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Discount Brokerage Weekly Roundup – October 26, 2018

Trading is definitely a numbers game. This week for most investors the numbers weren’t that great (unless you were short) yet, as many of the bank-owned online brokerages are well aware of, it’s not so much today’s numbers that are giving them cause for concern, but rather, the numbers of the future.

In this edition of the roundup, we take a deep dive into the story of one bank (who owns an online brokerage) who is publicly putting out a target of customer growth. Scroll down to learn more about the market fundamentals that may finally be the catalyst for some big changes to Canada’s online brokerages and other financial services. Following that, we’ll scan over a few minor developments by online brokerages including some interesting sponsorships for investor education. As usual, we’ll be sure to include conversations of DIY investors on Twitter as well as from the investor forums.

BMO Looking for One Million New Clients

There’s been lots of talk lately in the news about winning big. For one Canadian bank, however, the jackpot consists of customers, one million customers to be precise. While it has a certain Austin Powers ring to it, for the Canadian market, a million new customers is not as simple as it sounds however that is just what BMO is very publicly going after.

To make things a little easier, the timeframe BMO has given themselves to hit that target is 5 years. Of course, getting past the headline numbers, the challenge in front of them (and their peers) is not only to get one million new customers, but to keep those (and their existing) customers as well as keep everyone happy and wanting to deepen their relationship with BMO, which is a lot easier said than done. For some additional context, as of Q1 of 2018, BMO reported having 8 million customers in Canada.

First some math (yay) – the population of Canada in 2018 was reported to be just over 37 million people (as of July 2018) and by 2023, the forecast under the most optimistic projection puts the population at 40.7 million people, which means that there will be a net increase of 3.7 million people into the system. Of course, it’s not just about how many are coming in, it’s also about composition of the population – how many folks 18+ will be in the system from now through 2023?

One model of the Canadian population puts the proportion of individuals aged 15 to 64 at 65.7% in 2018 (24.3 million people) which will then contract to 62.9% by 2023 or about 26 million people – even so, that’s a net gain of 1.7 million people in that key segment over that time. In the 65+ segment, the estimate for 2018 sits at 16.9% or 6.25 million. By 2023, that number (again under the best growth forecast) would reach 19% of the 40.7 million forecasted population – or about 7.7 million people.

So, on a net basis there is forecasted to be about 3.3 million more people (give or take) who could open a personal bank or investment account by 2023 under the best of scenarios.

For some additional context, the significant driver of population growth is projected to come from migratory increase rather than natural increase.

Finally, another important set of details, according to the Financial Post, was that RBC mentioned that they too are looking to grow their client base by 2.5 million clients by 2023 (which would work out to just over 900K per year) and the Bank of Nova Scotia is working hard to win 1 million clients also from Canada and around the world. Assuming TD sets its sights on a figure like RBC’s and CIBC sets its sights on a projection similar to BMO or Scotia, that means the big five banks would be looking for about 8 million new clients (presumably they mean “net” new clients) collectively when there will only be about 3.3 million more people in Canada by that point in time – which is a huge discrepancy.

What could this mean for DIY investors in Canada – and the online brokerage market in general here in Canada?

Probably the first thing that jumps out is that the projections for desired new customers (which also don’t factor in other smaller financial services providers) doesn’t really add up with amount of “new” customers in the system. Clearly, there will likely be several banks (and the online brokerage units within those banks) that will underperform. It’s safe to say that the banks will be looking beyond just Canada as a source for new customers, however, competing and winning on home turf is much easier (and less risky) than having to venture out into other markets.

Another really important implication is that there will likely be a significant push to cater to new immigrants. Over the next decade or so, the majority of growth in the Canadian population will be from immigration. Thus, from a branding point of view, the banks and financial service providers will need to reshape their visual and brand identity to be in line with an evolving definition of what it means to be Canadian.

For DIY investors, there’s also a strong likelihood that online brokerages will be pushing harder to get clients. From aggressive switch campaigns to stronger incentive offers or greater investment in technology to deliver value, Canada’s discount brokerages still have a few levers they can pull.

Finally, with such aggressive growth targets set by the banks, it is not inconceivable that we see further consolidation in the online brokerage space in Canada – after all why fight to acquire new clients when you can acquire them directly? At some point soon, the valuation on that strategy will make more sense if it doesn’t already.

While BMO (and by extension their online brokerage BMO InvestorLine) was the focal point of this story, they are clearly representative of their peers in this space.

The challenge for financial services providers to grow in Canada is genuine and the race to innovate here in Canada is proof that financial services providers must become more efficient and scalable in the delivery of their services. There are already signs they are pushing the ‘innovation’ agenda – earlier in the month BMO announced the roll out of a digital wealth advice tool called WealthPath which should help simplify the provision of financial advice and in September, TD announced the partnership with The Hydrogen Technology Corp to provide a digital advice platform to TD Direct Investing clients.

If the US online brokerage market is any proxy, Canadian DIY investors can also look forward to technology playing an even more meaningful role in streamlining the online investing experience as well as lower commission prices. As the race for market share outpaces the growth in the Canadian investor market itself, the million customer question is which online brokerage or financial service provider will make something that Canadian investors will truly get excited about?

Quick Roundup

While there weren’t many seismic moves taking place in the Canadian online brokerage space this week, there are some interesting developments making small waves.

Options Education Day Coming Up

In just about two weeks, the fall edition of the Montreal Exchange’s Options Education Day will be taking place in Toronto. Now largely confined to Toronto and Montreal, Options Education Day offers the chance for DIY investors interested in learning about trading options to hear from practitioners and experts. Given the size of the Toronto market and its importance, there are four Canadian discount brokerages who are sponsors, with three of them having a significant footprint in Montreal. Sponsoring this event are CIBC Investor’s Edge, Desjardins Online Brokerage, Interactive Brokers and National Bank Direct Brokerage.  This event is a great opportunity to meet and connect with fellow DIY investors in the options trading space while also learning some interesting perspectives or suggestions on options trading.

CIBC Investor’s Edge Sponsors Trading Competition

Trading competitions are typically a way to get a hands-on feel for trading in the stock or options markets. While not novel in and of themselves, the Capitalize for Kids organization has done something unique by melding a trading competition with raising money for kids’ mental health.

This unique organization brings together some of the most prominent figures in Canadian (and in some cases global) capital markets to collectively support improving mental health care in Canada for children. Since launching in 2014, Capitalize for Kids has raised over $5 million dollars for various children’s mental health organizations.

For their part CIBC Investor’s Edge is this year’s key sponsor of the trading challenge and has provided the top prize of $10,000 in a CIBC Investor’s Edge account as well as the opportunity to meet with CIBC executives. The runner up in the competition gets $2,500 in cash credited to a CIBC Investor’s Edge account as well as a meeting with a CIBC Executive.

The trading competition runs for most of an academic year (October through March) and participants are given a virtual one million dollars to manage. The winner at the end of the competition is the individual with the best performing portfolio. Participants are only allowed to trade equities, ETFs and REITs listed on the TSX, NYSE and NASDAQ with a $500M or higher market cap. No commission fees are charged on these simulated trades. Interestingly, the trading platform participants get to use is powered by IRESS, so there is a unique opportunity to access top shelf trading software.

Even though there are a number of dynamics at play that would impact what these participants might choose to invest in, it was nonetheless interesting to see that the top 5 most widely held securities were:

  1. Amazon
  2. Canopy Growth Corp.
  3. Aurora Cannabis Inc.
  4. Tesla Inc.
  5. Aphria

In addition to holding a trading competition, the Capitalize for Kids organized a conference featuring high profile capital markets personalities and executives from across the globe. That conference took place earlier this week and provided exclusive access to investment ideas from the pros and where these individuals would be putting their money to work. Click here for a recap of the conference including what professionals had to say.

Progress on the performance of students in the competition can be monitored here.

Discount Brokerage Tweets of the Week

From the Forums

Too Many Financial Cooks

When it comes to DIY investing, looking at the bigger picture is always a wise approach in fine-tuning your finance strategy. This investor put their financial “master plan” on the Personal Finance Canada forum for feedback and for help to tell them where they were going wrong. Have you got a master plan? See what others had to say here.

Tomayto, Tomahto

This curious investor was looking into robo-advisors and draws an interesting comparison between two seemingly similar institutions, Wealthsimple and Wealthbar. But with any comparison of online investing services it comes down to other factors aside from features and deals. Read how the two compared in this Personal Finance Canada thread.

Into the Close

That’s a wrap on another turbulent trading week. With markets clearly pulling back and a myriad of other sources working against equities, this has not been a dull week by any stretch. Of course, with baseball, basketball, football and hockey going on, the hardest decisions will undoubtedly be what to tune into and what to tune out of. Oh and for those who are celebrating Halloween (or just the weekend), have a spooktacular weekend!

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Discount Brokerage Weekly Roundup – October 19, 2018

This fall, the colours of the leaves in Canada were distinctly green as legalization of recreational cannabis officially took effect. There was lots of excitement in the months and weeks leading up to this major milestone. For DIY investors, that has translated into lots of volatility and trading which online brokerages are always happy to receive.

Even though Canada was clearly in the spotlight across the globe this past week, for this edition of the roundup, we shine a spotlight on the US online brokerage space yet again. Earnings for major US brokerages were reported as well as what management at these brokerages had to say about some very weighty issues, so continue reading to get more details on what those reports mean for online investors on both sides of the border. As usual, we have the tweets from DIY investors and a pair of interesting forum posts to share.

Mind on My Money, Money on My Mind

Like all good students of any market, it pays to do your homework. So, when it comes to tracking movement in the online brokerage space, the publicly-traded US online brokerages provide ample reading – especially at this time of year when they publish their quarterly earnings results. Unlike many quarterly earnings calls and discussions in the past, however, there was definitely one event/issue on the minds of analysts and online brokerages alike: zero-commission trading.

While Robinhood was or is perhaps best known for their “zero-commission” trading model, it was the announcement last fiscal quarter by J.P. Morgan that they too will enter the commission free trading game that sent shockwaves through the online brokerage space.

This week it was the shockwave of that announcement and the maneuvering the industry has done in response that appeared in earnings calls (and calls with management) at Interactive Brokers, E*Trade Financial and Charles Schwab.

For many online brokerages, the launch of Robinhood in 2015 and their no-cost trade model certainly raised the notion that trading commissions could go to zero a lot faster than anyone had ever anticipated. Still, Robinhood faced many hurdles and incumbent online brokerages were content with monitoring the situation and reacting accordingly. Fast forward to 2018 and as Robinhood has crossed above six million accounts, which put them at least for a time ahead of E*Trade Financial.

Because there is so much back-story to each of these organizations, it is tricky to distill the path that each has taken to respond to zero-commission trading but the short version is that they will really only entertain a zero-commission model if there is no other choice, and right now, it appears that there are still many options on the table. That said, price reductions for equity commission trading are already on the minds and the financial models of both Schwab and E*Trade. Interactive Brokers, at least for the moment, is content with their pricing structure standing firm for some time.

Just for posterity, it’s important to mention that Q3 of 2018 for publicly traded US online brokerages was a massively profitable one. The number of accounts at Interactive Brokers is at its highest point, DARTS are incredibly strong and the pretax operating margin of 66% is enviably efficient. E*Trade is doing so well that they announced they will be distributing a dividend for the first time and on top having performed a $1B share buyback program in 2018, are also planning to do another in 2019. Schwab saw a net income for the quarter jump of 49% year over year to $923 million, with 1.2 million new accounts opened year to date.

The take away: the major players in the US online brokerage space are extremely well capitalized, have very large war chests, and are highly motivated to defend their market position.

So, how are US online brokerages preparing for a world of declining commission prices? For starters, diversification of service delivery is one key strategy.

If online brokerages aren’t reliant on direct online investing commissions alone then commission revenues have less of an impact. For Schwab, there are digital and in-person advisor services that are generating material revenues. At Interactive Brokers, they are looking to offer more traditional banking-style features like paying high interest on cash balances, direct deposit and a Mastercard tied to an individual’s portfolio account. And, at E*Trade, their corporate services division is bearing significant fruit and enabling them to differentiate relative to their peers.

Diversification for online brokerages also means encouraging or facilitating online investors’ use of higher margin (i.e. more profitable) products, in particular options. In both Interactive Brokers’ and E*Trade’s calls options were specifically cited as a product that, because investors weren’t trading as much, impacted revenues. For Canadian DIY investors, this is especially important because, like the US, options trading in Canada is highly profitable for the Canadian online brokerages, so there is likely going to be more emphasis on enabling and/or training individuals to be able to trade options.

Another strategy to defend against zero commission trading is to go on offence. In this regard, online brokerages have a number of interesting levers to pull.

For example, both Interactive Brokers and Schwab stated that advertising campaigns are going to be key. In fact, founder and CEO of Interactive Brokers, Thomas Peterffy will be looking to have the narrative around commission-free trading to be a net negative for consumers stating:

“So, this is a serious issue for us now that JPMorgan joined Robin Hood offering free trades. We have to take this very seriously as I said. So, we are currently working on commercial to explain to people why that is bad for them, but the fact is that if you look at our [track record] for example, we regularly gain customers, two, three, four customers a day from Robin Hood and I’ve never seen a customer who went from us to Robin Hood.”

Of course, there’s also the use of incentive offers and promotions to try and win over new customers or court them to switch. Not all brokerages are crazy about the use of promos, however, as noted by Walth Bettinger from Charles Schwab who stated:

“That’s always been an area of competition…where incentives are offered to new clients around possible cash or free trades. It’s certainly not something that we necessarily like because it’s not an ideal way to build a long-term relationship with a client. Unfortunately, I would say, in some ways, promotions like that work. And so therefore, as long as they are commonly utilized in the industry, it’s difficult to take a hard stand that we’re not going to have similar types of promotional offers. But they are inconsistent with our long-term approach of building trust-based relationships with clients.”

It’s important to note that despite their traction and growth, firms like Robinhood still have many challenges to overcome.

This week, for example, the co-founder of Robinhood Vlad Tenev appeared on stage at a technology conference hosted by Bloomberg, and struggled with the explanation as to why Robinhood sells its clients order flow. Although there was a response posted on their company blog, the communication around selling order flow is a bumpy topic.

Ironically, also this past week, Robinhood found itself in the spotlight for selling client orders to large market making firms in order to benefit from trade rebates. As such, even though they are doing well, Robinhood cannot really afford to fail or take too many missteps.

For Canadian DIY investors, this offers a very interesting perspective on the various kinds of scenarios that could play out here in Canada once a Wealthsimple Trade goes live or if another commission-free trading player were to enter the market.  Either way, it’s reasonably certain online brokerages in Canada are having the conversation about what can be done and how to avoid taking commission costs to zero. As is playing out in the US, however, Canadian online investors are also likely to see advertising from Canadian brokerages ramp up as well as promotional offers start to get richer. While it will sound good on the surface, DIY investors are soon going to have many more options to choose from so it looks like there will also be a lot more homework for discerning shoppers to have to do.

Discount Brokerage Tweets of the Week

From the Forums

Gateway Trade

The general advice from financial professionals is to never try and time the market. That didn’t stop this curious investor from turning to Personal Finance Canada forum to debate if it would be worth moving out of mutual funds into a lower cost ETF’s at the end of a market cycle. Find out what the forum had to add here.

Puff Piece

For DIY investors it’s important to think about the bigger picture when it comes to personal financial planning. This investor turned to the forums after years of “living recklessly and frivolously” when it came to saving, and now wants to utilize his upcoming funds wisely. Read some interesting advice and opinions in this Personal Finance Canada thread.

Into the Close

That’s a wrap – or roll – on this edition of the roundup. While there may be no shortage of sports drama or political intrigue this weekend, there might be a shortage of weed. Howsoever you choose to relax this weekend, just don’t forget to bring the Doritos!






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Discount Brokerage Weekly Roundup – October 12, 2018

The week wasn’t the only thing that was short for Canadian DIY investors. After what seems to have been a pretty steady upward run for the better part of the year, the “fall” season presented a stark reminder that markets can turn quickly. For this week at least, volatility is back however that isn’t the only excitement going on in the markets – as it turns out, there has been lots of activity in the US (not including rappers showing up at the White House) which collectively signal a different kind of step change in the pace at which online brokerages will have to be ready to change.

With last week offering a little extra on the roundup menu, we thought we’d balance things out with a focus on some of the many stories we haven’t yet had a chance to cover, specifically with respect to what’s happening in the US online brokerage space. So, in this edition of the roundup, we’re taking a look at what the many recent feature launches at US online brokerages signal for online investors and the industry as a whole. From there we’ll hear from DIY investors on Twitter and close out with interesting chatter from the investor forums.

Innovation in the USA

As any good student of charts or trends knows, there are times when it pays to step back to a longer time frame to put things into perspective.

This past week, volatility – and in particular stock price plunges – took centre stage. Steep declines in short order are understandably concerning but it takes stepping back to longer term trends to really appreciate whether this appears to be the confirmation of a new trend or simply a healthy pause of a continuing one.

Within the US online brokerage space, there has been a lot of concern (by online brokerages) about drops in commission pricing. The big picture forming, however, is not so much that commission prices are falling (that’s just the turbulence) but rather that innovation is accelerating. Perhaps the writing is on the wall about commission prices falling and the response by industry is to figure out how to mobilize.

For the past several weeks, in spite of all of the stories we have reported on in the weekly roundup, there have been a number of developments which haven’t been published or focused on to a significant degree.

In particular, there have been numerous interesting stories relating to US-based online brokerages such as TD Ameritrade, E-trade Financial, Schwab and Robinhood which have been eclipsed by developments in the Canadian online brokerage space.

The collective picture from many of these developments in the US online brokerage space point to a heated arms race to innovate which is almost certainly going to inspire and influence Canadian online brokers to accelerate their own pace of innovation (even if it will lag what’s happening in the US).

Enough of the vagaries, here are some of the details.

Ai, Ai, Oh

One of the first things that leapt out of the news cycle came from TD Ameritrade announcing earlier this month the launch of an AI-driven investor education content engine. The “Content Intelligence Platform” is intended to provide an even more optimized experience to clients for investor education.

To industry observers, TD Ameritrade already has an industry leading investor education arsenal. According to a recent press release, they reportedly have close to 500 videos, 7 courses and over 2,000 articles on investor education. They also have one of the strongest investor education curricula available in their Investools program.

Pairing the power of AI with investor education, however, is definitely next level stuff. To be fair, AI-driven investor education sounds cool but without actually seeing what’s under the hood and how the content optimization experience works, it remains to be seen how impactful the technology is. At the same time, they were announcing AI-driven investor education content, there was also news that TD Ameritrade invested in a cryptocurrency spot and futures exchange called ErisX. Other firms investing in the exchange include Virtu Financial and Cboe Global Markets (as well as half-a-dozen other rather notable names) with the goal of eliminating the barriers to institutional adoption of digital asset trading within a trusted, regulated ecosystem. In a nutshell, TD Ameritrade is making some big bets on frontier technologies in hopes of being future-ready.

Sherwood Like to See What’s Next

Also crossing the news radar this past week was the announcement by online brokerage Robinhood that they moved trade clearing in house (which is not that uncommon) but did so by building their own clearing system from scratch – and within two years – while doing everything else they have been doing (including prepping for an IPO).

Oh, and to boot, as part of their prep to go public (did we mention they’re prepping to go public), Robinhood has been sharing all kinds of interesting information including the fact that they added 1 million users between May and July of this year, effectively doubling in size of accounts to where they were last year and now sitting at 6 million accounts. Another nugget they shared – they plan to look like a full services consumer finance company in the “next couple of years.”

Traction by Interaction

At Interactive Brokers, things have been equally as busy. Their move away from being listed on Nasdaq to join the startup IEX has been reaping dividends in terms of media exposure. They took the risk of being first and are being summarily rewarded for doing so (at least for now).

On top of that, however, they have also sponsored the new state-of-the-art Bloomberg broadcast studio in the heart of Bloomberg’s New York headquarters. And, just to keep things even more interesting, Interactive Brokers announced this week that they are opening up a portfolio management tool called PortfolioAnalyst free to the general public. That’s correct, a portfolio tracker freely available to the public is not something new but after Google finance dropped this feature there’s clearly a demand for something well-built to keep track of one’s portfolio (and get stock quotes + news). With the experience and technology stack Interactive Brokers brings with it for investors, PortfolioAnalyst will and should give rival brokerages a reason to be concerned; this kind of a tool for Interactive Brokers moves them further forward into the being able to provide ‘traditional’ banking-style services to their clients (sound familiar?).

For context, at the time of publishing, we’re still not two-weeks into October.

We also haven’t mentioned E*Trade’s launching of “themed investing” comprised of investment themes and their associated ETFs. What are the themes covered? Artificial Intelligence, Clean Energy, Clean Water, Cybersecurity, Gamers, Gender Diversity and, wait for it, Millennials.

So, while each of these developments probably merits its own story, taken together, the timing, nature and number of these new features, services, technologies and developments across the brokerage industry in such a small span of time point to something far greater than turbulence.

This activity has the signature of an industry that is in transition and who understand that the next waves of opportunities will require being able to connect with millennial investors in a meaningful and significant way. Part of the future path will undoubtedly require content and design-driven thinking. More substantially, however, survival for online brokerages depends on technological capability and creative foresight. With so much going on in the news, it’s going to be increasingly more difficult for online brokerages on both sides of the border to make a splash. Instead, brokerages are going to or at least should try to, invest heavily (if possible) in delighting their users with great design.

Discount Brokerage Tweets of the Week

From the Forums

RRSP Regret

When seeking financial advice, it can sometimes be hard to listen to the professionals, especially when it’s tempting to go in the opposite direction. One investor turned to a forum and was reflecting on their decision on a growth strategy for their RRSP and the ratio of certain mutual funds to bonds. Read what the forums’ verdict was here.

Crowd Surfing

They say there is safety in numbers, which likely prompted one newcomer to turn to the Personal Finance Canada subreddit for some advice. After maxing out their TFSA and RRSP they were looking to take the plunge into a taxable account, but the question of “how much is too much?” was a tricky one to answer. See what others had to say here.

Into the Close

That does it for another wild week. From incredible rocket launches to incredulous UFC fights to the double black diamond drop off on the charts this week, perhaps legalization of marijuana can’t quite come soon enough. On the plus side, Halloween is just around the corner so anyone looking for a costume idea (market sell off?) or little bags to cure the munchies is in luck. Have a great weekend!


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Discount Brokerage Weekly Roundup – October 5, 2018

As with any good Thanksgiving meal, there’s usually a generous helping of something good. In keeping with the spirit of Thanksgiving, we’re dishing out an extra helping of interesting developments in the Canadian online brokerage space. Whatever the equivalent of eating pants are for your brain, we hope you’ve got them on.

In this edition of the roundup, we take a look at a very interesting move by a bank-owned online brokerage to become more accessible to younger investors. From there, we’ll take a look at a perennial crowd pleaser – deals and promotions, including one special offer that we spotted being chatted about online. As a bonus, we continue coverage of the celebratory year from another bank-owned discount broker who dropped some very interesting stats on their business and how it has grown over time. As usual, we’ll dish up the latest conversation starters on Twitter and in the investor forums. Bon appetit!

CIBC Investor’s Edge Launches Student-Friendly Pricing

Getting into DIY investing just got a little cheaper for some investors this past week. CIBC Investor’s Edge rolled out a new pricing structure geared specifically towards students that offer friendlier pricing and account maintenance terms. The new student commission pricing lowers the standard commission per trade to $5.95 from $6.95 and waives the annual $100 fee associated with accounts that have less than $10,000 in them.

While not a novel idea, providing a different pricing tier for students and/or youth does provide some extra incentive to try out a particular brokerage, especially for those new to investing. For CIBC Investor’s Edge, their already low commission rate makes them a natural contender for DIY investors looking to save on commission fees so, for students, who are typically on a budget, this is an attractive option.

One important requirement to qualify for the Investor’s Edge student pricing is that individuals have to open up a CIBC Smart Account for students before they can qualify for the Investor’s Edge student rate. Taken together, the fact that only those with student banking packages can access the student commission rates suggests that Investor’s Edge is looking to build a deeper relationship with this (mostly) younger demographic of client.

Interestingly, starting a banking relationship with CIBC also opens up the opportunity to get other products, such as a credit card, which a recent Rob Carrick article in the Globe and Mail is an important strategic decision that young people (typically post-secondary students) should consider to build a credit history.

While student-friendly pricing may not move the needle right away for CIBC Investor’s Edge in terms of higher commission revenues (except for those riskier clients who like the pot and crypto stocks), the fact this program exists might be enough to tip someone away from a competitor bank-owned brokerage. And, because of the requirements of the student bank account, there is a relatively low cost to using CIBC’s banking services while still getting the convenience associated with a large bank.

For other Canadian online brokerages, it will be interesting to see which of the bank-owned brokerages follows suit. Being friendlier to students and younger investors is one way to maintain a relationship with a key demographic. While user experience is key, at some point it’s hard to ignore the cost for services. So, for the non-bank-owned brokerages, there has to be more value to offset the inconvenience of having a separate funding source for an online trading account.

An example of an online brokerage getting creative in terms of retention is Interactive Brokers. One way they’ve pursued keeping a tighter rein on their clients has been to offer services like direct deposit and credit cards. Although that service is not available to Canadian DIY investors (yet) the reasoning is similar – the goal is to keep clients from trying out (and potentially liking) a competitor brand.

For CIBC Investor’s Edge, they’re hoping that they can build a long-term relationship with a generation in which Tinder is a thing; it will be interesting to see if these new features will have younger DIY investors swiping right to find a good match.

Discount Brokerage Deals & Promotions Update

The fall crop of Canadian discount brokerage deals is looking a little leaner than usual as we head into October. As mentioned a couple of weeks ago, CIBC Investor’s Edge launched an exclusive cash back offer for SparxTrading visitors towards the end of September and as a result, pits them against BMO InvestorLine as the only bank-owned brokerages (for now) with a cash back promotional offer.

This past week, we also had another deal from RBC Direct Investing cross our radar. The offer is for 20 commission-free trades that are good to use for up to one year. Although this offer from RBC Direct Investing is aimed at healthcare professionals, according to several forum users and looking through the terms and conditions, the deal is technically able to be accessed by non-health care professionals.

As we approach the end of the year, there is usually an uptick in activity with respect to TFSA’s and shortly thereafter, RRSPs. An interesting trend at Canadian discount brokerages over the past two to three years is that they are starting sooner in the year with their marketing efforts. The result for DIY investors is not unlike the experience of shopping at Costco where merchandise for Christmas shows up on store shelves in September. Perhaps they’re onto something.

For DIY investors in the market for interesting offers in October, the news is somewhat mixed. On the one hand, there’s strong variety in transfer fee coverage and, interestingly, in referral programs. On the other, previously popular categories such as cash back promotions and commission-free trade deals are leaner. That said, these latter two categories still have some strong offers for DIY investors on the fence about the brokerages offering up the promos.

With the year now in the home stretch and many financial services providers hitting their fiscal year end, the next several weeks will be interesting to watch. There are whispers of new offers coming to market soon and we are still watching out for the Wealthsimple Trade launch to officially start rolling out which may also create a sense of urgency for brokerages to step up with some interesting offers.

BMO InvestorLine Reflecting on 30

There continues to be interesting content emerging from the 30th-anniversary celebration of BMO InvestorLine. Instead of frosting or sprinkles, however, this treat came in the form of interesting data on the online brokerage and how it is reaching DIY investors.

Late last week, the president of BMO InvestorLine, Silvio Stroescu, highlighted some of the milestones and interesting stats associated with the online brokerage and ‘digital advice’ segments of the business (aka SmartFolio). One of those stats had to do with the total number of online brokerage accounts, which was quoted at 400,000. For context, the number of accounts at online brokerages in Canada is typically very opaque, unlike their publicly traded US online brokerage counterparts. So, it is interesting to see them share these stats publicly. Further, it was also interesting to learn about the number of SmartFolio and AdviceDirect clients (5,000 and 4,000 respectively). It is certainly a bold decision to telegraph numbers but it does help put into perspective the scale of how fast the online investing space is changing. Given that the number of accounts at the online brokerage unit was quoted as “over” 400,000 that could represent a much higher number, however for some perspective, the waiting list for Wealthsimple Trade stands at just over 76,000 interested parties and they haven’t even launched publicly yet. While it remains to be seen how many of those interested in this account actually open a trading account (and subsequently use it), there is clearly a competitor brewing in the DIY trading segment.

Another point highlighted by Stoescu that stood out was the bimodal distribution of the online investing demographic. Simply put, there are “younger” and “older” investors who appear to be gravitating towards online investing via the self-directed platform. There is clearly an interest in the younger tier with upgrades planned by TD Direct Investing also referencing this group and the story mentioned above relating to CIBC Investor’s Edge and the launch of student-friendly commission pricing.

Perhaps the most fascinating stat, however, was the reference to the growth of the adviceDirect platform, a service that blends DIY investing with accessibility to support from licensed wealth management professionals. In the period from January to September, they have seen more transfers of accounts worth more than $1 million compared to the past six years since the service launched. While the numbers and specifics are somewhat opaque, it nonetheless points to an interesting level of confidence in the service.

BMO InvestorLine has definitely earned quite a bit of coverage in the roundup for their 30th anniversary, however as a milestone year, it appears that there are reasons to celebrate. What also seems pretty clear, however, is that things are changing in the online investing space quite rapidly. Paradoxically, how old a financial institution doesn’t determine how quickly they will grow nor does it determine how well it will handle the future wave of technology-driven challenges. This alone is proof enough that age is just a number. And, for Canada’s online brokerages, it’s also an instructive lesson on staying agile to keep up with the younger generation of investors.

Discount Brokerage Tweets of the Week

From the Forums

Sow it Begins

How challenging is it to get started with online investing? One “newbie” investor posed an interesting question in this Reddit’s Personal finance Canada thread, drawing a comparison between two well-known passive investing options. Find out where the discussion led, and why so many comments favoured index funds and ETFs.

Mutually Beneficial

An overwhelmed investor took to this Personal Finance Canada forum seeking direction on which mutual fund to invest in. Willing to opt for a more risk tolerant profile, check out the helpful advice that was offered with some useful links too.

Into the Close

That’s a well-seasoned turkey wrap on the cusp of Thanksgiving weekend. This weekend is not really known for self-restraint, so whatever you choose to indulge in, on behalf of everyone here at the team, we hope you have a safe and happy long weekend. Just a reminder that Canadian markets are closed on Monday for Canadian Thanksgiving but US markets are open. Have a great weekend!

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Discount Brokerage Deals & Promotions – October 2018

Now that October is here, there are some unbe-leaf-able deals for DIY investors. Corny puns aside, the fall crop of Canadian discount brokerage deals is packed with a great selection of cash back and commission-free trading offers. With the entry of a popular bank-owned brokerage into the deals race, other online brokerages are certain to take notice.

To kick things off for the new month, the official start to the month came with a couple of important deal extensions from BMO InvestorLine, SmartFolio and Desjardins Online Brokerage. Also on the welcome manifest, a cash back promotion from CIBC Investor’s Edge exclusively for readers.

Overall, transfer offers and commission-free trade promotions are still the most popular choice for online brokerages. With two very noteworthy names now offering cash back promos, DIY investors looking for a deal will have a couple of strong options to consider from the 20+ deals listed. As with all things related to trading, be sure to look over the fine print and terms of the offers being consider.

Expired Deals

With summer officially in the books, HSBC InvestDirect also packed up and put away their summer commission-free trade promo. Unfortunately for HSBC InvestDirect, this promotion was seriously overshadowed by the announcement from Wealthsimple Trade that commission-free trading was going to launch in Canada. In fact, most commission-free offers are going to have a harder time stacking up against the full commission-free experience being promoted by WealthSimple trade.

Extended Deals

BMO InvestorLine’s cash back promotion has been extended out for yet another month. This past September marks the 30th anniversary of the launch of InvestorLine so we’re glad to see that their cash back promotion also got a chance to enjoy the party just a little bit longer. The new expiry date for BMO InvestorLine’s cash back promotion is October 31st.

Also extended from BMO is the SmartFolio 0.5% cash back promotional offer. Like the BMO InvestorLine extension, the new expiry date for SmartFolio’s promotion is October 31st.

Desjardins Online Brokerage kept its long-running commission credit offer going for one more month. The new deadline for this popular promotion is now October 31st, 2018.

New deals

CIBC Investor’s Edge stepped onto the deals and promotions field in a big way at the end of September by launching an exclusive cash back promotion for readers. This offer, which comes with a custom Sparx Trading promo code, is the first major bank-owned online brokerage promotion to carry on well into the new year – a sign that CIBC Investor’s Edge is quite confident in the competitiveness of this cash back offer.

Discount Brokerage Deals

  1. Cash Back/Free Trade/Product Offer Promotions
  2. Referral Promotions
  3. Transfer Fee Promotions
  4. Contests & Other Offers
  5. Digital Advice + Roboadvisor Promotions

Cash Back/Free Trade/Product Offer Promotions

Company Brief Description Minimum Deposit Amount Commission/Cash Offer/Promotion Type Time Limit to Use Commission/Cash Offer Details Link Deadline
Jitney Trade A Sparx Trading exclusive offer! Use the promo code “Sparx Trading” when signing up for a new account with Jitneytrade and receive access to their preferred pricing package. n/a Discounted Commission Rates none For more details click here none
Open and fund a new account (TFSA, Margin or RRSP) with at least $1,000 and you may be eligible to receive $88 in commission credits (up to 17 commission-free trades). Use promo code SPARX88 when signing up. Be sure to read terms and conditions carefully. $1,000 $88 commission credit 60 days Access this offer by clicking here: $88 commission-credit offer . For full terms and conditions, click here. none
Open and fund a new account (TFSA, Margin or RRSP) with at least $1,000 and you may be eligible to receive 5 commission-free trades. Use promo code 5FREETRADES when signing up. Be sure to read terms and conditions carefully. $1,000 5 commission-free trades 60 days 5 commission-free trade offer December 31, 2018
Disnat Desjardins Online Brokerage is offering new clients 1% of assets transferred into the new account in the form of commission credits (to a maximum value of $1,000). Minimum qualifying deposit is $10,000. To qualify, individuals will have to call 1-866-873-7103 and mention promo code DisnatTransfer or email: [email protected]. See details link for more info. $10,000 1% of assets transferred in the form of commission-credits (max credits: $1,000) 6 months Disnat 1% Commission Credit Promo October 31, 2018
Open and fund a new qualifying account with CIBC Investor’s Edge with a deposit of at least A) $25,000; B) $50,000 or C) $100,00+ and you may be eligible to receive a cash back bonus of A) $100; B) $200 or C) $400. This offer is open to both new and existing clients. Use offer code SPARX18 when opening the account to obtain this offer. Be sure to read full terms and conditions for complete details. A) $25,000 B) $50,000 C) $100,000 A) $100 B) $200 C) $400 Cash back will be deposited on the week of March 24, 2019 for transfers received by December 31, 2018; transfers received after December 31, 2018 but before May 1, 2019 will receive cash back on the week of July 1, 2019. CIBC Investor’s Edge Cash Back Promo March 24, 2019
Open and fund a new qualifying account with at least $25,000 and you may qualify for one month of unlimited commission-free trades and up to one month free of an advanced data package. Use promo code ADVANTAGE14 when opening a new account. Be sure to read terms and conditions for full details. $25,000 commission-free trades for 1 month + 1 month of advanced data. 1 month Active Trader Program December 31, 2018
BMO InvestorLine Open a new account or fund an existing account at BMO InvestorLine with new assets worth at least A) $50,000; B) $100,000; C) $300,000 or D) $500,000+ and you may be eligible to receive a cash back reward of up to A) $75; B) $200; C) $500 or D) $1000. Use promo code SPARXCASH when registering to qualify. Be sure to read full terms and conditions. A) $50,000 B) $100,000 C) $300,000 D) $500,000+ A) $75 B) $200 C) $500 D) $1000 Cash back will be deposited the week of April 15, 2019. BMO InvestorLine Summer 2018 Campaign October 31, 2018

Expired Offers

Last Updated: Oct. 1, 2018 22:00 PT

Referral Promotions

Company Brief Description Minimum Deposit Amount Incentive Structure Time Limit to Use Commission/Cash Offer Deposit Details Link Deadline
Refer a friend to Questrade and when they open an account you receive $25 cash back and they receive either A) $25; B) $50; C) $75; D) $100; or E) $250 depending on the amount deposited amount. Enter code: 476104302388759 during account sign up to qualify. Be sure to read the terms and conditions for eligibility and additional bonus payment structure and minimum balance requirements. A) $1,000 B) $10,000 C) $25,000 D) $50,000 E) $100,000+ $25 cash back (for referrer per referral; $50 bonus cash back for every 3rd referral) For referred individuals: A) $25 cash back B) $50 cash back C) $75 cash back D) $100 cash back E) $250 cash back Cash deposited into Questrade billing account within 7 days after funding period ends (90 days) Refer a friend terms and conditions Code Number: 476104302388759 none
If you (an existing Qtrade Investor client) refer a new client to Qtrade Investor and they open an account with at least $1,000 the referrer and the referee may both be eligible to receive $25 cash. See terms and conditions for full details. $1,000 $25 cash back (for both referrer and referee) Cash deposited at the end of the month in which referee’s account funded Refer A Friend to Qtrade Investor none
Scotia iTrade If you refer a friend/family member who is not already a Scotia iTRADE account holder to them, both you and your friend get a bonus of either cash or free trades. You have to use the referral form to pass along your info as well as your friend/family members’ contact info in order to qualify. There are lots of details/conditions to this deal so be sure to read the details link. A) $10,000 B) $50,000+ A) You(referrer): $50 or 10 free trades; Your “Friend”: $50 or 10 free trades (max total value:$99.90) B) You(referrer): $100 cash or 50 free trades; Your “Friend”: $100 cash or 50 free trades (max total value: $499.50) 60 days Refer A Friend to Scotia iTrade tbd
BMO InvestorLine If you (an existing BMO InvestorLine client) refer a new client to BMO InvestorLine and they open an account with at least $5,000 the referrer and the referee may both be eligible to receive $50 cash. To qualify the referee must use the email of the referrer that is linked to their BMO InvestorLine account. See terms and conditions for full details. $5,000 You(referrer): $50; Your Friend(referee): $50 Payout occurs 45 days after minimum 90 day holding period (subject to conditions). BMO InvestorLine Refer-a-Friend January 2, 2019

Expired Offers

Last Updated: Oct. 1, 2018 22:15 PT

Transfer Fee Promotions

Company Brief Description Maximum Transfer Fee Coverage Amount Minimum Deposit Amount for Transfer Fee Eligibility Details Link Deadline
Transfer $15,000 or more into a new HSBC InvestDirect account and you may be eligible to have up to $152.55 in transfer fees covered. 152.55 $15,000 Confirmed via email contact with HSBC InvestDirect Rep. Contact client service for more information. none
Transfer $15,000 or more to Qtrade Investor from another brokerage and Qtrade Investor may cover up to $150 in transfer fees. See terms and conditions for more details. $150 $15,000 Transfer Fee Rebate none
Transfer $15,000 or more to RBC Direct Investing and they will pay up to $135 in transfer fees. $135 $15,000 Transfer Fee Rebate Details none
Transfer $20,000 or more to a National Bank Direct Brokerage account and they will pay up to $135 plus taxes in transfer fees. $135 $20,000 Transfer Fee Rebate none
Move your brokerage account to Questrade and they’ll cover the transfer-out fee up to $150. $150 $25,000 Transfer Fee Promo none
Transfer at least $25,000 or more in new assets to TD Direct Investing when opening a new account and you may qualify to have transfer fees reimbursed up to $150. Be sure to contact TD Direct Investing for further details. $150 $25,000 Contact client service for more information (1-800-465-5463). none
Transfer $25,000 or more into a CIBC Investor’s Edge account and they will reimburse up to $135 in brokerage transfer fees. Clients must call customer service to request rebate after transfer made. $135 $25,000 Confirmed with reps. Contact client service for more information (1-800-567-3343). none
Disnat Disnat is offering up to $150 to cover the cost of transfer fees from another institution. To be eligible, new/existing clients need to deposit $50,000 into a Disnat account. You’ll have to call 1-866-873-7103 and mention promo code DisnatTransfer. See details link for more info. $150 $50,000 Disnat 1% Commission Credit Promo October 31, 2018
BMO InvestorLine Open a new qualifying account with BMO InvestorLine or fund a qualifying existing account, by transferring in at least $200,000+ in net new assets and you may be eligible to have transfer fees covered up to $200. Use promo code SPARXCASH when signing up. Be sure to read the terms and conditions for more details on the offer. $200 $200,000 BMO InvestorLine Summer 2018 Campaign September 3, 2018

Expired Offers

Last Updated: Oct. 5, 2018 17:15 PT

Other Promotions

Company Brief Description Minimum Deposit Amount Required Details Link Deadline
Disnat Desjardins Online Brokerage, in conjunction with MoneyTalks, is offering 3 months of the “Inside Edge” investor information service to Desjardins Online Brokerage clients. Use promo code DESJ2016 during checkout to qualify. Be sure to read full terms and conditions for more information. n/a MoneyTalks Inside Edge Discount none
Disnat Desjardins Online Brokerage is offering $50 in commission credits for new Disnat Classic clients depositing at least $1,000. See terms and conditions for full details. $1,000 Broker@ge 18-30 Promotion none
Scotia iTrade Scotiabank StartRight customers can receive 10 commission-free trades when investing $1,000 or more in a new Scotia iTrade account. Trades are good for use for up to 1 year from the date the account is funded. Use promo code SRPE15 when applying (in English) or SRPF15 when applying in French. Be sure to read full terms and conditions for full details. $1,000 StartRight Free Trade offer none

Expired Offers

Last Updated: Oct. 1, 2018 22:15 PT

Digital Advice + Roboadvisor Promotions

Robo-advisor / Digital advisor Offer Type Offer Description Min. Deposit Reward / Promotion Promo Code Expiry Date Link
Discounted Management Open and fund a new Questrade Portfolio IQ account with a deposit of at least $1,000 and the first month of management will be free. For more information on Portfolio IQ, click the product link. $1,000 1st month no management fees KDKFNBBC None Questrade Portfolio IQ Promo Offer
Cash Back Open and fund a new or existing SmartFolio account with at least $1,000 and you could receive 0.5% cash back up to $1000. Use promo code PROMO1000 when opening a new account. See terms and conditions for full details. This offer can be combined with the refer-a-friend promotion. $1,000 0.5% cash back to a maximum of $1000. PROMO1000 October 31, 2018 SmartFolio Cash Back Promo
Discounted Management Open a new account with BMO SmartFolio and receive one year of management of up to $15,000 free. See offer terms and conditions for more details. $1,000 1 year no management fees STSF April 30, 2019 SmartFolio New Account Promotion
Cash Back – Referral BMO SmartFolio clients will receive $50 cash back for every friend or family member who opens and funds a new SmartFolio account. Friends and family referred to SmartFolio will receive $50 cash back for opening and funding an account, plus automatic enrollment into SmartFolio’s mass offer in market at the time. See offer terms and conditions for more details. $1,000 $50 cash back (referrer) $50 cash back (referee) Unique link generated from SmartFolio required. None SmartFolio Website
Transfer Fee Coverage Transfer at least $25,000 into Virtual Wealth when opening a new account and you may be eligible to have up to $150 in transfer fees covered by Virtual Wealth. $25,000 up to $150 in transfer fees covered None None Contact customer service directly for more information.
Last Updated: Oct. 1, 2018 22:15 PT