• by Tanya Gazdik , October 29, 2007

Scottrade beat out 19 online investment firms to rank highest in customer satisfaction, according to a recent study.

The St. Louis-based firm has achieved the highest rank for the seventh time in eight years, according to the J.D. Power and Associates "2007 Online Investor Satisfaction Study." The study measures customer satisfaction with online investment and trading firms based on performance in five areas: information resources; cost; trade execution; Web site functionality; and interaction with customer service representatives.

Scottrade achieves an overall investor satisfaction index score of 825 on a 1,000-point scale--an 11-point improvement from 2006. The firm performs particularly well in cost and trade execution. Vanguard follows Scottrade in the rankings with a score of 819, performing well in Web site functionality. Charles Schwab, Fidelity Investments and TD Ameritrade also perform above the industry average.

Investors have high expectations of what an online investment Web site should provide them, says David Lo, director of investment services at Westlake Village, Calif.-based J.D. Power and Associates. While these sites were once just a means to make transactions, investors now also rely on them for information and tips, news, and trading rules and regulations.

"Three to five years ago, a lot of these sites started with the notion of just being bare-bones trading sites," Lo tells Marketing Daily. "What you are seeing today are very sophisticated sites that provide real-time information and a lot of additional information resources. The evolution of the sites and what's available on them and the degree to which investors are using the information has really changed over the last few years."

Charles Schwab was tops with information resources, followed by Vanguard, Fidelity and Scottrade. For Web site functionality, Vanguard ranked first, followed by Scottrade and Charles Schwab.

Investors who have access to a local branch office are more satisfied, on average, than those who do not have local access. About 42% of online investors indicate they have access to a local branch office for support, and these customers provide scores that are 25 points higher, on average, than investors who do not have such access. In addition, investors with local access tend to invest more of their assets with that online investment firm and are more tolerant of commissions and fees, compared with investors who don't have branch access. Scottrade has hundreds of offices, Lo notes.

"That's not to say that every firm should build more branch offices," Lo says. "There are firms such as Vanguard that have high investor satisfaction without them. It comes down to each firm's customer base. Active investors tend to require a higher level of customer 'touch' and therefore utilize a branch office to transact and resolve issues quickly. Less-active investors generally do not utilize those services nearly as often."

The study, now in its ninth year, is based on responses from 5,024 online investors who invest with one of 20 firms included in the study. The survey was conducted in July. To view ratings on online investment and trading firms, visit JDPower.com.