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Discount Brokerage Weekly Roundup – January 17, 2014

Wilson vs KaepernickStaying on top of all of the discount brokerage action going on this January feels a bit like chasing either Russell Wilson or Colin Kaepernick around the field.  The competition between these two elite quarterbacks pales in comparison, however, to that of Canadian brokerages.

This past week saw a game-changing commission drop announcement by a major bank-owned online brokerage that has probably got the other brokerages scrambling.  Against the backdrop of that news, there were still yet more deals being announced and the investor forums were ablaze with cheers and jeers on what it all means.    Let’s kickoff this week’s roundup with the biggest news from RBC.

RBC Direct Investing Drops Commission Pricing

It was tough to measure what dropped further this week: the prices for commissions at RBC Direct Investing or the jaws of their competitors.  RBC lowered the boom this week with their announcement that their standard commission rate is now $9.95 flat for all clients.   The reactions were swift across social media and on forums as to the gravity of this announcement and what it means for investors as well as the discount broker competitors.  While most of the reactions were positive, there were reactions from some individuals that felt that customer service wait times would be bogged down by the flood of new clients.

How things play out is only something we can wait and watch however to put it into perspective, the price drop from ~$29 down to $9.95 puts RBC Direct Investing’s commission pricing in line with that of the lowest cost discount brokerages – Questrade and Virtual Brokers.  The fact that they’re offering $9.95 flat means that in some instances, RBC may be cheaper because they won’t be passing through ECN fees.  Of course, in addition to lowering the price, they’ve also simplified it.  Gone are the days of elaborate calculations as to what the commission charge will be for a stock under a certain price and of a certain order size.

In a nutshell, while investors stand to benefit from the move and for RBC Direct Investing’s competitors, especially the lower cost brokerages, are going to have to get very creative and/or very efficient. Introducing steep inactivity fees or raising fees is no longer a viable strategy going forward.  For RBC’s larger bank-owned peers, if mortgage-rates were any indicator, the lowering/simplifying of standard commission fees is now just a matter of time.

January is Deal-icious for Discount Brokerage Accounts

Staying on the RBC Direct Investing theme, the cherry on the sundae was the announcement that RBC Direct Investing is also offering up 20 commission-free trades with a new sign up. These trades can be used for up to 90 days after account funding.   Co-incidentally, HSBC InvestDirect also quietly put a deal back on their homepage.  In HSBC’s case, for accounts that switch over to them, InvestDirect is willing to cover up to $150 of transfer fees and offer 5 commission-free equity trades.  Click the following link to learn more about the latest discount brokerage deals & promos. Both RBC and HSBC were recipients of top honors in the Dalbar direct brokerage client service evaluation, the results of which were announced last week.

From the Forums

Canadian investor forums were ablaze with the move by RBC to lower their commissions.   As the time draws closer to the RSP deadline for this year, the interest level and topics of discussion will start to pick up as they did this week.

The Wave

There were more than a few threads that were started in response to the RBC Direct Investing commission announcement.  Here are two of the more popular ones from Canadian Money Forum and from RedFlagDeals.

Going Solo

In this post from Canadian Money Forum, forum user ‘intricated’ contemplates how to make the jump from having a financial advisor to going it alone.  Find out some of the hazards and experiences other users flagged as being important when deciding to become a DIY investor.

Thanks for going the distance on this one.  Have a great weekend and of course, go Seahawks.

Go Wilson

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