Online Broker Commentary

Comments on “Comparing the Most Popular Online Brokers,” by Jaclyn N. McClellan, CFA, and Charles Rotblut, CFA, in the January 2019 AAII Journal:

The article comparing online brokers in the January 2019 issue is missing an important criterion, which is how well the brokerage interacts with personal finance software. I use Quicken and download transactions from several financial institutions. Some institutions are better at this than others in terms of the quality of the information they send. For example, Fidelity often incorrectly reports mutual fund capital gains distributions as dividends. It also often erroneously reports reinvestments as purchases. This requires the user to manually correct the errors if accurate reports are important. On the other hand, Morgan Stanley is virtually perfect when it sends transaction information to Quicken.
—Bob W. from California

What is missing from the broker article is any discussion of the broker paying or not paying interest on cash balances. I’ve made inquiries to brokerages on this very issue. The ones that pay market or near-market rates give out the information immediately upon request, and it’s easily found on their websites. The broker whose representatives “had to ask the fixed-income experts” pays a small fraction of 1%.
—LR from New York

I noticed there was no mention of which brokers provided the means to “paper trade.” While that function may be beyond the more experienced and sophisticated investors, I still find it useful for low-risk testing of investment strategies. Right now, I think only TD Ameritrade has this capability on their thinkorswim platform.
—Elmer Davis from Maryland

Interactive Brokers has paper-trading functionality. Their current allocation is $1 million. I find it a very difficult platform to successfully make the correct trades I want, and the commission structure is difficult for me to track (auto-compute) in my tracking spreadsheet. I have several friends who are successful in using the platform and the fees are razor thin at times.
—Bruce Bohannon from Illinois

Interactive Brokers’ customer service is horrible, and the web-trader is bad at times, goes into a hang with multiple accounts. But the price is unbeatable.
—MS from California

Schwab’s handling of the required minimum distribution (RMD) for taxable IRAs for us old folks makes it easy as they take care of all the details—no charge. I have some positions that report with K-1s inside an IRA, and they handle all the tax reporting and payments—no charge. And now I am considering their trust services in our estate planning through their bank in Nevada with fees currently much lower than traditional trust departments of banks, plus their planned use of no-fee or low-fee exchange-traded funds (ETFs) for managing an estate. We are happy customers of over several decades now.
—Harlan from North Carolina

40 Years of the Individual Investor

Comments on reprint of 1979 article “The Position of the Individual Investor,” by James B. Cloonan in the January 2019 AAII Journal:

I am a life member of AAII. I joined in the early 1980s. It was a good investment. I think AAII should commemorate the 40 years of the AAII Journal by observing the tremendous changes made that benefit the individual investor. Commission-free online trading has eliminated the need for brokers and commissions. Proliferation of index mutual funds and the rise of ETFs have allowed investors to play the averages and take advantage of lower fund costs. This is all to the good. When looking at one’s own accounts, there are now websites that allow individuals to view asset allocations, risks, costs, etc. Tax law changes over this time also seemed to have worked in favor of the individual investor who put money in Roth IRAs.
—Anonymous from United States

Clarification on “The Individual Investor’s Guide to Personal Tax Planning 2018”

An AAII member asked for clarification in regard to the $10,000 limitation on state and local taxes (SALT). The cap applies not only to state and local income taxes but to property taxes as well. Sales taxes can be used in lieu of income taxes. Any combination of state and local taxes exceeding the limitation cannot be deducted.