Responding to Change
As a law of nature, adaptation is critical to survival. The same is true for Canadian discount brokerages where competition for limited resources is fierce. In the discount brokerage business, however, size and scale while beneficial in some respects, can also make it challenging to keep pace with investor demands for the latest features. When asked how discount brokerages can keep pace with evolving technological demands of Canadian investors, Paquet explained it as follows:
“when you are a smaller company, you’re very agile but you might not always have the budget. If you are a bigger company, you might have the budget, but you might not be as agile as you would love to be”
Thus, for self-directed investors, larger discount brokerages might provide a ‘slow and steady’ approach to adopting new features. Indeed, the ability for any discount brokerage to respond to trends and changes requires being able to ensure that multiple moving parts work well together and with greater size comes greater complexity. For example, ensuring that clients get their tax statements on time requires that systems coordinate huge amounts of data and regulatory requirements across hundreds or thousands of clients – no small feat for many IT departments.
For financial institutions, such as discount brokerages, the stakes are high. Unlike low cost consumer products, financial services are heavily regulated and have lasting emotional impacts – investors are not willing to trust just anyone with their money, and certainly are not willing to be subjected to too many system glitches. Those online brokerages that are able to respond quickly, effectively and consistently will most certainly earn top marks with the growing segment of self-directed investors and those that falter will almost certainly earn their way into heated forum postings.
Conclusion
With an industry that continues to evolve quickly coming out ahead means having to juggle expectations and competition.
For NBDB, getting to first place this year took persistence and strategic innovation. Just because they’re in first though, doesn’t mean that they or their competitors are standing still. Disnat, for example, only lost by a very slim margin in one category and BMO InvestorLine has also been a podium finisher for the past several years. Then there are the brokerages making great strides, such as HSBC InvestDirect who went from an ultra-low score 3 years ago to being right in the middle of the pack this year.
The level-headed perspective Paquet provided for investors who navigate the markets could hold equally true for other discount brokerages. She stated: “People say you only panic when it goes down, but you also panic when it goes up, so keep calm, keep your plan steady and you’re good to go.”
In the next part of the series, I’ll take a deeper look at the numbers from the discount brokerage rankings and what they mean for all Canadian discount brokerages.