Why only Canadian ETFs and why only for a limited time?
Given the diversity of offerings of Canadian ETFs, there is certainly a healthy selection of possible investments to choose from (over 250) covering different sectors, strategies and asset classes.
In an environment where other Canadian discount brokerages are offering access to popular US based ETFs as a standard part of their packages, we were curious as to what prompted National Bank Direct Brokerage to structure this promotion in the way they did.
To help us answer those questions, we asked two representatives from National Bank Direct Brokerage, Nancy Paquet, President, and Martin Gagnon, Senior Vice President of Wealth Management about the decision to focus on Canadian ETFs and why they chose a short period for this offer.
Clients buy Canadian
According to Gagnon, part of the decision to provide commission free trading to Canadian ETFs was prompted by the preferences of many of National Bank Direct Brokerage’s clients. While some clients do trade US ETFs, a larger number prefer Canadian ETFs.
When asked about the competition’s offering in the ETF space, Gagnon pointed out that this is “one of the most aggressive” ETF offers currently available because clients are allowed to buy and sell all Canadian ETFs. While we won’t analyze their offering in detail here, the table below provides a quick comparison of the other discount brokerages offering commission-free ETF trading.
| Company | Number of Commission Free ETFs | Minimum Trade Amount | Hold Period (minimum) | Details Link |
|---|---|---|---|---|
 |
All Canadian ETFs (>250) | $5000 | 1 business day | National Bank Direct Brokerage Commission-Free ETF Plan |
 |
60 | $1000 | 1 business day | Qtrade Commission-Free ETF Plan |
 |
All ETFs* (only buys are commission-free) | $0 | None | Questrade Commission-Free ETF Plan |
 |
50 | $0 | 1 business day | Scotia iTrade Commission-Free ETF Plan |
 |
All ETFs* (only buys are commission-free) | $0 | None | Virtual Brokers Commission-Free ETF Plan |
The strength of this offering is that it strikes a balance between access and cost. On the one hand buying and selling are commission free (once the trade commission is reimbursed) for three months. On the other, there is a relatively high minimum order size. For medium to larger portfolios, however, the minimum order size may not be an issue.
While pricing and selection are certainly components to consider, Paquet also highlighted the support National Bank Direct Brokerage provides around ETFs. Products such as ETF research reports (prepared by National Bank’s Director of ETF Research & Strategy, Pat Chiefalo), seminars to orient investors on ETFS and a dedicated ETF research section online are extras this discount brokerage hopes self-directed investors consider when looking at their offering.
In terms of the three month time frame of the offer, Gagnon mentioned that providing an ETF-focused offering has been in the works for some time. This offer, while time limited, will give National Bank Direct Brokerage the opportunity to assess how they would like to build out their ETF offering to clients at the end of this promotion.
The Bottom Line
Given the competitive landscape for discount brokerages in Canada, National Bank Direct Brokerage’s offering is certainly an attempt to keep pace with other discount brokerages offering commission-free ETFs. The diversity of Canadian ETFs currently available means that there are many different types of investing strategies that can be supported by the ETFs now on the Canadian market. An added benefit of using the Canadian ETFs is the currency hedged exposure to major US indices and the increased competition that is keeping management fees low.
The structure and timing of this promotion mean that existing clients may find it more appealing than new clients even if it is for a limited time. If this promotion generates enough interest, however, the commission-free ETF club may just have to make room for one more.