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Coin Grading Service Rankings - Is the Three Tier System Enough?

Should We Use a Five Tier Ranking System for Coin Grading Services?

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Coin grading services, which are the companies that grade and authenticate a coin and put it in one of the tamper-proof hard plastic cases called "slabs," are generally categorized as belonging to one of three "tiers," or quality of service categories. Placement in these tiers is based upon the perceptions of the hobby as a whole, collectively, and isn't any kind of formalized system which is dictated by any official organization.

The Top Tier Grading Services

In the three tier system the first tier, usually called the "top tier," is reserved for the two largest grading services, PCGS and NGC. Both of these services are perceived to be about equal in the reliability and consistency of their grading standards. Both services use a consensus method of grading, where two graders independently evaluate a coin; if they differ, a third grader serves as tie-breaker. If three different grades emerge (practically unheard of) they all sit down and talk it out to arrive at a consensus. This method produces extremely consistent grading. Top tier companies also guarantee their grades and the authenticity of the coins in their holders.

Because of the great consistency in grading, and the guarantees the services offer, coins in PCGS and NGC holders trade sight-unseen, at premium prices over what coins with the same grade in second tier holders trade at. There is no real dispute that PCGS and NGC are both top tier companies, and the only two companies to enjoy top tier status.

Second Tier Grading Services

Second tier grading services are those that are generally respected for their ability to authenticate coins (and their guarantees regarding such) but are not as consistent or strict in their grading standards. The two companies generally considered to be second tier companies are ANACS and ICG. Both companies have been around for many years, but they don't have the same cachet that PCGS and NGC have, mostly because of ownership and management changes that have resulted in varying philosophies of doing business over the years. Both companies charge much lower fees than the top tier companies, and usually have the coins back to the submitter much sooner, too. The lower fees and faster turnaround times are the primary reasons why these companies can stay in business against the big boys in the top tier.

Third Tier Grading Services

In the current breakdown of the grading service tiers, the bottom tier is reserved for literally everyone else doing business as a grading service. This includes slightly better-known and more or less semi-reputable companies such as PCI and SEGS. But this tier also includes outright scammers, and self-slabbing dealers, along with every other fly-by-night enterprise that buys coin cases from Amos or somewhere and makes up their own "slabs."

I propose that we expand the three tier system to five tiers, so that we can more effectively differentiate between the large cluster of grading services at the bottom of the tier system.

Proposed Five Tier Grading Service Ranking System

Top Tier Grading Services - This tier stays the same - PCGS and NGC are the only two grading services in the top tier.

Second Tier Grading Services - This tier stays the same - ANACS and ICG are the only two companies currently in this tier.

Third Tier Grading Services - The third tier will include grading services that have demonstrated longevity, that have strong guarantees for authenticity, that make some reasonable attempt to be consistent about their grading, and whose grading more or less conforms to a published standard. The companies in this tier aren't exactly gems, but they're better than the slags in the bottom tier.

Fourth Tier Grading Services - This tier will contain self-slabbing dealers who are major players in the business (large scale operations, e.g. those that run weekly full page ads in major coin related publications such as Coin World and Numismatic News, or sell on TV shopping channels, etc.) This tier does not include smaller self-slabbing dealers, such as eBay sellers and dealers who do local coin shows. The primary qualifier for this category (over the bottom tier) is that the end buyer has some reasonable expectation of a replacement or compensation should the coin turn out to be fake or not as stated on the insert (grade excepted.) In other words, if the insert says the coin is a 1909-VDB but the coin in the holder lacks the VDB, the company would exchange it for the proper coin.

As a general rule, grading services in the fourth tier are not reliable graders, but the coins should be genuine and the buyer should have some short to medium term recourse for misidentified and possibly egregiously misgraded coins.

Bottom Tier Grading Services - Note that I do not propose calling this tier the "fifth tier." This tier really is the bottom of the barrel; the small-time dealers who self-slab ridiculously overgraded coins, or the third-party grader who "specializes" (read only grades) in MS-60 through MS-70. The most well-known and classic example of the bottom tier grading service is Star Grading Service (SGS.) The only grades they issue are 60 through 70, no matter how bad the coin is! Whenever I get complaints about graded coin value fraud, SGS is the most frequently cited grading service!

Part of the reason I don't want to call the bottom tier the "fifth tier" is to more easily dovetail this proposed system with current usage, where people who don't want to insult SEGS and PCI by grouping them with services like SGS often place SGS in a "fourth tier." Using the language I propose here, we can now differentiate between "poor" companies, "unacceptable" companies, and outright scammers by placing the scammers at the "bottom tier." (The "poor" and "unacceptable" rankings are from the PNG 2006 Grading Service Survey.) Plus, we now have a place for the major self-slabbing dealers, which fall through the cracks entirely under the three tier system.

What do you think about this proposal? Please share your thoughts with me about grading service rankings.

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