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Discount Brokerage Weekly Roundup – January 13, 2017

For the superstitious, Friday the 13th is supposedly an unlucky day. As this week draws to a close, however, it seems that DIY investors are in luck as deals and promotions activity is red hot at the outset of 2017.

We’ll keep things light for this edition of the roundup, putting the spotlight on the deals and promotions being offered by Canadian discount brokerages and how the new deals that launched this past week could shake things up for other Canadian brokerages. From there, we’ll take a look at some interesting news and developments from across the online brokerage landscape that caught our attention and round out with the latest tweets from Canadian investors & online brokerages as well as what people are talking about on the investor forums.

Everyone into the Pool

This week, the deals gauge went from hot to red hot, and with good reason. There are now at least 28 advertised offers from Canadian discount brokerages, with cash back/commission-free trades now making a comeback after pulling back late in 2016.

The two brokerages causing the commotion this week, CIBC Investor’s Edge and Scotia iTRADE, have now made the case for all Canadian online brokerages to have a live cash back or commission-free trade offer or risk losing out new business to those who do.

CIBC Investor’s Edge, which has the lowest standard commission costs amongst Canadian bank-owned brokerages, made a big splash by offering up a cash back promotion of up to $400 for deposits of $100K or more. In addition, individuals who set up a ‘Regular Investment Plan’ (amusingly given the acronym RIP), are also eligible for up to 50 commission-free trades.

So, while it is a positive development for DIY investors that CIBC Investor’s Edge has stepped into the promotions space to start 2017, there are also a number of other reasons why their entry is significant.

First, as one of the lowest cost commission rates available, CIBC Investor’s Edge naturally enjoys a competitive edge over its bank-owned brokerage peers as well as the non-bank-owned group. This means that they inevitably get more attention or get considered more often by virtue of the fact that many DIY investors are looking for the best value – and low commissions for many investors equates to just that.

Second, now that CIBC Investor’s Edge is in the fray, the only major bank-owned brokerage without a cash-back or commission-free trade offer is RBC Direct Investing (BMO, CIBC, Scotia and TD are all offering these promos) which means RBC Direct Investing will either have to post a promotion or contend with direct competitors grabbing attention and market share from them. If mortgage rates and other financial services offer any clues, the odds that RBC Direct Investing stands idly by while the rest of the field eats their lunch just got lower.

Finally, while CIBC Investor’s Edge has offered promotions in the past, the presentation of this offer (specifically the push to a cleanly designed landing page) suggests an overhaul to the Investor’s Edge look and feel are probably on the way. The broader CIBC user experience (for example on mobile) has seen an upgrade so to maintain a consistent user experience, it looks like a new website will likely be on its way.

Scotia iTRADE also returned to the deals and promotions section, this time with two offers launching simultaneously. The primary offer of interest to DIY investors is a commission free-trade offer that ranges from 75 trades up to 250 trades, depending on the amount deposited into the new account. The second promotion is actually tied to their travel credit card program in which individuals who do have a Scotia credit card and who sign up for a new online brokerage account can receive a combination of 50 commission-free trades points

An interesting angle on the deals and promotions activity might also be a response to the Rob Carrick article recently published that encourages DIY investors to try non-bank-owned online brokerages on for size rather than defaulting to a big bank. To say that this has made waves is certainly an understatement considering the degree of influence Carrick has with Canadians – and especially within the realm of Canadian personal finance. What this means is that big bank-owned brokerages may need to be more active with deals and promotional activity to counter the recommendation from Carrick’s article for DIY investors to try a non-bank-owned brokerage.

While there are important points Carrick makes in the article about fees and banks recently being in the news for overcharging investors, the point to be made (and certainly reading through comments from investors who are clients at non-bank-owned brokerages also highlights this) is that all financial service providers can make mistakes – whether by omission or commission.  There are simply too many moving parts, from technology integration, compliance, security and more to not expect something to break. The real questions are (or should be) which provider would be best able to address an issue when it comes up and what would be a reasonable price to pay for that as a consumer?

Marketing Pullback

Normally this is the section where we mention upcoming education events or events of interest to DIY investors. One such event that’s coming up is the Vancouver Resource Investment Conference taking place on 22nd and 23rd of January. While the focus of this conference has been primarily on natural resource related investing, historically there have been a couple of Canadian online brokerages exhibiting in person, specifically Desjardins Online Brokerage and TD Direct Investing. Interestingly, neither of these brokerages are on the list of exhibitors this year (as of publication), hinting at least of a redrawing of plans in terms of where brokerages are going to spend their time (and money) connecting with investors.

Rise of the Machines

While robo-advisors are currently getting a lion’s share of the attention with regards to using algorithms in financial services, another story crossed our radar regarding the use of artificial intelligence integrated into the trading platform interface at Interactive Brokers. Their recently deployed “IBot” is gathering data on how individuals trade in the hopes of determining how best to work with human traders in providing information/answers they are seeking. While it seems like a high-powered search engine at this point, it certainly provides a glimpse into the kinds of innovation to the trading experience that will be required to get DIY investors excited. Provided, of course, that it works the way it’s supposed to.

Discount Brokerage Tweets of the Week

This week saw the big bank owned brokerages in the cross hairs of more than a few DIY investors. Mentioned this week were BMO InvestorLine, CIBC Investor’s Edge, Questrade, RBC Direct Investing, Scotia iTRADE, TD Direct Investing and Virtual Brokers.

From the Forums

Mini-Series

For DIY investors, one of the most popular choices are low cost mutual funds, such as the TD E-series. In this post from reddit’s personal finance Canada thread, one community member was interested in finding out whether the grass was greener on the DIY side of the fence or if E-series was the way to go.

Money-weighted Return

With new CRM2 compliant investor statements heading out to DIY investors, one of the less familiar terms to be aware of is money-weighted return (performance). In this post from reddit’s personal finance Canada section, one Questrade user was looking for a little more clarity and got a number of good examples to help explain the concept.

Into the Close

That’s a wrap on this week’s action across the Canadian discount brokerage landscape. Remember, US markets will be closed on Monday for Martin Luther King Jr. Day. With all of the uncertainty in the markets, it seems appropriate to check out something a little lighthearted heading into the weekend. Of course, for all of the market watchers, maybe the picture of a bubble might hold a little more meaning. Stay warm and go Seahawks!

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