Author: Hamish Khamisa

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New Self-Directed Investors and the New Normal: An Interview with RBC Direct Investing’s Lori Darlington

Let’s start with an experiment. If you see the phrase, “Life is a highway” and are able to complete the next line, you will probably have an ear worm for the rest of the day (you’re welcome).

If you view this phrase as a simple platitude or remember hearing it for the first time from the Pixar movie Cars (released in June, 2006), then it’s likely you are part of a generation of investors stepping into the world of self-directed investing for the first time, and a group of increasing importance to Canadian online brokerages.

Last month, RBC Direct Investing published the results of a recently conducted survey that focused on understanding the perspectives of younger investors about the world of investing online. The catalyst: nearly half of new clients of RBC Direct Investing that joined during the pandemic were under the age of 35.

President and CEO of RBC Direct Investing, Lori Darlington, sat down with Sparx Trading to discuss the latest results of this survey, and provide context and perspective on how younger investors are going to impact the world of self-directed investing. She also provides insight into how RBC Direct Investing plans to adapt to this new client group.

Young Investors: A Market Mover

Those new to the world of Canadian online brokerages would likely be aware of RBC Direct Investing as the online brokerage arm of one of Canada’s largest and well-known banks, RBC. Unless you’ve been watching the online brokerage segment for more than the past eight years, however, what you may not know is the influence RBC Direct Investing wields in the Canadian online brokerage marketplace.

For a quick history lesson, RBC Direct Investing was the catalyst that drove stock trading commission prices down from the $20+ per trade range for bank-owned online brokerages to just under $10 in 2014, where most of these online brokerages price their trading commissions today.

Certainly, a lot in the online investing world has changed since 2014. However, in that time, nothing has changed so dramatically and so rapidly as the composition of online investors over the past two years. When a shift of this size impacts one of the most influential online brokerages in Canada, it’s likely to have a ripple effect throughout the Canadian online brokerage industry.

Though it is not a ‘new’ story at this point, the impact of the surge in new investor interest is still unfolding. Recent data we collected from the US online brokerage market, for example, highlights the trend and pace of investors opening online brokerage accounts. Even today, those numbers remain elevated relative to the start of the pandemic.

It is against this backdrop that the latest poll conducted by RBC Direct Investing is of interest to not only online investors, but also to anyone tracking the online brokerage space in Canada more broadly.

Before diving into the findings, it’s important to highlight the methodology to get a sense of what was being measured in the survey. The study, which was conducted by Ipsos, took place between October 26 and November 5, 2021, and focused on individuals between the ages of 18-34 (defined as “younger investors”). There were 529 individuals in this age range who responded to the survey and whose answers constituted the data referenced in the press release relating to younger investors.

Eager to Learn

Although there were a number of takeaways from the data collected in the RBC Direct Investing young investor insights poll, one of the most important themes was the willingness of younger investors to learn about investing.

According to the poll, 45% of younger investors have learned more about investing during the pandemic, and 82% of current and potential self-directed younger investors would like to learn more about investing.

Darlington stated, “They’re looking to learn more, they are learning more, but I think there’s an even bigger opportunity as we continue to support these young investors.”

More deeply, this appetite to learn more about investing could be governed by another interesting finding from the survey: younger investors wished their parents had talked to them more about investing. As it turns out, the number one response that younger investors stated they wished their parents had given them advice about was investing (57%), followed by saving (46%) or budgeting (44%).

The dominant narrative behind younger investors rushing into the market has been ‘to get rich quick,’ especially on the backs of meme stocks or heightened volatility during the outset of the pandemic.

In reality, however, the data from the latest RBC Direct Investing poll, as well as other research, supports another narrative: that younger individuals view investing as a means to effectively grow wealth, especially in a world where interest rates have been historically low and home ownership – an aspiration of many young people in Canada – continues to become increasingly more challenging.

Impressions & Expectations

Another important theme that came out of the discussion with Darlington was expectations.

For younger investors, especially the large numbers that decided to jump into self-directed investing during the pandemic, the conditions of stock markets formed that very important first impression.

That reality was shaped by volatility in household name stocks, as well as the emergence of new communities of investors and influencers online, especially on Reddit. Though older or more experienced investors know that the stock markets during the pandemic were anything but normal, the conditions during the pandemic will undoubtedly form a lasting memory of what stock markets are capable of.

Probably the most astounding observation in hindsight: instead of fleeing volatility, younger investors flocked to self-directed investing because of it.

A perspective offered by Darlington with regards to younger investors was that younger investors were already comfortable with technology and transacting online, including on mobile devices, by the time the pandemic struck. These factors enabled younger investors to have an easier time adopting trading platforms, as well as consuming information related to investing online.

Service outages and customer service delays were also a reality at that time among many online brokerages. Especially vexing for new investors was the friction to opening an online brokerage account when wanting to act on what was clearly a once in a generation world event.

When asked about what RBC Direct Investing has done over the course of the pandemic to specifically address some of the technical and service gaps that impacted online investors, Darlington stated that there has been considerable investment in technological infrastructure as well as continued efforts to prioritize client service.

Bridging the Generational Divide

The fact that there has been a study commissioned to understand the needs of a new client segment is telling. RBC Direct Investing is intent on listening to this new group of investors because they represent the next chapter in the online investing story for this online broker.

Although the playbook for navigating the influx of new investors is being written (or rewritten) in real time, there are some good case studies of what’s happening in the US online brokerage market to draw lessons from. The takeaway south of the border is that providing the right kind of investing experience is what ultimately wins loyalty and earns new business.

When asked what RBC Direct Investing is or could be doing to support younger investors, Darlington cited a number of important touch points already in place for RBC Direct Investing clients. Resources such as the Investing Academy and “getting started” guides, as well as practice accounts, are good starting points for new investors.

Darlington believes that online brokerages such as RBC Direct Investing “have a responsibility to bring the right tools and resources to the table so the younger investors getting into it have the information and the tools that they need at their fingertips to make the best decisions for themselves.”

Continuing the Conversation

The trend among Canadian online brokerages to focus on younger investors undoubtedly hit an inflection point during the pandemic. Features like preferred pricing or waiving of fees were the first steps being taken by several firms.

Now, however, the fact that a much bigger online brokerage has taken on the task of understanding younger investors, presumably to better cater service to this group, indicates that even more change could be on the horizon.

RBC Direct Investing has created a strong ecosystem of investor content as well as a unique online community that should serve it well in its pursuit to deliver value to online investors. That said, there are also significantly higher expectations around being able to get things right.

After all, the perception of bank-owned online brokerages is that they’re not hurting for financial resources, and as long as commission prices per trade remain high, investors are certainly going to be demanding value-added features.

To navigate the new normal among clients who have very different takes on markets and beliefs about money, RBC Direct Investing – and other Canadian online brokerages – can come back to a point that younger investors stated in the survey about creating meaningful conversations around investing.

When asked what Darlington wished she had learned from her parents’ generation, she largely agreed with the sentiment of investors from the new generation. Learning about investing, or even learning how to talk about investing, is clearly something investors of all generations could benefit from. Not every market is going to be like the past two years. If Canadian online brokerages like RBC Direct Investing can figure out how to continue the conversation about investing, then there’s a road ahead younger investors can look forward to travelling, regardless of the bumps and turns.

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Look Back / Look Ahead: A Review of Canadian Online Brokerages in 2021 & Preview of 2022

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:

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Discount Brokerage Weekly Roundup – July 19, 2021

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

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

BMO InvestorLine Launches adviceDirect Preview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

On the Radar: Quick Online Brokerage Stories

Ad Battle

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

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

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

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

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

Sherwood Like a Billion

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

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

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

From the Forums

A Glitch to Scratch

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

It’s Been a Slice

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

Into the Close

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

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Discount Brokerage Weekly Roundup – June 14, 2021

Taking a Moment

There’s a lot that goes into the production of a Weekly Roundup that many readers don’t see. Looking back on the week that was is as much a habit as knowing which letters to capitalize in an online brokerage’s name. Despite the hundreds of times having done this, occasionally something happens in a week that forces a pause from business as usual.

This past week there was a terrible tragedy that took place in London, Ontario. Four members of a family were murdered simply for looking and being different than what someone decided was appropriately Canadian. They were murdered because they were Muslim.

Like many Canadians, it is hard to find words to capture how thoroughly awful and traumatic this event was. And so, we are left with yet another heavy but necessary exercise: to not turn away from the terrible news but this time to watch and engage.

The news cycle will move on before the people will. A young boy will be left to figure out the rest of his life without his parents and sister beside him. Muslims and other religious and ethnic communities across Canada will forever be slightly less trusting that everything will be OK.

Before getting back to business as usual, I wanted to call attention to Islamophobia and the responsibility all of us bear to call out prejudice when and where we see it.

Please take a moment and either watch or read about this family.

All of us have a part to play in looking out for each other.

A Tale of Two Tables: 2021 MoneySense Online Brokerage Rankings Released

It’s hard to believe, but the DIY investor datapalooza (or datastravaganza?) that is characterizing 2021 continues to chug along well into June.

Earlier this month, a popular Canadian investment publication, MoneySense magazine, published their 2021 Canadian online brokerage rankings, essentially capping off the last of the major discount broker rankings for the summer.

Even though the fall feels far away, online brokerages are undoubtedly at work planning for their ramp up at the end of the year. These latest Canadian online brokerage rankings will ultimately prove to be a big part of what will help online investors shape their perceptions and decisions around which online broker they choose to go with, and ultimately impact how online brokerages market and talk about themselves for the rest of the year.

Why is this Online Brokerage Ranking Important?

Now in its ninth year, the MoneySense rankings have become a go-to resource for many DIY investors curious about the online brokerage marketplace in Canada. As the landscape evolves for online brokerages and self-directed investing, so too do these rankings.

Helping MoneySense stay on top of those changes is Surviscor, a financial services research firm that evaluates Canadian online brokerages across a number of different parameters.

Frequent readers of the Weekly Roundup will already be familiar with the research and in particular, the online brokerage rankings, produced by Surviscor. For a timely throwback, be sure to check out our Look Back/Look Ahead series featuring Glenn LaCoste, President and CEO of Surviscor, and the author of this year’s MoneySense online brokerage rankings.

With yet another online brokerage ranking appearing this year, it’s a lot for online investors to digest. The MoneySense rankings in particular offer an interesting way to see the importance of defining what’s “best” when it comes to online brokerages. Also, in digging through the data, we uncovered an interesting relationship between a major driver of investor decision making, cost of services, and the performance on measures of investor experience – like service.

There’s lots to dig into, so grab some caffeine and get ready to scroll.

Methodology

Online brokerage rankings and evaluations help to make sense of the often-confusing question: “which online brokerage is best?”

With several Canadian online brokerage rankings available for online investors to consult, it is important to come back to a familiar concept – that each online brokerage ranking measures the idea of what’s best in a different way.

The MoneySense online brokerage rankings are often cited as a resource to evaluate almost all of Canada’s online brokerages. Like most of the other comprehensive rankings, information is published annually, and as a result, the data takes a snapshot of the past year or so in the world of DIY investing at Canadian online brokerages.

It is important to note that the data for the MoneySense online brokerage rankings comes from financial services research firm Surviscor. Specifically, according to the methodology, the MoneySense rankings are based on a combination of the following Surviscor reviews:

1. Online experience

2. Mobile experience

3. Cost of services experience

4. Service experiences

Points were assigned to each online brokerage according to a points-based system in which each brokerage received a score based on its ranking within the seven sections of the review:

1st = 5 points

2nd = 4 points

3rd = 3 points

4th = 2 points

5th = 1 point

The overall score was the sum of the awarded sections and reported as points.

In addition to reporting on the points earned by each brokerage as part of this review, the MoneySense rankings also reported the “Best online brokers” by category. The breakdown is as follows:

  • Best online broker for fees
  • Best online broker for customer service
  • Best online broker for ETF investing
  • Best online broker for stock investing
  • Best online broker for financial literacy
  • Best online broker for market data
  • Best online broker for customer onboarding
  • Best online broker for mobile experience

Within each of these categories, the top two firms were reported.

Strengths & Limitations

One of the strengths of the review is that there is lots of data reported for investors to consider, and it has been published in a way that identifies the top two firms in each of the stated categories. This saves a lot of time for investors or readers who simply want or need a quick answer from a reputable source.

A big plus this year is that there is a companion publication on the Surviscor blog which dives into detail on the scores and provides more context on the process.

In terms of limitations, presenting this volume of information can be a challenge. For example, the methodology stated:

“Each firm was assigned a score based on its ranking within the seven sections of review (5 points for first; 4 for second; 3 for third; 2 for fourth; and 1 for fifth), and the overall score was the sum of the awarded sections.”

Given that there are eight reported categories (noted above), it was not immediately clear which seven sections of the review were being referred to, and as a result, validating the math or seeing how scores varied across sections would have added important context to rankings.

For example, one of the immediate questions that jumps to mind with the points system is what the maximum possible score would be?  Without that information, it is hard for the reader to get a sense of just how good a particular brokerage is. And, when the scores are close, or tied, the value of points and how they get calculated becomes even more important to contextualize results.

Results

The results for the 2021 MoneySense online brokerage rankings are shown in the following table.

FirmMoneySense PointsMoneySense Rank
Questrade361
National Bank Direct Brokerage312
TD Direct Investing253
Qtrade Direct Investing224
BMO InvestorLine95
Scotia iTRADE66
RBC Direct Investing57
Desjardins Online Brokerage48
Wealthsimple Trade48
Virtual Brokers48
Canaccord Genuity Direct48
CIBC Investor’s Edge212
HSBC InvestDirect113
Laurentian Bank Discount Brokerage014

Questrade took the top spot in this year’s rankings with a total of 36 points, followed closely by National Bank Direct Brokerage (31 points), and TD Direct Investing in third place (with 25 points). Again, without a maximum score, it is difficult to know exactly how well any one brokerage could have done.

The methodology states that there are seven “sections” and a five-point maximum which would imply a maximum score of 35. However, Questrade has clearly exceeded that score, hence some confusion.

Data outside of the top five brokerages was not published in the MoneySense rankings, however, it was available on the Surviscor site, which helped identify additional context on how the entire field of online brokerages performed this year.

One of the first noteworthy items is just how sharp the drop off is from fourth to fifth place in these rankings. Qtrade Direct Investing placed fourth with 22 points. However, BMO InvestorLine, with just nine points, managed to make it into the top five.

Even though on a relative basis, a top five finish may not sound so bad, in the case of this year’s ranking, the distance between fourth and fifth is materially different.

Another interesting observation about the data is the number of firms who tied for eighth place. CG Direct, Desjardins Online Brokerage, Virtual Brokers, and Wealthsimple Trade are very, very different firms, and yet each tied for eighth place with four points.

Somewhat stunning are the positions of CIBC Investor’s Edge and HSBC InvestDirect, who placed 12th and 13th respectively. In the case of the former, being a “Big Five” bank-owned brokerage should in theory enable it to have the resources to score better, but with a score of two points, it implies that Investor’s Edge was rarely a top five brokerage in any of the evaluated categories. Similarly, HSBC InvestDirect scored one point, and it too barely placed in a top five finish in any of the categories measured.

Surviscor’s “behind the scenes” look at the MoneySense rankings also provided some additional context and important takeaways when it came to this year’s analysis. The following five statements were made in reference to the data and the items that online investors (and online brokerages) should pay attention to.

  • Beware the marketing when it comes to fees
  • Firms never get a second chance to make a first impression
  • Financial literacy is weak
  • Mobile experience is still not where it needs to be
  • $0 commission is not always worth it

With so much data to crunch, it can be a challenge for DIY investors and industry analysts alike to form a “big picture” of what’s going on in the online brokerage space.

Surviscor’s multiple studies to measure online brokerages got us curious, so we compiled the ranking data from each of the four online brokerage analyses cited in the MoneySense rankings, and crunched the numbers to see what the correlation would be between the combined rankings of each evaluation and the MoneySense ranking data.

Methodology, Part Deux

First a(nother) note on methodology. The rankings in each of the four different Surviscor evaluations used in the MoneySense ranking were averaged out and reported along with a standard deviation. The computed rank is one that we generated based on the average rank across each of the evaluations.

 To try and get as close to an apples-to-apples comparison of how different online brokerages ranked against each other in each of the four evaluations, it was necessary to make some minor adjustments to the data.

In the Service Experiences, Interactive Brokers was actually evaluated, so for the sake of consistency across comparisons, they were excluded from the data and the ranks of other brokerages adjusted upwards by one. Wealthsimple Trade was assigned the lowest value for not having been able to be measured. For the actual service experience scores, check the link here.

Adjustments were also made in the Online Experience and Mobile Experience rankings. Laurentian Bank Discount Brokerage and CG Direct were assigned the lowest rank since they did not offer anything that could be evaluated using those tools.

Results

One of the first things to stand out is that the top four brokerages in the 2021 MoneySense online brokerage rankings are the same four online brokerages when computing scores across the four Surviscor evaluations, however, the order in which they appear is different.

In the computed rank, the measure that we calculated, Qtrade Direct Investing came in first, followed by National Bank Direct Brokerage, Questrade, and TD Direct Investing, respectively. What also stood out in the top three is that the average rank between Qtrade Direct Investing, National Bank Direct Brokerage, and Questrade is very close, ranging between 4.0 and 4.8. Having the standard deviation handy (shout out to the stats profs who drove home the point about standard deviations) as a measure of consistency, however, adds a bit more nuance to the top three online brokerages.

Specifically, Qtrade Direct Investing has a relatively low standard deviation (2.3) indicating their ranking is relatively consistent from one evaluation to the next. By comparison, Questrade has the highest standard deviation of the group (5.7), which points to the remarkably poor ranking they received in the Cost of Services evaluation (they ranked 13th). Having the context of all the data helps to illustrate where exactly the top three online brokerages excel relative to each other, and to see how consistently (or inconsistently) online brokerages are scoring.

Consistency cuts both ways, however.

RBC Direct Investing had the lowest standard deviation (1.2) of all of the rankings, implying a fairly consistent score across different evaluation studies. Their average rank was sixth, and the computed rank put them in fifth place overall.

By comparison, Virtual Brokers also had a very low standard deviation score (relatively speaking) at 2.1, but their average rank of 9.8 landed them with a computed rank of 13th overall. This implies that Virtual Brokers has consistently performed poorly on the four Surviscor evaluations for 2021.

It was also intriguing to note that after about eighth place in the MoneySense ranking, the divergence between these scores and the computed rank became more pronounced. In particular, CIBC Investor’s Edge ranked 12th in the MoneySense ranking but ninth in the computed ranking, only slightly behind Scotia iTRADE and Desjardins Online Brokerage.

Takeaways

Being able to step back and take a big picture view of the data provides a unique window into how the different evaluations generated by Surviscor come together, and how they compare to the MoneySense rankings.

When placed side by side, the combined Surviscor studies used in the MoneySense ranking show that firms that are strong on experiential factors, such as online, mobile, and service, tended to do better overall in the rankings.

Interestingly, with the exception of National Bank Direct Brokerage, firms that tended to do well on pricing had a negative correlation to performance on the MoneySense or combined Surviscor rankings. This points out that perhaps there is an inverse relationship between the cost of services and the experience of online investing.

Thus, having the additional data presented in a big picture format does help illustrate what exactly online investors would have to trade off. For example, in choosing between Questrade and National Bank Direct Brokerage, investors can see that the tradeoff might be one of “cost of services” versus “online experience.”

Clearly there is lots of data to explore, which can be both a pro and a con for online investors looking for a quick answer to “which online brokerage is best?”

The reality is that rankings help to compress a lot of the analysis into an easy to digest number. However, as illustrated above, how one defines “best” – even when using the same underlying data – can impact how specific brokerages are perceived and reported on by media, online brokerages themselves, and other DIY investors.

What is evident in looking at the big picture of this data is that the field of Canadian online brokerages is crowded, and with even more new entrants poised to add to the numbers, keeping on top of the evolving space is an ongoing challenge. For those that want to avoid the spreadsheets and comparisons, rankings offer a quick shortcut. But like everything else when it comes to investing online, it pays to do your homework.

Into the Close

That’s a wrap on this week’s Roundup. It’s been a difficult week but here’s hoping we can look for, find, and create the good in the week ahead.