It’s fitting that after so much discussion about “shorts” in the news, we also now have a short(er) trading week upon us. With one fewer trading day, it also means the deadline for RRSP contributions is ticking closer, adding to the pressure that is evidently already building at Canadian online brokerages this month.
In this edition of the Weekly Roundup, we take yet another look at the customer service angle at Canadian online brokerages, this time zeroing in on another recent set of rankings that measure digital interactions. From there, we dive into some exciting new features being launched by Canadian brokerages that will help take some of the guesswork out of investing before and during retirement. As always, we’ll serve up a generous helping of investor commentary from Twitter and the investor forums.
Canadian Online Brokerages Struggle at Delivering Service Online
The drumbeat for better customers service among DIY investors in Canada is getting louder by the day.
Increased coverage among high-profile financial writers in Canada, as well as a number of studies by financial research firms, validates what we have been seeing for many months on social media: Most Canadian online brokerages are falling short on providing timely customer service experiences.
Columnist @rcarrick said he’s received complaints about several bank-owned firms, but @TD_DirectInvest was named most often. As the largest player in the brokerage business, TD has had issues keeping up with client demand to speak to its live reps. https://t.co/J7SXJWBNWx— Ellen Roseman (@ellenroseman) January 25, 2021
While data has been emerging this year that puts the issues faced by online brokerages in the spotlight, it is somewhat confusing for online investors since different studies measure different aspects of the “service” experience.
Both the actual wait times experienced by Canadian DIY investors and the unpredictability of what users can expect when reaching out as either a customer or an interested consumer have potentially far-reaching consequences to the industry as a whole. And, as the data shows, if these issues are not addressed, the recent online brokerage challenges taking place in the US could spill over to providers here in Canada.
The Story in Numbers
At the end of January, a couple of important Canadian online brokerage rankings were published. We covered The Globe and Mail’s online brokerage rankings in detail earlier this month, with a significant amount of time spent diving into the wait times that were measured at Canadian online brokerages in January (2021).
|Online Brokerage||Wait Times (min)|
|CIBC Investor’s Edge||101|
|Desjardins Online Brokerage||170|
|National Bank Direct Brokerage||69|
|RBC Direct Investing||90|
|TD Direct Investing||58|
For a quick refresh, the table above contains the average wait time data reported as part of the online brokerage rankings among the 12 firms that were reviewed. Interestingly, in a post by DALBAR on LinkedIn, additional information about the wait times was provided that illustrates the range of wait times at each firm. Readers of the Weekly Roundup post in which these numbers were thoroughly examined can appreciate why average values, on their own, might not convey the full picture. The study data cited by The Globe and Mail rankings reported the average wait times, but the graphic below adds additional context around those average values.
Aside from the 25x difference between the average of the lowest wait times (Virtual Brokers) compared to the highest average wait times (Scotia iTrade), one of the most striking trends to jump out is variation in wait times that occurred as online brokerages took longer to respond. At the far right of the chart shown above, five firms in particular stand out with highly variable wait time ranges:
Of these firms, it was most evident that Questrade had the highest range of wait times, which stretched from about 50 minutes to just under 300 minutes, with an average of 128 minutes. By comparison, HSBC InvestDirect had an average of 125 minutes but a much narrower range of wait times, stretching from just over 60 minutes to about 210 minutes. When ranges this wide are part of the service experience, it is essentially a gamble for DIY investors as to exactly how long they are going to have to wait before connecting with a service agent.
Another striking feature of the data on the chart is where Qtrade Investor landed in terms of wait times. Their “worst” wait time (of about 50 minutes) was approximately the best wait time that any firm behind them could achieve.
These data points are also important because of how they compare against another set of online brokerage rankings that focused specifically on service levels. Financial services research firm Surviscor also released online brokerage service rankings at the end of January and concluded that there were clear and persistent shortcomings in the response times of most Canadian online brokerages.
Unlike the DALBAR study, which took a snapshot of one week’s worth of telephone data in January 2021, Surviscor conducted 163 service inquiries per online brokerage between January and December of 2020 on contact forms, emails, and social media channels.
|Firm||Response Time (hours)|
|Canaccord Genuity Direct||11.15|
|National Bank Direct Brokerage||29.38|
|RBC Direct Investing||39.17|
|TD Direct Investing||39.27|
|Laurentian Bank Discount Brokerage||62.30|
|Desjardins Online Brokerage||89.75|
|CIBC Investor’s Edge||104.17|
The average industry response time in 2020 ended up being 55 hours, which was actually an improvement over 2019, in which response times across the industry averaged out to 62 hours. One of the most compelling points observed in the Surviscor analysis of service response times, however, was that service has been trending in the wrong direction for many years now, and although COVID-19 can certainly be considered a contributing factor, the data shows that even before the pandemic, meeting customer response times online was a challenge.
Change the Channel or Channel the Change
When comparing the data from the Surviscor and DALBAR studies, it’s clear that the kind of service experience a consumer can encounter with a Canadian online brokerage depends on the channel used, which is a big problem on a number of levels.
First, and perhaps most ironic, is that when it comes to online capabilities for service touchpoints at Canadian online brokerages, in spite of the hairpulling wait times, it is still faster (in most cases) to wait on the phone than it is to send electronic correspondence.
In fact, when comparing the magnitude of the difference between the phone and online channels, the range went from 1x (Questrade) to 786x (Virtual Brokers). Excluding the outliers, the average factor difference was 39x between phone and online interactions. One clear standout in both the digital and telephone categories was Qtrade Investor, which had the shortest wait time on the phone and the second-fastest response time online.
To Surviscor’s point, the digital interactions may have been deprioritized compared to phone channels because customers would be more likely to use the phone channels; however, as far as making a first impression count, most Canadian online brokerages would not get a flattering response.
A second important consideration is that for the financial services industry as a whole, trust is an integral part of consumer confidence.
Granted, DIY investors are flocking to the markets in droves because of perceived generational opportunities to build wealth, but when those same investors are hitting roadblocks to getting issues addressed or questions answered, confidence takes a hit. If you add issues of platform stability to that, then individual investors lose faith that financial services firms are up to the task of safely and reliably providing the opportunities for wealth creation that much of the marketing suggests is possible.
With just a few weeks to go until the RSP contribution deadline for 2020, this is prime time for DIY investors looking to online brokerages for RSP options. It is against this backdrop that the wait times experienced by Canadian investors stand out as something that could ultimately become a much more important component to online brokerage selection than has been the case in the past. Deeper than that, however, the notion of lag time is anathema in the age of online investing.
The recent Robinhood debacle that resulted in trading in certain securities being restricted has been blamed on wait times for trade settlement – a stunning vulnerability in the year 2021. For DIY investors in Canada, the clear and present risk to consider is an online brokerage’s capacity to meet a respectable service delivery standard, especially during times of market volatility or heightened interest (which is arguably when those systems are needed the most).
For Robinhood, not only did they suffer a blow in the court of public opinion, but they are also going to have to answer tough questions from lawmakers and face the wrath of an increasing number of lawsuits. Other than the growing chorus of complaints from Canadian consumers and financial media, there isn’t anyone holding online brokerages accountable for their service standards.
Ironically (again), the longer Canadian online brokerages take to address these service gaps, the more likely it is that the industry will find themselves taking centre stage in a mass media story or, worse, the focal point of a Reddit wave. Make no mistake, the clock on this story is most certainly ticking.
New Features From Online Brokerages Chip Away at Guesswork
After talking at length about where Canadian online brokerages are struggling, it’s a nice change of pace to shift the focus to areas in which they’re looking to innovate and deliver additional value to clients as well as to DIY investors more broadly.
Readers of SparxTrading.com know that we regularly engage with Canadian online brokerages on a number of new features and developments (case in point: our Look Back / Look Ahead series). Two interesting features that were brought to our attention from Canadian online brokerages are worth highlighting to readers.
BMO InvestorLine Launches a Checkup for Portfolios
With a tsunami of new investors joining the stock market, one of the biggest challenges many of them face is understanding how to answer a very basic question: “Am I on the right track?”
Fortunately for DIY investors, BMO InvestorLine recently announced a new online tool that helps investors analyze their current portfolios against a set of investor profiles, to see whether or not their portfolios are in line with their desired investment objectives.
The adviceDirect Portfolio Health Check tool is interesting for a number of reasons, but chief among them is that it is freely available to the general public to use, and it is both simple and fast to complete.
Individuals can enter details about their financial picture (no personally identifiable information is captured) and assess it on four key parameters: asset allocation, diversification, security ratings, and risk. In about three steps, users can quickly see where they measure up to their “personality” type and also see what they may want to consider changing in order to bring their portfolio in line with their respective investing personality type.
In terms of who might be interested, this tool appears to be built around investors (rather than traders) who are interested in taking a portfolio approach to building wealth. This means that the tool is likely to have mass appeal, and it serves as a great starting point to the conversation about whether or not the composition of a portfolio is on target.
From a business development standpoint, this is also an interesting and savvy move by BMO InvestorLine to be part of the conversation about wealth management. Analogous to mortgage calculators helping potential homeowners understand some of the mechanics around house purchases and borrowing, the adviceDirect Portfolio Health Check tool is a timely resource for anyone wanting to get a digital “second opinion” on how their investments stack up. This is entirely in line with their adviceDirect offering, which enables investors to consult with a licensed investment professional about recommendations but leaves the actual work up to the investors themselves to implement.
In a crowded landscape of online brokerages that would normally be focusing on commission pricing, this public-facing tool will enable BMO InvestorLine to be visible to the right kinds of investors at the right moment and, because it is free, for the right price.
Looking in the RRIF-View Mirror
Against the backdrop of service enhancements at Canadian online brokerages, one important feature launched at the end of 2020 will help clients of RBC Direct Investing who are thinking about income when retiring.
Starting in December 2020, RBC Direct Investing enabled clients with Registered Retirement Income Fund accounts (such as RRIFs, LIFs, LRIFs, RLIFs, PRIFs) to be able to view payment details online, without needing to call or wait for a letter. In light of the wait times on the phone channel, this is a timely development.
To help navigate the most important details of a RRIF, the “RRIF View” provides a snapshot of a client’s plan, with information on the required minimum annual withdrawal amount and scheduled payment dates.
While this is a small development, it is an interesting example of a feature that is important to users who have this kind of account – it got a quick highlight as part of the Navigators series that publishes updates at RBC Direct Investing.
At this time of year, there is a lot of discussion about contributing to RRSPs, but there isn’t nearly as much information available on the next steps of funding retirement, in particular the variety of options available to individuals with an RRSP.
Fortunately, RBC Direct Investing also has a fairly good guide explaining RRIFs, which is helpful for individuals needing to navigate this new account type. With this new feature, RBC Direct Investing might also have the opportunity to spark a conversation about online brokerage platforms and the ease with which RRIF account holders can stay on top of key information.
Discount Brokerage Tweets of the Week
Discount Brokerage Tweets – Curated tweets by SparxTrading
From the Forums
Timing the Market
A potential investor asks in this post whether they should wait until after the stock market crash – or at least massive correction – that many experts predict is imminent, in order to buy stocks at rock-bottom prices. Fellow Redditors share their strong opinions about the value of time in the market versus trying to time the market.
Up, Up & Away
From boredom to FOMO to a record bull market, there are many reasons that retail investing is surging in Canada right now. In this post, hundreds of Redditors discuss meme stocks, cryptocurrency, market bubbles, crashes, index funds, interest rates, and a whole lot more.
Into the Close
With the combination of Lunar New Year, Valentine’s Day, and Family Day, there have been many reasons to celebrate this past week, and Friday being that much closer certainly adds one more item to the list. There’s a lot of gripping drama playing out in the US this week, with the GameStonks trade under the microscope. With snow and cold showing up just about everywhere, including Texas, this is going to be a weird one. Hang in there.