Staying on top is harder than getting there, if only because everyone is gunning for the No. 1 slot and trying to co-opt what the leader does right.
But for the fifth year in a row, Charles Schwab (SCHW) clients gave the firm the highest score for customer service in the IBD Best Online Brokers survey. Schwab also had the highest share of customers in the "very satisfied" category for the fifth year in a row and had the highest rating for website performance for the second consecutive year.
Schwab moved Thursday to endear itself to clients a bit more, announcing it will slash its standard commission on stocks and exchange traded funds from $8.95 to $6.95, effective Feb. 3. Also, expenses for index mutual funds will be lowered beginning March 1, and investment minimums will be eliminated for these funds. Additional details were outlined in a Schwab news release on the commission cut.
Brian McDonald, senior vice president of service and support, says customer service is "the biggest part of the culture" at Schwab.
"Everything we do starts with: 'See through the client's eyes,' " McDonald said in a phone interview with IBD.
While the motto might sound like something most companies would pay lip service to, Schwab has walked the walk from the company's beginnings.
"Our primary audience is the individual investors," McDonald said.
The rankings are based on a major annual survey by Investor's Business Daily and TechnoMetrica Market Intelligence in which thousands of investors evaluate how well their own brokers measure up in 13 critical performance areas. The best brokers overall are determined based on their ratings across all of the categories.
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Schwab has placed as one of the top two brokers in Overall Customer Experience in all five years of the study.
bobboxschwab020217updateSchwab also ranked in the top three this year in 11 of the 13 performance categories, including the highest ratings in four of them.
Forty or 50 years ago, Wall Street brokerages played a crony-capitalism game that favored the big players and the brokerages themselves. The idea that the individual investor mattered was laughable.
But when the Securities and Exchange Commission deregulated the brokerage industry in May 1975, Charles R. Schwab grabbed the opportunity. Schwab developed and popularized the discount brokerage, making himself a hated man on Wall Street.
Schwab unleashed a trend that accelerated. With the latest cut in commissions to $6.95, Schwab has now undercut many of its major rivals, including Fidelity, TD Ameritrade (AMTD), E-Trade (ETFC) and Vanguard. In stock market trading Thursday, online broker shares fell sharply on the potential for a price war. The stocks recouped some of their losses early Friday.
Low fees was one area where Schwab was not in the top three in the IBD-TIPP survey. The action to cut fees improves Schwab's position.
Another critical area is trade reliability, one of the categories where Schwab received the highest rating in the IBD-TechnoMetrica survey.
Many companies nowadays try to do customer service on the cheap, which seldom works out. Nearly every consumer can tell a frustrating story about dealing with an outsourced customer service department in a foreign country.
Schwab avoids that problem by providing multilingual international services including Mandarin, Cantonese, Vietnamese and Spanish, and by not outsourcing U.S. customer service.
"Our approach is that we want to have a great deal of control on the service experience," McDonald said. The goal at Schwab is to build a team of "financial service professionals," he said. Passion and integrity is what Schwab looks for and works to develop in the team.
The website is another area where many a company can fumble. This is another area where Schwab wins a top score from its clients.
"We focus on simple, intuitive, powerful research — up and running," McDonald said.
The Keynote Brokerage Performance Index confirms IBD's findings. Keynote measures how well and how fast an online transaction is handled. In the week ended Jan. 8, for example, Schwab was No. 1 among brokerages with a total response time of 4.26 seconds.
Schwab clients also gave it especially high marks in ETF choices. Bloomberg recently noted Charles Schwab has lured more than $10 billion to its exchange traded funds this year. Five years ago, Schwab wasn't even in the top 10 of ETF managers by assets. Now it's ranked fifth, with $54 billion in its 21 ETFs.
Today Schwab is a more far-reaching company than it was in the 1970s. Services offered now include financial consulting, retirement tools, helping clients find an independent advisor, assistance for employers, and even instruction on becoming a Schwab franchisee.
A version of this story was published Jan. 30, 2017.