About Top Brokerage Performance
What is the best way to pick a full service brokerage firm to help you manage your investments? There are 3 main qualities that you should consider in selecting the firm.
Service: How comfortable do you feel with the investment advisor in terms of competence and trustworthiness? Do they understand your needs and professionally follow through on delivering materials as requested?
Cost: How expensive are the commissions and management fees applied to activity in your account? Have you compared it to other alternatives?
Research Quality: How profitable is the investment advice from their research department versus their peers? Most people don't know the answer to this vital question, but now thanks to the Top Brokerage Performance feature on Zacks.com it is no longer a mystery. And in reality, this is the most important aspect to consider when selecting a brokerage firm. Because if the research is not profitable, then it raises the true cost of dealing with the broker and destroys any satisfaction in their service (not to mention the destruction in your portfolio).
Which Full Service Brokerage Firms Are Measured?
Here is a list of the 12 leading full service firms that we measure as part of Top Brokerage Performance.
- A G Edwards
- Bank of America
- Bear Stearns
- Charles Schwab
- Credit Suisse FB
- Edward Jones
- Goldman Sachs
- Merrill Lynch
- Morgan Keegan
- Morgan Stanley DW
- Raymond James
- Smith Barney Citigroup
How is the Performance Measured?
The leading brokerage firms employ an army of analysts who produce recommendations on hundreds of stocks. It would not be surprising for a larger firm to have Buy recommendations on well over 200 stocks at the same time. This can often be confusing to their clients. That is why the leading firms create a concept like a Core List or Focus List from which to share the firm's favorite recommendations. These are generally large cap stocks meant for more conservative investors.
For each of these top firms we create a simulated portfolio that contains all the stock recommendations on their core lists to determine the percentage return on these investments. This allows us to have an 'apples to apples' comparison of the core lists of the top firms. And it serves as a proxy to show the quality of the overall research from each firm.
How to Read the Performance Table
In the bottom right hand corner of the Brokerage Research home page of Zacks.com you will find an overview of the Top Brokerage Performance table. There you will see the current year's performance as well as the performance over the last 3 years. Underneath the table you will see a link that will take you to the Top Brokerage Performance Details.
Once there you will get more in-depth performance #s (see example of performance table below). The default display on the table will list the firms from best to worst performing in the most recent time period. However, you can also click the heading of any of the other columns to have the table resort from best to worst for the other time periods such as the 5 year period.
Brokerage Performance
| Name | 1st Q 2006 | 1 year | 3 Year | 5 year | 7 year |
|---|---|---|---|---|---|
| SMITH BARNEY CITIGROUP | 8.65% | 16.04% | 25.10% | 4.25% | -0.85% |
| RAYMOND JAMES | 8.50% | 26.21% | 20.41% | 3.70% | 7.79% |
| BEAR STEARNS | 8.08% | 10.81% | 17.08% | 6.24% | 4.57% |
| GOLDMAN SACHS | 7.98% | 21.27% | 28.52% | 3.64% | 4.21% |
| CHARLES SCHWAB | 7.24% | 22.19% | 25.63% | 12.95% | NA |
| MORGAN STANLEY DW | 4.78% | 19.89% | 22.22% | 5.07% | 3.22% |
| CREDIT SUISSE FB | 4.58% | 12.99% | 19.53% | 6.67% | 6.53% |
| MERRILL LYNCH | 4.34% | 17.35% | 18.58% | 5.70% | 7.67% |
| EDWARD JONES | 3.19% | 5.35% | 15.38% | 3.68% | 2.23% |
| A G EDWARDS | 2.88% | 8.10% | 17.68% | 2.35% | -0.20% |
| BANK OF AMERICA | -2.83% | 5.80% | 17.91% | NA | NA |
| S&P 500 | 4.21% | 17.22% | 0.20% | 3.97% | 1.66% |
*Annualized returns for 3, 5 and 7 years.
What Stocks Are They Recommending Now?
The top brokerage firms realize that stock recommendations are amongst their most valuable assets, which they only want to make available to their clients. So even though Zacks is allowed to track the individual stocks recommending by the firms for performance calculations, we unfortunately are not allowed to share with you the specific recommendations from each firm. But we do have the next best thing; Brokerage Buy List.
The Brokerage Buy List is a model portfolio that consists of any stock that is on the Core list of at least 3 of the top 12 firms. These firms actively promote these Core stocks to their institutional and retail clients, which often drives up the price. We are allowed to share this with you because we do not name which specific firms are making the buy recommendations for these stocks. It is sound reasoning to assume that if 3 or more of these firms are on board then there is very good odds that the stock should outperform the market.
Resources
Top Brokerage Performance Table
All Star Analyst Survey: Zacks computes the stock recommendations returns for every analyst on Wall Street. Who are the best in the business and what stocks are they picking now? You find the answers with our All Star Analyst Survey.
All Star Analyst Portfolio: The most highly recommended stocks from the 5 Star (Best) Analysts.
