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Online Brokerage Weekly Roundup – February 22, 2022

This year more than most, February is a month that embodies competition. From the Super Bowl to the Winter Olympics to the final stretch of RRSP season, there’s no shortage of high drama, stats, scores, and podium finishes. And while there might not be any formal winner declared to RRSP season, the reality is that Canadian online brokerages are battling hard to lock in new clients and assets ahead of the RRSP contribution deadline.

In this reboot to the Weekly Roundup, we took our cues from the biggest sporting events in the world to bring an exceptional edition filled with high degrees of difficulty to compare one of the most influential touchpoints of DIY investors making decisions on which online brokerage to choose: Canadian online brokerage rankings. Grab some snacks (maybe a coffee too), this is going to be a good one – but if you don’t have time, check out the key takeaways below.

Key Takeaways

  • It is increasingly more difficult to distinguish between Canadian online brokerages, let alone to find out which online brokerage is best
  • Different online brokerage rankings (Globe and Mail and Surviscor) ended up with very similar opinions about Canadian online brokerages this year, despite measuring them differently
  • When comparing online brokerage rankings, consistency between rankings provides greater confidence, whereas, inconsistency is a warning that experiences may be variable (aka YMMV)
  • Most online brokerages in Canada are generally OK to meet the needs of most self-directed investors; however, ranking as a best online brokerage means hitting important feature metrics, not just having the lowest commission pricing

Which Online Brokerage is Best? Comparing Online Brokerage Rankings to Find Out

The 2022 RRSP season is on the cusp of wrapping up, and, as in previous years, there has been a predictable surge among self-directed investors to find a new Canadian online brokerage. Unlike in past years, however, this year it seems that competition between Canadian brokerages is even more heated than ever before. And despite that competition (or perhaps a result of it), it is becoming increasingly more challenging to distinguish Canadian online brokerages from one another.

While commission price has historically been a key distinguishing feature for value-conscious self-directed investors to base their decisions on, zero-commission pricing has now gained a foothold among Canadian online brokerages.

Increasingly recognizable names, such as National Bank Direct Brokerage and Desjardins Online Brokerage, and even big players, such as TD Direct Investing, have introduced this pricing outright, or in the case of TD Direct Investing, are taking a phased approach.

The fact that there is more than Wealthsimple Trade – which was the sole zero-commission option for several years – to choose from since the start of this year’s RRSP season also heavily impacted an important touchpoint for the online brokerage industry and consumers alike: Canadian online brokerage rankings.

Online Brokerage Rankings Launch Ahead of RRSP Season

Earlier this month, the 2022 edition of the Globe and Mail’s online brokerage rankings was released, just in time for the peak of the wave of investor interest in online brokerage account opening. Now in its 23rd year, Rob Carrick’s long-running review is hands down one of the most influential online brokerage reviews with Canadian self-directed investors. And in late December 2021, the other big name in online brokerage rankings, Surviscor, released their 2021 online brokerage experience rankings, a comprehensive ranking of online brokerages in Canada based on detailed criteria about the online investing experience.

While it comes as no surprise that in the lead up to the 2022 RRSP contribution deadline two very important Canadian online brokerage reviews have been released, it was surprising to see the degree to which both rankings ended up agreeing with each other.

At Sparx Trading, we don’t rank online brokerages, but we do have a long history reviewing online brokerage reviews. We’ve continuously held the perspective that “the best” online brokerage for Canadian investors is one that suits their particular needs as a self-directed investor.

That said, for self-directed investors who turn to third party reviews for guidance and perspective on which online brokerages are leaders or laggards (or to find out “which online brokerage is best?”), our recommended approach would be to see what different brokerage rankings have to say.

The challenge, however, is that each of these reviews take very different approaches to defining and measuring which online brokerages in Canada are the best, and so it is important to understand what each of these online brokerage reviews measure and how they measure it. But comparing online brokerage rankings is not easy.

From a consumer perspective, there is quite a bit of analysis and more homework/guesswork than most are willing to do, which is why we’ve tried to simplify this in our online brokerage review pages by providing ranking data from different sources alongside information about the brokerages themselves below.

Emerging Convergence

An important trend that we’ve observed with online brokerage rankings in Canada is that the difference between online brokerage ranking scores has been shrinking.

For the past two decades, online brokerage reviews from third party sites and sources have played an important role in helping Canadian self-directed investors understand how to choose an online brokerage, as well as provide recommendations on which Canadian online brokerage is best. That said, the spread between the top and bottom ranked firms has been closing across different reviews, a signal that it is becoming increasingly more difficult to distinguish between online brokerage firms.

While the appeal of these online brokerage rankings is that they offer a quick point of reference for investors to be able to determine which online brokerage(s) are the segment leaders and which are the laggards, there hasn’t been an easy way to compare Canadian online brokerage rankings – until now.

To address this analysis gap and to highlight the trend towards homogenization among online brokerages (i.e. that it is harder to tell online brokerages apart from one another) we wanted to put the latest online brokerage rankings from the Globe and Mail and Surviscor into a format where they could be compared side by side. By doing this, a much clearer picture emerges of where there is consensus from subject matter experts on which Canadian online brokerages are leaders and which are lagging their peers.

Specifically, the most important thing (we think) to pay attention to when comparing online brokerage rankings is where there is agreement and the extent of that agreement, because it demonstrates increased confidence in the experience that self-directed investors can expect from a particular Canadian online brokerage.  

How We Compared Canadian Online Brokerage Rankings

Before diving into a comparison of the two different online brokerage rankings, it is important to provide some context as to how these numbers were generated.

The scoring criteria for the 2022 Globe and Mail online brokerage rankings uses letter grades in combination with +/- components. (For those who wish to take an in-depth look at how the grading system changed over time, you can check out one of our original articles explaining how the Globe and Mail online brokerage rankings evolved from 2002 to 2012.) As in the past, there are multiple criteria that Canadian online brokerages are evaluated on with a final letter grade assigned based on a combination of scoring and impression of the online brokerage (from the perspective of the “average” online investor).

In contrast, Surviscor reports a numerical percentage for their Canadian online brokerage experience rankings. The methodology for their analysis takes a criteria-based approach and measures features that online brokerages do (or do not) have. This year’s online brokerage experience review audited Canadian online brokerages during October and November 2021 and analyzed over 400 criteria in six categories and 27 subcategories.

To enable a fair comparison, we decided to convert the letter grade ranking system used by the most recent Globe and Mail online brokerage rankings, into a numerical system that is used by Surviscor.

Interactive Brokers Canada was analyzed as part of the Globe and Mail’s 2022 online brokerage rankings, whereas Surviscor’s brokerage ranking did not include them. Conversely, Wealthsimple Trade was rated by both firms; however, they were only scored in the Surviscor rankings. In the Globe and Mail online brokerage rankings, Wealthsimple Trade was given an “I” for “incomplete.” As such, both Interactive Brokers and Wealthsimple Trade are not directly comparable in the two different rankings.

The table below contains the raw rankings from both online brokerage reviews. As mentioned above, the online brokerage rankings from the Globe and Mail are reported in the form of letter grades, whereas the rankings of online brokerage experience from Surviscor are reported in percentages:

Canadian Online BrokerageGlobe and MailSurviscor
BMO InvestorLineB+82%
CIBC Investor’s EdgeB-75%
CI Direct TradingB80%
Desjardins Online BrokerageC+76%
HSBC InvestDirectD+66%
Interactive BrokersBn/a
National Bank Direct BrokerageB+69%
Qtrade Direct InvestingA93%
QuestradeB+88%
RBC Direct InvestingB-81%
Scotia iTRADEB91%
TD Direct InvestingA-89%
Wealthsimple TradeI20%
Date of PublicationFeb 4, 2022Dec 20, 2021

To figure out a conversion scale between letter grades and percentage scores, we relied on the grading scheme used by the University of Toronto, since that was the university selected as the “best” post-secondary institution in Canada (according to the most recent Maclean’s rating).

Also, for ease of comparison, we’ve calculated the average score between the two sets of online brokerage rankings, as well as the difference between the scores (in percentage points) to highlight the degree of agreement (or disagreement) between the two different rankings’ results.

What We Found When Comparing Canadian Online Brokerage Rankings

Again, in the interest of a fair comparison, it is important to reiterate that we are comparing two different Canadian online brokerage rankings that measure different aspects of trading online via a Canadian online brokerage.

The Globe and Mail’s online brokerage rankings take the perspective of what the “average” Canadian self-directed investor would typically need or want. By comparison, Surviscor’s rankings measure the “online brokerage experience,” which reflects what their perception of a leading online brokerage experience could look like.

Comparing Rankings

One of the first things that jumps out from the results of this year’s rankings is that averages from the Globe and Mail (75%) are lower than those from Surviscor (81%). Moreover (and for the stats nerds), the standard deviation – or measure of variance of the average – for each set of scores show much more consistency for the Globe and Mail’s online brokerage ranking than for Surviscor’s (7.31% vs 8.88%). It is important to note that the scores for Wealthsimple Trade on Surviscor’s rating (20%) were not included because they were so far below everyone else’s that it would have significantly skewed the analysis.

What these averages and standard deviations point to is that the perception of the overall online brokerage offering for Canadian self-directed investors is generally not bad.

Aside from a couple of outliers – in particular Wealthsimple Trade – an online investor could pick just about any Canadian online brokerage and be OK. Thus, choosing a Canadian online brokerage in 2022 for most individual investors is not a decision to fret over – especially if their needs are fairly straightforward or basic.

Importantly, a low number on these rankings doesn’t necessarily imply a “bad” or poor online brokerage, but rather one that doesn’t meet a full spectrum of user needs based on what else is out there. As such, not all investors will end up wanting or needing all features that are available elsewhere, which might be just fine for those investors.

Another interesting observation right off the bat is that the average score for Canadian online brokerages is lower in the Globe and Mail ranking than it is in the Surviscor ranking. One interpretation is that Rob Carrick is a tougher grader than Surviscor, something that is somewhat of a surprise given the qualitative data and commentary on the online brokerages coming from each ranking. While it is clear what Surviscor’s position is on firms like Wealthsimple Trade, other than that, according to Surviscor’s scores, most Canadian online brokerage firms appear to be faring well (in a relative sense) when it comes to features.

Combined Scores

One of the unique features of analyzing the Canadian online brokerage rankings this way is that it is possible to combine the scores into an average score between the two different rankings. In doing so, not only does this enable readers to more easily compare Canadian online brokerages based on the average alone, but it also highlights where these rankings agree and the extent to which they do.

To be fair and consistent for the analysis on combined scores, Interactive Brokers (which was analyzed only in the Globe and Mail) and Wealthsimple Trade (which was not graded in the Globe and Mail and was a severe outlier in the Surviscor analysis) were not included.

The table below shows the combined average scores from each Canadian online brokerage, as well as the difference (in percentage points) between the two rankings. Firms that had the same average score but lower difference between rankings were rated higher in this analysis, thus it is possible to have a lower average score but place higher because there is greater confidence associated with a particular average.

The scores for the combined rankings ranged from a high of 90% (Qtrade Direct Investing) to a low of 62% (HSBC InvestDirect) with the overall average of the group coming in at 78% and a standard deviation of 7.7%.

With these numbers in mind, the results of the best ranked online brokerages (as well as the worst) take on greater meaning.

In particular, based on the average values and the range of scores alone, Qtrade’s performance is very close to being significantly better than the other firms ranked, falling just three percentage points shy of being two standard deviations better than the average. Conversely, HSBC InvestDirect’s ranking does (barely) cross the threshold into being significantly lower than its peers.

As for the rest of the field, which is essentially every other online brokerage, the experience is generally OK. This could explain the observation that many Canadian self-directed investors don’t feel compelled to switch online brokerages, even in the face of low or zero commission alternatives. Even if costs may be somewhat higher, things are not so materially bad to induce a change. It’s only likely after a negative service interaction (or feature shortcoming) or some significant convenience boost (e.g. consolidating other financial services or very cool feature) that would form the catalyst to change brokerages.

Areas of Agreement

What became clear in comparing these online brokerage rankings is that there were clearly some instances where both sets of reviews arrived at similar conclusions about the performance of a particular online brokerage.

The range of agreement was between 4 and 16.5; however, the latter score (the result of the difference in scoring for Scotia iTRADE) was certainly an outlier. Excluding that from the analysis, the average difference between the Globe and Mail rankings and Surviscor ratings was about 7.15 percentage points with a standard deviation of 2.24.

When including a “confidence” measure, which is really a consistency between rankings measure, the most consistent conclusions were about BMO InvestorLine (average combined score of 80%) and CIBC Investor’s Edge (average combined score of 73%). Rankings for both of these firms were within four percentage points of each other, suggesting that both Surviscor and the Globe and Mail analyses arrived at a similar conclusion about what self-directed investors can expect. In this case, when comparing BMO InvestorLine versus CIBC Investor’s Edge, according to the rankings, BMO InvestorLine would provider higher probability of a better outcome for investors.

Where the confidence measure really impacts the average scoring and ultimate ranking of online brokerages is when the difference between online brokerage rankings is considered high. In this case difference scores of 8 or higher were considered to be an indicator of a “YMMV” (your mileage may vary) for investors in terms of what their own experiences with an online brokerage may be. Several firms fell into this cluster including (in descending order of disagreement):

The most extreme example of disagreement between online brokerage rankings was for Scotia iTRADE, which had a 16.5 percentage point difference. The Globe and Mail’s online brokerage rankings rated Scotia iTRADE at 74.5%, a score that put it in the middle of the pack in terms of grading; however, in the Surviscor rating, Scotia iTRADE earned a 91% rating. According to Rob Carrick’s commentary, the website interface came across as dated but in the Surviscor ranking, the overall online experience was close to exceptional. In short, this is a good example of a firm where consumer experience is likely somewhere between good or excellent, depending on the user.

Other interesting names on the YMMV list were the two online brokerages with zero commission trading: National Bank Direct Brokerage and Desjardins Online Brokerage.

Despite being a “tougher” judge overall, it was the Globe and Mail ranking for National Bank Direct Brokerage (78%) which was higher than Surviscor (69%). The situation was almost the opposite at Desjardins Online Brokerage, which scored higher on the Surviscor ranking (76%) compared to the Globe and Mail (68%). And despite not being captured in the comparison analysis shown above, Wealthsimple Trade is also a zero commission brokerage that did not score well on the online brokerage rankings.

The shift to this low-cost structure for consumers would almost certainly be considered a win, but as these online brokerage rankings clearly show, pricing is just one of many factors that online brokerages need to get right in order to score well on these brokerage rankings. In fact, it appears that when it comes to Canadian online brokerage rankings, each of these aggregate ratings favour the online brokerage offering features and “frills” rather than the most essential online trading experience. Most “average” investors don’t make a significant amount of online trades in a year, so the “value” of zero commission trading might be minimal compared to other features (such as portfolio tracking) that would be of interest.

Conclusions

Online brokerage reviews and rankings have and will continue to play an important role for self-directed investors who are interested in opening an online brokerage account. For Canadian online brokerages, rankings – especially those from the Globe and Mail and Surviscor (as well as from JD Power) – are a particular point of pride, and demonstrate to investors that these online brokerages can meet certain standards of quality that, in turn, should give investors confidence in doing business with them.

While historically there might have been substantial differences between firms, in 2022 it is clear that most Canadian online brokerages are doing an adequate job of providing self-directed investors with the essential functions of being able to trade and track their portfolios online. The customer service wait times, which became a dominant topic of discussion in 2021, were also part of the conversation this year, but what that data also showed is a) improvements have been achieved in most places year over year, and b) customer service channels are, like pricing, only part of what earns good grades in an online brokerage ranking.

Our conversion of the letter grades used in the Globe and Mail’s online brokerage rankings into percentages is not a perfect one-to-one mapping. For that reason, the percentages that we’ve used are at best, a reasonable approximation of what it takes to conduct an apples-to-apples comparison of the different online brokerage rankings that are highly influential during the current RSP season and throughout the rest of 2022. Despite the limitations, the ability to compare different online brokerage rankings does show that firms like Qtrade Direct Investing and TD Direct Investing have earned their way to the top of the list of firms who are providing broadly appealing features and value to Canadian self-directed investors. The fact that there are both strong averages as well as reasonable agreement can give self-directed investors some degree of confidence when trying to decide on a “good” choice for an online brokerage.

That said, the online brokerage rankings are a line of best fit for the “average” or typical investor. And despite some firms scoring lower, it is important to recognize that a “lower” score doesn’t translate necessarily into a firm that doesn’t please its customers. Different features matter to different investors, and as such, firms that didn’t receive much spotlight in these rankings and analysis, in particular Interactive Brokers and Wealthsimple Trade, have passionate users who genuinely enjoy using these brokerages.

Thus, if there is one big cautionary note in relying on the rankings and ratings generated by both the Globe and Mail and Surviscor, is that these ratings reflect the perspectives of the respective entities that developed the rankings. The rankings do not, unfortunately, factor in customer satisfaction or sentiment, which is a highly prized but very difficult factor to get reliable data on.

Nonetheless, much like the Olympics, the competition between Canadian online brokerages is so intense that the difference between a podium finish and being out of the spotlight is small. The gap between the best online brokerage and the rest is closing. Canadian online brokerages who are agile enough to continuously improve, especially in what kind of features they can bring to market, should continue to do well in the rankings. If there’s one important lesson from the world of sport that holds true for Canadian online brokerages, however, it’s to try and eliminate unforced errors, especially once RRSP season is done. The data now exists in an easier format for Canadian online investors to compare online brokerages, but whether or not they’re driven to look it up after RRSP season is a function of how well each online brokerage can perform.

Into the Close

It’s great “two” be back in the thick of things just in time for sprint to the RRSP finish line at the end of February.

There’s lots that’s happened since our pause so we’re looking forward to digging out from the vacation responder emails, as well as reviewing the latest developments taking place with Canadian self-directed investors and online brokerages.

Of course, anyone who’s also had a newborn knows that sleep is a precious commodity, as is family time. So we thank you for your patience as we get back online and promise that there are even more dad joke puns about to make their way into the Roundup from here on out.

Fingers crossed, it’s going to be a nail-biter of a week in more ways than one.

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Discount Brokerage Deals & Promotions – February 2022

With the 2022 RRSP contribution deadline just around the corner, retirement planning seems to be on everyone’s mind this February, including Tom Brady’s.

For most Canadian DIY investors, however, retiring in your early forties after a storied career in the NFL isn’t the typical route to old age. Instead, we’re tasked with figuring out how to choose an online brokerage so that we can manage our own wealth online.

Fortunately, competition among Canadian online brokerages in 2022 is higher than it’s ever been. For self-directed investors, this means more value, either with better pricing or more features (or both!) starting to show up.

One of the interesting places we’ve seen this competition turn into tangible benefits for self-directed investors has been with online brokerage deals and promotions. While there are no new deals to report at the beginning of February per se, there was plenty of action in January to set up a really exciting sprint to the finish of RRSP season at the end of the month.  

Case in point: Qtrade’s latest promotion.  While it is not unheard of, an online broker adjusting the reward of an already live promotion is exceptionally rare. Qtrade’s decision to revise their offer so substantially (in some cases more than double the previous cash back amounts) and to apply these changes retroactively to anyone who had signed up under the original terms is likely unprecedented.

To see just how drastic the changes are, it is worth putting these changes into perspective with some tables.

The upper table shows the cash back promotions from Canadian online brokerages heading into late January (just prior to the revised Qtrade promotion). In that table it is clear that Qtrade Direct Investing did not stand out with a leading offer across any of the deposit tiers attached to current brokerage promotions.

In contrast, the revised offer table shows that Qtrade Direct Investing is now tied for the top cash back promotion amount at nearly all of the deposit tiers (except for deposits of $25,000 to $49,999), and has the distinct lead of offering $5,000 cash back for deposits of $2M+, an amount more than double any other cash back offer and certainly worthy of the headlines it is sure to grab.

In short, Qtrade Direct Investing’s latest cash back promotion amounts are historically higher than they’ve ever been for Qtrade (at least in recent memory) and they are now competing shoulder to shoulder with the biggest online brokerages in the market.

To help put things into further perspective for readers, looking at the year-over-year change between deals launched in 2020 compared to those launched in 2021 (including the revised Qtrade deal here in 2021 for convenience), it’s clear that minimum deposit requirements have cratered (including at Qtrade with this latest revision) and minimum bonus amounts have surged at three of the five firms compared here, with Scotia iTRADE increasing their bonus amount fourfold at their minimum deposit tier.

The takeaway for Canadian self-directed investors is that this month (February) offers one of the best opportunities to land a significant cash back promotion from an online brokerage for opening a new online trading account.

With zero-commission trading now more likely to become the new normal in the near future (thanks to TD Direct Investing rolling out a zero-commission trading option in January), this might be one of the last times Canadian online brokerages turn to sizeable cash back promotions to win new customers.

As always, be sure to check out the full list of current online trading account deals and promotions in our deals index. We’ll keep our eyes and ears open for new offers that could surface in the coming weeks. If there’s a new deal or promotion you’d like to share for other DIY investors to know about, let us know.

Expired Deals

No expired deals to report at this time.

Extended Deals

No new extensions to report at this time.

New Deals

The Qtrade Direct Investing promotion revision technically falls into this category because it offers up new cash back bonus amounts. (Kudos to Qtrade for applying the bonus retroactively to people who signed up for the offer already.)

Deposit requirements for the Qtrade promotion now range from a low of $5,000 (for which there is now a $100 bonus) to $2M+ (which nets a $5,000 bonus). Timing of the promotion is still the same, with expiry dates and holding periods remaining identical to the terms when the deal was first launched. Click for more information on the latest Qtrade promo.

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Discount Brokerage Weekly Roundup – January 6, 2022

Happy New Year and welcome to 2022! The start of a new calendar year is typically the time of year when we all struggle with writing the correct year for a few weeks and then eventually get the hang of (or accept) being in a new place. Ironically, time distortion is a hallmark of a pandemic, and aside from not knowing what day of the week it is (every day is sweatpants day!), it seems that timing was topsy-turvy at online brokerages in Canada and the US. But this is the definition of the new normal, and like markets tend to do, we’re embracing the ability to adapt with the times.

Change is a big theme in this mega-edition of the Roundup. First, we dive into the biggest review of Canadian online brokerages: the Look Back / Look Ahead for 2021/2022. This in-depth look at the latest issue picks out some important themes that impacted Canadian online brokerages and self-directed investors in 2021 and what’s in store for 2022. Next, we recap the year with memes & themes in an epic rundown of the big (and small) stories of 2021. So, in case you missed the past year or simply just need a quick(ish) primer on what happened with Canadian online brokerages in 2021, be sure to read through this ultimate roundup of Roundups. Finally, be sure to get to the end for an important announcement on the schedule changes to the Roundup coming this January.

Online Brokerages Review 2021 & Offer Exclusive Preview of 2022

When given the opportunity and spotlight to speak directly to online investors, what did Canadian online brokerages have to say about an exceptional year and how to build on top of that?

Well, we found out just that in the latest edition of the Look Back / Look Ahead series in which Canadian online brokerage leaders shared their perspectives on the past year, as well as what they have planned for the year ahead.

This year’s edition featured submissions from BMO InvestorLine, Desjardins Online Brokerage, HSBC InvestDirect, National Bank Direct Brokerage, Qtrade Direct Investing and RBC Direct Investing, with senior leaders from each of these firms, sharing unique and intriguing perspectives into how various factors over the past year have influenced the priorities and direction of their respective firms going forward.

On a thematic level, it was clear that one of the biggest challenges and opportunities for the online brokerage industry in Canada was the meteoric rise of retail investor interest in trading stocks online. The stats provided were incredible. Desjardins Online Brokerage, for example, shared that 30% of their user base is between the ages of 18 and 30, and BMO InvestorLine reported nearly 50% of their new clients are under 35. And they’re likely not alone. The huge demographic shift in clients means that online brokerages are working to deliver features and experiences that align more closely with this group – including investor education resources.

Having covered the online brokerage industry in Canada for the past decade, an important theme of this issue we’ve witnessed is effort into investor education gradually recede. When Sparx Trading first launched, at least half a dozen or more online brokerages would regularly hold investor education seminars, webinars, or education-focused events. Gradually, however, as markets moved steadily higher and volatility subsided, interest in education waned, and whether it was supply or demand driven, “investor education” resources began to disappear.

Fast forward to today and it seems we are experiencing a renaissance of investor education based on the feedback from online brokerages, as well as in several of the trends we’ve been tracking throughout the industry. National Bank Direct Brokerage, for example, highlighted the fact they offer Options Play for free to their clients. This digital tool enables clients to simulate and learn about options trading strategies – something that is of growing interest to younger investors, especially coming out of the meme-stock craze of early 2021. At RBC Direct Investing, education is also on the roadmap for 2022 as is building out additional content for investors via the Inspired Investor magazine. And, at the industry giant TD Direct Investing, it is clear that investor-focused content will play an important role given their sizeable investment in building an entire content team that is likely going to be producing content at an unmatched volume.

Of course, the big story for 2021 in the Canadian online brokerage industry was the launch of commission-free trading by National Bank Direct Brokerage in August. Undeniably a surprise for many, the fact that a bank-owned online brokerage with a national footprint would be the first to offer full commission-free trading changed the competitive landscape for larger and smaller players alike. Not long after NBDB lowered their fees, Desjardins Online Brokerage followed suit. With both of these Quebec-based institutions taking trading commissions to zero, clearly commission-free trading is on the minds of self-directed investors and online brokerages alike. When polled about the issue, Canadian online brokerages revealed that they are clearly aware of it and would be looking to enhance value for investors with new features and offers rather than lower prices for trading commissions – at least at this point.

As we round the turn into 2022, however, zero-commission trading looms large. Just ahead of the end of 2021, Mogo Trade announced it had received the official green light to launch its commission-free trading app, and in our special section on commission-free online brokerages, we listed a total of four (including Mogo Trade) that we are currently tracking that are likely to come online either in 2022 or 2023. So, the reality for Canadian online brokerages is that zero-commission trading is coming, as is more competition.

Given the pace of innovation and change that are on the horizon, the Look Back / Look Ahead series provides visibility on which Canadian online brokerages are actively innovating, which firms are working on important infrastructure components, such as client experience, and which firms are clearly capable of doing both.

For self-directed investors, moving from online brokerage to online brokerage is (at least for now) a slow and painful exercise. Consumers would much rather stay where they are; however, without confidence in their online brokerage’s ability to innovate or be competitive on cost or value, alternatives are increasingly present.

Perhaps one of the most compelling stories in 2022 beyond commission-free trading will be a new feature telegraphed in the Look Back / Look Ahead from National Bank Direct Brokerage: paid securities lending.

In addition to offering zero-commission trading, the fact that clients could be compensated for lending their securities out to those seeking to short them lays a strategic foundation for NBDB to not only hang on to clients in a way that other brokerages are not (at least not yet), but it also is a draw for active traders who are looking to source shares for shorting. It’s a feature that currently exists only at Interactive Brokers, which is a signal or validation that active investors are either direct or indirect benefactors of this program. In short (pun intended), our call on National Bank Direct Brokerage in early 2021 appears to continue to play out: they are increasingly going to be an online brokerage to watch as they expand their presence across Canada. Until another major online brokerage in Canada drops their commission pricing to zero or close to it, National Bank Direct Brokerage is going to continue to be a top contender among self-directed investors looking to for a value-oriented online trading experience. Unlike other providers, however, NBDB isn’t waiting around for that to happen – they are clearly positioning themselves well with Options Play and the paid securities lending feature to be an attractive destination for active investors, as well as passive ones, and they’re working towards launching a mobile app which would only deepen the appeal with younger investors.

With 2021 now officially in the books, the Look Back / Look Ahead series is a great opportunity to get a unique perspective from industry insiders on the world of self-directed investing. As it falls on the tenth official year of the launch of SparxTrading.com, it also represents a significant milestone to have been covering the activity in this space to the depth and consistency that we have. Over the course of the decade, it’s been amazing to connect with industry analysts, online brokerage leaders, and self-directed investors to chat all things online investing. Most fulfilling, however, has been getting to be able to level the playing field for DIY investors and help, even in some small measure, make self-directed investing easier and more accessible.

True to the spirit of the Look Back / Look Ahead series, we also took the opportunity to announce the launch of Sparx Trading Pro. While it is still in development, we’re excited to be building something special for the community of users that regularly turn to SparxTrading.com for in-depth insight and analysis of the online brokerage industry. We love analytics and numbers, so a big part of what we hope to introduce is more data on what self-directed investors are interested in, and as a result, help serve as a catalyst to drive innovation.

Finally, on behalf of the entire Sparx Publishing Group organization and SparxTrading.com team, thank you to our loyal readers, visitors, and supporters. We’re amazed that 10 years has flown by, and we’re bullish on where the next chapter in self-directed investing goes from here. Thanks for tuning in!

Themes and Memes: Online Brokerage Highlights from Q2 2021 onwards

April: In with the New

From Qtrade’s new look and new name (Qtrade Direct Investing) to the preview of long sought-after features from Questrade and Wealthsimple Trade, April showered self-directed investors with the promise of new things to come.

The launch of the new brand direction for Qtrade Direct Investing was a huge milestone for this popular Canadian online brokerage. Executing a rebrand is no small feat; however, Qtrade managed to strike the right balance between a connection to what people know it for (i.e. its first name) and what it wants people to know it for. With a bold, new look and energy, it felt like Qtrade was ready to embrace the new landscape of online investing and bring something emotion into what has typically been a conservative brand.

Also looking to stir up some excitement, Questrade telegraphed the launch of a new mobile app – something that they hoped would help them compete more effectively against a design-savvy, mobile-first competitor: Wealthsimple Trade. It wouldn’t actually launch until November (see below) but the hype train on the new mobile app officially pulled out of the station in April.

And speaking of Wealthsimple Trade, new feature releases were a regular occurrence throughout the year, but one big announcement from the zero-commission brokerage was the news that they would be launching US dollar trading accounts. Long the Achilles heel for this very popular brokerage, the final form of the US dollar trading offering from Wealthsimple Trade ended up launching in December (see below).  

May: Statistics and Outliers

Strange, almost by definition, is not normal. For the (fellow) statistics nerds out there, data is a great way to get a handle on what is considered normal and what’s an outlier. This month happened to be filled with DIY investor data from all over the world.

One of the big developments was the online brokerage ranking by Surviscor, which put online brokerage fees into the spotlight. Remarkably, even before going to zero commissions, National Bank Direct Brokerage took the crown of lowest cost provider which is no small feat in a fiercely price sensitive industry.

Another watershed pricing moment came later in the month from popular bank-owned online brokerage BMO InvestorLine. In a calculated move, BMO InvestorLine launched 80 commission-free ETFs, and while they are not the only Canadian online brokerage to offer completely commission-free ETF buying and selling, the move gave both active and passive investors a compelling reason to choose this online brokerage over others (especially bank-owned brokerage competitors).

June: More New Features

Summer is typically the time for big blockbuster movies. Although the silver screens weren’t as busy this past year, DIY investor screens were filled with blockbuster reveals in the summer.

Perhaps the biggest one for Canadian self-directed investors (up until that point) was the launch of fractional share trading by Wealthsimple Trade. This highly-prized feature is something that US online investors were able to have access to from a variety of online brokerages, but for mainstream investors in Canada, Wealthsimple Trade was able to make a huge splash by bringing this trading to the masses in Canada.

The huge news from Wealthsimple Trade essentially overshadowed a lot of other new and newsworthy feature releases that month, including the launch of faster deposit times for Questrade, new advanced trading tools for clients of RBC Direct Investing, and the launch of the Interactive Brokers credit card in Canada.  

July: No Strings Attached

The Robinhood IPO and the opportunity to “buy buy buy” into the game-changing commission-free online brokerage was undeniably one of the biggest stories in the space this past year. By venturing into the public markets, it was possible to look under the financial “hood” to see how this commission-free brokerage managed to grow so rapidly, and, more importantly, how they made their money despite keeping commissions at zero. As it turned out, the prospectus for Robinhood’s IPO made for some fascinating reading.

No stranger to life as a publicly traded online brokerage, however, Interactive Brokers managed to pull off a deft mic drop moment of their own when they waved bye-bye-bye to inactivity fees for their clients worldwide. This included Canadian online investors, so it was a huge win for DIY investors everywhere who, prior to the removal of inactivity fees, were reluctant to have more than their most active accounts with Interactive Brokers. By lowering the friction to stay a customer of Interactive Brokers, this savvy online brokerage turned the math of customer churn on its head and managed to find a way to get customers to stay, even if they needed to step back from active trading for a while.

August: Coming This Fall

Twenty twenty-one was many things, but typical it was not. For that reason, we probably should have known better than to think it would be business as usual – or more appropriately – quiet business as usual. August happened to be an historic month for Canadian online investors because that was the month National Bank Direct Brokerage chose to launch commission-free trading.

Not only did National Bank Direct Brokerage take their commission fees for trading stocks to zero, they simultaneously took the vacation plans for other online brokerage leaders to zero as well.

And, while there wasn’t a story bigger than that, there was one that came close. We spotted and reported on the potential launch of yet another commission-free online broker, FreeTrade, here in Canada. In addition to Mogo Trade, FreeTrade represented yet another online brokerage interested in launching direct trading services in Canada with no commission.

Between the news of National Bank Direct Brokerage and the potential launch of another commission-free online brokerage in Canada, a clear trend is forming, and now it seems only a matter of time before existing big-bank online brokerages follow suit with significant commission rate drops.

September: Adding Up

We had to do a double take when it came to turning double digits. September marked 10 years since SparxTrading.com launched with a mission to level the playing field for online investors and “discount brokerages” as they were then known.

It has been a spectacular journey, and despite a very different landscape for online investors today, it was clear that a resource like Sparx Trading is needed as much now as it was when we first started. We also recognized that to prepare for a very dynamic future in the online brokerage space, we had to make some big changes – starting with a full redesign on the website, and in September, we also added the ability for online investors to research what other people are saying about online brokerages on Twitter and reddit, two areas which saw huge gains in participation by retail investors.  

We weren’t the only ones launching a retail investor sentiment tool, however. As it turned out, TD Direct Investing  launched the TD Direct Investing Index to measure Canadian investor sentiment in the stock market. With several Canadian online brokerages regularly reporting what their clients have been trading, this new feature from TDDI takes things to a whole new level by providing data on demographics and location, as well as sectors.

Of course, when it comes to online investors in 2021, stocks weren’t the only asset class of interest to them. In a stunning pivot (and/or a capitulation to giving people what they want), Interactive Brokers announced they would be enabling cryptocurrency trading to their clients. The big story here is that founder and very public face of Interactive Brokers, Thomas Peterffy, has been an outspoken critic of cryptocurrency for years, and so to see him personally acknowledge the material relevance of cryptocurrency as well as make the feature available to Interactive Brokers clients underscores the trading adage of “not fighting the tape.” Demand for cryptocurrency trading was simply too high despite the potential regulatory peril it could represent. Interactive Brokers was by no means the only big name in the US to adopt or support cryptocurrency trading, but it does signal that there is a sufficiently high level of interest among new and experienced investors in trading this digital asset class.

October: And Another One

And speaking of listening to customers, the launch of the QuestMobile app by Questrade generated a tonne (yes, it felt like the metric kind) of responses from clients and observers who weighed in (pun intended) on the new feature. There are only a handful of examples of feature launches from online brokerages over the past decade that generated so much response online, and the QuestMobile launch ranks high on the list of lightning rod discussion points.

Questrade’s unique success online with DIY investors ultimately became its undoing in this case because so many of its clients were not shy about providing their (negative) feedback on social media and investor forums. Regardless of the merits of the app, the roll-out of a new interface is a highly instructive case study change management, especially in an era of increasingly tech and design savvy clientele.

It seemed fitting in a month often known for trick or treating that a huge treat for self-directed investors was the announcement that (yet) another commission-free online brokerage was looking to formally launch in Canada in 2022. TradeZero, a name familiar to very active traders, indicated their plans to expand globally with Canada being an important jumping off point in that roadmap. Excluding the perennial “are we there yet?” questions about tastyworks coming to Canada, the announcement by TradeZero brought the total number of new online brokerages (new commission-free online brokerages) looking to launch in Canada in 2022(ish) to three. In the decade prior to 2021, the number of commission-free online brokerages that were publicly looking to launch in Canada was exactly Wealthsimple Trade long (we announced this back in 2018).

Finally, October was also the month where Virtual Brokers officially rebranded to CI Direct Trading. It had been just over four years since CI Financial acquired Virtual Brokers in 2017; however, the highly recognizable low-cost online brokerage had clearly been paring back on news and announcements post-acquisition. In an interesting (cryptic?) move in September, Virtual Brokers announced its name would be changing; however, it didn’t specify what it would be changing to. Nonetheless, 2021 brought some answers as to what’s going to happen next with Virtual Brokers / CI Direct Trading, and as we saw through the year, rebranding is big project but does set the stage for some transformative moves.

November: Let the Games Begin

In a month that has now become synonymous with bargain hunting, November didn’t disappoint for DIY investors either. There was a dizzying amount of news to report on but the biggest story for self-directed investors in Canada was the unofficial (but now kinda official) launch of RSP season. While the contribution deadline comes at the beginning of March 2022, the deals and promotions for online trading accounts have now started to appear at the beginning of November, and 2021 was no exception. Some big players in the Canadian online brokerage space came out swinging early, among them, CIBC Investor’s Edge and TD Direct Investing, both of which provided a preview to the highly competitive promotional offers available this season.

Another big theme for this year was in the non-bank-owned online brokerage group launching features to help self-directed investors get started and funded as quickly as possible. Qtrade Direct Investing announced the launch of rapid account opening knocking down the time required to open an online trading account at Qtrade from days to minutes. While getting an account opened quickly is a huge step forward, another big hurdle to clear is account funding. Competitor online brokerages such as Questrade and Wealthsimple Trade worked feverishly in 2021 to address instant account funding (albeit with limited amounts).

On the topic of opening accounts quickly, Robinhood, the poster child for rapid growth in online brokerage accounts, in 2020 and 2021 reported earnings, and for anyone keeping score on their stock price recently, the outlook was not great. Being winter, the phrase “getting ahead of your skis” characterizes the Robinhood story, and the now publicly traded stock has seen a massive sell off in large part because of the stall in momentum from retail investor trading. Specifically, the pull back in options and cryptotrading have clearly hurt the top and bottom lines for this zero-commission brokerage. Beyond the trading in those products, it also appears that after the meme-stock debacle, the “for the people” branding took a significant hit, something that might be keeping newer clients away from considering Robinhood as their online brokerage of choice.

And, speaking of choosing, Interactive Brokers once again reflected that the power of capitalism is ultimately in listening and providing to the market what the market wants. Ironically (or perhaps appropriately), ESG-driven trading is something that Interactive Brokers offers to its clients with the launch of their IMPACT app. Commission-free trading that enables you to make the world better through your investment decisions pretty much nails it for the demographic this app is clearly targeting.

December: Free Fallin’

Even with ice and snow on the ground, it seems like stock markets (and a couple of online brokerages) were doing all the slipping and sliding heading into the end of the year. Yet again, 2021 proved that time distortion and normalcy are not a thing because feature launches and big announcements continued to roll in despite it traditionally being a month when activity among online brokerages gears down for the holiday season.

But the giving season did giveth, or at least asketh to taketh, in the case of Wealthsimple Trade which launched a new subscription-based service. The commission-free brokerage finally addressed (sort of) one of their clients’ biggest pain points, the high cost of trading US-listed stocks by launching access to US currency trading accounts. The devil, however, was in the details, and despite the sizzle on rolling out the feature, there were many important unanswered questions about how converting between currencies would work with the subscription model.

Questrade managed to slide in some interesting new features ahead of the end of the year as well, launching a wonderfully named “RoundUP” service to help make investing digital spare change easier as well as a “cash back” shopping feature in which the worlds of online shopping and online investing collide.

Also, just casually sliding some big news in before the end of the year, Mogo Trade received approval for it to launch its zero-commission online trading platform and opened up the waiting list to be notified of the official go live date.

Finally, we shipped the annual Look Back / Look Ahead series for 2021/2022 in December (see above), and with it we wrapped up what has clearly been an eventful year with insights from Canadian online brokerage leaders. As busy as the year was in 2021, all signs point to even more activity in 2022, with new features continuing to launch, new pricing drops likely to come from existing online brokerages (who haven’t already lowered their prices), some interesting new players on the field, and, naturally, the unknown.

Into the Close

If you’ve made it to this point reading top to bottom, congratulations! Not only are you all caught up on the biggest developments in the online brokerage space for the year, but you’re also well prepared for what’s about to come next in 2022. The start of a new year is often a time for reflection and resolutions, but this new year brings even greater cause for reflection as well as celebration.

After 10 years of publishing the Weekly Roundup from pretty much everywhere life has taken me, there are only a handful of instances where publication has been paused, and they’ve been to tend to the greatest investment anyone can have: family. For that reason, the Weekly Roundup will be going on pause until mid-February.

In the interim, we will continue to be publishing deals and promotions updates, as well as monitoring and sharing interesting content to our Twitter channel and newsletter, so be sure to subscribe to those if you haven’t already done so. Also, we will continue to monitor the online brokerage space for big developments, and like all of life’s great surprises, perhaps don’t be surprised if we drop some interesting posts between now and the return of Roundup.

Until then, Happy New Year, and wishing good health, prosperity, and joy to you and your loved ones for 2022! Here’s hoping we get back to a time where can all fist bump in person again soon.

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Discount Brokerage Deals & Promotions – January 2022

*Updated* Welcome to the first online brokerage deals and promotions update for 2022! January is an exciting month for DIY investors in Canada, as it signals the start of a new contribution window for TFSAs as well as the final sprint to the 2022 RRSP contribution deadline in March.

This year in particular there’s lots for self-directed investors to celebrate. As we covered in our latest Look Back / Look Ahead series, Canadian online brokerages are working on exciting new features for DIY investors. Also worth celebrating is a new class of zero-commission online brokerages readying to launch in Canada.

In addition to celebrating the end of 2021, Canadian self-directed investors can celebrate the fact that all big bank-owned brokerages are well represented in the online broker deals and promotions department. And, despite the several deals that expired at the end of 2021, there is still a lot of choice – especially around cash back promotions. The big story, however, isn’t for individuals with million-dollar portfolios – quite the opposite in fact.

This year, it appears that the battle to attract new clients and assets is heating up for new investors.

Comparing the minimum deposit amounts required to qualify for an offer last year versus this year reveals some dramatic drops. TD Direct Investing, for example, lowered their minimum deposit requirement by 90% compared to last year, and BMO InvestorLine’s latest promotion (see below) lowered the requirement by 70% compared to last year at this time. Finally, Qtrade Direct Investing lowered their minimum threshold by 40% from $25,000 to $15,000. Decreasing deposit minimums aren’t the only signs of heated competition. We’ve also spotted increased bonus amounts surfacing relative to last year. In particular, the latest BMO InvestorLine promo bonus of $150 at the entry point deposit tier is up 50% compared to last year.

With commission-free trading now a reality at multiple Canadian online brokerages, online brokerages are going to have to rethink how they approach deals and promotions. In December, we saw this start to happen with the latest RBC Direct Investing promotion. Their current commission-free trading promotion comes with 100 commission-free trades which are good for up to two years – a record high offer and extremely long period of time to take advantage of it for this online broker.

On balance, the news is great for anyone looking to open an online trading account and get a promotion while doing so. Even existing clients of select Canadian online brokerages will be happier knowing there are promotional offers for depositing additional funds into their account.

With the 2022 RSP contribution deadline coming up quickly, there might be one or two online brokerages willing to launch a new very limited time offer. But realistically, the slate of offers currently available is going to be very difficult to compete against. With a new online brokerage (MogoTrade) in the wings and even more zero-commission online brokerages in the works, the current group of online brokerages is using deals and promotions to go on the offense heading into RSP season.

Expired Deals

This is a busy section this month, potentially busier than needed depending on whether some legacy promotions are actually expired or simply just not updated by the time of publication of this deals update.

First up, HSBC InvestDirect’s commission-free trade offer officially expired into the end of the year. It’s unclear if a new promotion will be launched ahead of the RSP deadline, however, historically HSBC InvestDirect does launch offers throughout the year. It will be interesting to see how they navigate the larger and more aggressive offers from competing online brokerages.

Next, another commission-free trade offer expired at the stroke of midnight on December 31st. Qtrade Direct Investing’s 50 free trade offer officially retired, which isn’t too bad since there is a cash back promotion from Qtrade already in motion.

For those keeping score at home, BMO InvestorLine officially retired their fall cash back promotion and replaced it with an even more competitive one (see below). It’s listed here for tracking purposes.

Questrade is on the list for expired promotions, which is interesting considering that both (technically expired) deals are visible on their website at the time of publication (this also happened last year as well). The two offers are their standing 5 commission-free trade offer (which pales in comparison to other Questrade promotions for commission-free trades) and their Questrade advantage promo (one month of commission-free trading). We’ll monitor their promotions section for updates on these two long-standing offers.

Extended Deals

*Updated January 9: It may have taken a few days to shake off 2021, but the expiry dates of two Questrade promotions have been updated. The two promotions in question: the five commission-free trades offer and Questrade Advantage. The new expiry dates for these promotions are the end of 2022.*

No extensions to promotional offers to report at the moment.

New Deals

It was great to welcome the new year with a BMO InvestorLine promo launch. The latest offer is a tiered cash back offer with incredibly competitive cash bonus in deposit tiers ranging from $15,000 to $499,999. The cash back amounts range from $150 to $2,000, with BMO’s offer leading that of their peers at the $15,000; $50,000 and $250,000 deposit levels specifically.

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Discount Brokerage Weekly Roundup – December 20, 2021

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.

Unfortunately, there is a lot of ground to make up by Scotia iTRADE when it comes to client experience.

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!

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Discount Brokerage Weekly Roundup – December 13, 2021

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.

At Sparx Trading, January was also busy (but nowhere nearly as tumultuous). We launched the first ever influencer edition of our Look Back / Look Ahead series, featuring contributions from the most influential folks in the Canadian online brokerage research industry, and hit restart on a long-dormant newsletter program.

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.

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

Fees Squeeze

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!

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Discount Brokerage Weekly Roundup – December 6, 2021

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.

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Discount Brokerage Deals & Promotions – December 2021

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.

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Discount Brokerage Weekly Roundup – November 29, 2021

Just when we thought things couldn’t take a turn for the bizarre, Black Friday showed up, and with it, a whole new COVID-19 variant of concern. As a result, markets rapidly sold off, but as this edition of the Roundup is going live, there seems to be some enthusiasm that things will get better from here. 

In this edition of the Roundup, we review Qtrade Direct Investing’s latest move to launch real-time account opening, as well as look into the stats and rankings of online brokerages from Surviscor. As always, we serve up some healthy investor culture to end on. 

There in an Instant: Qtrade Launches Instant Account Opening

In a world where we can do almost anything online, it shouldn’t seem like instant account opening is a game changer, and yet, it definitely is when it comes to the world of online investing in Canada. 

This past week, Qtrade Direct Investing announced the launch of “real time” account opening for self-directed investors, and in doing so, has managed to get a highly-prized feature ready just in time for the start of RSP season. Importantly for Qtrade, this feature now enables them to provide a competitive onboarding experience relative to other Canadian brokerages that already have digital applications in place. 

Aside from being incredibly convenient for customers to be able to open accounts online, the speed with which an investor can get up and running has become an increasingly important determinant of whether or not investors will ultimately select a particular online brokerage. One only needs to look back at the past 18 months to see that the two major waves of self-directed investor interest tested the existing capabilities of online brokerages to be able to sign up clients fast enough. 

On both sides of the border, and in fact across the globe, self-directed investors poured into the stock market in unprecedented numbers. And, despite investors encountering long delays on customer service channels, as well as manual processes to actually complete an application, they nonetheless stuck it out because the opportunity (at least in the eyes of any traders) was there. 

And while it is difficult to predict whether or not something like the pandemic-driven sell-off in stocks will ever happen again, it is nonetheless important to acknowledge that the investor pool has dramatically changed. Those self-directed investors that have now become active in participating in markets have very different expectations about how quickly an online brokerage needs to be available to jump on fast-moving market opportunities. 

While online account opening seems like a natural feature for the online brokerage industry to adopt, the reality is that Canadian online brokerages have been fairly slow at doing so. Even with a more “digital” experience, approval times to get up and running can still take a few days. 

Another trend that has emerged over the past year relating to getting started quickly is in terms of funding accounts. Opening an account is only half the battle – there has to be a quick way to fund the account as well to be able to capitalize on market opportunities. In the case of Qtrade Direct Investing, opening an account is now faster, but funding it will still take time. Conversely, competitors of Qtrade, such as Wealthsimple Trade and Questrade, have digital account opening procedures and the ability to fund accounts right away, albeit with limited amounts. 

Heading into this RSP season, Qtrade Direct Investing has managed to address an important component of the onboarding process. In what is often a scramble to get an account opened or funded, Qtrade clients and those considering choosing Qtrade are in for a pleasant surprise. Conversely, the handful of online brokerages that still require printing or physical signatures of documents are increasingly going to be relegated to the sidelines until they can match the speed and efficiency of the instant account approval process. 

Ranking File: Questrade Notches Second Consecutive Top Mobile Experience Ranking

While the end of the year is typically the ramp up to RSP season, there’s also another important season for online brokerages that shows up around this time of year: online brokerage rankings.

This past week, financial services research firm Surviscor published their latest online brokerage mobile experience rankings, and it seems like this year there were a few surprises, as well as a fair share of tough love doled out to Canadian online brokerages.  

Before diving into the results, it is key to mention that when it comes to online brokerage rankings and ratings, methodology matters (a lot). Ultimately, the goal of online brokerage rankings is to be able to compare brokers to one another using some structured criteria. In this case, the mobile experience rankings are intended to measure the overall user experience of a self-directed investor via a phone or tablet device. 

Importantly, Surviscor uses a fairly comprehensive set of measures that assess various aspects of the service experience. Those components are then collated into six categories that can be used for a high-level view of the “mobile experience.”

Five of the six items that Surviscor reports on with respect to mobile experience at online brokerages include: 

  • Opening an Account
  • Navigational Design
  • Account Management
  • Market Information
  • Market Notifications

This year’s review covered 11 Canadian online brokerage firms. The four firms that were not covered were HSBC InvestDirect, Canaccord Genuity Direct, Laurentian Bank Discount Brokerage, and Interactive Brokers Canada. Interestingly, as part of the summary of the results of this year’s review, Surviscor revealed that while all online brokerages analyzed were invited to participate, several of them declined to do so. 

While the ranking data alone was interesting to see, to add deeper context on the ranking, we also gathered the scores associated with the above mentioned categories. In doing so, there are some fascinating observations of the state of mobile experience as defined by Surviscor.

The first important note to point out is that Questrade’s Edge platform was the one that was evaluated and not the recently launched QuestMobile. There has been considerable controversy among self-directed investors, in particular on user forums, about the switch to the new QuestMobile look and feel on the desktop platform. It is therefore important to distinguish between the way in which a user will interact with a platform on a mobile device compared to a desktop. 

Looking at the overall ranking more closely, the top three firms in the ranking, Questrade (77%), BMO InvestorLine (73%) and TD Direct Investing (72%) were relatively close to one another. Similarly, firms in positions six through nine were also very close in terms of overall ranking (range 54% to 57%). One very interesting result was just how poorly Wealthsimple Trade (33%) performed on this evaluation. Anecdotally, the aesthetic and user experience/user interface for Wealthsimple Trade is something that many self-directed investors specifically highlight as a positive feature. In this analysis, however, other than the account opening category, Wealthsimple Trade came up at or near the bottom of peer firms. 

Another interesting thing that jumps out from the full data set is that almost all online brokerage mobile apps do a poor job of notifications. Only four firms did not score 5%, with BMO InvestorLine scoring the highest in this category (95%). Market notifications are a particularly important feature for active investors, so it is curious to note that more firms would not make this component a more refined experience. 

One more pattern that emerged from the data is the correlation between navigational design and rank. In general terms, the better the navigation, the higher the ranking. That said, it was also interesting to see that navigation ranged from 67% to 90% and in this category; Wealthsimple Trade was a real outlier at 3%.

In the categories of Opening an Account, Account Management, and Market Information, the data show how variable the mobile experience can be in these categories. From a user perspective, this is the definition of hit and miss. It highlights some of the challenges associated with creating rankings and ratings, namely that there are some features that certain online investors will prefer and prioritize that others won’t. 

The mobile experience for self-directed investors in Canada, according to Surviscor’s latest report, has room for improvement and innovation. It seems like most online brokerages have managed to do a decent enough job of navigation but outside of that, there really isn’t a consensus from an industry perspective on what defines mobile experience. One goal to aspire to would be to do everything in an online brokerage account on a smartphone that you could do on a computer. 

From an execution standpoint, Surviscor didn’t hold back on a critique of some of the players in the online brokerage industry. The biggest critique, however, was that there was no app that “wowed” the rating team at Surviscor. There isn’t the kind of innovation or pace of innovation in the Canadian market that exists in other markets, such as the US. 

For self-directed investors looking for an online brokerage and for which mobile trading capabilities are important, this analysis is a great way to dive into the nitty gritty. There’s clearly work to be done by the online brokerages to provide a better trading experience. However, the tricky part will be understanding what clients generally want. 

From the forums

Live and Let Trade

In volatile markets, fortunes can change in an instant. For that reason, having access to accurate information on the latest stock prices is crucial to getting visibility on the best entry or exit points on a trade. In this post from reddit, one user looks to the self-directed investor community to find out which services other investors are relying on for real-time data.

Beware the Deals

Heading into RSP season, there’s no question that online brokerage deals and promotions are in full swing. Among the deal types, cash back offers are the most popular, but they’re not without some important considerations. In this post from RedFlagDeals.com, one forum user asks an important question about getting a cash back bonus for a registered account. 

Into the Close

Just when we thought we were out of the woods, Omicron surfaced and volatility came back into stock markets in a hurry and just in time for the weekend. It didn’t help matters much that the US had their shortened work week (because of Thanksgiving).  If there’s at least one silver lining, it’s that this time around, the world is much more prepared than previously. Stay safe and kind!

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Discount Brokerage Weekly Roundup – November 22, 2021

It’s been a tough week all around. As this edition of the Roundup goes to publication, there’s a tragedy unfolding in Wisconsin. And, in BC, there’s been a lot of bad news over the past week because of the floods. After the year and a half that has passed, when things rise to the level of exceptionally bad, it is often a moment to take a pause and reflect on the things to be thankful for.

In this shortened edition of the Roundup, the US online brokerage market is in the spotlight once again. We dive into recently released metrics to examine a possible shift in investor sentiment, as well as the uphill battle faced by Robinhood into the final stretch of 2021. To close out, we wrap up with some interesting chatter from the investor forums.

Growing Pains: Account Growth at Interactive Brokers and Schwab Spells Trouble for Robinhood

It’s barely winter, but already there are signs that online investor sentiment is “springing” back to life – albeit modestly.

Data from two large publicly traded online brokerages in the US, Interactive Brokers and Charles Schwab, appear to be pointing in the same direction with regards to positive month-over-month new account growth, the first time that has happened in 2021.

This year has certainly been a storied one for online brokerages. Right out of the gate, 2021 saw an unprecedented surge in retail investor enthusiasm based on the “meme stock” interest. All online brokerages in Canada and the US saw record-breaking activity in account opening and trading volumes. That interest, however, faded quickly as the meme stocks lost steam and the fast money sought other opportunities (such as crypto trading).

The October stats on new account growth at Schwab showed 397 thousand new accounts opened, an increase of just over 6% compared to September. By comparison, Interactive Brokers reported 46.3 thousand net new accounts opened in October, an increase of almost 6.7% month over month. Aside from the numbers of new accounts being vastly different at the two firms, the target clientele is also quite different. Interactive Brokers tends to target and attract active traders, whereas Schwab could be a better proxy for “main street” investors.

But what about the “new kid on the block” aka Robinhood?

With the surge of interest in online trading this year, a new segment of investor emerged that didn’t fit the traditional understanding and paradigm of “investor” and many (if not the vast majority) of those investors found their way to Robinhood.

Now that Robinhood is a publicly traded company, it is possible to get a better handle on what kinds of investors are gravitating towards this online brokerage and to see how account performance stacks up relative to incumbent firms. To compare apples-to-apples on account growth, it is important to note that, unlike Interactive Brokers or Schwab, Robinhood does not report monthly performance metrics. As such, we have compiled data on new accounts based on quarterly totals so that we could compare how Robinhood’s performance to Schwab and Interactive Brokers.

The chart shown above helps to put into perspective just how big of a wave of interest in online trading the first two quarters of the year represented to Robinhood’s business and the disruptive force Robinhood has been to the online brokerage market in the US. In the first calendar quarter of 2021, Robinhood added more accounts than Interactive Brokers and Schwab did in the first two calendar quarters combined.

Equally as evident in the chart above, however, is the enormity of the drop off in new account growth at Robinhood in Q3 2021. New account opens plummeted from 5.1 million accounts to just 700 thousand – which is still more than Interactive Brokers but well short of Schwab. Another table from the Robinhood earnings release provides additional context on what investors who signed up for Robinhood were most interested in trading, and as a result, where Robinhood earned most of its revenues each quarter.

Against the backdrop of revenue figures, it’s clear that options trading followed by equities trading dominated the revenue picture for Robinhood for Q1 2021, but in Q2, crypto became the primary driver of revenues. In Q3, Robinhood earned most of its revenues from options trading. Based on the revenue mix, it appears that Robinhood has both active traders – who would prefer options trading and cryptocurrency over equities – as well as less active investors, who would prefer equities and ETFs. For Q4 of 2021, Robinhood has already signalled to expect a soft quarter in line with the Q3 performance figures.

The latest numbers from Schwab and Interactive Brokers indicate a possible resurgence in interest with both active and passive investors which should seem like good news for Robinhood; however, we can’t help but wonder whether there is a significant number of accounts jumping ship from Robinhood. Neither the pace of growth in terms of new accounts nor the trading activity at Robinhood is clear enough at this point in the quarter to make a call either way. If Robinhood wants to attract investors interested in gaining exposure to online trading, they will likely have to change the way in which they report performance to bring them in line with other online brokerages. The fact that they haven’t yet done so does beg the question as to why those monthly figures don’t get published?

In the Canadian online brokerage segment, the data on online trading activity and new account openings is much less transparent. The US online brokerage market serves as a proxy for the performance of online brokerages and online investing on this side of the border. Interactive Brokers’ latest account figures reflect their continuous appeal to active investors and traders, and despite charging commissions for trade execution, people are prepared to pay. Schwab, by comparison, has shown that commission-free trading is only a small component of the wealth management opportunity to be had, a model other Canadian online brokerages are likely to look to when deciding which is worth more to their long-term success.

For the growing number of investors interested and curious about options trading, Interactive Brokers offers an experience that is hard to rival here in Canada – even when factoring in commission pricing. That said, if Robinhood is an indicator, commission-free options trading is something that is going to be increasingly sought after while cryptocurrency trading capability is also important to the newer segment of online investors. In terms of the latter, Wealthsimple Trade has an edge that offers self-directed investors direct exposure to cryptocurrencies and equities in one platform. The major downside, of course, is the cost for trading in US dollars and the lack of options trading. On the other hand, almost all popular Canadian online brokerages offer options trading as well as US-denominated trading accounts.

Until all three products: options, cryptocurrencies, and equities are available in a single online brokerage in Canada (and at a reasonable cost), it appears that Canadian self-directed investors are going to have to figure out how to combine providers to get the exposure they desire.

Turning back to the US online brokerage market, the latest performance figures from Interactive Brokers and Schwab point to an interesting scenario which we will be monitoring when Robinhood reports its next earnings release – namely, whether the account growth at Schwab and Interactive Brokers is coming at the expense of Robinhood clients.

It is difficult to know with certainty that clients leave one online brokerage to go to another; however, the revenue mix provided by Robinhood does suggest that Interactive Brokers is now a compelling alternative for cryptocurrency trading (of certain currencies) and definitely for options trading. Interactive Brokers, as of this past quarter, now offers the “trifecta” of options, crypto, and stocks at a professional trader’s level of sophistication. To boot, Interactive Brokers also now offers an ESG-focused trading tool that takes investor values into consideration when screening companies for possible investment opportunities.

At the other end of the spectrum, many of those investors that thought they could make a fast dollar on the meme-stock frenzy might have learned that investing profitably is a challenge and takes time and effort to do well. Those investors might now prefer a more hands off approach, or even value advice, which would point them towards Schwab.

The concurrent uptick in new account growth at Interactive Brokers and Schwab is a positive sign for both firms and an interesting development at this point in the year and stock market cycle. While it is difficult to know the source of those new clients, it’s clear that winning over Robinhood’s clients seems like part of the strategy of the existing players. Despite Robinhood’s success in bringing in new clients earlier this year, learning to hang onto those clients is an entirely different game altogether.

From the Forums

Exit Signs

While price is one reason online investors make decisions, there’s sometimes more to the story than that. In this interesting post from reddit, one user explains their reasoning behind saying goodbye to traditionally low-cost online brokerage to find greener pastures elsewhere.

Shopping for Options

With Black Friday just around the corner, it seems like Canadian investors are in the shopping state of mind. In this reddit post, one self-directed investor is interested in choosing a new online brokerage catering to options trading and receives some interesting perspective and suggestions.

Into the Close

It’ll be a short week for trading in the US because of American Thanksgiving, one that will undoubtedly be tough for community of Waukesha. Often in times of tragedy, it is the strength of communities that shine through and the kindness shown to others that makes an immeasurable difference. It certainly showed up here in BC when it was needed the most.