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Discount Brokerage Weekly Roundup – April 26, 2021

It’s been a week of stranger things. Starting with the Federal budget with numbers so staggering they seem like they’re from the Upside Down, and ending with an announcement that Elon Musk would host Saturday Night Live, Glenn Close dancing to “Da Butt” at the Oscars, and a beaver taking down internet and cell phone service. All of this underscores just how tricky trying to figure out what’s coming next can be, except it seems, in the world of online brokerages.

In this edition of the Weekly Roundup, we dive into the hazy cloud of online forum chatter to highlight some interesting developments coming soon to Canada’s online brokerage landscape from two very popular players. Also, we’ve got updates on the latest activities here at Sparx Trading that will help readers stay engaged and smiling. Finally, we close out the Roundup with more interesting conversations from the online forums.

The Chatters that Matter

Every so often, it’s fun to spill the tea.

Usually, when we talk about the latest features and developments at Canadian online brokerages, it’s in reference to things that have already launched or are well on their way to launching.

The reason is that we want to be able to attribute the story back to a reasonable source. Rumours are interesting, but we like to do our due diligence and provide citations or links to sources wherever possible, so that others can validate our work.

Of course, between the official statements that come via press releases and the conjecture from different social media and forum users, there is the “grey zone” of chatter that comes from official social media or investor forum accounts owned by online brokerages. Sometimes, online brokerages will let slip some interesting details and updates in response to user queries, and this past month we spotted two noteworthy features to discuss.

Questrade to Launch a New Mobile Trading App Later This Year

With so many new investors jumping into online trading since early last year, it’s no secret that online brokerages are now focusing more of their attention on this segment of investor. Typically younger and more tech savvy, newer online investors also demand best-in-class digital experiences, which for online brokerages, means having a very strong mobile trading user experience.

Earlier this month on reddit, a user started this thread highlighting their angst about Questrade’s current mobile trading experience. Intriguingly, this thread touched off quite a bit of discussion around the mobile trading app at Questrade and whether it cuts the mustard as an online trading app.

Here are some of the critical things that people said:

“Who else is sick of the spinning wheel on Questrade app? Anytime you switch to other apps and come back to Q it shows spinning wheel. Looks like Questrade is still using mom and pops app developer or platform.”

sick and tired of the spinning wheel of you’re not going to trade today.”

Yeah… the “app” is terrible. I mainly trade on my computer because of it, but it would be great to be able to trade from phone if I’m away from my computer without the spinning black wheel and having to constantly log back in. It would be a dream for a new app to come out. Wealthsimple has Questrade majorly beat in this category.

Given there is no one clear leader across the board when it comes to online investing in Canada, DIY investors have to make some tradeoffs when it comes to features at different brokerages. It’s not uncommon for online investors to have multiple online trading accounts with different online brokers specifically to access certain features (e.g. US trading).

It is therefore interesting to learn from a user associated with Questrade’s reddit account that this online brokerage is planning on launching a new and improved mobile trading app later this year.

Also on deck for the year ahead are improved research tools.

Although many Canadian online brokerages are continuously hard at work with new features and enhancements, there’s often a gap between what they’re doing and what they’re prepared to talk about. The one exception to this appears to be Wealthsimple Trade (see below for more details), who publishes their feature request directory along with how many votes each feature receives.

With Canada gradually achieving increased vaccinations (11+ million Canadians have had at least one vaccine shot at the time of publication), and the US already administering over 225 million vaccine shots, with almost 95 million people fully vaccinated, economic activity (and therefore stock market activity) is pointing towards recovery.

What that could mean is that the trend that has caused so many investors to be able to have the time to spend focusing on the markets is coming to an end. Users simply cannot pay attention to their jobs full time and maintain the pace of active investing. Further, without significant swings in volatility, active traders will also likely step back.

Canada, because of this lag in vaccinations, is likely to see online investing from home continue for longer than it will in the US. That said, once things start opening up again, being able to monitor and place trades on the go will become more important. Reliability (especially uptime and speed) is going to be paramount for anyone who’s considering very actively investing.

Although Questrade is already telegraphing improvements to its mobile trading app experience later this year, in reality, the macro picture of economic recovery and demographics of new traders likely suggests that other online brokerages in Canada are also thinking about, if not working on, improving their own mobile experiences.

That said, by letting people know that they are working on this new feature and targeting a launch later this year, Questrade is one brokerage that Canadian DIY investors won’t be guessing about for much longer when it comes to mobile trading.

Wealthsimple Trade Hints at USD Trading Accounts “Coming Soon”

There’s no doubt that Wealthsimple Trade has made significant strides in becoming a popular choice among cost-sensitive online investors. With their zero-commission trading offer, at least for Canadian securities, online investors have flocked to this online brokerage en masse.

Despite all the things people typically cite (beyond just the price) that they enjoy about Wealthsimple Trade, there are clear concerns and gripes that also accompany DIY investor conversations about this online brokerage. In an earlier Weekly Roundup, we covered what people don’t like about Wealthsimple Trade in some detail.

Among the list of things that users wanted to see changed at Wealthsimple Trade is having US dollar-denominated trading accounts. The reason: foreign exchange fees. Currently, Wealthsimple Trade charges 1.5% per transaction to convert from CAD to USD (and vice versa).

Earlier this month, one user on reddit posted a screenshot of a support interaction in which Wealthsimple stated that they are planning to support USD trading in “the near future” – potentially as part of their new suite of premium features.

This response from Wealthsimple’s client support was especially interesting given that Wealthsimple Trade publishes a list of roadmapped features (along with the votes in favour of those features). Specifically, US dollar accounts has been on the requested feature board for two years, and has received 282 votes to date (at the time of publication). Unlike other features which have tags to indicate that they are either planned or launched, the US dollar accounts feature isn’t tagged as being planned.

Given the significant response on reddit to this feature, and that (many) users are discussing what they would be prepared to pay per month to have this feature, this suggests that even if it goes live as part of the newly launched Wealthsimple Trade premium program, it could see considerable interest.

There are many questions about how USD accounts at Wealthsimple Trade would work, and often the devil is in the details. The most important detail for now, though, is when exactly this feature will go live.

Updates from Sparx Trading

We’re doing it for the ‘gram

What do Die Hard and the Sound of Music have in common? The answer is on the newly launched Instagram page.

We’re firm believers in having fun between the YOLOs & FOMOs of every day stock market conversations. So, for a lighter side of what we’re celebrating and working on at, be sure to follow @sparxtrading and let us know if you have any requests to see DIY investor bulls & bears having some fun in everyday life.

Check Out Our Newsletter

The Weekly Roundup is an awesome way to kick off your week, however, there are times when it’s maybe too hard to tune in to all of the interesting things taking place across the online brokerage space.

Cue the Sparx Trading newsletter!

The latest edition of our newsletter is now live, and it features quick recaps of the big stories shaping the world of online investing.

If you’re looking for something that feels even more awesome than starting your week with the Roundup, the newsletter is it!

Subscribe to the newsletter to make sure you get the next issue delivered straight to your inbox.  

From the Forums

Dialed into Service

The last year has presented a real challenge to online brokerages and DIY investors alike in terms of communicating by phone. One DIY investor had enough, and was compelled to make a change of online brokerage based on needing to have access to phone support. Read what other DIY investors had to say in this post on the Financial Wisdom Forum.

Broken Records

One DIY investor new to the world of trading online found out that keeping detailed records of online trading is only half the battle. Reporting those trades also presents a challenge. Find out what tips fellow DIY investors offered to help ease the angst of filing trade information.

Into the Close

That’s a wrap on another edition of the Roundup. It’s a mixed bag of news – hope for vaccinations and also stories of things continuing to worsen before they get better, or weirder. Markets, however, are positioning for better days ahead, so if there’s a beacon of positive news that seems to be it. Stay safe & profitable in the week ahead!

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Discount Brokerage Weekly Roundup – April 19, 2021

Apparently, stock markets are not sheepish about sounding like a broken record, especially when they’re breaking records. Yet another week has gone by, and with it, stock markets continue to press higher, appeasing the bulls, unnerving the bears, and delighting online brokerages.

In this edition of the Weekly Roundup, we take a deep dive into the big news from the past week: a major rebrand of one of Canada’s most popular online brokerages: Qtrade. Dig in to learn about the updates to the brand, and what it means for DIY investors and online brokerages in Canada. Also on the menu for this edition, interesting chatter from the investor forums.

Qtrade Charts a New Course for DIY Investors

This past week, a lot of things changed about Qtrade, one of Canada’s most popular online brokerages. Specifically, they launched a major brand overhaul, which included a new logo, new colour and design schemes, and an update to their website. They also changed their name to Qtrade Direct Investing.

While these substantial changes are visually apparent, there are also subtle changes that have taken place. When analyzed in conjunction with one another, these big and small changes paint a very interesting picture of the new direction for Qtrade, and potentially for the Canadian online brokerage industry as a whole.

New Logo, New Identity

Though there are over a dozen different online brokerages in Canada, they all face the same problem: standing out.

Advertising and marketing have been important tools to help online brokerages in Canada get onto the radar of investors, however, the reality for many DIY investors is that price often becomes the most important differentiator between online brokerages. Now that most online brokerages offer trading commissions at about the same price, communicating what makes an online brokerage special or unique is becoming increasingly important.

Beyond pricing, one common way to segment the Canadian online brokerage space is into “bank-owned” online brokerages and “independent” online brokerages.

Why this matters so much for Canadian online brokerages is because the same thing that is an advantage for bank-owned online brokerages, which is the affiliation with the larger parent bank brand, is also a limitation when it comes to leading change and innovation. The criteria, such as convenience or perceived security, that bank-owned online brokerages tend to have associated with them are not necessarily things that can be evolved quickly.

As a result, the larger online brokers have many more moving parts to coordinate, so change can almost by definition only happen slowly and, in many cases, reactively.

For independent or non-bank-owned online brokerages, however, the advantage to being small(er) and potentially more focused on online investing is that innovation and change can happen more frequently. Accordingly, the features can be tailored specifically towards DIY investors without running afoul of other considerations of the parent brand – such as banking or lending products, or even other investment services (such as mutual funds).

As such, for Qtrade, the launch of a new brand identity – including a new logo – is an opportunity to reaffirm to the market of DIY investors what is special about their brand, and to position themselves for a new vision of the future.

Breaking Bored

In an industry that is increasingly viewed as a commodity, standing out is not only important, but arguably vital. Big bank-owned brokerages are associated with boring because that’s generally what older online investors have valued: stability. What new entrants, like Wealthsimple Trade, and even edgier independent online brokerages like Questrade have shown, however, is that a newer DIY investors are paying attention to innovation.

Loyal, excited clients have to see the value in the brand and they have to connect emotionally with the brand. Typically, however, this kind of excitement is driven by online brokerages who can deliver a stable trading experience and strong value (read: low trading costs).

In the current landscape of Canadian online brokerages, it is hard for most DIY investors to be aware of more than a handful of providers, let alone know what the corporate branding looks like or get emotional about it.

Instead, most online investors tend to be aware of online brokerages by name only – whether that be by parent brand affiliation (such as a bank-owned online brokerage) or the name of the online brokerage directly.

With those challenges in mind, the new Qtrade logo and brand identity appear to position them to look bold and distinct. Their choice of colours, and even the logo itself, are very different to what is “traditionally” seen among their competitors. This makes Qtrade immediately striking.

The new Qtrade logo focuses on their core brand name, Qtrade – something we’ll touch on in more detail below – which is crucial to existing clients and existing DIY investors who would or should know the name. Gone from the logo, however, is the word “Investor,” which has also been dropped as part of their new name update.

Another interesting feature of their logo is that it progresses up and to the right – something that is very noticeably different than other online brokerage logos which move horizontally from left to right. The direction of moving up and to the right is incredibly meaningful to online investors, as that is the general direction that most investors want to see the progress of their investments move in.

Finally, the fact the new logo presents the word Qtrade in all caps instead of just capitalizing the first letter the way the previous logo did, ties together the whole brand name and subtly elevates the word “trade” to new prominence.

The new Qtrade logo communicates confidence and is thoughtfully designed with features that speak to the online investor experience. No longer is it just about the “Q”, which encircled the previous logo, but rather where the brand can potentially take an investor.

It is this last point that really drives home the power of what a logo can communicate without needing to deconstruct it in a (*cough*) long post. The visual medium communicates information more quickly and impactfully than processing words can. And, in a world where interactions take place in fractions of a second, the new Qtrade logo is able to communicate a lot because of the way it has been designed.

New Colours

Another related component to the new Qtrade brand identity is the colour palette. If it was Qtrade’s goal to stand out from their peers with the use of colour, then it’s safe to say they have achieved it.

Their use of vibrant colours sets them apart completely from many of the colours that dominate their financial service competitors, and the colours that comprised their previous brand identity.

Most of the colours used by Canadian online brokerages are green, red or blue, however Qtrade’s use of dark pinks, mandarin orange, and lime green against the dark backgrounds (blues and grey) instantly communicate something bold and noticeable.

While there is a lot that could be said about psychology of colour that would be relevant to this rebranding of Qtrade, the most important point is that the new colour palette differentiates Qtrade from their online brokerage competitors and on a more subtle level, the vibrancy of colour choices is not meant to communicate “calm” but rather something quite opposite – and rare in finance – “excitement.”

New Website

The next major components to unpack are the changes to the Qtrade website.

If the new site feels like the difference is “night and day,” it’s because the updated website has a dark mode feel to it, in stark contrast to the previous site, which used white as a background.

Some noteworthy items dropped from their previous website include:

  • removing the photos and imagery
  • removing the financial data ticker with different market indices

But the most interesting change, aside from the visuals, is the absence of pricing. There are no longer commission prices or commission-free ETFs prominently displayed (or displayed at all) on the homepage.

Instead, the focus of the new homepage is on the key value drivers they want to present going forward. The top three for now (presumably because they are mentioned on the homepage) are:

  • Industry-leading tools
  • Award-winning platform
  • Canada’s best support

Further, there are short but meaningful explanations for investors of different experience levels that are featured prominently on the homepage.

Compared to the websites of their peers and against the previous version of their own site, the new Qtrade website has struck a balance between having fewer items on their website that don’t directly communicate what they do, the features/benefits of their platform, and wandering entirely into the minimalist design. Again, psychologically, it seems like a great deal of thought went into positioning Qtrade as a brand that exudes and communicates confidence, and the new website ties this together really well.

Another notable difference is the age and diversity of the individuals in the imagery chosen for their photos. While there is still a reliance on stock photographs, it appears that these images are more reflective of the diversity of their client base as well as from an age point of view, an indication of who they are hoping to resonate with: a younger investor.

What’s in a Name?

The new look and feel of Qtrade also features a new name. Qtrade Investor has now officially become Qtrade Direct Investing.

While changing colours and logos are big decisions on their own, changing the name of the brand is also a very big decision, especially given the fact they’ve had their name for 20 years and have earned a significant amount of media coverage with it. Thus, dropping or changing the name Qtrade to something else seems like it would be a tough sell.

That said, Qtrade has also, for better or worse, often been confused with Questrade, the other online brokerage in Canada that starts with a Q and has “trade” in the name. So, despite the rebrand efforts, abbreviated discussions (like the kind that happen on social media or reddit) will likely still result in some confusion.

Choosing to drop “Investor” and replace it with “Direct Investing” is a curious decision from a branding perspective, however.

On the one hand, “Investor” does imply a certain type of personality – perhaps a “buy and hold” type – something that is at odds with the future direction that Qtrade wants to move towards. That future, it seems, would favour individuals who have the confidence to “trade” rather than those investors who might remain passive and “do nothing.”

On the other, if there was some brand confusion before, adding “Direct Investing” to the mix may also run the risk of confusing DIY investors since there are already two big bank-owned online brokerages (TD Direct Investing and RBC Direct Investing) that use the “direct investing” label, as well as smaller brands CG Direct (Investing) and CI Direct Investing (that’s also going to be very confusing for DIY investors when that shift takes place for Virtual Brokers).

Thus, while Qtrade’s brand refresh is intended to have them stand out, by virtue of their name, it seems like Qtrade is going to be sometimes confused with other “direct investing” providers and still with Questrade. As an aside, the move to “direct investing” as a name to describe what online brokerages do, also suggests a continued move away from “discount brokerage” or “online brokerage,” which is potentially something we may see other online brokerages adopt – especially now given Qtrade’s name update.

Why Qtrade’s Rebranding Matters

Clearly, rebrands are a big undertaking with significant investment required to make the kinds of changes that Qtrade Direct Investing has. The simple question, it seems, is why? In particular, why now and why to this degree?

One possible answer is competition.

While competition among Canadian online brokerages is not as fierce as it is in the United States, there are, nonetheless, several firms that are consistently active when it comes to updates and improving their position in the market. Qtrade is definitely one them.

Regardless of their platform or website front end, Qtrade has been one of the few online brokerages in Canada that has kept itself in the spotlight, primarily by winning or earning recognition from various online brokerage reviews.

Given that rebranding is a decision with a timescale of years, however, it seems that winning top billing in the limited number of online brokerage reviews in Canada isn’t going to be enough to carry the brand forward into the future.

With so many online brokers in Canada, and even more on the way, the reality is that one of the biggest challenges to the online brokerages is figuring out how to stand out.

By changing their name and visual identity, Qtrade Direct Investing is signaling they are embarking on a new direction for their business. Their bold colour palette, excited tone, and increased inclusion both from a diversity standpoint and with younger investors in their imagery, means that Qtrade is focused on appealing to a new cohort of investors who represent the future of Qtrade Direct Investing.

The decisions to include emotion and excitement in the world of finance is a signal that financial services brands need to appeal to novelty rather than history. It doesn’t seem to matter to younger investors that an online brokerage may be new, but rather that the client experience be easy and fast.

The first impression of the digital touchpoint will be formative, so the new front end of the brand needs to be striking and memorable just to establish relevance in otherwise noisy world.  The fact is, a lot of online investors will start their journey either with their own bank-owned brand (out of convenience) or will look to the conversation online, especially in forums and social media more so than in traditional media – such as a magazine or newspaper (even an online one). As such, rankings and ratings won’t be enough. Investors will need a reason to get excited about Qtrade Direct Investing (or any other online brokerage).

Despite the amount of time and effort that has already been invested in crafting the next chapter of the Qtrade story, the reality is that a lot more work lies ahead of this online brokerage to win the attention and accolades of online investors in the places that those investors consume content.

It seems clear that for the time being, Qtrade wants to shift the conversation away from pricing and towards features and client experience, two areas in which they are competitive. To do so successfully, however, Qtrade will have to put itself on the radar of those DIY investors for whom those other features matter. For that reason, we expect to see a ramp up of activity across content and marketing channels to reach investors and amplify the new brand direction of Qtrade.

There is a lot more to dig into with regards to the Qtrade Direct Investing rebrand, however, given their perennial appearance in the online brokerage rankings, it is safe to assume that their competitors are paying close attention to this development at Qtrade.

The shift in tone and design towards building a more emotional connection with users is something other online brokerages will undoubtedly look to emulate as a result of this latest brand relaunch by Qtrade. As such, there will certainly be more to say about the consequences of this rebranding effort, including how DIY investors and competitors ultimately react to an online brokerage that is turning the energy level up.

From the Forums

Off the Charts

Active DIY investors are always on the lookout for charting tools, however, not all Canadian online brokerages offer them at a competitive price. In this reddit post, some DIY investors have found a clever solution to get their chart fix.

One Trade to Rule Them All

When it comes to passive investing, the ideal approach is “set it and forget it.” In this post, one online investor was looking for a single investment to make that would take the work out of DIY investing, and it seems that redditors were able to provide a suggestion.  

Into the Close

That’s a wrap on a big week. Markets aren’t the only things flying higher and online brokerages aren’t the only ones launching things: the first ever helicopter flight is set to take place on Mars. While we’re certainly facing our own share of struggles here on Earth, it’s great to have a reminder that there’s still lots of opportunity to celebrate. Hope your week is out of this world!

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Discount Brokerage Weekly Roundup – April 12, 2021

Another week, another record high on the stock market. Despite the gloomy news on COVID-19 numbers here in Canada and in many parts of the world, stock markets are pricing in brighter days ahead as major economies continue their path to reopening…

In this week’s Roundup, we take an in-depth look into some interesting data which reflects the challenges and opportunities confronting commission-free trading in Canada. Also, we’ll tee up some interesting discussions about online investing we spotted on investor forums.

What’s Wrong with Wealthsimple Trade?

If you were to ask most Canadian online investors what their number one gripe about trading online would be, trading commissions would almost certainly be at or near the top of the list.

What would happen if you removed commissions from the equation, though? Would investors still find reasons to be unhappy with the fact that they don’t pay any trading commissions? The answer, according to some surprising data gathered from reddit, is apparently yes.

Even though zero-dollar commission trading hasn’t yet fully taken over the online brokerage industry in Canada, Wealthsimple Trade has emerged as the clear first mover with this pricing model. With the rest of the Canadian online brokerages still charging up to $9.99 per trade, an interesting consumer preference experiment is playing out in real time.

Consumers and industry alike are witnessing that going commission-free isn’t without costs.

In the race to bring zero-dollar trading commissions to the Canadian online investing market, it appears that Wealthsimple Trade had to choose between features they were going to make available to online investors right away, and features that would have to wait. The result is that Wealthsimple Trade does not offer many of the features that other online brokerages do. And this has generated mixed feelings about the low-cost provider.

On one hand, the price of zero dollars for some trades is right for DIY investors. On the other, there are fees, such as foreign currency conversion, that some other online brokerages don’t charge.  In addition, there are also many features being offered by competing brokerages that Wealthsimple Trade does not (yet).

Last month, there was a rather fascinating reddit post that posed the following question: What’s the biggest problem with Wealthsimple?

While polls about other Canadian online brokerages exist in forums – including across reddit – this poll was unusual in a few respects.

First, it was a poll posted in the Wealthsimple Trade subreddit. That Wealthsimple Trade has its own subreddit is perhaps not surprising given their target demographic, however, it is unusual among Canadian online brokerages. They are not the only Canadian online brokerage to be on reddit, but they are the most popular.

Questrade has had its own subreddit since 2014, and has amassed a following of 11K. Wealthsimple Trade joined reddit in 2019 and has 14.8K members.

Seeing a poll about what users were unhappy with on the actual subreddit of the online brokerage in question is unusual. It would be hard to imagine, for example, an analogous situation arising at larger Canadian bank-owned online brokerages who elected to open themselves up to the unchecked reaction of the reddit crowd.

Another unusual aspect to this poll was the sheer scale of participation.

Almost two thousand respondents weighed in on the poll. While questions of what individuals are not happy with periodically surface in forums and social media, this poll clearly struck a nerve with the community of Wealthsimple Trade users on reddit.

As a result of having so many responses, and assuming no nefarious voting, data such as this offers a unique glimpse into the sentiment around user experience with Wealthsimple Trade.

The leading pain point for individuals polled was clearly dissatisfaction with transfer times for funding accounts, which are currently pegged at three to five days. Despite Wealthsimple Trade implementing near-instant deposits of $250 for users, the reality is that trading accounts require larger amounts of funds be available faster for most users.

The next issue poll respondents were unhappy with was delayed stock price quotes. Currently, prices shown on Wealthsimple Trade are delayed by 15 minutes, a real disadvantage to anyone who actively trades. This time delay requires users who want more accurate views of pricing to find another service that provides real time information (including other brokerages), or to simply guess at pricing and use limit orders.

Following the delayed quote data, lack of options trading was also flagged by respondents as a reason Wealthsimple Trade was falling short. Options trading has skyrocketed in popularity over the past year, especially within reddit investment circles, so for Wealthsimple Trade to not offer this feature is a significant limitation to DIY investors on reddit who are eager to trade options.

Perhaps the least surprising data point was that user interface was the last on the list of things that users were unhappy with, an indicator that Wealthsimple Trade is probably doing quite a bit right in this department.

While the data provided by this poll does shed light on what the limitations of Wealthsimple Trade are, the poll doesn’t tell the whole story. Venturing deeper into the post reveals more pain points that didn’t get included in the poll, such as US dollar account costs and the lack of availability of certain stocks to trade.

Despite the critical tone of the comments, it was fascinating to observe the number of comments in which users indicate they are supportive of Wealthsimple Trade. There is a very active community of Wealthsimple Trade users who believe in the model, and who are willing to step up to defend against or challenge statements that are overly negative.

Users of Wealthsimple Trade won’t have to wait much longer to have some of their biggest pain points addressed, however.

This past week, Wealthsimple Trade launched a premium service offering that charges a monthly subscription of $3 for access to real-time snap quotes and instant transfers of $1,000. These two items address, in part, two of the most significant pain points raised in the reddit poll.  While it might be a good start, there is still lots of ground to make up compared to what other online brokerages offer.

For example, real-time snap quotes, while unquestionably better than delayed data, are not as good as real-time streaming quotes which would automatically update without users having to constantly hit refresh. Though this feature is likely more appealing to an active trader, it is hard to imagine the core client of Wealthsimple Trade enjoying having to manually query stock prices.

Further, transfer amounts of $1,000 being available instantly is better than $250. But for larger trades, this cap is still a limitation to accessing bigger opportunities.

Deploying a “premium” version of Wealthsimple Trade is similar to what US online brokerage Robinhood has done with their Robinhood Gold premium version. Interestingly, the dollar amount Robinhood Gold users can instantly deposit depends on their account balance, with deposit amounts ranging between $5,000 and $50,000. Robinhood does not charge for real-time quotes, but does include level 2 data as part of the Robinhood Gold program.

The timing of the reddit poll launched last month and the release of these new features at Wealthsimple Trade seem fortuitous. Coincidence aside, Wealthsimple Trade launching new features signals to its users that it is working to address the gaps that it knows its users are aware of.

Still, it may not be good enough. Other Canadian online brokerages may charge more for commissions per trade, however, they do have the features that Wealthsimple Trade is playing catch-up on.

This theme is clear throughout the comments from users on reddit who, despite liking what Wealthsimple Trade is trying to do, still have accounts with competitors because those features keep them there. It seems likely, then, to be a question of when rather than if other Canadian online brokerages bring their commission rates down to a point where the cost per trade is negligible in the face of other features that are available.

Perhaps in a twist of irony, the new subscription model being launched by Wealthsimple Trade might accelerate other Canadian online brokerages to offer zero-commission trading (or drop commission prices significantly).

If the experiment at Wealthsimple Trade proves to be a success, other Canadian online brokerages can explore “unbundling” the online investing experience and charging customers for the kinds of features that best suit their usage habits and patterns.

The numbers speak for themselves at Wealthsimple Trade when it comes to their customer growth over the past year. That said, there are clearly hurdles for clients of other online brokerages hoping to get the full set of features available at Wealthsimple Trade similar to what they currently have at their existing brokerage.

The data from the reddit poll offers online brokers in Canada an opportunity to highlight their advantages relative to Wealthsimple Trade and to make strategic improvements to their own offering. Whether that means lowering prices, or enhancing features, or both, it would serve to keep existing clients happy enough to stay, and perhaps encourage online investors to see that zero-commission trading, while possible, isn’t without its tradeoffs.  

From the Forums

One Day(trade) at a Time

Trading stocks has seen a resurgence in interest over the past year. But how much trading is too much? When it comes to defining what a day trader is, the answers aren’t so clear. Find out what redditors offered one DIY investor in terms of advice in this post here.

Dues and Don’ts

When it comes to investing in the markets, there are no shortcuts. At least that’s the point of view from one redditor who laid out a lengthy but informative post on the merits of due diligence before jumping into an investment. Read more here.

Into the Close

That’s a wrap on another week. There are a few big stories in the works this month, so enjoy the reprieve for the moment. One big story that did drop this past week was a monkey being able to control a video game using only its mind. While we might be trading stocks with our minds one day, until then, you’ll have to click on the link below the old-fashioned way. Have a profitable week!

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Discount Brokerage Weekly Roundup – April 5, 2021

Despite the short week last week, markets didn’t mind and leaped ever higher. While patient investors were rewarded, not everyone was so hoppy, it seemed.

In this edition of the Weekly Roundup, we jump into the latest deals and promotions activity spotted at Canadian discount brokerages in April, and the trends that seem to be emerging from the latest offerings. Next, we take a look at why some investors are not so keen on markets grinding upwards and what that could mean for Canadian online brokerages through the rest of the year. Tweets will be off for a few weeks, but we’ll wrap up with interesting discussions taking place on investor forums.

Online Brokerage Deals Spring Into Action

There’s good news for DIY investors on the hunt for a deal when opening an online trading account. April brings with it more than just rain and signs of spring, as another Canadian online brokerage has also decided to step into the deals and promotions pool, bringing the post-RSP season count of new deals to two.

It might seem unusual to make a big deal out of just two online brokerages doing anything, however, it’s not just any two online brokers. While it’s too soon to call something a trend outright, there are some interesting parallels that make a case for a possible pattern emerging.

To start off the month, HSBC InvestDirect launched a new commission-free trading offer that features 60 commission-free North American equity or ETF trades which are good for use for up to 60 days. The offer, which launched at the beginning of April, runs through the end of June and is available to both new and existing clients.

Midway through last month, National Bank Direct Brokerage also launched a massive commission-free trading promo, ponying up 100 commission-free trades which were good for use for up to one year.

With a competing commission-free trading offer already on the market that is both larger and longer in duration, why might Canadian DIY investors consider HSBC InvestDirect’s promotion?

One of the reasons that HSBC InvestDirect’s new offer might appeal to new clients is because HSBC InvestDirect has the lowest standard commission rates for a Canadian bank-owned online brokerage, at $6.88 per trade. It might seem like a few pennies per transaction when compared to National Bank Direct Brokerage’s or CIBC Investor’s Edge standard commission of $6.95 per trade. However, investors who are ultra-price sensitive and who want to have the convenience that a bank-owned online brokerage affords, as well as the potential security of one provider for their personal financial and wealth management needs, can find all of these with HSBC InvestDirect.

Another key reason why investors might lean towards HSBC InvestDirect is because this online brokerage is fairly unique among most Canadian online brokerages in that it enables trading on international stock exchanges, something that is of increasing appeal. It is why in the fine print of the new offer by HSBC InvestDirect, trading is restricted to North American equities and ETFs. No other online brokerage makes it a point to stipulate that commission-free trades apply only to these geographies.

In comparing the commission-free trading offers from HSBC InvestDirect and National Bank Direct Brokerage, both show that the numbers of commission-free trades being offered are relatively high. By comparison, Questrade, one of the online brokerages that has a long-standing promotion for commission-free trades, comes in at a much more modest range (up to 18 commission-free trades), depending on how commission credits are used.

Based on our long-term deals and promotions research, commission-free promotions are less appealing to DIY investors than cash back offers. That said, some investors will find free trades valuable when considering opening an online brokerage account. It might be just the component to help tip an investor in the direction of either one of these non “big five” bank-owned online brokerages.

The fact that the two newest online brokerage promotions to come to market after RSP season are commission-free trading offers points to a possible preference by online brokerages to use this kind of deal to stay on the radars of online investors.

The good news in the near term for DIY investors is that Canadian online brokerages appear to be shifting from taking a passive stance on promotions to taking a more active one. This means there are likely other online brokerages (that aren’t the “big five”) which will consider launching offers in the coming weeks and months.

In terms of timing, launching a new promotional offer at this point in the calendar year might offer some advantages, because the competition for attention isn’t as fierce (and therefore expensive) as it is leading up to RSP season, or into the end of the year.

One of the big milestones in April is the deadline for filing income taxes at the end of the month. We have already observed that Wealthsimple is using products in its ecosystem, Wealthsimple Tax (formerly Simple Tax) and Wealthsimple Trade, to combine these two worlds in a very unique promotional offer. Users of Wealthsimple Tax’s paid feature can be eligible to receive a free stock in their, wait for it, Wealthsimple Trade account. No other online brokerage has this streamlined marketing capability between the world of taxes and the world of investing, despite how tightly intertwined these two worlds actually are (especially this time of year).

For any Canadian online investors who couldn’t, or didn’t need to, capitalize on the offers from online brokerages in the first calendar quarter of this year, the good news is they can now choose from two sizable commission-free trade deals and, if history is any indicator, perhaps a few more as the spring progresses.

For Canadian online brokerages, the fact that another two bank-owned online brokerages stepped into the deals and promotions pool with commission-free trade offers is a signal that this kind of offer is one possible way to stay visible with online investors while keeping costs low at the same time.

Commission-free trades are not as costly as cash back programs to administer, and thus offer greater flexibility. For example, the minimum deposit requirements for cash back promotions tend to be higher than for commission-free trade promotions, which in turn makes it less likely for potential clients to sign on.

The current market climate for online investors is also something worth considering.

Unlike the same point in time last year, there is much greater clarity and certainty available to the stock markets on the direction of the major global economies. Yes, it appears that the return to “normal” will be slow, but already markets have seen a significant drop in volatility and therefore opportunity for rapid wealth growth (or loss).

Thinking longer term, however, this year will be interesting for commission-free trade incentives overall.

In Canada, there is already one online brokerage that offers standard commission-free trading (Wealthsimple Trade), and there was recently news of another commission-free online broker possibly launching towards the end of 2021. There is also the possibility that Tastyworks shows up with an ultra-low standard trading commission structure for Canada this year, too. With so many commission-free providers in the mix, it could prove to be the catalyst for most Canadian online brokerages to have a standard commission-free trade offer if they don’t want to lower their commissions to zero right away.

As always, we’ll simply have to wait and see how the rest of the spring and summer play out as far as promotions. With the launch of these recent deals and the looming uptick in commission-free trading offers, we find it hard to believe that most online brokerages won’t be taking this opportunity to ramp up their marketing efforts, including using incentives, to solidify their own growth goals.   

Have We Reached Peak “YOLO”?

This past week, the S&P 500 closed above 4,000 points for the first time ever, and it seems that some investors have had enough.

With volatility decreasing while indices like the S&P 500 make new highs, the get-rich-quick crowd appears to have hit a wall.

For anyone paying close attention to the world of online investing, especially over the past year, one of the biggest catalysts for investors jumping headfirst into the markets was the massive shock to stock prices that followed initial news of the pandemic lockdowns. With the outside world in chaos, individual investors hunkered down inside. Whether they were working from home or just at home, one of the only places that had any signs of life was the stock market.

Online brokerages in Canada and the US saw this play out firsthand.

It started as a surge in online account openings followed by backlogs in call centre wait times. One other odd thing occurred too – many Canadian online brokerages started to retreat from offering deals and promotions. The reasoning was clear: demand was so strong that they didn’t have to create even more by running incentives. We believe, however, the pendulum of investor interest in trading is about to swing back.

This past week, Interactive Brokers released their monthly operating metrics. However, in those numbers was a stunning figure: a 21% m/m decline in new account opens. This is the second consecutive month of double-digit drops (February saw a 35% m/m decline) and while that might normally be a shocking occurrence, on a year-over-year basis, Interactive Brokers new account opens are up 51%.

These massive drops in new account openings in 2021 are the result of a statistically anomalous period for investors being interested in trading the stock market, and the sharp drops from the highs in January underscore numerically just how strange the push to begin the year has been. The fact that these numbers at Interactive Brokers are dropping, however, suggests the heightened enthusiasm might be waning.

Other sources point to this online investor pullback being true as well.

According to a recent article analyzing US retail investor behaviour, there has been a staggering drop off of stock buying, to the tune of 60% near the end of March, and estimates of traffic decreases to US online brokerage Robinhood’s website are pegged at 63%.

In Canada, an article from the Globe and Mail describing the allocation of CERB money to online investing also conveys a sentiment of caution, rather than the frenzied “YOLO” trades that were taking place at the end of January or during this point last year in various beaten down travel stocks.

DIY investors simply aren’t jumping into the markets because there isn’t the perception of opportunity that comes with stable markets. That said, the data now suggests that while the big surge may be over, interest in stocks and trading remains elevated as a result of those who did enter the markets during 2020 and 2021.

So, what could this shift in investor interest mean for Canadian online brokerages?

One of the most immediate consequences is that new account openings will likely continue to drop off. Interestingly – perhaps almost counterintuitively – new account openings might be inversely correlated to the volatility of stock markets, which would force a rethink of how online brokerages position themselves for choppy markets.

While volatility has historically been a warning signal to stay away from markets, there is now a cohort of investors who have seen that doing the opposite actually pays off. Going forward, Canadian online brokerages will likely have to be prepared to bolster systems to deal with the increased interest that accompanies volatility.

Another near-term consequence will likely be how online brokerages approach attracting new clients.

The surge in investor interest over the past year exposed gaps among various online brokerages, in terms of being ready to take on new clients. Those online brokerages with online sign-up processes already in place were able to win clients more quickly than those who had not invested in these systems. As such, new clients found the path of least resistance into markets.  

With a pullback in investors wanting to trade, however, we expect there to be heightened deals and promotions activity among Canadian online brokerages, especially at brokerages agile enough to deploy these offers.

Marketing campaigns can take weeks or months of planning, so it is safe to assume that the planning for promotions in November through March of next year will be discussed during the summer. The fact that there will likely be fewer new investors coming to market means that online brokerages will have to factor this into their planning.

Also, as mentioned above, with new entrants to the Canadian online brokerage market on the horizon and fewer new investors, promotions pricing will be a key lever to get and keep attention.

The “new normal” in terms of online investing is already presenting itself. Stock markets tend to be future focused, so it is perhaps no surprise that investor behaviour might serve as a bellwether for other sectors of the economy. Many investors found their way into the markets because of rapid drops in prices of big-name stocks and a hope of getting rich fast. As life returns to “normal” and these larger names see appreciation in prices, there are fewer places for investors to find fast-money opportunities.

If there’s one thing that the “YOLO” investors don’t like, it’s when things get too hard. And, as any veteran of the market could tell you, doing nothing in the markets is a lot harder than it looks.

From the Forums

I Do Declare

Some big news coming out of the Canadian securities regulators prompted a wave of discussion among online traders in this reddit post. Cryptocurrency trading platforms operating in Canada will soon have to be registered as investment dealers with IIROC, the same governing body that oversees online brokerages. Check out the frenzy of discussions as confusion sets in over how this is all going to work, and what investors think of the move towards increased regulation.

Sibling Remedy

Helping family members with financial affairs can be dicey at the best of times. In this post on reddit, one younger sibling steps in to help an older one plan for a retirement that’s not too far away. There were many tips on to help navigate a touchy subject.

Into the Close

That’s a wrap on this edition of the Roundup. Even though it was a short week, there were still lots of egg-citing developments taking shape. Economic numbers continue to point towards the US economy starting to recover, and the new frenzy du jour here in Canada is real estate, where despite a recession and pandemic, housing sales numbers continue to skyrocket. If there was any question as to where the get-rich-quick crowd might have turned to after stocks and crypto have started to become less volatile, this might be a clue.

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Discount Brokerage Deals & Promotions – April 2021

If you’re fortunate enough to be in a place where spring is starting to arrive, the sight of new growth is a welcome change. Another spot where there are some pleasant surprises of growth: our online brokerage deals and promotions section.

This month, we’re excited to see a new commission-free trade deal cross the wires at the start of the month from HSBC InvestDirect. After the appearance of a new commission-free offer last month from National Bank Direct Brokerage it appears the look for the spring season is commission-free trading.

Of course, what would April be without some clouds and rain? Offers that expired heading into the month include RBC Direct Investing’s cash back (plus free trades) promotion.

As the saying goes, however, April showers bring May flowers and there seems to be more pleasant surprises showing up this month, so stay tuned for updates and be sure to check out our new deals and promotions filter to analyze the latest offers.

Expired Deals

March was a blustery month for deals activity among Canadian online brokerages. Most of the offers that were timed around RRSP season expired early in the month however there were two interesting promotions later in the month that also wound down.

In the middle of the month, Wealthsimple Trade’s latest referral contest expired. And, at the end of March, RBC Direct Investing’s cash back plus free trade promotion officially concluded.

Extended Deals

No extended deals to report at this time.

New Deals

Great news for deal hunters looking for commission-free trades as the start of this month features two new offers to review.

First, HSBC InvestDirect launched a new commission-free trade offer of 60 commission-free equity and ETF trades (North America only). This offer enables qualifying customers to trade commission-free (up to 60 trades) for 60 days. This promotion expires on June 30 and applies to both existing and new clients.

Second, be sure to review National Bank Direct Brokerage’s massive 100 commission-free trade offer. This crossed our radar in March and coincided with their recent commission-price drop, making this a competitive offer from a Canadian bank-owned online broker.

Review all the available online brokerage deals using our new deal filter tools here.