How Investor Ratings Of Top Brokers Were Calculated


Investor's Business Daily and TechnoMetrica partnered to conduct the study of online brokers on which this special report is based.

Our goal was to measure the customer experience and satisfaction of investors with their primary online brokers. We divided the research into two phases.

In Phase I, we identified and ranked the broker characteristics most important to investors. The editors of IBD and TechnoMetrica identified 20 potential attributes of online brokers to evaluate.

Last August, 1,400 visitors to IBD's participated in the Phase I survey .

The survey tested 20 potential attributes using the MaxDiff method, which helps determine the relative importance of attributes. Investors were presented with combinations of the attributes and asked to identify which attributes were most and least important to them.

Based on Phase I data, TechnoMetrica narrowed the 20 attributes to 12. We also developed the weights that should be assigned to each of the 12 attributes to compute an Overall Customer Experience Index for each broker.

In Phase II -- from September to November -- 10,250 visitors to the IBD website took part in the survey.

Of the 34 online brokers explicitly listed in the questionnaire, 16 had at least 100 respondents.

Our analysis in this report is limited to the 16 brokers. Survey respondents rated their past six-month experiences with their primary broker using a five-point scale (Excellent, Very Good, Good, Fair and Poor) for the 12 attributes.

For each broker attribute, we developed a Customer Experience Index using the question: Based on your experience with your primary online broker during the past six months, how would you rate your primary online broker?

We measured the Customer Experience Index as the difference between the percentage of respondents giving ratings of Excellent and Very Good and the percentage who gave ratings of Fair and Poor.

For example, if 30% of respondents rated customer service of a broker as Excellent, 26% Very Good, 20% Good, 13% Fair and 11% Poor, we calculated the Customer Experience Index to be 32% (56% less 24%).

This report presents the five brokers with the highest Customer Experience Index for each of the 12 attributes.

To arrive at our Overall Customer Experience Index, we combined the subindexes for all 12 attributes using the weights we developed in Phase I. The five online brokers with the highest ratings in this index make up our Top Overall Customer Experience list.

Mayur is president of TechnoMetrica Market Intelligence.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks:

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