Whether it was landing a great Black Friday deal, or a managing to catch a seemingly impossible pass, this past week has been book-ended by really interesting catches and stuffed with goodies. Discount brokerages this week kept pace with the great catch theme as they hauled in awards and recognition as part of online brokerage ratings season.
In this week’s roundup, we go deep on the rankings and ratings that crossed the tape for DIY investors. Specifically we look at the results from the Globe and Mail’s Online Brokerage Ranking as well as the award for best online brokerage from Morningstar. While ratings were definitely a dominant story, there was also an announcement made by an independent Canadian online brokerage that can help a select few rest a little easier at night. Given the focus of the roundup on ratings and rankings, we’ve elected to add in commentary on the brokerage rankings from the forums and Twitter.
Qtrade Back on Top of Globe’s Online Brokerage Rankings
As one of the most highly anticipated rankings of the year, the Globe and Mail’s 2014 Canadian Online Brokerage Rankings did not disappoint. This year’s results contained a bit of drama, a lot of data and even some interesting decisions.
Of course, when it comes to the discount brokerage rankings the burning question that everyone asks is: “who is Canada’s best online brokerage?”
According to Rob Carrick’s analysis, the best of the bunch is a long time podium finisher and previously dominant name in this ranking: Qtrade Financial.
The drama (or at least what may count as drama in the discount brokerage world) was the close finish between the winner for the previous two years, Virtual Brokers, and first place winner Qtrade as the margin separating the two was quite small. Rounding out the top three was BMO InvestorLine.
As with year’s past, cost was a significant contributor to the scoring of the brokerages covered, however it seems that given the widespread cutting of standard commissions, additional costs are being considered as well as broader features related to opening and owning an online brokerage account.
There was lots to chew on in this year’s rankings (which we cover in an upcoming in-depth look at the rankings) however there were a number of interesting observations we had of this year’s online brokerage rankings.
First, there was lots of data this year that hasn’t previously been available or has been put into the brokerage rankings. There were many more tables (which we’re big fans of) that explained other items like forex costs and margin interest rates. In addition, Rob Carrick also released the completed surveys by each brokerage for users of GlobeInvestor to examine. Finally, there was a ‘decision path’ that was created to help users navigate the maze of questions and features that can help determine a provider.
It was encouraging to see the ratings and rankings to go beyond just the report card style grading of discount brokerages and to enable users to sort by key category. There was clearly a lot of work and data that went into the grading decisions and the presentation this year. In particular, the decision pathway that, while complex, may enable some users to navigate the evaluation process more efficiently.
That said, it is important to take the rankings with a grain of salt.
The online brokerage rankings and ratings were coming largely from a single (albeit) informed source and as such carry a very subjective element. Another item to keep in mind is that these rankings take a snapshot and grade based on a particular moment in time. The Canadian discount brokerage industry is rapidly evolving and features that might be missing today in a particular brokerage could get addressed between now and the next rankings. Finally, there will likely be a lot of related marketing emerging from the various brokerages based on the results, so it is important to understand how the Globe and Mail online brokerage rankings work. We’ve put together a primer from year’s past which is still largely applicable to this past year.
BMO InvestorLine wins Morningstar Investment Award
This past week there was another group that bestowed the title of “Best Online Brokerage” to a Canadian discount brokerage.
The annual Morningstar Investment Awards took place this past week in downtown Toronto which is where BMO InvestorLine was crowned Canada’s Best Online Brokerage.
As the award may not be as well known as some of the other online brokerage rankings/ratings, here is a quick primer.
In terms of process and selection, the best online brokerage award is designated as a “submission-based” award. What this means is that individual Canadian discount brokerages essentially self-select for participation/evaluation by paying a $1,000 submission fee and preparing answers to a list of questions about their firm. Proceeds from the submission fees collected go to MusicCounts, the charitable foundation partner of the Morningstar event.
For the online brokerage segment, the key questions were grouped under three main categories:
- The website
- Customer service
As part of their submission, brokerages were asked to mention how their firm was different than other firms, what the firm has done over the past one to two years and to discuss any strategic area of focus.
A panel of jurors ( in the case this year there were three jurors) evaluates the submissions and establishes three finalists. They then discuss/deliberate the three finalists and ultimately choose a winner who then gets the award.
One of the reasons the process is key to understand is that, unlike other rankings or ratings, the evaluations are not scored or weighted using a point system. Instead the winner of the top online brokerage award comes down to the decision of the jurors. The jurors for ‘best discount brokerage’ this year included:
- Glenn A. Lacoste, President, Surviscor
- Jon Purther, President & COO, Corbin Partners Inc.
- Paul K. Bates, CMA, FCMA, Assistant Professor of Leadership, McMaster Divinity College
While the Morningstar award may not be as well known on the rankings circuit as the other online brokerage rankings that are currently available, there is a connection between them and several other Canadian brokerage rankings. Specifically, one of the award judges was Glenn Lacoste, president of Surviscor, produces the Surviscor ‘best online brokerage’ rating as well as helps Moneysense Magazine to power their online brokerage ratings. This, naturally spurred a bit of curiosity as to whether there would be a connection in the results of the awards from Surviscor and Morningstar.
When looking back at the results over the past 3 years in particular between the Surviscor winners for Best Online Brokerage and the winners for Best Discount/Online Brokerage on Morningstar, we noted that the winner of the Surviscor designation (or at least one of the winners depending on the quarter) had a strong tendency to win the Morningstar designation also.
|Year||Juror 1||Juror 2||Juror 3||Juror 4||Surviscor Best Online Brokerage Award Winner||Morningstar Best Online Brokerage Award Winner|
|2012||PAUL K. BATES ASSISTANT PROFESSOR OF LEADERSHIP, MCMASTER DIVINITY COLLEGE||GLENN A. LACOSTE, PRESIDENT SURVISCOR||JON PURTHER PRESIDENT AND COO, CORBIN PARTNERS INC.||JONATHAN CHEVREAU, EDITOR, MONEY SENSE||Q1 – Qtrade Q3 – Scotia iTrade||Qtrade (best discount broker)|
|2013||PAUL K. BATES ASSISTANT PROFESSOR OF LEADERSHIP, MCMASTER DIVINITY COLLEGE||GLENN A. LACOSTE, PRESIDENT SURVISCOR||JON PURTHER PRESIDENT AND COO, CORBIN PARTNERS INC.||JONATHAN CHEVREAU, EDITOR, MONEY SENSE||Q1 – Scotia iTrade Q3 – BMO Investorline||BMO InvestorLine (best online brokerage)|
|2014||PAUL K. BATES ASSISTANT PROFESSOR OF LEADERSHIP, MCMASTER DIVINITY COLLEGE||GLENN A. LACOSTE, PRESIDENT SURVISCOR||JON PURTHER PRESIDENT AND COO, CORBIN PARTNERS INC.||BMO InvestorLine||BMO InvestorLine (best online brokerage)|
|Source: http://www.investmentawards.com/home http://surviscor.com/scorView/Reviews/OnlineDiscountBrokerage/Q3-2012/ http://www.surviscor.com/scorView/Reviews/OnlineDiscountBrokerage/Q1-2013/ http://www.surviscor.com/scorView/Reviews/OnlineDiscountBrokerage/Q3-2013/||#colspan#||#colspan#|
Given the similarity of focus between the criteria for the Surviscor award as well as for the Morningstar best online brokerage award, it is understandable that there would likely be some degree of concordance between the two in terms of outcomes. What is interesting, however, is that because the Morningstar awards are submission-based, not all brokerages may choose to participate. Morningstar does not publish or release the list of submissions so it is unclear as to how many brokerages actually submitted to participate this year.
The important takeaway for consumers with respect to the rankings and ratings or awards, is that it is important to put the method of evaluation into context. With both the Globe and Mail’s “best online brokerage” and Morningstar’s “best online brokerage” yielding differing results, things can get understandably confusing.
With several firms (including JD Power and Dalbar) also participating in the rankings and ratings of Canadian discount brokerages there will be no shortage of “bests” or “tops” still to come. The process and transparency by which these designations are awarded, however, will ultimately govern the extent to which DIY investors turn to these awards and more importantly, trust them.
Just in Case
Switching gears away from ratings, ravings, and rankings, there was a new feature addition that Virtual Brokers announced earlier this week. Specifically they have added additional coverage on portfolios over and above what the CIPF currently offers (which is $1 million) to the tune of $11 million. As such clients with portfolios up to $11 million can have supplemental insurance coverage of their accounts. The insurance is being provided by Lloyds of London.
From the Forums
Reactions to the rankings and ratings were minimal in the forums. We did find this post related to features referenced from TD Direct Investing as mentioned in the Globe and Mail brokerage ranking.
We’ve also included some reactions from Twitter that map onto the frenzy of ratings/rankings that have taken place over the last few days.
That’s a wrap for this week. For the deal hunters out there, keep your heads up and have a great cyber shopping weekend!