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2017 Canadian discount brokerage review & 2018 preview

Hard to believe how fast time flies. As we near the end of the 2017, we felt it was an appropriate time to reflect on what has been yet another eventful year for Canadian online brokerages. And, while we could comment on the rise of roboadvisors or the changing preferences of online investors, we figured it would be far more interesting to hear what Canada’s online brokerages had to say about their milestones in 2017 and what they have planned for 2018.

In total, we received submissions from 9 Canadian online brokerages and we’re excited to share these perspectives from, in many cases, the voices of the individuals leading these organizations.

In keeping with the spirit of the exercise, we’ll keep the commentary to a minimum but before diving in, we highlight three interesting themes we noted shine through from comparing all of the submissions. If there’s one takeaway for online brokerage industry however, it’s that brokerages can no longer afford to stand still.

Theme 1: It’s a technological arms race

While it hardly seems surprising that online brokerages would naturally be heavily reliant on technology, the rapidly changing nature of technology has required all of Canada’s online brokerages to become more adept at leveraging this technology in their favour.

Larger online brokerages have had to adapt their technology development cycles to be faster and more agile; smaller online brokerages have had to learn how to leverage technology to do more to compete with larger bank-owned brokerages and nearly all online brokerages have had to learn how to create a seamless trading experience across screens and devices.

As smartphones continue to surpass home computers in usage, price and functionality, and as internet speed and coverage increase, there’s a greater likelihood that consumers will be using smartphones for many aspects of the trading experience. A very interesting example of this from 2017 has been the investment in enhancing options trading capability by Questrade and TD Direct Investing.

A noteworthy mention is Interactive Brokers’ deployment of a ‘personal assistant’ style trading interface (called IBot) which offers a view of how ‘AI’ might find its way into online brokerage services and help online investors execute and manage trades with simplified text and spoken commands.

Theme 2: Delivering more value to DIY investors

In a fiercely competitive discount brokerage landscape, commission costs still stand out as one of the most (if not the most) important factor for many Canadian DIY investors to consider when choosing an online brokerage. While prices still have room to fall (and they are falling), the reductions in standard commission pricing are not likely to be as significant as they were in 2014 and as a result, other features have to help Canadian online brokerages stand out.

Enhancing the value that DIY investors receive, and more importantly perceive, is one strategy online brokerages can use to keep from having to lower trading commissions.

While none of the online brokerages who provided a submission lowered their standard commission pricing this year (so far), they have found ways to lower commission pricing on certain products – such as ETFs in the case of National Bank Direct Brokerage, or to enable DIY investors to use loyalty points to pay for commissions (RBC Direct Investing).

Other sources for enhancing value came from improving and creating DIY investor content. Whether it was through investor newsletters, blogs or other content sources and streams, a number of Canadian online brokerages were actively creating and curating DIY investor-focused content.

Theme 3: Focus on better trading experiences

A third interesting theme for 2017 was to improve the trading experience. Whether it was focusing on making complex trading strategies easier to execute (e.g. TD Direct Investing and Questrade deployed improvements to complex options trading execution) or improving management of holdings and documentation (as in the case of BMO InvestorLine and Qtrade Investor), there has been and will continue to be a lot of resources devoted to enhancing how and where online trading takes place.

Like a good Netflix series, we’ve released all of the submissions provided to us by Canada’s online brokerages – although there are no shadow monsters or stranger things (we promise). So, go ahead and binge-read about some of the highlights from 2017 and get a sneak peek at what’s in store for 2018.

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