If there’s one thing that all self-directed investors have in common, it’s that they pay attention to trends. This year, we officially crossed the 10-year mark at Sparx Trading, and if there’s one thing that we can speak to after a decade’s worth of data and analysis, it’s being able to spot trends in the Canadian online brokerage industry.
Taking stock (pun intended) of the past year and a half, it’s fair to say that we’re living through events unlike anything we’ve ever witnessed before. And yet, one of the most striking features of the Canadian online brokerage industry, even in the face of such dramatic events, is the ability of the Canadian market to sustain firms that move at paradoxically different speeds when it comes to innovation. That world, however, is about to change.
In this fifth iteration of the Look Back / Look Ahead magazine, it’s abundantly clear that the Canadian self-directed investing industry sits at the cusp of a major transformation.
From the launch of commission-free trading by National Bank Direct Brokerage, to a structural shift in demographics of investors who entered the online trading world, 2021 was a year that online brokerage executives told us challenged them to establish a new normal when it comes to delivering outstanding experiences for Canadian self-directed investors.
Drastic change was also prevalent at SparxTrading.com this year. Our choice to completely overhaul our website and lean into refining our brand identity appears to be in line with where leaders in the industry are as well. And we, too, have some incredibly ambitious projects slated for the next year that we can’t wait to share more about, especially the launch of Sparx Trading Pro.
After 10 years of consistently producing content on the Canadian online brokerage landscape, it’s remarkable to reflect on the breadth of audience that we serve.
Analysts, journalists, executives, enthusiasts, and investors turn to Sparx Trading for in-depth insights and newsworthy developments, as well as puns, gifs, and fun artwork. In today’s parlance, we’ve helped to democratize online investing by providing industry-grade content and insights to all. Today, investors have more technology, platforms, products, providers, and pricing options than they have ever had before, which means our place in the DIY investor ecosystem is even more important today than it was a decade ago when we first launched.
On behalf of the exceptionally talented Sparx team, I would like to thank our loyal readers, supporters, and, especially, the online brokerage community for 10 years of wonderful memories, and for keeping things interesting.
Where the next 10 years takes us all, we’re not sure. But we’re excited all the same, especially if where we’re going next won’t need roads. See you in the future!
Click below to learn more about what each individual online brokerage had to say about 2021 and what’s coming up in 2022:
Vixen might be a reindeer name, but Vix’n is just what the active traders wanted to see Blitzen and Dash-in around their screens as volatility, like lockdowns, makes a comeback. Screens and markets might be redder than Rudolph’s nose heading into the end of the year, but like all things market related, there are opportunities for good news if you Comet to finding them.
In this I-can’t-believe-we’re-so-close-to-the-end-of-this-hot-mess-of-a-year edition of the Roundup, we spotted new features being launched by one popular online brokerage just in time for the holiday shopping season, and what they could signal for this brokerage, as well as DIY investors. Next, more savings just got deal-ivered as two (big!) new online brokerage promos crossed our radar this week. Finally, a bonus story about a story – we preview the launch of the Look Back / Look Ahead magazine with an overview of what to expect, including some special features we think will drastically shape the industry in 2022.
Cashing In: Questrade Launches Cash Rewards and Roundup Features
At Sparx, we know a thing or two about roundups. So, you can imagine our joy when we noticed a Canadian online brokerage launch a new product line with “roundup” in the name!
Questrade, one of Canada’s most popular online brokerages, quietly rolled out a pair of new “savings” features for existing clients this past week in what looks like an interesting tactic to encourage low-friction asset gathering, while providing clients with additional value for being a Questrade customer.
The first, the RoundUP automatic savings program, is similar to many well-established services that help encourage saving and investing by rounding up dollar amounts on purchases which then get contributed into investments. Think of it like finding the spare change in your actual couch and automatically adding it to your couch potato strategy.
The second is the new Cashback Rewards program. This new feature appears to offer Questrade clients a way to spend their way to savings via cash back rewards from a variety of retailers. Similar to ebates/Rakuten, purchases made at different online merchants will provide shoppers with a cash back bonus for those purchases. The cash back amount can then be deposited directly into a Questrade account automatically.
In either case, these are timely programs to have arrive just before the holidays and when online shopping season hits a crescendo. More strategically, these new features also help Questrade stand out amongst an increasingly commoditized and crowded field of online brokerage service providers.
Despite an initial mixed reaction from investors and skepticism on the part of clients seeking out lower commission rates, this idea from Questrade is quite savvy even if it is not original. Questrade can lean on the successes from similar programs, such as Acorns in the US and Moka (recently acquired by Mogo Financial) in Canada, all of which are built on a premise of small amounts adding up to material gains. Undoubtedly, it is going to play well with the personal finance discussion groups and influencers who recognize that sometimes being disciplined about saving is hard; anything that makes building the habit of saving and investing easier is likely to win support.
One of the early critiques of the Cashback Rewards program is that Questrade has pulled together a list of merchants offering deals that most online investors don’t find compelling. There are a handful of recognizable names and a heavy concentration of shopping mall gift card-linked offers, so the successful uptake of this program will be correlated to the kinds of offers that Questrade can negotiate in. By comparison, rewards programs offered by Canadian financial service providers, such as RBC Rewards, or even like Rakuten, illustrate just how sophisticated these reward programs are.
As we noted in our coverage of Questrade in the soon-to-be-released Look Back / Look Ahead feature magazine, this year Questrade elected not to provide a submission highlighting what they’ve been working on. Nonetheless, there has clearly been activity and new features being brought forward, so it is curious that even with this new program that the rollout has been quiet out of the gate.
It’s clear that Questrade continues to innovate; however, what also is clear is that they are expanding beyond just the online brokerage space – a trend that other online brokerages in the US have demonstrated is necessary to retain clients from having to access other financial service providers for things like credit cards or bill payments. Their acquisition of Community Trust in 2019 helps to explain why Questrade Financial Group is hiring for roles related to digital banking, and even in roles related to their online brokerage site, they are looking to drive growth in the banking side of their business, the clearest signal yet of where they intend to move into next.
Against the backdrop of broader ambitions in the traditional banking and financial services realm, the latest product launch of RoundUP and Cashback Rewards programs seem aligned with a bigger picture to create ongoing relationships with online investors beyond just the world of investing. Tying real world purchases to the online investing accounts through credit cards and bank accounts gives Questrade important insights into spending patterns of their customers, better enabling Questrade to provide support and content (among other things – like mortgages) to clients in a more meaningful way.
And, if moving into the traditional banking offering is part of Questrade’s roadmap, it also stands to reason that the economics of offering commission-free (or lower commission fee) investing options would change. After all, National Bank Direct Brokerage and Desjardins Online Brokerage managed to take a “big picture” approach to what their online investing clients could represent in terms of business opportunities for other lines of business, and if the math made sense to them, it could certainly do so for Questrade.
Deal-ightful News: RBC Direct Investing Promo and Scotia iTRADE Offer Launch
It might have taken some time, but like the thrill of last-minute shopping, promotions from RBC Direct Investing and Scotia iTRADE joined the pool of online brokerage offers this past week.
In terms of the latest promotions, however, there are some noteworthy differences from the trend of cash back offers that have been dominant through the launch of RSP season promos. The biggest difference: the reappearance of commission-free trades.
The latest promotion from RBC Direct Investing is a huge 100 commission-free trade offer, with those trades being good for up to two years. This is by far the biggest commission-free trade deal we’ve seen since a similarly sized one offered by National Bank Direct Brokerage (before they went fully commission free), and both the quantity of those free trades as well as the duration of time that clients could use them make it incredibly competitive. To boot, there is no minimum deposit required to qualify for this promotion, which immediately positions this offer at the top of the list for any online investor seeking out deep value for active trading or doing some major portfolio reorganization. It is impossible to say where exactly things will end up in two years’ time; however, the fact that RBC Direct Investing is willing to extend such a long runway for commission-free trades is perhaps a sign of an experiment playing out in real time. Either way, this is an exceptional offer that other online brokerages (who still charge commissions and even those who don’t) are going to be compared against, especially given RBC Direct Investing’s feature set (in particular real-time data).
While at first blush it may seem like Scotia iTRADE is content to rely on their regular playbook of promotion structure, their latest tiered promotion of cash back or commission-free trades shows that they’ve been doing their homework (and reading the Roundup!) when it comes to strategic deposit amounts.
It helps to view the latest cash back promotion from Scotia iTRADE against its bank-owned brokerage peers to see the deposit levels at which Scotia iTRADE is competing the most aggressively for deposits.
The first tier that jumps out is the minimum deposit level. Scotia iTRADE is the only one of the online brokerages to have minimum of $5,000 for a deposit, and the associated cash back amount of $100 is tied with the only other bank-owned brokerage with a cash back bonus at that deposit tier (TD Direct Investing). In fact, Scotia iTRADE keeps pace with TD Direct Investing’s cash back offer through deposit tiers up to $100,000, after which point Scotia iTRADE’s cash back bonus leaps to $500, matching the leader at that tier, CIBC Investor’s Edge. What delivers bonus value to anyone signing up for the Scotia iTRADE cash back promotion, however, is that those individuals also receive a temporary commission rate of $4.99 per trade (flat!!) – effectively, a 50% discount on the standard commission rate – until the end of July 2022.
As we referenced in prior Roundups, Scotia iTRADE has been quietly going through a “rebuilding” mode, as evidenced by their front-end website refresh and winding down of their Twitter channel. This latest offer reveals some signs of activity, however, and that they are willing to keep pace with peer firms when it comes to trying to attract new clients.
A quick look at their Google reviews showcases concerns that have been voiced very publicly online, and as such, as competitive as their offering may be, it may hold greater appeal with existing clients rather than new clients who are learning about this brokerage for the first time.
The latest launch of new promotions at this point in the calendar year is a great indicator of the high degree of competition between online brokerages. The biggest rush of interest to self-directed investing is likely behind us, however there is greater awareness of trading online (especially among younger investors) and it’s clear that the effect that National Bank Direct Brokerage’s move to zero commission rates has had across the board. While most online brokerages aren’t lowering standard commissions to zero (yet), the commission-free trades are getting more numerous, cash back incentives higher and commission rates dropping (even temporarily). Combined, those factors clearly paint a picture of a world in which pricing for self-directed investing will continue to decline.
Preview: Look Back / Look Ahead Magazine
The end of a calendar year is a fitting time to reflect on the events of the past twelve months, while also casting a gaze forward as to what to look forward to. We’re not alone in that activity, as numerous political and business leaders are taking the time to comment on what they thought the most important developments were for the past year.
This week coming up, the latest issue of Look Back / Look Ahead magazine is set to publish, and included in it are some very insightful perspectives by a cross section of senior leaders of Canada’s online brokerages. In this issue, we asked all participants a series of questions about what investors can expect from their firms, what interesting trends they noted, and in particular, what they see coming in the year ahead.
All Canadian online brokerages that we cover on SparxTrading.com were invited to participate, free of charge, and were given the opportunity to speak directly and freely to Canadian self-directed investors about the challenges and triumphs of 2021.
Naturally, the industry being as competitive as it is, many online brokerages were not going to reveal all of the things they’re working on; however, it was refreshing to see that among all the participants, there were some candid discussions of new features slated to arrive in the new year.
The online brokerages that provided submissions to this year’s issue include:
We also provided coverage of the rest of the field based on what we saw as important and noteworthy developments during the year, and where things could go for those firms in 2022.
Among the big trends that we noted for 2021, multiple online brokerages called attention to the shift in demographics of their client base to a decidedly younger group. Stats vary, but in the order of 20% to 40% of new clients joining online brokerages in Canada this past year were under the age of 35. This has tremendous implications for what online brokerages are focusing on, and we can already see what several brokerages are committing to as a result. One tangible feature that is in focus is investor-oriented content to support new investors.
We also asked about client experience, and how each firm interprets that component of their service offering. While we doubt anyone would talk down their service experience, there were clear and tangible activities shared by online brokerages as to what they intend to do in the area of providing strong service to online investors.
On the topic of zero-commission trading, there were some intriguing answers – especially from the firms that have not yet lowered their commission rates to zero. It’s clearly something that has been discussed, and in fact, will continue to be evaluated as the market continues to evolve.
There were several notable new features coming soon that were discussed by online brokerages in this issue. One, we believe, will be significant (dare we say huge) and will serve as a catalyst for self-directed investors to seriously consider brokerages based on this one big feature. Other features being telegraphed will undoubtedly address certain pain points with mobile and digital experiences that will hopefully contribute to self-directed investors remaining where they are.
Beyond the online brokerages already operating in Canada, we also took a look at the companies that have all provided some indication of interest in launching new online brokerages in Canada in the near future. Names such as Mogotrade, Tradezero, FreeTrade, and, infamously, Tastyworks, are set to make history if they all are able to come to market in such a short amount of time. Realistically, we understand the regulatory process is neither easy nor fast when it comes to launching a new brokerage in Canada; however, none of those firms mentioned are standing still on the issue of going live in Canada as soon as is feasible to do so.
Finally, this issue happens to coincide with the 10th anniversary of SparxTrading.com’s launch. It’s hard to fathom that a decade has gone by, and through that time, we’ve been covering the ups, downs, and sideways of the online brokerage industry in Canada, as well as in the US. We provide some fun behind the scenes snippets of the journey to this point, and in stepping back to look at the bigger picture of the state of the industry, as well as the needs of online investors, we see our role and mission as more important than ever to deliver on. It’s abundantly clear (to us) that we’ve also grown a sizable community of online brokerage industry stakeholders, followers, and online brokerage enthusiasts, and we’re really excited to reveal what we’ve got planned next for this community in 2022.
Be sure to sign up to our newsletter for recaps and updates (including the first look at the magazine) and follow along on our social media accounts for highlights from the Look Back / Look Ahead.
Thanks to all the firms that submitted and participated in this year’s magazine, as well as to the readers and supporters of Sparx Trading that have helped us make it to year 10, conveniently X in Roman numerals. Here’s to the next X.
Into the Close
At the time of publication, markets are poised for a bumpy start to a shortened holiday week. And, as financial services firms also sound the alarm to retreat and work from home through the winter to ride out the Omicron blizzard, we’re mindful that this is going to be a turbulent week. Volatility is going to be high, so despite travel bans and lockdowns starting to take effect, anyone who is a student of recent history is going to get a chance to witness a rerun of market turmoil and trading activity spikes. For traders, that’s about as bittersweet as it gets at this time of year but all we can do is buckle up, be kind, and hold on. We’ll be publishing the next edition of the Roundup a little later than usual courtesy of the holidays, but between now and then, thank you for joining us this year, and from all of us at Sparx, we wish you and your loved ones a safe and restful holiday season!
Inflation isn’t the only reason interest is heading higher at the end of the year. For the online brokerage industry in Canada, it seems that new features and announcements are also grabbing attention and fueling speculation as to what’s next as we head into the new year.
With just a few weeks left in 2021, and some big announcements of our own to report on, the Weekly Roundup is shifting gears into “year-end” mode. To kick things off, we look into the newest big feature drop announced by Wealthsimple Trade and unpack what it means for investors and competitor brokerages heading into RSP season. Next, we launch into rewind mode and review the big milestone developments from earlier this year as a prelude to the launch of our exclusive Look Back / Look Ahead magazine later this week. Finally, we wrap up with DIY investor chatter from the investing forums.
Wealthsimple Trade Launches SaaSy New Subscription
Just in time for the holiday season, Wealthsimple Trade rolled out a brand-new enhancement that has caused quite a stir among Canadian self-directed investors.
Wealthsimple Trade Plus, a new subscription model-based program offered by Wealthsimple Trade, will soon be removing per trade currency conversion and replacing it with a modified currency conversion option, adding in real-time data (though not streaming real-time data), and increasing the amount available for instant deposit to $5,000. The fee for this new service model is $10 per month, up from the current $3 per month being charged for Wealthsimple Trade Premium.
The new Plus program is slated to replace the Wealthsimple Premium plan. Premium is scheduled to be sunset in March 2022.
Like most big new features at Wealthsimple Trade, there’s a waitlist and a gradual rollout plan to contend with. However, despite what is clearly an attempt to address some of the most highly sought-after features by their clients, the early feedback from self-directed investors is mixed.
Arguably, the price tag is a sticking point. Paying $10 per month for a service might seem small; however, among the discount investor crowd, what amounts to an annual fee of $120 (if used through the year) is considered friction. In fact, introducing optional monthly fees at a time when other leading online brokerages, such as Interactive Brokers eliminate monthly fees (coincidentally, at $10 per month), and when competing online brokerages in Canada such as National Bank Direct Brokerage and Desjardins Online Brokerage have lowered their commission rates to zero (while providing access to USD accounts without forced currency conversions), means that the new Wealthsimple Trade Plus offering will have limited appeal.
For some clients of Wealthsimple Trade, this new capability will make financial sense – they can transfer a large dollar amount into USD and pay a one-time conversion fee of 1.5%. What hasn’t been made clear yet is how clients will be able to withdraw the funds, and whether it will have to first be converted back into CAD or if users can link directly to an external USD account. Additional questions have been raised, such as the ability to journal shares for cross listed securities and what will happen for clients with existing USD securities who sign up for Wealthsimple Trade Plus, and most importantly, what happens when a user opts out of the Wealthsimple Trade Plus program?
Of course, the timing of the announcement is certainly convenient given the proximity to RSP season; however, the fact that there is going to be a waitlist and a phased rollout of the new feature means that competing online brokerages have an opportunity to reposition themselves against this new offer. And the longer those questions about the new feature release remain unanswered, the greater the window of opportunity for competitors to provide a more tangible alternative.
The marketing and advertising for and in response to this latest development is sure to be heated. Already one key theme that existing online brokerages seem to be highlighting is “certainty” in what investors have to pay. Flat fees per trade are, arguably, more appealing than variable costs. The biggest test for Wealthsimple Trade, however, appears to be waning sentiment among millennial investors towards the commission-free offering which was once the exclusive domain of Wealthsimple Trade. One of the most influential sources of information for new and existing online investors is reddit, and it appears that National Bank Direct Brokerage and Desjardins Online Brokerage are both getting a lot of “earned media” from DIY investors who are leaving their existing brokerage (including Wealthsimple Trade) outright or redirecting a portion of their investment portfolio to these low-cost options.
Data from Robinhood, arguably, the best bellwether for Wealthsimple Trade, shows a substantial pullback in equities trading and user growth on the platform plateauing. Thus, the limits of design are going head-to-head with pricing, and in the self-directed investing space, while design might count for something, pricing (and features) usually win the day.
This latest move by Wealthsimple Trade will likely not spur existing Canadian online brokerages into action, nor will it likely be a significant catalyst to lower prices. Most Canadian online brokerages already offer the kinds of services (or better) that Wealthsimple Trade is bringing online in the new year.
As such, heading into the busiest stretch of RSP season, we anticipate Canadian online brokerages to step up advertising and awareness campaigns. If not to highlight their own features, then certainly to go on the offense to directly challenge competitors. The timing seems right for a big announcement from an online brokerage, and we’re probably not the only ones thinking that right now either.
2021 Online Brokerage Rewind: Part 1
It’s hard to believe that the end of another wild year is here. Time distortion is in full effect, thanks to the lingering impact that COVID-19 and all of its unwelcomed variants have had on the course of “normal” life. Now that we’re collectively almost two years into the global pandemic, there is clearly a shift – albeit a rocky one – towards a new equilibrium.
In January, a new reality was also thrust upon the online brokerage industry in Canada and across the globe at the beginning of 2021 when meme-stock mania and FOMO took hold and yet another surge of online investors wanting to join the world of trading online overwhelmed many Canadian online brokerages’ systems. Robinhood took centre stage as the zero-commission stock (and option and crypto) trading firm saw unprecedented customer growth and customer angst play out simultaneously.
Of course, all of this took place against the backdrop of a historic riot/coup in Washington, DC, a scene that provided a poignant reminder that even despite the chaos experienced in the real world, stock markets continued to drive higher. Regardless of what happened at the Capitol, capitalism remained intact.
Gamestonks continued to be a dominant theme heading into February, and the surge of (noted now as the “rise of”) retail investors grew, shattering trading and new account growth records at all online brokerages in Canada and around the world. The world, it seems, had shifted, and retail investors embraced markets and risk in a way that nobody really saw coming. That fact was laid bare as customer service wait times exploded in Canada just as RSP season was reaching its zenith, and the combination was not pretty. There were anecdotes of multi-hour wait times to get through to client service teams and it was clear that many (many) online brokerages in Canada were simply not equipped to service that level of rapid interest.
#Robinhood‘s interface is CLEARLY designed to make the average investor – Americans like my nephew – feel like they’re gambling in a casino.
Despite the turmoil on the client service channels, the beginning of 2021 saw what would become an overarching theme across the Canadian online brokerage industry for the year: the release of new features. Twenty twenty was an exceptional curveball that all online brokerages had to figure out how to contend with; however, once teams had transitioned to working remotely (itself a phenomenal effort for the financial sector), the work restarted on launching new features. Big bank-owned brokerages, such as BMO InvestorLine and RBC Direct Investing, took the lead with new bells and whistles added into their offering.
And speaking of shiny new things, the tail end of February saw the beginning of a new chapter in the digital life of SparxTrading.com, as we officially rolled out a new website. The brand-new look and feel of the site as well as the new features, such as an online brokerage deals calculator and new approach to delivering information on deals and promotions, set the stage for a new direction for the site. The big investments in new architecture were not without hiccups though, and behind the scenes we’ve been working hard throughout the year to continuously monitor and improve performance based on user feedback.
The end of the calendar quarter somehow managed to deliver equally headline-grabbing developments. Specifically, we noted on two separate occasions that month that new commission-free trading firms were positioning to come to market in Canada by the end of the year. Easier said than done it seems. Among the big names, Tastyworks, the popular US online brokerage that focuses on options trading, and Mogo Financial, who announced the launch of Mogo Trade, after the acquisition of Moka. Of course, we didn’t know it at the time, but March was also when National Bank Direct Brokerage set the stage for their eventual leap into being the first bank-owned online brokerage in Canada to offer commission-free trading. In March, however, National Bank Direct Brokerage tested the waters by dropping their standard commission rates by about 30% to $6.95 per trade.
There were, of course, many other stories, as well as copious amounts of silly gifs shared in the Weekly Roundups, that we didn’t mention here. To catch up on all of the stories from Q1 of 2021, check out our 2021 archives here, and in case you missed some of the fun artwork, be sure to check out the Sparx Trading Instagram page.
Stay tuned for more updates through the year in the next Roundup, as well as the big launch of the Look Back / Look Ahead magazine!
From the Forums
With the launch of Wealthsimple Trade Plus, inevitably investors are asking whether existing online brokerages are going to drop their fees – even nominally – to offset the slow but steady growth of commission-free trading. In the crosshairs of investors this past week, Questrade, where users on this reddit post debated the current low-cost options for self-directed investing, and challenged the perception of Questrade as a low-cost leader.
On Better Terms
Another week, another interesting thread about the finer points of a popular bonus offer. In this post, reddit users weigh in on the tax treatment of cash back bonus offers, and the perspectives are interesting as they are varied.
Into the Close
That’s a wrap on yet another wild week in the markets. After shrugging off omicron, hot inflation, chip shortages, and crypto crashes, it seems like 2021 is determined to end on a high note. We’re also pretty excited about what’s coming just around the corner with the launch of our Look Back / Look Ahead series for 2021/2022 and to gear down for the holiday season. With so much activity in play, we suspect that January will be an exceptionally busy month, and we’d have it no other way! Have a profitable week!
And just like that, there are less than 19 days until Christmas (fewer if you aren’t reading this on Monday). This past week and year have seen more twists and turns than a pack of Twizzlers, but either by design or some kind of pleasant surprise, stock markets appear to be pricing in better times ahead – at least for some.
In this edition of the Roundup, it seems that gifts for self-directed investors are arriving in time for the holidays (no chip shortage here!). Read on for more insight into some big online brokerage deals and possibly bigger savings coming for self-directed investors into this cycle of RSP season. Next, we preview the upcoming edition of the Sparx Trading exclusive, Look Back / Look Ahead. Be sure to check out the teaser for interesting perspectives on what we’ve seen from brokerages participating this year. As always, we’ve included some banter from the forums to capture the sentiment from the past week.
Deal-cember: Big Savings for Self-Directed Investors this RSP Season
The number of deals and promotions that tend to show up around this time of year are driven by the interest in the TFSA and RSP contribution deadlines.
There’s fairly reliable data (see below) that shows that Canadians start asking more questions and inquiring about these investment vehicles at about the same time each year; however, it’s clear that the volume of searches on a relative basis favours RRSPs vs TFSAs. Not surprisingly then, the savvy Canadian online brokerages tend to time their promotions for opening new accounts or adding more funds to existing accounts around the same time as well.
What is interesting to compare with the current list of promotions is the expiry dates. Given that the RSP contribution deadline to qualify for the 2021 tax year is March 1, 2022, there are several online brokerage promotions currently running that are timed to expire at around that date. Notably, cash back promotions from TD Direct Investing, CIBC Investor’s Edge and Qtrade Direct Investing – all of which launched in November – are set to expire in the new year. In contrast, the cash back promotion from BMO InvestorLine is set to expire at the end of December, and the commission-free trade deal from HSBC InvestDirect is also set to expire at the end of 2021.
Why these dates matter is because if we look to last year, both BMO InvestorLine and HSBC InvestDirect ran cash back promotions heading into the RSP contribution deadline. Further, RBC Direct Investing and Scotia iTRADE were also on the list of online brokerages offering cash back (or combined cash back and commission-free trade) promotions.
So, as busy as the deals and promotions section is, there is certainly potential for more activity as we progress through December and into January if last year is any indicator.
At this stage of the year, however, it appears that the big bank-owned brokerages are the most aggressive in competing for new business. In particular, TD Direct Investing appears to be on the hunt for new accounts with the largest cash back amounts for deposits ranging from $1,500 to $49,999. This isn’t typical territory for a bank-owned brokerage to look to take a lead in; however, these are clearly not typical times.
Currently, TD Direct Investing’s offer outcompetes Questrade’s referral promotion (which is the only way to get a cash back bonus) at the sub $10K mark. And, in comparing the online brokerage promotions available at this time last year there are some even more startling developments. As seen in the chart below, TD Direct Investing dropped the minimum deposit threshold to qualify for a cash back promotion by 90%. Similarly, BMO InvestorLine and Qtrade Direct Investing also dropped the minimum requirement to qualify by 50% and 40%, respectively. So, while the cash back amounts have stayed relatively the same – or proportionately lower in the case of BMO InvestorLine – the deposit amounts required to qualify for those bonuses (i.e. the hurdle to qualify) has significantly decreased at three of the four online brokerages currently offering cash back promotions.
While no online brokerage aspires to have to spend heavily to acquire new clients, the reality is that when the largest online brokerage in Canada makes such an aggressive move, other peer firms are almost required to follow suit.
Aside from the published deals, it appears there are also very aggressive commission-price lowering efforts happening behind the scenes. While we typically don’t report on rumours, we’ve seen and heard reports of commission prices being lowered at CIBC Investor’s Edge and TD Direct Investing with rates going down to $2.95 to $4.95 per trade. Usually, this kind of price adjustment would be negotiated for very active traders. Now, it appears to be spreading to higher value accounts, which suggests it is a matter of time before a bigger public announcement takes place for commission drops.
All told, it appears that the online brokerage industry in Canada is at a tipping point heading into the next RSP season.
Deals and promotions activity is once again active; however, the fact that promotional offers are being led by the largest player in the space (right now) indicates that they are starting to play offense rather than simply position themselves according to their popularity. TD Direct Investing didn’t have to drop their cash back offer qualification rate for the same offer rate they were giving out last year; however, the fact that they did indicates they felt the need to.
One of the biggest catalysts, we suspect, is commission-free trading available at National Bank Direct Brokerage. Further, the cash bonus from Wealthsimple Trade and Questrade’s continued rise in popularity are additional factors that sway investors with sub-$15K amounts to deposit. With three quarters of the current cash back promotions now having offers for investors with $15,000 and half of the cash back promotions offering promos for investors with $10,000, we might be witnessing a trend by the larger or more established players to revisit their offerings in this segment of the market.
Additional threats to the incumbent online brokerages include newcomers, such as Mogo Trade, Tastytrade, Tradezero, and Free Trade to name a few, all of whom are promising to bring with them commission-free stock trading. At least two of those firms have stated that they will be looking to launch in 2022, if not sooner.
The takeaway is that there are likely to be some interesting offers coming to market for self-directed investors, especially between now and the first few days of January 2022. We expect there to be lots of investment by online brokerages to try and advertise these offers so it may not come as a surprise to see more than Questrade commercials show up from now until the end of February. This, perhaps more than in years’ past, December is really the most wonderful time of the year – especially if you’re looking to open an online brokerage account (or are considering switching online brokerages).
Getting Ready to Look Back, Can’t Wait to Look Ahead
The end of the year is just around the corner, and with it comes a slew of enjoyable traditions. It’s been a tremendous year for the self-directed investing space here in Canada, and with so much having taken place, it’s hard to keep track of everything that’s happened. Or at least it would be much harder were it not for the upcoming issue of the Look Back / Look Ahead magazine.
We’re thrilled to be launching this upcoming issue which features submissions from some of the leading online brokerages in Canada. This issue is currently in production; however, it provides some very rich insights into how the past year played out for Canadian online brokerages and highlights how big shifts in the industry, such as the flood of new investors or the launch of commission-free trading, have impacted firms in different ways.
One of the biggest draws of the magazine is to see what self-directed investors can expect from different Canadian online brokerages in the year ahead. And, there are some very interesting announcements we think are going to continue to shape the industry – especially as more competition enters into the market. From hints on pricing to innovative new ways for investors to get greater value out of their relationship with an online brokerage, some big changes are set to make landfall in early 2022.
Of course, it’s hard for anyone (as we know) to stay on top of developments and feature launches. That said, it’s also a challenge for the online brokerage industry in Canada as a whole to communicate what they’re up to. While press releases remain a mainstay for big feature announcements, we believe that a series of small announcements tend to accrue more value over time with DIY investors. Activity is certainly a marker of progress, however, so too is transparency in communication.
As we noted in a Roundup last month, we’ve seen communications strategy at Canadian online brokerages shift, especially on platforms like social media. Several once-active online brokerages, it seems, have run out of things to talk about or have opted to not say much in places that investors would frequent.
Thus, it is a bit of a paradox as 2021 draws to a close. Despite having more options for finding out information about online brokerages, it is increasingly more challenging for self-directed investors to find well curated and in-depth content about those brokerages.
The Look Back / Look Ahead is therefore a unique opportunity to get direct information from Canada’s online brokerages that would not necessarily be as easy to find anywhere else. It also helps to serve as an indicator of the online brokerages we can expect to hear and see more about heading into 2022.
From the Forums
Paid to Wait, Eh
Patience in the stock market can pay dividends, literally. For one Canadian self-directed investor, the recent news of dividend hikes at major Canadian financial institutions was confused when those hikes hadn’t yet been updated in a popular Canadian ETF, XIU. See what fellow investors had to say in this post about the pace of dividend updates and the virtue of patience.
Waiting on the Edge
The old adage of time equaling money is something that eventually comes home to roost for online investors who have to spend a lot of time waiting on customer service lines. Although it was a big issue early on in the pandemic, wait times appeared to recede to more “normal” levels. So, it was interesting to see this post on reddit from one self-directed investor who experienced an unusually long wait time and had lots of time to write a review and contemplate alternates.
Into the Close
If 2021 wanted to keep things interesting for everyone on its way out the door, it is certainly doing a good job of that. With just a few weeks to go, self-directed investors are getting into planning mode, with tax-loss selling, harvesting of gains, and culling of losses all on the docket heading into the home stretch of the year. Of course, when stocks are done for the week, there’s always crypto dipping to keep things interesting over the weekend.
December is here – or should we say Deal-cember. With Black Friday and Cyber Monday behind us, the start of December is typically the time of year when people kick their holiday shopping into high gear. For Canadian self-directed investors, this is perhaps one of the best months to be shopping around for an added deal or promotion for opening a new account or bringing new funds into an existing one.
This month, there are no new deals officially launching at the beginning of the month. However, there was a flurry of promotional offers that arrived throughout November which means that out of the gate, December is an exceptionally strong month for offers from just about all online brokerages.
Before diving into the specific online brokerage deals that launched, it is worth pointing out that this year the online brokerage field in Canada is unlike any other time in recent memory.
There are not one, not two, but three Canadian online brokerages that offer commission-free trading. And, one of those, Wealthsimple Trade, is still running referral promotions including their most ambitious one yet that launched for Black Friday – a cash referral bonus equivalent to four (!!) stocks (instead of their normal one). The other two commission-free trading online brokers, National Bank Direct Brokerage and Desjardins Online Brokerage, offer the most compelling price point plus the big financial institution convenience and “peace of mind” factor. If that weren’t enough, there are reports of not one, not two, but three more new commission-free online brokerages looking to launch in Canada.
This brings us to the current state of affairs for deals and promotions.
It is worth pointing out that firms NOT offering an incentive or promotion this month are in the minority, which only increases the likelihood (due to competitive pressures) of more promotions coming to market between the start of this month and the start of the new year. It’s hard to envision larger bank-owned brokerages letting competitors with offers get too far ahead, and it’s also puzzling as to why smaller brokerages wouldn’t be aggressively competing with promotional offers if they still charge more than zero for trading commissions. At some point the physics (or economics) will have to kick in.
Throughout November we saw big cash back offers launch big names in the space. In a Weekly Roundup near the start of the month, we compared current cash back promotions from TD Direct Investing, CIBC Investor’s Edge, and BMO InvestorLine and found that there is an incredibly competitive effort to attract investors with lower starting balances, something that hasn’t really happened at this scale before. Later on in the month, Qtrade Direct Investing also launched their own cash back promotions (yes plural) with a traditional tiered cash back offer and additional bonus cash back for pre-authorized contributions.
Expired Online Brokerage Deals
The good news story heading into December is that there are no expired deals to report on just yet. Later on this month, there are several offers scheduled to expire so it is worth keeping an eye on these to see if they start landing in the “extended” category or get replaced outright with new offers.
Extended Online Brokerage Deals
No deal extensions to report on just yet to start the month.
New Online Brokerage Deals
Technically no new deals have launched at the beginning of December, but there are two noteworthy offers from some popular online brokerages to highlight.
The first is the “Black Friday” referral bonus offer from Wealthsimple Trade. It is, arguably, one of their biggest promotions to date using their referral structure, so it is likely that if you have friends who use Wealthsimple Trade, you’ll be hearing from them, as well as the long-lost friends you might not have heard from in a while.
Another important new set of offers are the Qtrade cash back promotions. There are so many (is there such a thing as too many?) promo codes associated with their latest cash back offer, which ranges from $50 for deposits of $15,000 to $2,000 for deposits of $2 million or more. For an extra boost of $50 cash back, clients can set up a pre-authorized contribution as well. Be sure to check back through the month for more deals and promotion updates or if you hear of any offers that other self-directed investors could benefit from, drop us a note and we’ll review it.