Like the Toronto Blue Jays’ bats, fall colours are also in full swing. As we head into the halfway point in October this edition of the roundup has an equally interesting feature – something that all Canadian online brokerages are going to want to tune into.
In this week’s roundup, we lead off with a spotlight piece on deals and promotions – specifically we present the findings from our reader survey from September that shows that DIY investors and Canadian online brokerages are out of sync and a suggestion on how to make it better. As with our usual menu, we’ll also be covering reactions from DIY investors this week on Twitter and what investors are chatting about on investor forums. For good measure, we’ve also included some of the interesting upcoming investor education events DIY investors might want to check out as the weather gets colder.
Let’s make a deal
Even though RRSP deadline season is months away, it’s already clear that Canadian discount brokerages are collectively ramping up efforts to attract new clientele. And while it’s one thing to work hard, it’s certainly also important to work smart.
As part of our coverage of the Canadian online brokerage landscape, one of the areas we analyze are the deals and promotions offered by discount brokerages to incentivize DIY investors to open a new online trading account.
Last month, we ran an informal one-question poll of visitors to SparxTrading.com that asked: “what is your preferred deal or promo?” and found some fascinating results about what Canadian DIY investors actually want and what they’re being offered.
Before jumping into the results of our deals and promotions survey from last month, it is useful to take a quick look at the deals & promotions that are currently in play.
As of the first week in October, we’ve uncovered 27 live advertised promotions with transfer offers representing and cash back/commission-free trades tied for the largest portion (31% or 8 offers), followed by (contest/other (7 offers) with referrals rounding out the group (three offers). Currently, Desjardins Online Brokerage, Questrade and Scotia iTRADE are tied with the most number of offers (four apiece) while Interactive Brokers Canada is the only brokerage not currently advertising a promotional offer of some sort (note their referral program is not counted because it only offers the individual making the referral a bonus, not the new account holder). Transfer fee coverage offers may be underreported in this count because certain firms may offer it but have not advertised this on their website.
For a bit of background on the poll itself, respondents could choose between the following options:
- Cash back deals (for just the individual)
- Commission-free trades (for just the individual)
- Referral bonuses (me & a friend)
- Transfer fee coverage
- Technology items
- Contest entry/prizes
These choices were selected as they represented the most popular or prevalent promotional offers typically put forward by Canadian discount brokerages. A total of 59 respondents from across Canada participated.
Results
Our poll showed that the overwhelming majority of DIY investors (68%) surveyed stated that they were interested in cash back promotions while commission-free trades came in a distant second at 27%. Transfer fee deals (3%) and technology items (2%) rounded out which offers DIY investors preferred.
What is fascinating to see is just how far off many online brokerage offers are from what investors are actually interested in. Of the 27 deals currently offered by Canadian discount brokerages, only two (which translates into 7%) offer cash back promotions: HSBC InvestDirect and BMO InvestorLine. That is certainly a major disconnect in the marketplace, one that, upon further reflection, just doesn’t quite make sense.
Considering that at least 9 brokerages are prepared to cover transfer fees from accounts from other institutions, it stands to reason that they would offer up as much (perhaps more) for a new client that didn’t put them through the hassle of having to transfer an account. A simple look at some forum comments or on Twitter would show that there are all kinds of issues that can arise that delay a transfer of accounts.
Another interesting finding was that referral or affiliate programs aren’t popular as a first choice. Ironically, all of the referral offers in the market right now actually offer cash back for the person referring and the individual signing up for the account, so it really is a win-win option.
One interpretation of this data suggests that individuals who are looking for a cash back offer don’t necessarily want to go through the effort of finding a referral source. Fortunately for Questrade, for example, they not only have the most competitive offer for referral based deposits, but they also have the easiest system in place for these referrals to be generated. Conversely, Scotia iTRADE and BMO InvestorLine require a bit more effort for each referral.
Finally, it was made abundantly clear that DIY investors were just not that into contests among those who are looking to open an online trading account. It is probably understandable that getting a “chance” at something is akin to playing the lottery except in this case, the payout is far lower and the price of participation astronomically higher. Nonetheless, looking back over the past year, there are numerous examples of Canadian discount brokerages offering up contest entries as a way in which to encourage users to deposit more.
For Canadian discount brokerages, the lesson here seems to be that the market is clearly communicating one thing while most providers are doing another. Like all businesses, online brokerages need to make sensible decisions around adding to their client base, however the results of our survey certainly suggest that a very sensible decision to get attention of new clients is to offer cash back promotions. For those that do offer cash back promotions, even in the affiliate or referral program, that is something that more DIY investors should probably be better aware of.
And, just to show that we’re also into the giving spirit, any Canadian discount brokerage that wants to advertise its cash back offer to visitors of SparxTrading.com may receive up to $250 cash back* for doing so (*conditions apply). Contact us for full terms and conditions.
Discount Brokerage Tweets of the Week
Whether you blame it on the rain, or some other stranger things, this past week there was plenty of blame being tossed around on Twitter, mainly due to outages on trading platforms. It’s a great example that shows, whatever the size of the brokerage, online trading can get interrupted. Mentioned this week were BMO InvestorLine, Questrade, Scotia iTRADE, TD Direct Investing and Virtual Brokers.
Event Horizon
Fall’s in full swing, and it’s a colourful week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to those curious about technical analysis and trading strategies. A pair of special events for options enthusiasts rounds out this week’s selection.
October 15
Options Education Day Vancouver – Autumn 2016
October 16
Options Education Day Calgary – Autumn 2016
October 18
Scotia iTRADE – Understanding Price Action To Make More Informed Trading Decisions
From the Forums
The price of advice
Everyday there are Canadians who are faced with decisions about where and how they should invest their money. With a crowded landscape, it is interesting to see how first time investors have to navigate the choices given to them by financial services firms. In this post from reddit’s Personal Finance Canada thread, there are lots of interesting suggestions for a novice investor looking for a little help in figuring out how/where to park some capital.
Into the Close
Even though it was a short week, there was certainly no shortage of excitement. While folks in Vancouver and Calgary will be able to learn about options, some other options include hunkering down for a serious weekend of sports watching. For those in Vancouver and other parts of BC – stay safe and dry (as much as you can anyway)! Have a great weekend!
