For many years, observers of the Canadian discount brokerage marketplace as well as the discount brokers themselves have all understood that the online brokerage business is a highly competitive space. Despite the many trends in products, services and pricing that have occurred over the last decade the standard commission rates at bank-owned brokerages have remained largely high and untouched. After a bold move by RBC Direct Investing, however, all that is set to change.
10 is the New 30
With the announcement by RBC Direct Investing that they were lowering (and simplifying) their standard commission fee from $28.85+ down to $9.95 flat, they have set the wheels in motion for one of the most potentially disruptive moves to happen in this space in a very long time.
With this pricing adjustment, not only does RBC Direct Investing now get out in front of their bank-owned brokerage peers in terms of pricing, they also have taken a shot directly at the traditionally lower cost online-only brokerages such as Questrade and Virtual Brokers. The ‘flat’ in the pricing means that ECN fees which some deep discount brokers pass along on their standard plans makes them more expensive than RBC Direct Investing on certain market orders of over 995 shares.
| Standard Commission Rates | Assets Required for Discounted Commission Rate | Discounted Commission Rate | |
|---|---|---|---|
| RBC Direct Investing | $9.95 (flat) | Not required | Not required |
| Scotia iTrade | $24.99+ | $50,000 | $9.95 (flat) |
| CIBC Investor’s Edge | $28.95+ | $50,000 | $9.95 (flat) |
| National Bank Direct Brokerage | $28.95+ | $50,000 | $9.95 (flat) |
| BMO InvestorLine | $29+ | $50,000 | $9.95 (flat) |
| TD Direct Investing | $29+ | $50,000 | $9.95 (flat) |
Keeping it Simple
While the announcement about pricing is a headline-grabbing way to kick off 2014, observers of RBC Direct Investing will note that over the past 3 years there have been a number of steps RBC has taken to bring their products, platform and services to a more competitive level with their peers. Whether it was the streamlining of their administration fees, the introduction of the “community” investing feature, their practice account or the lowering of minimum investment amounts of the Series D mutual funds, RBC Direct Investing has been steadily deploying investor-friendly features and pricing.
One of the individuals who is, in part, responsible for these tactical maneuvers is Michael MacDonald, Vice-President of Strategy for RBC Direct Investing. We spoke to Mr. MacDonald regarding the recent changes to RBC Direct Investing’s pricing and what his thoughts were on the impact these changes will have on the industry as well as to retail investors.