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Discount Brokerage Weekly Roundup – September 18, 2015

This past week, as all eyes were on movie stars in Toronto and on the US for direction on where the “Rate Race” will take interest rates. Of course DIY investors aren’t the only ones caught in the wheel of misfortune. The longer the uncertainty hangs over the market, the harder Canadian discount brokerages are going to have to work to encourage investors to step in.

In this week’s roundup we take a look at how one Canadian discount brokerage took the drastic step of lowering its standard commission fees and what it means for the other bank-owned brokerages who have or haven’t lowered theirs. Next we take a look at the strategies of a number of brokerages attempting to use promotions to get the attention of investors. In the discount brokerage tweets, we see some interesting flare ups from DIY investors over technology glitches. Finally we round off with investor education events and interesting chatter about cross border trading in the forums.

HSBC InvestDirect Lowers Standard Commission Fees

Earlier this week, HSBC InvestDirect officially joined the club of Canadian discount brokerages that have lowered their standard commission rates to the sub-$10 level. As of this month, HSBC InvestDirect clients can now look forward to standard commission rates of $9.88, a definite reprieve from the $28.88+ commissions which preceded the drop.

For regular observers of the Canadian brokerage marketplace, HSBC InvestDirect is not a name that often comes up for features, pricing or promotions. With this latest move, however, DIY investors as well as certain Canadian online brokerages are bound to take notice.

As a bank-owned online brokerage, HSBC InvestDirect enjoys the “safety factor” and somewhat of the “convenience” element that consumers look to as selling points when choosing an online broker. Even so, the reality of the Canadian discount brokerage landscape is that there are just too many other compelling lower-priced alternatives. To get attention, HSBC InvestDirect had to make a bold move.

CIBC Investor’s Edge clearly understood this when they almost literally turned the new $9 anchor price prefix introduced by RBC Direct Investing in January of 2014 upside down to $6. Even if CIBC’s commission pricing is $6.95, it’s that first number people tend to notice.

Ironically, it is the same strategy Scotia iTrade employs with their active trader pricing of $4.99. Unfortunately for Scotia iTrade, they are also the lone holdout for lowering their standard commission pricing from the $24.99+ level down to where the rest of the market is.

For HSBC InvestDirect, the options were somewhat limited in terms of a move that would competitively position them with their peers while simultaneously giving them visibility in strategic markets (such as Western Canada). Without flashy platforms or a strong educational/feature offering, a shift in pricing was a potent option. That said, the move to undercut the majority of other brokerages by charging $9.88 vs. the $9.95 gives HSBC InvestDirect additional visibility with price sensitive consumers.

The true coup, however, is for clients that have $50,000+ in assets. Clients at this asset tier can qualify for the HSBC InvestDirect Advanced commission pricing that takes the cost per North American equity trade down to $8.88 – substantially undercutting many other bank-owned brokerages.

Be sure to check out the in-depth breakdown on the latest commission pricing at Canadian bank-owned discount brokerages to see just where the largest players now sit with one another.

Deals Get into Gear

Although September got off to a slow start when it came to discount brokerage deals and promotions, this past week, the deals and promotions section has been hotter than the Toronto TIFF red carpets.

With BMO InvestorLine updating their special offers page, the extension once again of their popular youth-oriented deal was confirmed. It was, however, the fact that three other offers from three different brokerages that showed up throughout the week that really signaled that the promotional war may once again be heating up.

While National Bank Direct Brokerage, Questrade and Scotia iTrade all launched new offers, it was interesting to see National Bank Direct Brokerage step back into the deals and promotions ring after their absence.

Although it is just speculation, with the JD Power discount brokerage rankings right around the corner and the fact that National Bank Direct Brokerage has traditionally performed well in this particular ranking, the timing of NBDB’s set of commission-credit offers may be no coincidence.

Another interesting observation is how the value of Scotia iTrade’s latest cashback/commission-free trade offer is starting to creep up.

Specifically, Scotia iTrade just launched (or relaunched) their $500 cash back or 500 commission free trade promotion after just retiring the $1000 cash back or 1000 free trade promotion. In the case of their latest offer, the minimum deposit to qualify for the offer ($15,000) can net a new client a $75 cash back bonus. In the offer that just expired, however, the minimum tier of $15,000 would have only netted a $50 cash back bonus.

Clearly Scotia iTrade is looking to step up its efforts at attracting clients in by offering them more and the fact that iTrade has posted this deal through the end of the year means that they’re banking that it will be tough for other brokerages to come up with a better offer to beat it.

Tweets of the Week

This past week, technology glitches resurfaced as a reminder that trading online and now “on the go online”, is not without its potential mishaps. The brokerage at the centre of it all was Scotia iTrade, who experienced a server glitch that meant some users went offline temporarily (or in the users minds far too long). Other brokerages on the hot seat this week were BMO InvestorLine and Questrade. Virtual Brokers was spotted yet again on their campus tour, this time at U of T Scarborough.

Event Horizon

This week’s line-up of discount brokerage-sponsored investor education events include upcoming sessions that may be of interest to those intrigued by RRIFs, trading psychology, and options. Short selling and trading strategies round out this week’s selection.

September 19 – September 25

Scotia iTRADE – Trading Psychology Part 1 with Stefanie Kammerman

Scotia iTRADE – RRIF Accounts with Scotia iTRADE

TD Direct Investing – Options as an Income Strategy

Scotia iTRADE – Options as an Income Strategy Using Calls with Montreal Exchange

NBDB – Trading Plan and Investment Strategy for Mid and Short Term Traders – [Fr]

TD Direct Investing – Understanding Margin & Short Selling

 September 21st

Scotia iTRADE – Trading Psychology Part 1 with Stefanie Kammerman

September 22nd

Scotia iTRADE – RRIF Accounts with Scotia iTRADE

September 23rd

TD Direct Investing – Options as an Income Strategy

Scotia iTRADE – Options as an Income Strategy Using Calls with Montreal Exchange

NBDB – Trading Plan and Investment Strategy for Mid and Short Term Traders – [Fr]

September 24th

TD Direct Investing – Understanding Margin & Short Selling

Questrade – Energy Market Outlook

From the Forums

A Heated Exchange

One of the biggest thorns in the sides of Canadian investors is the exchange rate they typically have to pay when converting between Canadian and US dollars when trading US listed stocks. Clever investors have figured out creative ways to minimize those conversions however this post from RedFlagDeals shows that one user has stumbled on a conversion rate from CIBC Investor’s Edge that is bound to make more than a few other discount brokerages nervous.

Stuck at the Border

In this post, also from RedFlagDeals, a DIY investor client of Questrade looks to have run into some delays in getting access to dividend payments. Interestingly, the Questrade support engine did not (yet) jump in to address the issue. Either way, it’s worth a read for those interested in how sometimes dividend investing can get derailed.

Into the Close

That’s a wrap for this week’s roundup. However you are gearing up or gearing down, have a great final weekend-of-summer. For those celebrating Oktoberfest, have a safe and uber-fun weekend!

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