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Discount Brokerage Weekly Roundup – October 25, 2021

Halloween is just around the corner, and it’s not just ghouls and goblins that are causing a fright around online brokerage circles. Apparently, the specter of zero-commission trading is a bit of a phantom menace on both sides of the border.

In this edition of the Roundup, we reveal (yet) another new commission-free online brokerage setting its sights on coming to Canada and what that could mean to existing online brokerages’ plans to keep commission rates where they are. Next, we review one US online brokerage’s move to put account funding in the fast lane and dive into what it could mean for active traders here in Canada who want to get going as fast as possible. Finally, we cap off this week’s news with some fascinating commentary from self-directed investors in the investing forums.

TradeZero Coming to Canada

Last week we mentioned the news that TradeZero announced they would be going public. A fun fact about going public is that there is usually a pitch deck for investors to buy into your company, and in the case of TradeZero, there were several interesting nuggets of information about their intent as an online brokerage.

Buried in the TradeZero investor presentation deck was the revelation that TradeZero intends to launch in Canada sometime in 2022. Although they had officially registered in Canada as far back as June of this year, the investor presentation put a timeline and target on what the opportunity for them in the Canadian market could look like. It appears that TradeZero is using its launch in Canada as part of a series of launches in different countries and regions over the next few years.

Perhaps the most interesting angle in terms of their expansion is that TradeZero is positioning itself to compete directly against Interactive Brokers for the ultra-active retail trader. Of all the segments of investors, the active trader is highly prized but comes with the highest expectations for quality of experience, platform stability, capability for complex trading, and competitive pricing.

Although it is unclear as to what they will launch in Canada, it’s a safe assumption that the products will be aligned to active traders, and according to their investor presentation, options, and cryptocurrency trading, are likely candidates alongside equities to be a part of the go-to-market offering. The timeframe to achieve the scale they’re looking for, namely some percentage of the 160,000 accounts, is also unclear. For comparison, account opens cited by other media sources peg Questrade as opening 200,000 accounts per year, and while there very well may be a large number of accounts in the total addressable market in Canada, hitting their target number won’t come easy.

It begs the question, who would TradeZero’s competitors be in Canada?

At the top of the list would be Interactive Brokers; however, based on their target demographic and the active trader profile, there are several other firms whose lunch TradeZero would try to eat. These would include CG Direct (the legacy business from Jitneytrade), Wealthsimple Trade (because of crypto and US equities), and it’s fair that Questrade and TD Direct Investing would be in the mix too because of their active trader offering, especially on the options side.

Then, there is the branding issue. While active traders might be more inclined to trial or check out a new technology or brokerage, being a new online brokerage in the Canadian market is generally met with some suspicion, regardless of the offer. A great case in point is the fact that despite having low standard commissions and offering a lot of the perks of being bank-owned, both HSBC InvestDirect and National Bank Direct Brokerage have yet to see the kind of traction from price sensitive online investors that would have been expected. Even with zero commission trading now available from National Bank Direct Brokerage, it is surprising to read how many investors are willing to stay with their existing brokerage in hopes that commission rates will drop at their broker.

In order to ramp up to the addressable market that TradeZero is targeting for Canada, there will almost certainly be a significant investment in marketing and advertising to let people know who they are and what they do best – perhaps better than the alternatives. And, to make matters more challenging, they will also be doing this alongside at least two if not three other new entrants into the Canadian online trading landscape – the most directly challenging one being Tastyworks.

Of course, Interactive Brokers is also no slouch and is unlikely to simply allow a new entrant to directly compete for high value clients. The product mix, especially with regards to account types such as RRSPs and TFSAs, are crucial to the “convenience factor” even for ultra-active traders. The benefits of TFSAs and RRSPs for wealth creation are simply too high to not try to take full advantage of, hence clients who wish to “trade fast” with TradeZero will have to maintain another relationship with another online brokerage to do the “slow stuff,” thus opening the door to being courted away.

To TradeZero’s credit, despite the hurdles, they are clearly ambitious in their desire to expand their brand globally and into the highly regulated areas of securities trading. The fundamental business case is certainly there; however, so is the competition. There are pain points among users of Interactive Brokers, such as a steep learning curve of the trading platform and lackluster customer service, so TradeZero does have a foothold if they can improve the client experience of active retail traders.

The consequences for the Canadian online brokerage landscape may not be felt right away, especially given the segment that TradeZero will be pursuing. That said, with a name like TradeZero and an offering of commission-free trades, there is almost certainly going to be increased pressure on incumbent online brokerages to drop their commission prices. It is already happening a few times per week in investor forums and discussions and will likely only ramp up as each new commission-free brokerage comes on stream.

Canadian investors and traders alike might just find the pace of change at their own online brokerage slow enough that they’d be willing to at least try TradeZero, and at that point, it’s a slippery slope as to whether they switch brokerages. Those are the odds that perhaps TradeZero is banking on.

Interactive Brokers Puts Payments on Rails

Payments were an interesting thread of discussion at Interactive Brokers this past week. In the first instance, there were some intriguing remarks made by founder and Chairman of Interactive Brokers, Thomas Peterffy, regarding payment for order flow (PFOF), the (now) controversial practice that enables zero-commission online brokerages like Robinhood to sell the orders their clients place to buy and sell stocks to a third party.

An industry veteran, it is always fascinating to hear Peterffy’s take on the mechanics of online trading, and in an interview last week with Yahoo! Finance, it was his position that despite the increased scrutiny from the US financial regulators, the reality is that the practice of selling orders would likely still persist although under a different pathway. In short, even if PFOF was clamped down on, online brokerages would find another way to monetize the trade execution.

Another interesting talking point about Interactive Brokers this past week was an announcement that they are launching a real-time payment solution that will enable clients to make instant deposits to their accounts. The rollout of this feature in the US is starting with clients who have accounts with Chase; however, given the desire for fast money traders to be able to move money around just as fast, this is a huge step forward.

Getting funds from point A to point B is remarkably longer than it should be in 2021, especially among online brokerages who aren’t bank-owned. The ability for individuals to open an account and essentially fund the account instantly removes a major friction point from being able to quickly jump into hot trading opportunities.

In the case of real-time funding of accounts, among Canadian online brokerages that are not bank-owned, this has been a significant stumbling block to individuals who are looking to get started as quickly as possible. Earlier this year, we reported on Questrade launching instant deposits (up to $3,500) and Wealthsimple (Trade) too, with the latter raising deposit limits significantly since they first launched and tying the ability to send more (up to $1,000) to their premium service. For Interactive Brokers in Canada, the funding time listed on their website states up to four business days for funds to be available, depending on the funding method chosen.  

As the launch of the real time payments option in the US is still in the early stages of a roll out, there is likely some time before Canadian self-directed investors can benefit. That said, it is a sign of a trend already in place whereby the faster an online investor can fund their account, the more likely they are to choose that brokerage to get up and running with. It’s not enough to have instant or fast account approvals if the ability to trade opportunities – especially fast-moving ones – is limited. Clearly, other online brokerages in Canada have figured this out, so it is now a bit of a race for others, including Interactive Brokers, to ramp this feature up quickly or risk being derailed by whatever the next big wave of new trading opportunities brings.

From the Forums

Trade Interrupted

If there’s one thing that all seasoned DIY investors know, it’s that online trading is not without its risks. One active investor learned the hard way about the risk of a platform not working as intended, and shared their experience in this post on reddit. Find out what fellow online investors had to say about what happened as well as the aftermath.

Hold On, For One More Day

Being told to wait is rarely music to any investor’s ears. In this post on reddit, one self-directed investor pointed out that the new hold music (or lack thereof) at TD Direct Investing was an unusual experience. Find out what fellow online investors had to say about this small but interesting detail of the customer service experience.\

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Discount Brokerage Weekly Roundup – October 18, 2021

If there’s one thing that stock markets can do quite well, it’s to price in expectations. Judging by the rally in stock markets, including in the share prices of some online brokerages, there’s optimism and some insight as to what the market thinks is going to be necessary to succeed in the coming months.

In this edition of the Roundup, we peek across the fence at the latest developments in the US online brokerage market, with a particular view on different strategies for growing in a highly competitive market. From there, we relay updates from one Canadian fintech firm looking to add zero-commission trading into its suite of services by the end of this year. Finally, we cap off the news with some fascinating feedback from self-directed investors in the forums.

Charting New Territory: US Online Brokerages Trade Their Way Higher

Stock markets aren’t the only ones pushing new highs. Share prices for a couple of online brokerages in the US are also on the move upward in a scenario that appears to be more than a simple case of a “rising tide lifting all ships.”

Earlier this month, Interactive Brokers reported their regularly scheduled performance metrics, and this past week, online brokerage giant Schwab also reported their latest quarterly earnings. Included in both reports are numbers around new account growth rates that we’ve been tracking closely to gauge what the retail online trading sentiment is like south of the border.

The latest data continues to show an interesting divergence in new account growth at these two big names. Interactive Brokers continues to grow net new accounts while the pace of new account growth at Schwab has continued to contract. Interestingly, the share price trend over the past year points to the opposite – at least until very recently.

Historically, and in “normal conditions,” the growth rate of new accounts at Interactive Brokers has managed to stay positive. The exception, however, was the meme-stock mania which significantly distorted stats. After account openings reached a peak frenzy in January and February, the enthusiasm for new account opening has been waning.

As can be seen in the Interactive Brokers account growth data chart above, after bottoming out in May, Interactive Brokers has shown new account growth in the past four consecutive months. It looks like things are “back to normal” insofar as account growth is concerned.

On the other hand, account openings at Schwab show that after the peak of account openings earlier this year, the month over month decline persists. It is worth noting, however, that the magnitude of difference in the number of accounts opened between Schwab and Interactive Brokers is enormous.

Schwab has opened about 10 to 20 times the number of accounts that Interactive Brokers has over the past 9 months, which is no small feat. The combination of Ameritrade and Schwab within the online trading space has created a formidable giant against which only agility and service experience can truly outcompete.

Considering the context of the two firms, however, Interactive Brokers’ growth is exceptional in that they still charge for commissions per trade (in their IBKR Pro, they do offer a commission-free version IBKR Lite) which is clearly not a deterrent for some.

The online brokerage space is incredibly competitive, especially in the US and increasingly around the globe. Earlier this month, zero-commission trading firm Tradezero filed to go public (via SPAC) and just this past week, UK-based Freetrade announced it had reached one million users. Both of these zero-commission trading brokerages have Canada on their roadmaps (and likely the US as well).

Growth in interest in trading online certainly helped propel zero-commission trading into the spotlight. However, for an online brokerage to be sustainable, the model has been shown time and again, that other financial services must be a part of what the online brokerage offers. Scale is also important.

Despite the differences between Canadian and US online investing markets, the dynamic of being able to survive and thrive as an online brokerage are remarkably similar. At the end of the day, online brokerages need to make money – and profit – to sustain themselves and aside from the active trader segment, there has to be more than just trading stocks or ETFs.

As National Bank Direct Brokerage and TD Direct Investing have both pointed out, it’s those “other” relationships and financial products that offer opportunities to deepen the value self-directed clients bring to their respective firms.

Interactive Brokers and Schwab demonstrate two different approaches to monetizing the online brokerage space. In the case of Interactive Brokers, it is still able to charge for commissions because of superior technology and user experience for active traders. Conversely, Schwab is able to survive because they have the immense scale to be able to generate higher earnings with interest rates. In either case, agility or scale, the room for new entrants is tough, so creative differentiation and investment in product will be key to survival for newcomers.

The stock prices for Schwab and Interactive Brokers are signaling a brighter future than Robinhood’s. That future seems to suggest that to truly succeed, an online brokerage must be fast or big. Simply being the least expensive option isn’t enough.

MogoTrade Coming Soon(er)

One of the hallmarks of a great Thanksgiving is having some leftovers to dig into after the holiday is over. Cue some developments earlier this month that we didn’t get a chance to report on.

This past week there was an interesting update on the commission-free trading front that will naturally add more kindling to the smoldering conversation about when “that” pricing model will gain wider adoption here in Canada.

Mogo Financial, a Canadian fintech firm, provided another update on the status of their commission-free trading service, MogoTrade, announcing that they had selected CI Investment Services to provide “operational and back office services, including clearing and settlement, custody of client funds and securities, and trade execution.”

The biggest update in the press release, however, was a forecast that the launch date would be coming later this year, putting MogoTrade and the zero-commission option in the conversation for investors during peak season for online investors poking around for new online brokerage providers.

By working with an established services provider like CI Investment Services, MogoTrade is able to hit the ground running in technology, operations, and compliance required to run an online brokerage in Canada. This, in theory, should enable MogoTrade to focus on bringing on new clients and working on user experience. It is currently unclear what account types and features will be a part of the launch. And, importantly, based on the infrastructure costs associated with online trading (including all of the back office function), how MogoTrade will make money will be an important question many investors will surely be asking.

As referenced above, the connection of online trading to other financial products seems to be key to Mogo’s strategy to enter into the world of self-directed investing, with a particular focus on beginner investors.

Mogo has a number of additional lending products as well as cryptocurrency trading connections that could enable it to use self-directed trading as a mechanism to cross-promote other services, a direction laid out in their recent investor presentation. This increasingly familiar playbook of cryptocurrency trading showing up beside traditional online investing in stocks and ETFs might become a sign of things to come at other online brokerages in Canada.

From the Forums

Readying to Move

When it comes to transferring away from an online brokerage, sometimes the exit can be complicated. In this reddit post, one user wants to minimize the financial hit incurred from switching brokerage away from Questrade. Find out what fellow investors provided in terms of perspective.

A Portfolio Built for Two

DIY investing isn’t just about managing one’s own investments, for many couples and families, additional account management comes into play. In this post, it was interesting to see how many self-directed investors are also taking on the management of their significant others’ portfolios.

Into the Close

That’s it for another edition of the Roundup. It was a short week; however, as we round past the halfway point in October, signals from all over point to an incredibly busy stretch to the end of December. On deck for the week ahead is yet another earnings wave, and with several new online brokerage stories forming, there’ll be lots to digest. Fortunately, if Thanksgiving is any indicator, there’s always a creative way to find more room for something enticing.

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Discount Brokerage Weekly Roundup – October 11, 2021

If there’s one thing that Thanksgiving is famous for, it’s making a little extra room for treats. And, fortunately, it seems like online brokerages on both sides of the border were dishing out a healthy portion of good news heading into the Canadian long weekend.

In this edition of the Roundup, we kick things off with some bite-sized updates on new pricing and new naming from a couple of popular online brokerages. Next, we dial into the main course – a deep dive on the latest big feature from Robinhood: phone customer service. And finally, you’ll want to save room for dessert, which consists of some sweet chatter from the online investor forums.

Appetizing Canadian Online Brokerage Updates

BMO adviceDirect Lowers Fees to Attract New Clients

In the ramp up to RSP season, we expect to see a flood of new features and pricing announcements come through from Canadian online brokerages. This past week, BMO InvestorLine announced some interesting enhancements to their adviceDirect service that made it more accessible and enticing to investors with lower portfolio balances looking to trial out this service.

The biggest change is the reduction in the required minimum to open an adviceDirect account, from $50,000 down to $10,000. Of course, in an era of zero-commission trading, there were also some free trades (15, to be exact) thrown in for good measure for accounts with deposits of between $10,000 and $50,000.

One of the biggest challenges for consumers, especially those looking at the cost of “advice” on their portfolio, is paying fees. The minimum annual fee for adviceDirect has also been lowered from $750 to 0.75% on billable assets, with a maximum annual advisory fee of $3,750. For the entry point investor (i.e. someone with $10,000) the annual cost for the service would be $75.

While many online investors are aware of BMO InvestorLine, there are many who don’t know about adviceDirect, and given how long adviceDirect has been around, there are many online investors in DIY circles who’ve simply viewed this option as pricey. So, the move to lower the balance requirement as well as the fee structure is a great opportunity to introduce the new cohort of investors to this product. The challenge, however, will be in changing the narrative and conversation around adviceDirect, which is something that has been heavily shaped by the many years of discussion about it. As such, we expect that going into the RSP season, there will not only be greater advertising of adviceDirect, but more effort into repositioning this solution with the kinds of investors who would value having additional support and advice when making investing decisions.

Another interesting angle to this offering is that adviceDirect standard commissions per trade are $7.75 whereas BMO InvestorLine commission rates are $9.95. The disparity between the two presumably is a result of additional revenues from clients paying an annual fee for services. This, of course, naturally raises a couple of questions around how much BMO InvestorLine would be willing to lower their commission rates to in order to secure minimum activity thresholds.

Peer firms, such as RBC Direct Investing or TD Direct Investing offer discounted commission rates for active traders, but BMO InvestorLine does not. Instead, BMO InvestorLine offers up access to additional features (such as their advanced trading platform) for clients who trade more actively. If BMO InvestorLine were to lower their commissions to zero to match other brokerages, like National Bank Direct Brokerage, then it also could impact the pricing structure for adviceDirect.

Digging deeper into the pricing at this entry point tier, if a new client is being charged $75 for the service and 15 trades, that works out to $5 per trade – far lower than the current $9.95 for the self-directed investing service and the $7.75 for the adviceDirect standard commission.

For now, it’s clear that based on the pricing and the free trades for the new tier created for adviceDirect that BMO InvestorLine is very interested in attracting in new clients to give this service a try. As RSP season heats up, this latest move from BMO InvestorLine signals that there is likely more to come in terms of either features, pricing, or promotions to entice the self-directed investor segment. And, if BMO InvestorLine is any indicator, the other bank-owned online brokerages won’t be too far behind with something big.

Virtual Brokers Now CI Direct Trading

It may have taken some time, but the Virtual Brokers brand has finally seen its sunset. After Virtual Brokers was acquired by CI Financial in 2017, it was unclear as to how the Virtual Brokers brand would co-exist among the other brands managed by CI Financial. Then, in early 2020, there was some clarification that the many brands owned by CI Financial, while strong in their own right, were not building the CI brand directly, and as a result, they were all brought under the umbrella of the “CI Financial” name.

As of the publication of this edition of the Roundup, Virtual Brokers is now CI Direct Trading. It was unclear once CI Direct Investing was created whether Virtual Brokers would fall under that brand or another, especially given how crowded the “direct investing” name has become.

Qtrade, RBC, and TD all have “Direct Investing” in their name, so the “Direct Trading” brand does help them stand out but with the “direct” in the name, they also must contend with CG Direct – something that will almost certainly cause confusion, especially if CG Direct decides to ramp up their marketing to make more investors aware of their offering.

One of the biggest challenges facing CI Direct Trading, however, will be managing the transition from such a well-known name. For example, although the website has changed names, the current site structure and design are still the same. Also, the mobile app links still point to the existing Virtual Brokers mobile app page and naming.

The roll out of a new brand, especially as big of a change as a name, reveals the complexity of an online brokerage in terms of moving parts. Qtrade Direct Investing did an effective job managing their rebrand earlier this year, and when they went live, they also initiated a new marketing campaign to carry the new brand forward with the energy and momentum required to build excitement with their existing stakeholders.

If there are any clues as to where things go for CI Direct Trading, there might be some in the CI Direct Investing user experience. The shift from WealthBar to CI Direct Investing set a high bar for user experience and design for the CI Financial family. So, if the transformation for Virtual Brokers is anything like the look and feel for CI Direct Investing, it seems like Canadian self-directed investors are in for a pleasant surprise.

Robinhood Launches 24/7 Phone Support

One of the biggest stories out of the US online brokerage space this past week was from Robinhood, who announced on their blog that they have rolled out 24/7 phone support. The mixed reaction (or lack thereof) to the news is a unique reflection of where this feature fits into their business and the continued overhang of negative sentiment towards Robinhood from very vocal users online.

Historically, phone service was never really a priority at Robinhood – it was simply too expensive a feature that a zero-commission online brokerage couldn’t effectively support. Instead, for much of its existence, Robinhood fielded customer enquiries digitally, through email and chat and eventually with some limited phone support. In contrast, many peers of Robinhood, such as Schwab, Ameritrade and Interactive Brokers, have robust phone customer service infrastructure, including coverage 24 hours a day for the business week, if not for the whole week.

So, why is rolling out 24/7 phone customer service such a big deal at Robinhood?

For starters, launching a point of contact that is available all day, every day is a signal that Robinhood is trying to improve the customer experience. Events over the past 18 months, in particular the crush of volume of new accounts and the meme stock rush, uncovered issues with how customers of Robinhood dealt with things like outages, trading restrictions, account hacks/breaches, and more. Ultimately, these high stakes situations required many customers to reach out to the Robinhood customer support team.

Thus, 24/7 phone service – while a standard feature amongst other large online brokerages – provides a measure of comfort to clients who want or need to get in touch with a human to help sort through an issue.

A bigger reason why the phone service access matters, however, is because Robinhood also supports cryptocurrency trading – a market that never closes. While there was very little chatter among online investors on the stock trading side about this feature at Robinhood, the crypto community was abuzz with this innovation. There simply is no analogue for customer service at that level from crypto exchanges.

Scaling up to meet the needs of their 22+ million customers won’t be easy – or smooth. Their initial approach to providing phone support will require clients to use the app to request contact from a Robinhood agent. According to an article published in TechCrunch, there are no “guaranteed” wait times, however, the targeted call back time is within half an hour. To meet that commitment, Robinhood will employ in-house customer service reps, as well as contracted outsourced agents. Clients can therefore expect some heavy triaging of calls to ensure that resources be allocated efficiently. Of course, one of the quirks of dealing with individuals in finance is that interactions can’t seem “too rushed” otherwise the experience becomes less enjoyable. As a result, Robinhood customer service will be subject to the same forces that tend to impact their peers when the markets get extremely volatile: longer wait times on the phone.  

As important as this as a development for Robinhood, they are not the only US online brokerage to be shoring up their customer service and customer experience. Interactive Brokers, another brand for which customer support has been a lower priority, had mentioned earlier this year that they are working on something exciting for their customer support experience.

Here in Canada, 24/7 customer service at an online brokerage is a very rare feature. In fact, there is no online brokerage that offers this, but there are two that come close: HSBC InvestDirect and Interactive Brokers. The rest of the online brokerages phone service channels typically operate around business hours on Eastern Time, which is a frustrating thing for clients in Western Canada.

HSBC InvestDirect’s phone customer service hours are 24 hours a day from Monday through Thursday, and from 12am to 8pm ET on Friday. Agents resume phone coverage again on Sunday evening starting at 6pm ET. Interactive Brokers has phone service coverage 24hrs a day, five days a week. Interactive Broker’s phone customer service hours are 24 hours a day, Monday through Friday. For Interactive Brokers, however, the Canadian service operation runs from 8am to 8:30pm ET and outside of these hours calls are answered by an international affiliate of Interactive Brokers.

Perhaps unsurprisingly, Canadian online brokerages have some work to do to provide a cutting-edge phone customer service experience. To begin with, coverage for Canadian online brokerages is largely limited to business hours, with several big named brokerages only offering coverage during business hours in the Eastern time zone. Then, there are simple features, like call back (instead of waiting on hold) to letting clients know where they are in a call queue with an estimated wait time, which are still not in place at many online brokerages.

What the latest move by Robinhood demonstrates, however, is that eventually customer service and customer experience do matter and that even at a commission-free online brokerage, clients still expect to be able to connect to a human being to solve complicated or urgent issues. It is also instructive to note that any online brokerage that currently deals with a “market that never closes” like cryptocurrency (such as Wealthsimple Trade) or international trading is going to have to support customers with a phone channel at extended hours.

The silver lining for Canadian online brokerages and self-directed investors is that phone support is an area that has been an important focal point for improvement after the mega-delays experienced during the pandemic surge last year. Firms such as BMO InvestorLine and Questrade have been very public about their investments in increasing call centre resources to keep wait times low. Impressively, BMO InvestorLine also publishes wait time numbers on their customer login pages so clients can see how long wait times are.

Despite Robinhood’s launch of the new 24/7 phone support system, cynicism among clients and observers remains high.

The outages and trading restrictions are still fresh in the minds of many online investors who have weighed in on the Robinhood announcement, so getting it right on phone support will be key. The real test will come during times of market volatility, which have benefited them in the past, but going forward, will expose what they haven’t yet thought about as far as customer service.

From the Forums

Zeroing in on Commissions at Questrade

Heavy is the head that wears the crown. For the Canadian online brokerage that long held the title of the lowest-cost online Canadian brokerage, recent developments around zero-commission trading have raised questions from clients as to when Questrade will follow suit. Threads like this one on reddit are reflective of a growing chorus of investors looking for more value in a highly competitive market.

Not So Simple After All

Cryptocurrency trading – the direct way – seems to continue to present opportunity and controversy at one Canadian online brokerage. Wealthsimple Trade, which initially launched under the mantra of supporting “getting rich slowly” announced a recent development regarding cryptocurrency transfers that got online investors buzzing in this reddit post. The pivot for Wealthsimple towards cryptocurrency did not go unnoticed, and was the focus of this article in the Globe and Mail which also had a lot of people weighing in.

Into the Close

That’s a wrap on this holiday edition of the Roundup. There’s a lot that we didn’t get to this week (but that’s what leftovers are for right?), including a shout-out to World Investor Week. For Canadian self-directed investors, it might be a short week ahead but there’s no shortage of new developments on the radar (including a few generated by us!). However, between Squid Game, football, new movies starting to trickle out, and the unemployment rate dropping to pre-pandemic levels, it’s going to be quite the battle for attention regardless of what screen you’re watching from.

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Discount Brokerage Weekly Roundup – October 4, 2021

And just like that, October is upon us. Changing leaves, falling temperatures, and costumes are now part of the normal routine; however, this year it seems like this month (and those coming after it) are going to be filled with new features and deals from Canadian online brokerages.

In this week’s Roundup, we catch up on the latest activity in the deals and promotions section, and highlight how commission-free trading is starting to shape the kinds of promotions we’re seeing emerge from online brokerages heading into RSP season. From there, we review the rocky start to QuestMobile, the new trading app experience launched by Questrade and the lessons to be learned from rolling out a new platform. With all of the commentary on the Questrade story, forum chatter was paused for this week (not to worry, there’s plenty to dig into) but will return again next week.

Tricks and Treats: DIY Investor Deals Update

October is often associated with treats and for Canadian self-directed investors, it seems like this month is shaping up to be especially treat-worthy.

The start of a new month is a great time to check in on deals and promotions being offered by Canadian online brokerages, and this month did not disappoint. With two big names, RBC Direct Investing and Qtrade Direct Investing, electing to extend commission-free trade offers and another bank-owned online brokerage, HSBC InvestDirect, launching a commission-free trade offer, there was a clearly a trend towards leaning into commission-free trading.

This year more than any other, promotions and incentive offers are going to play an important role in swaying online investor opinion – and loyalty.

Since the seismic shift in the Canadian online brokerage landscape from National Bank Direct Brokerage and Desjardins Online Brokerage offering commission-free trading (on equities and ETFs), there’s no doubt that other Canadian online brokerages are discussing how they might position themselves in a commission-free trading world.

While none of Canada’s online brokers are in a hurry to go commission-free, there is also a sense that this might be the last year in which commission rates can stay where they currently are. As such, commission-free trade promotions offer a middle ground for existing players to entice new clients while they configure themselves for a commission drop. In both the commission-free offers from Qtrade Direct Investing and RBC Direct Investing, the timeframe to use up a healthy number of commission-free trades (50 apiece) ranges from several months to two years, respectively. In terms of RBC Direct Investing, it is the longest that we’ve seen a commission-free trading offer stretch out to, a signal that the need to do so has clearly come.

A subtle but important maneuver we have also observed is the movement of expiry dates of the promotions themselves.

While extending offers is nothing new (Desjardins Online Brokerage famously kept extending their commission-free deal for a few years), the duration of recent deals seems to be a bit shorter than in years past. Wealthsimple Trade, for example, has been using shorter time frames than their competitors, and with the latest offer from RBC Direct Investing, the extension of the promotion expiry date was only for an additional month. Historically, promotional offers would last for several months; however, the tide has clearly shifted given everything that has happened this year.

Looking across the online brokerage landscape, it’s almost a given that big-bank online brokerages that don’t have a big deal will have to come to market with something enticing. Cash-back offers are hard to come by these days, which is why BMO InvestorLine currently stands alone in this category – especially when compared with its bank-owned brokerage peers. That said, long-duration commission-free trades seem to make the most sense for “occasional” investors who would enjoy the peace of mind that for the next year or two, there is a low likelihood of them needing to pay much (or anything) for equity or ETF trades. It would certainly sway investors away from opening a “test” account at zero-commission brokerage and instead open a new account or deposit new funds into an existing account.

The fact that we’ve already seen two big deal extensions and a new offer come to market at the beginning of October is a clear signal that online brokerages in Canada are gearing up for a busy RSP season battle.

Promotions offer a strategic option to online brokerages that aren’t ready to drop commission prices just yet. And, even at online brokerages that offer commission-free trading, such as Wealthsimple Trade, promotional offers still play an important role in capturing new client interest. Whichever route that brokerages take this fall, Canadian self-directed investors are in for a treat.

A (Cautionary) Tale of Two Screens: Questrade’s New Layout Generates Mixed Reviews

If there’s one big theme to 2021, it’s been new features and offerings from Canadian online brokerages. This past week, Questrade was the latest online brokerage to launch a new (and long-awaited) mobile trading experience.

Unfortunately, it didn’t quite go as intended.

The launch of a new website or app experience is something that wouldn’t ordinarily generate a lot of discussion or coverage. So, in that regard, this roll out was unusual in the degree to which many online investors did not like what they saw.

In fact, on the Questrade reddit thread, we collected (and read through) no fewer than 20 different threads complaining about the changes to trading experience. Twitter and other online investor forums also had a similar set of responses. For reference, here are some of the comments regarding QuestMobile on Questrade’s reddit:


There is definitely a lot to unpack in reading through the investor comments and reactions to the new interface. Through some detective work, it is evident that online investors seemed to take issue with the fact that the desktop and mobile experiences were rendered in the exact same way, something that clearly didn’t sit well with desktop users.

While the new QuestMobile experience was designed around keeping things simple and easy to navigate, the biggest ask for users of the desktop experience was how to revert back to the way things were.

Unlike other rollouts of new platforms we’ve seen over the years, it wasn’t just the case that things were unfamiliar either, it was that information that users on desktop were used to seeing was no longer there. Information such as bid/ask spreads or watchlists were not part of the “new” default view. To find those features, users had to navigate to and install Questrade Edge, a separate platform that was what desktop users were used to seeing.

As feedback from the new rollout started to emerge, the responses from Questrade on reddit and social media seemed to reflect an understanding that something had not gone according to plan. Though it was clear they were aiming to simplify things, the reality is that many online investors were confused by the move.

The fact that Questrade now has two mobile apps, Questrade Edge and QuestMobile, is also a source of confusion (or choice) for users. What will need to emerge over the coming weeks is a clarification to existing clients as well as to prospective ones, as to the differences between the platforms.

The reality of the QuestMobile app, however, is that despite the issues and reactions mentioned in regards to the “desktop” experience, mobile users of the new app were generally positive on new layout and experience. On Google Play and on the Apple App Store, for example, ratings for the new app were relatively high (compared to the other Questrade mobile app), a sign that although not perfect, it was resonating with clients who tried it out.

It is also important to note that in addition to the “basic” overview of trading online, Questrade has also telegraphed that they are working on a new mobile app experience tailored for active traders as well.

As mentioned above, there is clearly a lot to unpack. For a few years now, Questrade has signaled to online investors that a new mobile trading experience was on its way. And, granted, while it took quite some time to arrive, it is clear that they have taken design cues from competitors like Wealthsimple Trade to try and simplify how trading information is presented in a mobile-first experience while also enabling a simplified navigation experience as well. The new QuestMobile is lighter than its Questrade Edge counterpart, for better or worse.

Although it is unclear when or if Questrade will adopt the commission-free trading model that peer firms in the online brokerage space have, it does seem like the QuestMobile trading experience hints at a path for lower cost online investing to happen. By effectively unbundling features from their current platform experience into a “lite” and “full featured” combination, it seems like Questrade could create two different pricing structures around those features. This is all speculative, of course. However, Wealthsimple Trade has shown that they are willing (and able) to charge users for a more premium experience, as has Robinhood in the US, so the precedent is established for zero-commission online brokerages to charge for specific features.

After 20 years in the online brokerage space, Questrade has learned a few things about handling missteps. One can go back to their decision to charge inactivity fees in 2012, for example, in which they had faced a similar firestorm from clients who were not happy with the move. Eventually, they phased them in anyway and then as market forces shifted, they phased them out.

Granted, there is now a renewed interest in trading online and there are even more channels to which investors can turn for information about online investing. So, the stakes for getting things wrong now are certainly higher than they were almost a decade ago. And yet, as was the case in 2012, Questrade is adapting to the times.

The new QuestMobile app was developed for a simpler use case for investing online and it is precisely because it has fewer features than what existing clients were used to that they voiced their discontent. But, those existing clients represent a different use case than potential new clients, in particular those who are not “active traders.” Individuals who are contemplating switching from other online brokerages, including Wealthsimple Trade, who are looking for a simple-to-use interface will find exactly that on the new QuestMobile platform. And, it seems with a bit of work on the communications front, making it easier to find and take advantage of the Questrade Edge interface can help with supporting more complex investing/trading needs – at least until the “active trader” version of QuestMobile gets released.

If there are any lessons for other online brokerages to glean from this roll out, it’s clear that giving existing users a clear way to opt out of a new platform is key to managing the transition between old and new interfaces. BMO InvestorLine did an especially good job of this in the roll out of their new online trading experience. Although the switch to a “new” platform experience took quite some time, users had the ability to toggle between the “old” and “new” and it is clearly stated in multiple places that users were able to do that.

Another important lesson to draw from the QuestMobile experience is the difference between mobile and desktop interfaces. Going “mobile first” doesn’t mean that mobile UI/UX translates well into desktop. They clearly do not map onto one another 1:1, which is something many of the responses pointed out.

Finally, it turns out that one of Questrade’s greatest strengths, the ability to reach self-directed investors on social media and in forums, is not without its risks. Building those strong communities online has helped propel Questrade’s growth. But as the reddit threads, investor forums and Twitter comments have shown, in 2021, online investors also on those channels are also much more willing to be vocal about what they don’t like. If there seems to be consensus across forums and social media that something needs to change with the QuestMobile experience, Questrade would be wise to pay attention.

From the Forums

With all of the forum chatter from this week, it seemed appropriate to cap coverage of investor commentary. Forum chatter will return again next week.

Into the Close

That’s a wrap on another week. It was an important week on many fronts – Canada marked the first National Day of Truth and Reconciliation and at Sparx Publishing Group, we also launched our first edition of Make The World Better Magazine. We know there is a lot of news that can be sad and disheartening; however, there is also a lot of great work being done by individuals and organizations who are out there trying to make a positive difference in the world, which is exactly what we wanted to feature.

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Discount Brokerage Deals & Promotions – October 2021

The spookiest month for online brokerage deals and promotions is finally here. October is famous for tricks and treats, and this year in particular, it seems like investors are in for a few treats in the deals section (and some sneaky tricks too). Sadly, it also signals the end of the wildly popular Sparx88 custom offer from Questrade.

In the “treats” column, there is a mix of new and extended offers for self-directed investors to choose from. To kick things off this month, HSBC InvestDirect has launched a commission-free trading offer, and both Qtrade Direct Investing and RBC Direct Investing have extended their offers as well.

Like all Halloween treats, if there’s one thing for self-directed investors to pay attention to with these new and extended offers, it’s the expiry dates. In particular, there are two sets of dates: the actual expiry date to be eligible for the offer, and the expiry date on the commission-free trades as well.

As the commission-free trading battle escalates among Canadian online brokerages, we are starting to see the number of commission-free trades being given out increase, as well as the timeframe over which to use these trades – to a degree. The exception, for now, seems to be the latest offer by HSBC InvestDirect which gives clients up to 60 days to use up to 60 commission-free trades. By comparison, Qtrade Direct Investing is offering 50 commission-free trades that are good for use until just about the end of April 2022 – which is almost seven months from the time of this posting. And, RBC Direct Investing is giving out 50 commission-free trades that last up to two years.

Somewhere in the treats may be a trick or two.

Expiry dates, especially those that are scheduled in the not-too-distant future, may be one way Canadian online brokerages might encourage users to sign up sooner rather than later. As we have seen in several cases this year, including in the Qtrade Direct Investing and RBC Direct Investing offers that were extended, the “flexibility” on the expiry dates is something that online brokerages can use as an option to lean into offers that are working, or pivot away from in case they see conditions change.

With so much change expected across the Canadian online brokerage industry over the coming months, we believe deals and promotions will be an exciting place to monitor. Nothing buys time on lowering commission rates like a commission-free trading deal, so for those online brokerages looking to explore the appetite for commission-free trading interest, there’s never been a better time to run an offer like this.

Expired Deals

There was only one noteworthy deal expiration heading into October: the end of the Sparx88 Questrade promotion. After a four-plus year run, this deal wound down as some behind-the-scenes changes to how Questrade manages custom offers required that this be phased out. On the plus side, there will be a new Sparx/Questrade offer coming soon, so stay tuned.

Extended Deals

Two big names in the Canadian online brokerage space elected to extend their current commission-free trade offers. The first, RBC Direct Investing, moved the expiry date from their 50 commission-free trade offer from the end of September to the end of October. Qtrade Direct Investing also extended their 50 commission-free trade offer until the end of December, a bold move considering the anticipated ramp up of offers slated to come online in the next two months.

New Deals

HSBC InvestDirect is bringing back a familiar face – the 60 commission-free trade offer. Starting in October and running through to the end of December, HSBC InvestDirect is offering up to 60 commission-free trades (North American equities and ETFs only) good for up to 60 days.

To stay on top of all of the latest discount brokerage deals and promotions, including quick access to promo codes, be sure to check out our online brokerage deals section.