Investor satisfaction with specific discount brokerages
When we looked at the standard deviations of the scores from each year, we noticed that over time these deviations were getting larger, implying that some discount brokerages were pulling away from the average at the high end as well as at the low end. The plain English translation: some companies were scoring far better than others when it came to investor satisfaction in 2012 than in 2009. The “improvements” that have been made by Canadian discount brokerages have not been “across the board” and certainly not in areas that are the most important to the investor satisfaction rating definition. Instead, it appears that there are individual performances that need to be looked at to see where the variability might be coming from.
Table 1: Company Scores from J.D. Power and Associates Discount Brokerage Investor Satisfaction Study from 2009 to 2012
| Overall Rank | Company | 2012 | 2011 | 2010 | 2009 | Average (2009-2012) | Standard Deviation | Datapoints |
|---|---|---|---|---|---|---|---|---|
| 1 | Disnat | 768 | 729 | 725 | 723 | 741 | 21 | 4 |
| 2 | National Bank Direct Brokerage | 719 | 724 | 716 | n/a | 720 | 4 | 3 |
| 3 | BMO InvestorLine | 720 | 699 | 720 | 698 | 713 | 12 | 4 |
| 4 | TD Waterhouse | 707 | 693 | 706 | 690 | 702 | 9 | 4 |
| 5 | RBC Direct Investing | 687 | 677 | 706 | 714 | 690 | 17 | 4 |
| 6 | Questrade | 690 | 676 | 686 | n/a | 684 | 7 | 3 |
| 7 | CIBC Investor’s Edge | 686 | 640 | 668 | 689 | 665 | 23 | 4 |
| 8 | Scotia iTrade | 656 | 633 | 668 | 661 | 652 | 15 | 4 |
Looking at the scores of individual discount brokerages, what immediately jumps out is the performance that Disnat has managed to produce over the past four years. Not only were they ranked highest in each of the four years of the survey, but their numerical scores have also improved each year with this past year getting the highest score (768 out of 1000) ever achieved by a Canadian discount brokerage on this survey. When compared with the rest of the Canadian discount brokerages, no other discount brokerage has managed to show as consistent an improvement on the investor satisfaction survey year over year. Statistically, 2012 for Disnat is one in which they blew past the field and placed over 2 standard deviations ahead of the average. When compared to their performance from the prior 3 years, 2012 was even more anomalous. What all of this means is that according to those surveyed, Disnat clients report themselves to be extremely satisfied relative to the rest of the discount brokerage industry and relative to prior years.
Even though they are numerically not contained within the “top 10 percent” BMO Investorline and TD Waterhouse Discount Brokerage have put in consistent performances over four years. Interestingly, National Bank Direct Brokerage’s scores have remained consistently at the higher end of the pack, suggesting that whatever they are doing is keeping them close to the top.
If consistency of performance is one important metric, it is also interesting to shine a light on Scotia iTrade which has ranked last in each year of the J.D. Power investor satisfaction survey. Although they have numerical scores that continue to put them in last place, statistically their performance is improving. Similarly, CIBC Investor’s Edge has, at least statistically, managed to improve their performance to become closer to the industry average, doing so much more substantially than Scotia iTrade.
A discount brokerage that is clearly slipping in terms of investor satisfaction is RBC Direct Investing. While numerically it may not seem like a large shift, relative to the industry average they are doing 10 times worse in 2012 in terms of investor satisfaction than they were in 2010 i.e. in 2010 they were only 0.04 standard deviations below average, in 2012 they are 0.42 standard deviations below average.
Three discount brokerages that we were not able to get sufficient data on from the J.D. Power investor satisfaction survey were Qtrade, Credential Direct and HSBC InvestDirect.