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DISCOUNT BROKERAGES CUT COMMISSIONS, NOT CHOICES

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The competition is fierce, and I can't think of a better example of supply vs. demand. I'm talking, of course, about discount brokerages where commissions are getting lower and the number of fund choices is getting higher.

According to Mercer Inc., which tracks commissions, discount brokerage firms have reduced their commissions an average of 6 percent last year, while full-service brokerage firms increased their commissions an average of 3 percent over the past year. Higher commissions and the more and more talked about conflicts of interest in the full-service broker/client relationship really put discount brokers in the spotlight as the way to invest.SMART MONEY. Every year Smart Money Magazine reviews the best and the worst discount brokers, and their latest review was published in the July issue. Who came out on top? You guessed it, Jack White again.

I've always recommended using Jack White, Schwab OneSource, or Fidelity FundsNetwork for their excellent NTF programs. Smart-Money's review of 19 discount brokers gave me an excellent opportunity to review my recommendations and evaluate theirs.

FREE NO LOAD MUTUAL FUNDS. This is the top criteria on my list for whether or not a brokerage program is a good one. And it's not just how many, but how good. Waterhouse Securities, for example, has 192 funds available, but only one was ranked in the top 25 percent of its peer group over the past five years. Why have access to so many funds if none of them are going to give you the performance you want?

Schwab comes out on top in this category. Of the 345 funds available NTF (No Transaction Fee) from Schwab, 90 of them have ranked in the top 25 percent of their peer group over the past five years. Now those are the kinds of funds you want to be investing in.

Schwab ranked number one on this criteria and Fidelity came in number two with 390 funds available NTF, 46 of which were top performers. Third was Muriel Siebert with 360 funds and 34 top performers, while Jack White came in fourth for top performers at 32, but number one for total number of funds available with an amazing 546.

VANGUARD EASES IN THE GAME. Vanguard Discount Brokerage came out number five in this survey with 80 funds available NTF, and 19 top performers. A recent slip from a fund company that Vanguard was starting their own trading program sparked my attention.

While Vanguard was brief with any information about this program since they have not officially announced it yet, I was able to find out a few things about their new program.

1. It's called Fund Access and it's not NTF. There is a fee for each transaction, a flat $35 per trade, but if you trade from one fund to another within the program it's only $60 total. It's not NTF but that's still a good price.

2. There are 185 non-Vanguard funds available in the program and 90 Vanguard funds. That doesn't put them on top as far as total number of funds available, but looking at the families included you can bet there will be some winners

FAMILIES INCLUDED

Vanguard

20th Century

Invesco

Dreyfuss

Benham

Mutual Series

Strong

Newberger and Berman

Warburg Pincus

SteinRoe