online brokers are more suppliers of tools rather than providers of advice. They provide charts, research and execution tools but stop short of recommending specific investment ideas. That's different from a firm that acts as an investment advisor. Once the brokerage industry went online, investing became more of a do-it-yourself endeavor.
One-on-one advice that provides specific investment ideas still exists, but typically with higher-commission accounts. Some stock brokerages have a sort of hybrid model in which they recommend asset allocations depending on clients' goals. And brokers that have their own analysts, such as MerrillEdge, make their company research reports available to clients.
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But one brokerage clearly stood out in providing investment ideas. Tastyworks scored at least twice as well as any other broker in the Trade Ideas category. The separation between Tastyworks and its peers was sharp, and one look at the company's trading platform explains why.
Tastyworks Broadcasts 8 Hours A Day
Tastyworks is more a community than a platform. Besides advanced trading tools, Tastyworks is known for video personalities who broadcast their trades and market thoughts online eight hours a day starting at 7 a.m. Central Time on the platform or the companion site Tastytrade.com.
All the personalities' trades are logged and posted on the platform, so there are plenty of investment ideas to pick from. Users can search specific stocks or look up each trader's moves. Those who miss the broadcast can watch two replays that run through the night.
For investors hungry for investment ideas, and in particular those who trade options, Tastyworks has been just the ticket.
"OptionsXpress was my old broker, and they provided various trade recommendations. But the examples were just trades," Jim Kerrigan, an options trader in Fort Mill, S.C., told IBD. "There was no 'understanding' attached to the trades."
Tastyworks, Kerrigan adds, puts trades in context: "Actual trades that we can see and decide if we want to do the same thing."
Focus On Options Trade Ideas
A pioneer in zero commissions, Tastyworks launched in 2017 and now has 132,000 customers. About 150,000 people view the broadcast each day.
CEO and founder Tom Sosnoff sees the company's true strength in the company's innovative technology, which rests on a new-generation platform that, Sosnoff says, can process trades 40 times faster than other brokers. But he agrees the format lends itself well to finding trade ideas.
"We open our network up to anybody to see what anyone is doing, and I think that's one of the coolest things because no one else does that. That's the strength of our trade ideas," Sosnoff told IBD.
About 75% to 80% of Tastyworks transactions are options, 10% futures and 10% futures options. Only about 2% are stocks, he says.
Personalities on Tastyworks videos all have trading backgrounds and mostly lean to quantitative analysis. That's stock picking based on number crunching, not fundamentals, news or even chart analysis. Of course, a good track record is needed to land a spot on the show. "You have to earn it," Sosnoff said.
Why Some Brokers' Investment Ideas Disappoint
In the study by IBD and polling partner TechnoMetrica Market Intelligence, thousands of investors were asked which steps they'd like their primary broker to take in the next year. Twenty-seven percent said they'd like better buy lists. That made it the third most-favored action, after lower broker fees and better research. Eighteen percent of investors said they want better sell lists.
What are most brokerages doing wrong? For some investors, trade ideas are too simplistic or unsuited to their goals.
"All of the (other) brokers that I know suggest trades based on sales and earnings," said Marvin Pozefsky, a Tastyworks client and options trader who participated in this year's survey.
Investors are inundated with so much "noise," they need their brokerages to help them better use trading tools, said Jeff Chiappetta, vice president of trading services at Charles Schwab.
"I think brokerage firms should offer a little bit more help not only with screening tools but guidance on how to use tools and what to look for," he said. Chiappetta says Schwab is responding to that need with education, from a wide-angle view of the investing world to boiling down the research into individual ideas. Part of the education process is Schwab Live, another online video broadcast that helps clients find actionable ideas. Schwab's training, he added, includes workshops on using screens, the steps of a trade and reasonable expectations for a trade.
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Investing has a steep learning curve, which may explain why investors want more ideas from their brokers, says Josh Rowe-Heupler, general manager for investments at LendingTree/MagnifyMoney. But investors seeking ideas have to ask themselves some key questions. Are they looking for investments or more speculative trades?
Even when they have some recommendations, it's good for investors to be skeptical and do thorough research before investing. "The tip may not be enough." Rowe-Heupler cautioned. "And even then, you might be wrong."
Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia
