The Best Online Brokers for 2022: Tools for Navigating a Complex Investing Environment

Russia's invasion of Ukraine has wreaked havoc on the global economy in ways that were unthinkable only a few weeks ago. Energy, supply lines, commerce, and financial institutions have all been disrupted throughout the globe. Meanwhile, interest rates are increasing, inflation is soaring, and tens of thousands of new investors have flooded into the market during the last two epidemic years. It's little surprise that equities have been roiled by crosscurrents that are sometimes difficult to discern, much alone chart.

How does the self-directed investor handle his or her finances？ With difficulty—even for the most seasoned and level-headed among us.

This year's Barron's annual evaluation of internet brokerages comes at a particularly perilous time. This kind of turmoil is foreign to many younger investors. More than 13 years ago, the world experienced a financial catastrophe. And, except for a brief, though sharp, Covid-related downturn in March 2020—a time before many of today's investors purchased their first stocks—almost a complete generation has experienced consistent, upward trend inequities.

It was a harsh revelation. For the first time in 2020 and 2021, millions of enthusiastic young investors flocked to trading platforms. They were often drawn in by sleek, user-friendly trading applications and entranced by the cacophony of the crowd, which was magnified on social media. This reached a climax in early 2021, when internet message boards, notably Reddit's WallStreetBets, drummed up a craze for battered stocks such as retailer GameStop (ticker: GME) and movie-theater operator AMC Entertainment Holdings (AMC). The phenomenon of so-called meme trading made headlines. It now seems to be a cute epidemic distraction.

Are investors ready？ These markets require cold analysis and contemplation, not passionate ranting. Investors want complex strategy and precise analyses, not rash peer statements. This generates a desire for websites that can combine market data with personal holdings, filter expectations, and do various functions quickly and effectively. The finest brokerages strive to fulfill these and other obstacles. Others, though, fall short.

The 27th annual Barron's Best Online Brokers Survey will be held this year. We put financial-technology applications in the approved mix for the first time. We chose three of the most well-known to examine: Robinhood Markets (HOOD), Webull Financial, and SoFi Technologies (SOFI). To make space, we removed SogoTrade, TradeStation, and TradingBlock, brokerage sites that did not attract the numbers touted by the best financial-technology firms, or fintech, or accomplish much in previous rankings. We added another feature: a large bank. JPMorgan Chase's (JPM) J.P. Morgan Self-Directed Investing decided to participate in the poll this year after rejecting to do so the previous two years. And, once again, Vanguard refused to comply. We examined a total of a dozen trading platforms.

We performed remote interviews with all of the businesses that offered site demonstrations, as we did last year. They also answered 80 survey questions verbally and in writing. We then worked our way through their platforms on our own. The evaluations represent a baseline awareness of what is available, which improvements have happened in the last year, and which inadequacies remain.

As we describe in our methodology description, we continue to place a priority on brokers that provide useful, well-designed tools for mainstream, self-directed investors. If mobile-only sites suffer, so do brokerages that eliminate aspects that an active trader or investor needs. Our top-rated brokers represent the breadth and complexity of the markets and investors they serve.

The best brokerages continue to astonish by appealing to the broadest possible spectrum of consumers. None outperform Interactive Brokers Group (IBKR), which won for the sixth year in a row. This time, the Greenwich, Conn.–based firm triumphed by a 13-point margin over runner-up Fidelity Investments, which tied for top two years ago and finished a close second the previous year.

E*Trade and Charles Schwab (SCHW) tied for the third position, while TD Ameritrade finished fifth. In comparison to the previous year's rankings, Schwab rose two spots, E*Trade rose one, and TD Ameritrade declined two. TD Ameritrade is owned by Schwab, whereas E*Trade is a subsidiary of Morgan Stanley (MS).

Merrill Edge finished sixth, slightly ahead of tastyworks in the eighth. Webull finished ninth, which was a very acceptable finish.

Following that, the totals plummet dramatically. Ally Invest was ninth, with Robinhood and J.P. Morgan tied for tenth. SoFi was in charge of bringing up the rear.

The majority of brokerages' ratings improved. We'd like to believe that this is less a case of grade inflation and more of a case of constantly adding new features, technologies, and insights on top of a good foundation—in other words, becoming better.

Despite significant obstacles, they succeeded. None was more significant than accommodating millions of first-time traders, an attack that started in 2020 with Covid stimulus checks, lockdowns, and stay-at-home ennui and only escalated in early 2021. “Meme trading, for all its absurdity, spurred the expansion of retail investment, which had taken off in 2020,” says Christopher Larkin, managing director of E*Trade's digital brokerage platform. “That was an unexpected industrywide growth trend that we all noticed.”

While practically all brokerages saw huge growth in client numbers, the lion's share of attention was focused on Robinhood, whose user base almost quadrupled to 21.3 million in the first half of the year, a staggering figure. In July, Robinhood went public. Last year, half of the firm's customers were first-time investors, according to the company.

That type of precipitous ascent costs a lot of money. During the peak of the meme trading craze, Robinhood struggled to keep up with the volume, volatility, and clearinghouse deposit requirements. It was compelled to halt trade on several meme stocks, including GameStop and AMC, in late January 2021. This resulted in regulatory scrutiny, litigation, and a great deal of ill will. And, at the time, Robinhood lacked a customer support phone number.

In the second half of 2021, Robinhood lost four million users. Some dropped out, while others changed their minds. “We have a joke that Robinhood is their first account, and Webull is their second,” Webull CEO Anthony Denier explains.

Much has been made of the fast rise of fintech applications and how they compare to conventional brokerages in recent years. These applications are often long on appearance and feel but short on content. This comes at a cost, with opponents warning about applications that make stock trading as simple as downloading a movie and as fun as legalizing sports betting.

“Design is an area where fintechs consistently shine.” They're making it easy to comprehend. They're employing simple terminology. Jen Taylor, senior director of research at Corporate Insight, a financial-services research and consulting organization, describes the experience as “obvious.” “Where they fall short is in the amount of information.”

However, the distinction between fintech and online brokerage is not always clear. Webull excellently illustrates that a fintech might compete with online brokerages in both content and appearance. “Our type of trader is similar to that of a [TD Ameritrade's active site] thinkorswim customer that utilizes these advanced tools, charts, to try to be a smarter trader, to try to make better intraday trades, longer-term decisions based on charting, on real analysis, rather than what people are talking about on Reddit,” Denier says.

In the second half of 2021, Robinhood lost four million users. Some dropped out, while others changed their minds. “We have a joke that Robinhood is their first account, and Webull is their second,” Webull CEO Anthony Denier explains.

Much has been made of the fast rise of fintech applications and how they compare to conventional brokerages in recent years. These applications are often long on appearance and feel but short on content. This comes at a cost, with opponents warning about applications that make stock trading as simple as downloading a movie and as fun as legalizing sports betting.

“Design is an area where fintechs consistently shine.” They're making it easy to comprehend. They're employing simple terminology. Jen Taylor, senior director of research at Corporate Insight, a financial-services research and consulting organization, describes the experience as “obvious.” “Where they fall short is in the amount of information.”

However, the distinction between fintech and online brokerage is not always clear. Webull excellently illustrates that a fintech might compete with online brokerages in both content and appearance. “Our type of trader is similar to that of a [TD Ameritrade's active site] thinkorswim customer that utilizes these advanced tools, charts, to try to be a smarter trader, to try to make better intraday trades, longer-term decisions based on charting, on real analysis, rather than what people are talking about on Reddit,” Denier says.

That implies brokerages must provide more targeted primers on options and other products, ones that are rich in explanation and short on jargon yet creative enough to garner adoption.

The dichotomy of fintech/brokerage isn't the only one. Most businesses began as brokerages and grew from there. Some, on the other hand, were founded as divisions of much bigger financial companies. Three of them were surveyed: Ally Invest, J.P. Morgan Self-Directed, and SoFi Invest. They all position their investments as part of a larger financial services continuum, and their websites and mobile applications reflect this. Herein is the issue. Investing is one of the various items that are equally weighted. A savings or mortgage account is as prominent on them as a brokerage account.

While these financial-services firms strive for a centralized website, several brokerages are taking the opposite approach and releasing more-specialized applications. Interactive Brokers, for example, recently launched two: one focusing on socially responsible investment and the other on global markets. According to Taylor, this trend is reminiscent of a plan abandoned a decade ago in favor of a single app. “It'll be fascinating to watch how it develops,” she adds.

While brokerage mergers have slowed, several major players are still undergoing post-merger integration. Charles Schwab purchased TD Ameritrade in 2020, and Morgan Stanley bought E*Trade. IG Group Holdings (IGG.UK) of the United Kingdom purchased tastytrade, delicious works parent, early last year. The success of these transactions will have an impact on the future of self-directed investing. This is particularly true for the Schwab–TD Ameritrade merger, which has the potential to become an even more powerful online brokerage than the two are present.

Brokerages are still looking for acquisitions that may provide specialized products or expertise. One example is direct indexing, which allows you to follow an index by sampling individual companies rather than depending on mutual or exchange-traded funds. For years, wealthy individuals and institutional investors have used separately managed accounts, or SMAs, to participate in direct indexing. Interactive Brokers currently provides direct-indexing capabilities to self-directed customers, and Fidelity just stated that it would create a direct-indexing product for a $5,000 minimum investment in the coming months.

Several specialist businesses succeed in this field. When Schwab purchased Motif in 2020, it set the standard. Last year, Morgan Stanley acquired one of the field's notables, Parametric Portfolio Associates, by purchasing Eaton Vance, the parent company of Parametric. Vanguard purchased Just Invest, while JPMorgan Chase purchased 55ip.

Schwab filed paperwork in September announcing the commencement of a pilot project in direct investing SMAs, with a rollout planned this year. Schwab's minimum investment is $100,000, and it will be promoted via financial advisers, but many anticipate that the corporation would ultimately employ the technology for self-directed investors, a process made simpler by fractional-share trading.

In mid-March, Schwab joined the increasing trend by launching a suite of 45 themed stock lists. Thematic investing is another manifestation of self-directed traders' desire for more control over their holdings.

Of course, there are cryptocurrencies, which are growing in popularity, though not always activity. Currently, internet brokerages are split. Independents are keen to provide Bitcoin, ether, and other cryptos, with Interactive Brokers being the most recent. Firms that are part of bank holding corporations, on the other hand, cannot be forbidden by at least three US government agencies. Many, though, claim they are planning to do so once the government gives the go-ahead.