Special Series: Review of Globe and Mail’s Discount Brokerage Rankings – Part II

Interesting Findings – The Value of History

Taking a step back and looking across the landscape of the Canadian discount brokerage industry as described by the Globe and Mail rankings, we noted some interesting observations.

The first was the relative constancy of the size of the industry over time.  While the players have changed between 2002 and 2012, the numbers of those players has remained steady at about 12 (not counting Interactive Brokers). The constancy could be telling of how many discount brokerages the Canadian marketplace can reasonably support before a company exits either through acquisition or by folding operations.  Earlier this year we saw OptionsXpress elect to exit the Canadian market, passing its accounts over to Virtual Brokers, a signal that perhaps the market was not economical to pursue alongside so many other competitors.

Another interesting observation was who has been on the list the longest. The veterans of this ranking (having appeared in all of the rankings we looked at) include BMO InvestorLine, CIBC Investor’s Edge, Credential Direct, Disnat, National Bank Direct Brokerage, Qtrade, RBC Direct Investing (formerly RBC Action Direct) and TD Waterhouse (now TD Direct Investing).  Of those names, BMO InvestorLine and Qtrade have dominated first place having achieved the top ranking 10 out the past 11 years.  Overall Qtrade has a slight edge over BMO InvestorLine with an average rank of 2.3 versus a rank of 2.4 respectively (see the table below). Interestingly, most of the long appearing discount brokerages listed are “bank owned” discount brokerages and so with the exception of BMO InvestorLine, the Globe and Mail survey is not somewhere that “bank owned” discount brokerages shine.

Company	Average Ranking Score	# of times in ranking between 2002 – 2012
	2.3	11
	2.4	11
	4.5	4
	4.6	11
	5.3	3
	5.5	11
	6.2	11
	7.3	11
	9.3	6
	9.6	11
	9.8	11
	11.6	9
	N/A	N/A
	N/A	N/A
	N/A	N/A

At the bottom end of the list, HSBC InvestDirect and National Bank Direct Brokerage have consistently performed very poorly in these rankings. In fact, when we took the average ranking of discount brokerages between 2002 and 2012, the poorest performers (from worst to best) were HSBC InvestDirect, Disnat (classic) and National Bank Direct Brokerage.  This was a very interesting finding as both Disnat and National Bank Direct Brokerage have consistently placed at or near the top of the J.D. Power and Associates Investor Satisfaction Survey for the past four years.

By looking at the historical data, what clearly stands out is the extent to which discount brokerages prioritize evolving with the times.  Looking across the ranking commentaries, it is evident that certain companies are much more responsive to change than others. Responsiveness to change is something that consumers ought to pay attention to because who they choose to open an account with today is also who they’ll be doing business with in the future.