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Discount Brokerage Weekly Roundup – July 19, 2021

There are rare occasions in the Weekly Roundup when the outside world serves up a perfect metaphor for what’s going on in the world of online brokerages. And this week, it’s all about big names, big billionaires, and big launches.

In this edition of the Roundup, we take to the launchpad to witness the liftoff of new feature at a popular bank-owned online brokerage. From there, we pull up the radar screen for some interesting activity on the advertising front, as well as a potential billion-dollar payday to the founders of a US-based online brokerage (if they can manage to scale their business even farther than it already has gone). As is standard fare, we also serve up intriguing DIY investor commentary on fractional shares and trading platform glitches.

BMO InvestorLine Launches adviceDirect Preview

About two weeks ago, the BMO YouTube channel (BMOCommunity) started to share a number of videos about one specific product line: adviceDirect.

Fast forward to an announcement this past week of the launch of a new service from BMO InvestorLine: adviceDirect Preview. This new service enables users to take a test drive of the adviceDirect experience (albeit with limited functionality) and tinker with the “free account” features.

This announcement isn’t so much a new service as much as it is a new twist on an existing service. adviceDirect launched (waaay back) in September 2012 as a solution to support self-directed investors with decision making around their trading and portfolio management. Since its initial launch, adviceDirect has undergone a number of changes, including lowering the minimum required to open an adviceDirect account from $100K to $50K, and the capping of annual fees to be paid for this service at $3,750.

The new “preview” feature for adviceDirect is aimed at providing new users with some of the resources available to full adviceDirect clients. Signing up for an adviceDirect Preview account is free and provides users with access to personalized watchlists, trading ideas via five preset stock screeners, learning and educational materials, and access to the recently launched Healthcheck portfolio analyzer.  

One of the natural questions that has accompanied adviceDirect is who this service is for exactly?

On the one hand, self-directed investors are generally averse to paying for advice, and on the other hand, those who might be willing to pay for advice and wealth management services prefer to have the day-to-day oversight and management taken care of by a professional.

That adviceDirect has managed to endure despite these questions is an indicator that there is a segment of online investors who prefer to have access to a trusted, credentialed professional who can weigh in on trading and portfolio management decisions.

Interestingly, unlike the world in 2012, in 2021 there are now rich and active communities of online investors in places like reddit that can help investors “crowdsource” answers to investment decisions. That said, getting personalized attention from a professional in a reasonably convenient manner is a compelling proposition to those who don’t believe that random strangers on the internet will be a reliable resource for financial advice.

On balance, adviceDirect Preview is an interesting proposition for DIY investors who are advice-curious.

While only a select number of features are available in the adviceDirect Preview platform, those features could be used to help evaluate whether or not an investment plan is “on track” – something the adviceDirect platform is essentially built around.

Given the relatively high watermark to qualify for an adviceDirect account, younger investors or those just getting started might not qualify for the full experience for some time. That said, by offering a free version of the adviceDirect experience, it is a creative way for BMO InvestorLine to identify and cater to potentially valuable new clients.

From an industry perspective, being able to offer a “try before you buy” is a great strategy to create a relationship with curious DIY investors. For adviceDirect in particular, this move will hopefully help open up opportunities for skeptical investors to see whether there is value to be had in the advice-lite version of wealth management solutions.

Among the important benefits for BMO InvestorLine is that the adviceDirect platform is unique among online brokerages in Canada. Getting the model to work and to be cost effective is not something that can happen overnight, so if other online brokerages are going to start emulating or delivering something similar, there is going to be a long runway before adviceDirect finds a direct competitor.

And, while adviceDirect might not be a stranger to uphill battles, this year in particular stands out as a challenging one to launch new features in.

This spring/summer in particular has seen a surge in feature releases from Canadian online brokerages big and small. As we’ve covered in numerous Roundups this year, the flurry of new features coming to market suggests that the marketing and communications teams have their work cut out for them. Already, the activity on YouTube to release content related to adviceDirect suggests that a significant push is coming to promote this platform. The creation of a “preview” version of adviceDirect offers up both a boost of awareness of the platform, as well as a possible group of prospective future clients, so for BMO InvestorLine, it seems like a winning combination.

If history offers any lesson on adviceDirect, it is that it will continue to be more niche compared to the core DIY investing experience. With many more new investors now participating in the stock market, however, a material number of these investors might be inclined to seek out additional tools – and advice – about what to do after the fast money trades have come and gone. And, if there’s one clear example in favour of taking things slow and steady, adviceDirect is it.

On the Radar: Quick Online Brokerage Stories

Ad Battle

Even though there is a really interesting YouTube video about sharks and blood in the water, it still feels apropos to point out that in a fiercely competitive space, it seems like Canadian online brokerages sense something is up. Or more appropriately, down.

After scanning casually through reddit, one very interesting ad campaign from Questrade surfaced that appears to take direct aim at some of the pain points users have expressed with Wealthsimple Trade.

Ironically, for anyone who has spent any time on YouTube lately, Wealthsimple Trade ads are everywhere, indicating that there’s a bit of a digital media blitz taking place among Canadian online brokerages.

As mentioned above, there have been a whole slew of new features launched this year by online brokerages, and clearly, there’s got to be new marketing campaigns associated with these brands.

With much more advertising expected this year than in past years, we anticipate even more fierce competition for attention and some creative campaigns to surface before the end of 2021. Stay tuned!

Sherwood Like a Billion

Would a billion-dollar payday make you work harder or more creatively? We’ll soon find out whether or not putting another billion dollars on the line will prove to be the catalyst that gets Robinhood’s share price to hit certain targets by 2025.

In a recent article on the upcoming Robinhood IPO spotted on Reuters, there’s apparently a huge payday ($1.4 billion USD) for cofounders Vladimir Tenev and Baiju Bhatt if they can get the stock price of Robinhood up to $101.50 per share, even more money if the share price hits higher price levels.

What would need to be true for Robinhood, an already popular online brokerage, to hit the kind of per share price levels noted in their filing, would be to attract even more clients who are active investors and for Robinhood to find more ways to monetize their growing client base. With the cash generated from the IPO, there will certainly be a number of options to consider; however, it looks like increasing their global footprint and their service offering to clients will likely be a big part of the plan.

From the Forums

A Glitch to Scratch

After a year with a popular online brokerage, one DIY investor simply had enough of the technical hiccups. Find out from this post, which features ended up becoming points of frustration for one reddit user, as well as what other DIY investors had to say in response.

It’s Been a Slice

Now that fractional shares are here, there are clearly some kinks to get out of the way. In this post from reddit, a confused reader turns Wealthsimple Trade’s latest feature into an intriguing discussion about how, exactly, fractional shares work.

Into the Close

That’s a wrap on another out-of-this world edition of the Roundup. While billionaires going to space is definitely going to make it to the highlight reel for the year, there are also going to be lots of upcoming records to be broken at the Olympics. Attendance won’t be one of them (unless it’s for the fewest attendees). Here’s wishing everyone an award-winning week and the Canadian athletes all the best!