Makeovers seem to be making the headlines this past week. Markets this past week gave investor’s a bit of a portfolio makeover, actress Renee Zellweger got a bit of an extreme makeover and set the internet ablaze and even the Canadian discount brokerage landscape saw (and is about to get) a bit of work done.
In this week’s roundup we take our cues from a Zellweger movie-inspired theme to lead us through the makeover from a major bank-owned online brokerage pricing adjustment. Next we look at earnings from a pair of US brokerages to see what their operation looks like without the makeup on. Finally we’re proud to announce a new community feature from SparxTrading.com that we think will help change the landscape for the better for all DIY investors. Of course, our roundup will be completed by some insightful banter from the Canadian investor forums.
You Didn’t Quite Have Me at Hello
This past week saw an interesting announcement come from BMO InvestorLine regarding their flagship AdviceDirect platform. Specifically, BMO InvestorLine is changing the fee structure and lowering the threshold to participate from $100,000 down to $50,000.
While BMO InvestorLine has tactfully positioned this move as improving ‘accessibility’ the timing and nature of the changes demonstrate that evolutionary axiom: adapt or die.
It has been just over two years since BMO InvestorLine bet big that their unique AdviceDirect platform would meet a need for the “in-between” DIY investors who embrace the lone wolf approach, but still need the “pack” to provide counsel and confidence.
In the wealth management industry of today, however, two years is a long time to go status-quo. The “phone a friend” and flat fee approach of AdviceDirect has faced headwinds of ultra-low MER ETFs and the robo-advisor phenomenon. In fact, the same day BMO InvestorLine announced their changes to AdviceDirect, National Bank Direct Brokerage formally announced their launch of InvestCube service, an automated ETF management solution for DIY investors.
With new tiered pricing, fixed dollar charges and lower thresholds to participate, the new face of AdviceDirect may be more accessible to DIY investors. The challenge in front of BMO InvestorLine, however, is getting Canadian investors to pay attention in an even more crowded marketplace.
Show Me the Money
It’s earnings season for some major US online brokerages and with it comes a chance to ask or answer “how’s business?” Quarterly earnings for E*Trade Financial and Interactive Brokers seem to suggest the answer depends on who you talk to.
On the one hand, there is a ‘good news’ story. Bolstered by higher trade volume, E*Trade saw its third quarter earnings jump more than 31% as well as impressive performance on key metrics such as the number of trades and net new accounts. Interestingly the average commission per trade came in at $11.05 per trade, a number that seems incredibly high relative to Interactive Brokers’ average of $4.21 per trade. Nonetheless, after many years of grinding away at deleveraging their business, the results and market conditions are lining up in their favour. These latest results this represent a third successive earnings win for the US brokerage.
Interactive Brokers, on the other hand, probably provoked a wave of face palms from analysts and shareholders alike. The Q3 EPS tallied in at $0.05 – a far cry from the consensus estimates of $0.23. Among the reasons cited for the miss were some rather hefty losses (~$70M) by their market making segment demonstrating that markets can humble traders of all sizes. On a slightly more positive note for Interactive Brokers, they continued to see growth in the number of accounts (18% y/y) and total daily average revenue trades (DARTs) up 14% over the same period last year.
Help Me Help You
Many Canadians understand that being a DIY investor isn’t simple, but even so, we believe it certainly shouldn’t be prohibitively hard either. What we’ve observed over the few years we’ve been around is that one of the biggest sources of support for investors is actually other investors.
It’s both inspiring and awesome to know that there are lots of great online communities that investors of all experience levels can access to get support, encouragement and perspective on their investing journey.
So, after much research, discussion, caffeine and coding, we’re happy to announce first to the loyal weekly roundup readers that we’re launching a space on SparxTrading.com for the community of online brokerage users. We’ll have the official beta launch link on our Twitter feed so be sure to check our feed over the upcoming week to get the first look.
Ultimately we believe that by making finding and navigating information more efficient, we can improve the experience of being a DIY investor. We hope it will be a platform that will attract like-minded folks to help, support and learn from one another as well as a place to get reliable answers to questions relevant to their online brokerage experience.
Attention all self-directed investor education and event enthusiasts, learning opportunities are abound. This week’s event horizon features a veritable potpourri of offerings. Sample and enjoy.
Oct. 25 (Sat)
- TD Direct Investing – Workshop: Getting Started with Options
Oct. 28 (Tues)
- NBDB – Introduction to Call Options
- TD Direct Investing – Introduction to Fundamental Analysis
- Scotia iTrade – Cash Management Using ETFs
- Desjardins Online Brokerage – Maximizing Your Trading Experience
Oct. 29 (Wed)
- TD Direct Investing – Understanding Margin & Short Selling
- Desjardins Online Brokerage – Portfolio construction using ETFs
Oct. 30 (Thur)
From the Forums
Just when you thought you were out…
Is too much of a good thing no longer a good thing? In this forum post from Canadian Money Forum, a client of Scotia iTrade is testing the waters for what other investors might suggest as a good alternative. Check out the long list of pros and cons given to the author of the post from a handful of level headed voices.
Clear and present pricing
The impact of regulatory changes to the way brokerages report their fees shines through in this post from the Financial Wisdom Forum. In the post a BMO InvestorLine user details a breakdown of a potential bond transaction and shows that when brokerages are more transparent with pricing, good things can happen.
That does it for this week’s roundup. It has been a tough week for Canada. Going into the weekend, the SparxTrading.com team salutes and says thank-you to the brave men and women who, because of their courage and sacrifice, make this country the great nation that it is.