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Price Drop: HSBC InvestDirect Lowers Standard Commission Pricing

If there’s one thing that can take a Canadian discount brokerage from obscurity to contender, it’s dramatically lowering its standard commission pricing. Despite a relatively quiet summer, the lead up to the fall of 2015 has now officially been marked with a price drop from an unlikely source: HSBC InvestDirect.

As of early September, HSBC InvestDirect has dramatically lowered and simplified their standard equity commission pricing from $28.88+ per trade down to $9.88. In addition, standard options commission pricing has also dropped from a base of $35+ per trade to the standard $9.88 fee + $1.25 per contract. To clarify, the new commission pricing applies to North American equities/ETFs and options only (HSBC InvestDirect is one of a few Canadian online brokerages that has global market trading capability).

While the most drastic pricing adjustments are for the standard offerings, HSBC InvestDirect Advanced clients (i.e. clients with at least $50,000 in assets or who execute 30+ trades per quarter) also caught a break. Their commission price dropped from $9.88 per trade down to $8.88 a trade.

Prior to this move, HSBC InvestDirect and Scotia iTrade were the two remaining bank-owned brokerages that had yet to lower their standard commission pricing down to the sub-$10 range. Unfortunately for Scotia iTrade, it’s now the sole major Canadian bank-owned discount brokerage that charges more double the going rate of about $10 ($24.99+ to be exact) for a standard commission on an equity trade.

The chart below illustrates just how drastic a difference there is between standard commission pricing at Scotia iTrade and the rest of bank-owned online brokerages. Also noticeable is the fact that HSBC InvestDirect’s new commission pricing edges out a lot of its peers.

Standard commission rates at select bank-owned Canadian online brokerages

For those watching the cost per trade closely, HSBC InvestDirect’s new $9.88 commission pricing is actually lower than the standard commission pricing of most of the bank-owned brokerages except for CIBC Investor’s Edge who still offers standard commission pricing at $6.95 per trade. For clients of the HSBC InvestDirect Advanced tier, however, the $8.88 pricing offers a significant savings per trade when compared to what other bank-owned brokerages are offering for deposit/assets of $50,000.

Over the past year HSBC InvestDirect has become increasingly more active with updates to their website content, and with a few promotional offers, the most recent ending just ahead of the announcement of the new pricing. Prior to the past year or so, HSBC InvestDirect appeared to be in somewhat of a holding pattern, not really producing many new deals or promotions nor shifting their pricing alongside the major online brokerage players. Perhaps this move will serve as a catalyst for more activity in the coming months.

It was interesting to note that there was no promotional offer that coincided with the launch of the new pricing. Given the ramp up to the busy fall season, however, HSBC InvestDirect may already have something in the works to take advantage of the attention they’re bound to get from this new pricing initiative.

Whatever HSBC InvestDirect’s strategy is at this point, it’s clear that having standard commission pricing that is lower than most of the other bank-owned brokerages will make waves with the bigger players in the pool. The trick, as almost all other brokerages know, is keeping investors’ attention, which is not something price alone can do.

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Exclusive: Sneak Peek at Desjardins Online Brokerage’s New Website

Exclusive first look at the new homepage for Desjardins Online Brokerage’s new website

The big story for Canadian online brokerages in 2014 was undoubtedly lower commission pricing. For 2015, however, it appears that Desjardins Online Brokerage has clearly cast user experience and design into the spotlight as they prepare for the launch of their newly redesigned website.

SparxTrading.com was fortunate enough to get an exclusive first look at Desjardins Online Brokerage’s new website and, by all accounts, their new website raises the bar for their discount brokerage peers to step up in both function and form.

One Step at a Time

The new Desjardins Online Brokerage website is another iteration in a coordinated series of improvements to their online user experience.

Last year, for example, they released a newly designed investor education calendar that appeared to presage this new look and feel.  Further, in our profile of Desjardins Online Brokerage, Vice President and General Manager Laurent Blanchard revealed an upcoming refresh to the website was in the works.

As a firm that prefers to discuss features that they are confident they will deliver on, the suggestions of a new website have been few but present for those paying attention.  According to internal sources, the Desjardins team are both proud and excited for the upcoming milestone launch of the new site which is scheduled to go live by the end of February 2015.

Walking the Online Walk

The irony of succeeding as an online brokerage is that you not only have to be able to succeed on the transactional side (i.e. provide the service of online brokerage), but also demonstrate that you understand and can respond to the constant evolution of being online. As the storefront of their online presence, the look, feel and performance of a website will definitely factor into what visitors think of the brand and whether or not ‘they get it’.

While many of Canada’s online brokerage websites don’t get it ‘wrong’ per se, so few have embraced what the US online brokerages already have in terms of simplified design and function for a multi-screen world.

The drastic design difference between Desjardins Online Brokerage’s new website and anything at other Canadian discount brokerages, however, may spur competitors to pay attention to the importance of what a site looks and feels like in today’s world. If, for some reason, it does not, there’s all kinds of data to suggest consumers will choose to use a better designed product (just ask Apple).

New Features

In form and function, Desjardins Online Brokerage’s new website has several important upgrades over their current site.

First, finding information is much easier. The design elements on the new website help make information easier to spot and easier to retrieve. Using the blocked design (e.g. putting things in squares) makes viewing the website on a tablet or mobile device easier and substantially more efficient to navigate.

The top and bottom menus are clear, intuitive and well-spaced out.  There is a manageable number of choices (five) with the most important for most DIY investors (finding out about fees and getting in touch with client service) easily accessed from the top menu.

Top menu on new Desjardins Online Brokerage website

Another defining feature is accessibility to investor education.  Desjardins Online Brokerage is one of a few Canadian brokerages that has invested heavily in investor education and their homepage layout clearly reflects that. The new website clearly positions educational events and investor education video content prominently on the bottom of the page.  This means that clients and non-clients alike can view this information easily and quickly.

Investor education section on the new Desjardins Online Brokerage website

Finally, it’s just interesting to look at. The prominent video background of a fictional investor named ‘Nicolas’ is definitely eye-catching however there is also a very slick market data and stock quote interface that invites users to look up a symbol via Desjardins’ website. Mixed in with the thoughtful visual elements, there is also a good balance between static and dynamic content as well as sections that can slide open or closed.

As is often the case with good design, the devil is in the details. Paying attention to design reflects a well-thought out, user-focused experience however against limited time and finite resources there’s inevitably things still to do. In the case of Desjardins’ website, one of those key pieces will be enabling online account opening. While they’ve acknowledged it’s on their list of features to implement, in the interim, the new website will offer some improvements to the current form-based process.

The Bottom Line

For a Canadian financial services firm, especially one tied to online investing, to capture the look and feeling of being ‘current’ is noteworthy.  More importantly, however, the new Desjardins Online Brokerage website has shone a light on the importance of translating website user experience into what people think about the brokerage.  The new website reflects the broader trend with current websites generally: that paying attention to users matters. With the noise of commission pricing now fading, creating a great end-to-end experience is a message other Canadian brokerages will start to receive loud and clear.

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Review: Dalbar Direct Brokerage Service Evaluation 2014

For Canadian discount brokerages, the idea of providing great client service is a moving target. Not too long ago service used to refer to the ‘offline’ world and meant having a face-to-face interaction at a branch. That gave way to the telephone, and the telephone to email, and email to web chat and web chat to social media.

The result of this communication evolution is that online brokerages are forced to cater to a wide spectrum of touch points that consumers can now access in order to manage their online investments. While consumers benefit from being able to (theoretically) stay connected to their brokerage howsoever they please, the reality is that client service at any brokerage on any channel is only going to be as good as the brokerage’s investment on it.

DIY investors shopping around for online brokerages based on client service should take note of this. If client service, and specifically telephone service, is of interest, then Dalbar Canada’s recently released direct brokerage evaluation of telephone client service interactions is worth looking into. And, while many brokerages are finding their way through the myriad of new technology touch points, telephones, it seems, still matter to online investors.

Who You Gonna Call?

Where and how telephone-based client service fits into today’s highly screen-driven age is a bit confusing. On the one hand while some issues can be resolved via online only methods there are times when getting someone on the phone is necessary.

From highly specific account inquiries to routine trading strategies, such as ‘journaling’ or exercising options, there are still many roads that require DIY investors to turn to telephone agents to address their needs. Of course, when a website goes down or a trading outage occurs, the only way to get an answer is to turn to the phone. Those interactions, as it turns out, impact how a client experiences doing business with that provider and what they ultimately tell others about those experiences.

Dalbar Canada, a financial service analysis firm, understands the value and impact quality service has on direct brokerage client relationships and has been measuring the quality of telephone interactions for many years now.

Given that brokerages use the results of Dalbar’s evaluations in their advertising, it is important for DIY investors to understand some context behind the results.

Widening the Circle

According to Dalbar, “quality” of client interaction at a direct brokerage is broken into four key components:

  • product and procedural knowledge
  • professionalism
  • ease of doing business and
  • the ability to deepen relationships with clients

These categories reflect strategic points around which a firm can either strengthen or weaken the relationship with their clients. While what a telephone agent knows is certainly crucial, how they communicate that information goes a long way in providing a positive experience. Whether the agent takes a ‘big picture’ view of clients question or simply responds literally to the question asked also influences whether a client leaves the call feeling frustrated or satisfied. What Dalbar measures when they analyze the interaction between provider and client is therefore a clear snapshot of the ‘human’ element of the brokerage experience.

It should be mentioned that one of the parameters these awards either don’t measure or report is the availability (i.e. hours to reach an agent) nor the duration. So, while it may be nice to get a nice person, there is still something to be said about getting a person when you need one, even outside of market hours.

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Exclusive: A Year in Review and Look Ahead from Canada’s Online Brokerages

Pic_Blog_201412_YearInReview_LeadImage_B*Edited Dec. 22/14* What an exciting year to be a DIY investor. As an active observer and commentator on the landscape of Canada’s online brokerages, we’ve seen some dramatic changes this past year. Whether it was reduction in commission pricing, changes in account types or enhancements to platforms, user experience or investor education, 2014 presented no shortage of exciting developments.

With so many online brokerages, DIY investors now enjoy more choice in terms of who they want to end up doing business with and how they want to trade online. The flip side to the benefit of having so much choice, however, is actually keeping up with all of the innovation that’s taking place amongst online brokerages.  Every time a new feature, like a platform or a new order type, comes out, there is a lot of information that goes with it.

In their own words

So, in keeping with our continued efforts to track and structure the information coming from Canadian online brokerages, we thought it would be great if we gave Canada’s online brokerages the opportunity to give investors their own take on 2014 and also to provide everyone with a preview of where 2015 is heading.

We reached out to all the brokerages and were more than pleased with the response we received to participate. Our request was simple. We asked that brokerages provide SparxTrading.com readers with a recap of 2014, perhaps with milestones or achievements as well as to provide some direction as to what’s around the corner for next year.

What follows is a really interesting (in our opinion) compilation of voices of 8 9 of Canada’s most influential and visible online brokerages – from bank-owned online brokerages to independent brokerages. It is clear from reading these submissions that 2014 was a busy year everywhere. Nobody was standing still. Even more interesting, however, are the hints and previews online brokerages have shared for 2015.

Table 1: Canadian Online Brokerages Participating in the Year in Review

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Click on a logo to read the review of that particular brokerage. #colspan# #colspan#

Getting up to speed

Heading into RRSP deadline season and the first half of 2015, we know that there will be many individuals who are either considering online investing or who are already with a provider and would just like to better understand the landscape of choices that are out there.

This compilation is a great starting point to learn more about each of the providers listed. They are certainly a diverse group of providers which is reflected in the different ways in which each has written their submission. In our opinion, this diversity will become one of the biggest themes for 2015.

With standard commission pricing having dropped significantly across several brokerages, the focal point will turn to standing out. Our view on this is that ‘standing out’ will be achieved by being ‘outstanding’. That means improved service, pricing (yes, we still think there’s room to go lower for some), features and user experience.

We believe that in 2015, Canada’s online brokerages will work even harder to differentiate themselves from one another. And, as was the case in 2014, we are looking forward to tracking these developments and helping our readers make sense of them all as they unfold.

Click the logos above or the page numbers below to read this year’s submissions.

Editor’s Note: We received a submission from CIBC Investor’s Edge after our original publication date and so we have included their submission as part of this series. For functionality purposes, however, we have placed their submission at the end of the series rather than in alphabetical sequence.

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Behind the Screen: An Interview with Palestrina – Reddit Personal Finance Canada Moderator

For many who wade into the waters of DIY investing, those first few steps begin in shallow waters. With no lifeguard on duty and countless warnings of sharks and other dangers, those first steps can be nerve wracking. And yet, despite the nerves, and the warnings, the promise of fortunes and financial freedom continue to lure investors into the deep waters of DIY investing.

While safety is never an outright guarantee, there are pockets of helpful and well-intentioned investors online. Where these pockets are, at least for Canadian investors, is less of a mystery than who might be participating in them.

In this piece we take a look at an increasingly popular source of personal finance information – Reddit, and walk behind the curtain with the ‘subreddit’ moderator of the personal finance Canada subreddit.  (In reddit fashion, for those who wish to skip to the ‘TL;DR’ summary, click here)

Setting Sail

The online DIY investor journey often begins behind a keyboard with the first stop being a search engine. After typing in their best guess into the search box, the search engine tosses back it’s best guess of what that visitor wants to know about. For beginner investors, and for anyone really, it’s hard to know what you don’t know.  So, a back and forth game of search pong ensues and eventually (or hopefully) an investor finds something useful.

Catch of the Day

So, just what does a novice investor get back by casting their net with the term ‘online investing?’  The image below is pretty typical.

Online investing search results
Google search result for online investing

Lots of advertising. Lots of financial service providers and very little, if any, support.  There’s a reason why Google has generated more than $42.7 billion in advertising revenue year to date.

The Thrill of the Hunt

DIY’ers are a special breed, however.  They are a persistent lot. They endure trawling through questionable search results until they find something that can get them closer to answer.

Of course, being able to ask a question to someone (or many people) more knowledgeable would be a much more efficient search strategy.  And, for many who seek answers online, the place they can generally find them is in an online forum.

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Special Series: An In-Depth Look at the 2014 J.D. Power Canadian Discount Brokerage Rankings – Part 1

This year’s J.D. Power & Associates’ Canadian discount brokerage rankings were recently announced. As with years past, the rankings and the underlying survey they’re based on, provided a unique window into the collective voice of Canadian self-directed investors and their perceptions of Canada’s online discount brokerages.

In the first of our multi-part special series on this year’s discount brokerage rankings, we take a look at the survey that produces the rankings, including how it measures investor satisfaction as well as some of the unique features of this year’s survey and results.

The next part of our series will drill down into the actual performance of Canada’s brokerages on this year’s ranking and what these results mean for the online brokerages as a whole as well as self-directed investors.

A Quick Recap of the 2014 Canadian Discount Brokerage Rankings

When it comes to the various Canadian discount brokerage rankings, the J.D. Power & Associates evaluation occupies a special niche. Unlike other rankings that focus on direct evaluation of features, the J.D. Power ranking of Canadian brokerages is unique because its is the based on the systematic organization of opinions, experiences and perceptions of discount brokerage clients – what they call the “voice of the customer”.

Between mid-May and mid-June of this year, the Investor Satisfaction Survey polled just over 2500 clients from a number of Canadian discount brokerages to find out just how satisfied (or dissatisfied) these investors were with their current online brokerage. In total, 7 Canadian discount brokerages ended up having sufficient data to participate in the rankings (compared to 11 last year), with an average investor satisfaction score of 736 (compared to an average of 724 last year).

The firms covered in this year’s ranking (along with their overall investor satisfaction score) are shown in the chart below.

J.D. Power & Associates Canadian Discount Brokerage Rankings 2014
While numbers help to make the assessment and ranking easier, the process behind how these numbers are generated is actually fairly complex.   (For those who want a more detailed explanation of the survey and scoring system, click to read our overview on the J.D. Power Investor Satisfaction Survey here)

It is useful, however, to get a quick sense of how these numbers are derived to better understand what they mean.

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Breaking News: CIBC Investor’s Edge poised to rock the market with $6.95 standard commissions

The online brokerage battle is boldly going where many thought it might – into a full-on price war.  Sparxtrading.com has learned from sources within CIBC Investor’s Edge that they’re planning to slash their trading commission rate to $6.95 for all clients. The pricing change could be officially announced as early as Monday.

What we’ve learned so far is their best commission rate of $6.95, which is currently only available to clients with $100,000 or more in assets, will soon be made available to everyone, regardless of account balance or trading frequency.  We don’t yet have details on how other fees may change as a result.

This latest move by a Canadian online brokerage comes on the heels of Qtrade’s announcement last week that they are lowering their standard commission price to $8.95 and more than 9 months since RBC Direct Investing made waves by lowering their standard trading commission price to $9.95.

CIBC Investor’s Edge, along with Scotia iTrade, have been the last of Canada’s big bank-owned brokerages to go sub-$10 on their standard commission prices.

Set Pricing to Stun

At the sub-$7 price point CIBC Investor’s Edge is muscling in on the prized territories of Canadian online brokerages big and small.

For the big bank-owned brokerages, commissions of $7 or thereabouts are only typically offered to only to their most valuable trading clients (those who typically trade 30-150+ times per quarter or who have larger portfolio sizes).

Independent discount brokerages, such as Questrade and Virtual Brokers also seem to have their work cut out for them. At $6.95 flat per trade, CIBC Investor’s Edge commission rates now rival, if not beat, certain rates offered by these ‘lower commission’ providers, especially when ECN fees are factored in.

While CIBC Investor’s Edge still has a lot of ground to make up with respect to its website and platform, the giant has certainly been stirred. Whatever they were planning to do to get back into the online brokerage race had to be big and had to be bold. Lowering their standard commission pricing to $6.95 definitely qualifies.

Well Played, Investor’s Edge

In addition to the waves they’re bound to make with pricing, the timing of this move is also significant.

On the eve of the Globe and Mail online brokerage rankings, this latest pricing drop may just be big enough to steal some of the spotlight away from whichever brokerage (bank-owned or independent) wins the coveted title of ‘best online brokerage’. This pricing move signals to the other Canadian online brokerages that they’re going to have a much tougher time living long or prospering, so long as CIBC Investor’s Edge is in the race.

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Kind of a Big Deal: Scotia iTrade Raises the Stakes for Discount Brokerage Deals

Earlier last week the Canadian discount brokerage landscape saw a massive deal unfold. Scotia iTrade, one of Canada’s bank-owned online brokerages, launched their latest offer: 500 commission-free trades or $500 cash back for deposits of $500,000 (or more). Yes, that’s correct, 500 commission-free trades or $500 cash back.

Aside from the headline grabbing numbers, what arguably makes Scotia iTrade’s most recent deal interesting to highlight is its timing, scope and what it signals to the other discount brokerage players on the field. The message Scotia iTrade seems to be sending to the other players: get ready to play hard ball.

What’s Being Offered

As Scotia iTrade’s promotional machinery kicks into high gear, many online investors (especially if they spend enough time surfing online) will inevitably come across the splashy advertisement with 500 free trades in big bold red letters.

Drilling down into the deal, however, reveals that there are two other tiers of commission-free trade/cash-back offers that investors may be eligible for. The initial tier is for deposits of $15,000 to $99,999 which qualifies individuals for either a cash rebate of $50 or 100 commission-free trades (valued at $9.99 per trade). The next tier is for deposits of $100,000 to $499,999 and offers $250 cash back or 250 free trades.

While the top tier offer is going to raise eyebrows, the other two offer tiers directly challenge offers from both bank-owned brokerages, such as BMO InvestorLine and independent brokerages such as Questrade.

Timing the Market

For much of 2014, the big story amongst Canadian brokerages has been the dropping of the standard commission rate by RBC Direct Investing. Interestingly, although several of their bank-owned brokerage peers quickly followed suit, Scotia iTrade elected not to lower its standard commission fee per trade (which currently sits at a minimum of $24.99 per trade) for those with balances under $50,000.

Instead of lowering their standard commission-price, Scotia iTrade has chosen to look at other strategies to enhance the value of their offering. These moves include lowering their commissions for their most active traders (defined as those who make 150 or more trades per quarter) from $6.99 to $4.99, promoting their ‘loyalty’ program Scotia iClub and widening the eligibility threshold of what it takes to qualify for preferred pricing ($9.99 per trade).

Against this backdrop, the deal currently being offered makes sense with Scotia iTrade’s current strategy of trying to improve the value to clients with higher assets or who are more valuable to the business (such as highly active traders).

While the strategy of not lowering their standard commission fee appears in line with their other moves so far, what is particularly interesting is how this has been received by consumers and industry observers. As we mentioned in our weekly roundup from September 12th, Rob Carrick from the Globe and Mail has made it clear that Scotia iTrade’s performance in this year’s online brokerage rankings will likely be weaker because they are not competing on price (both amount and simplicity) with most of the other Canadian discount brokerages. Also, the latest results from the 2014 JD Power Investor Satisfaction Survey put Scotia iTrade second-to-last, signaling that they are falling behind their peers in terms of client satisfaction.

Thus, the choice by Scotia iTrade to keep their standard pricing intact means they’re going to have to get creative at challenging their competitors, especially for the segment of clients with less than $50,000 in assets.

Chasing the Podium

So, what does this latest deal mean for Scotia iTrade’s potential clients and competitors?

First, it will certainly succeed in getting everybody’s attention. Whether it’s 500, 250 or 100 free trades, Scotia iTrade is trying to wave a big flag on value. Interestingly, they’ve also signed on as sponsors for the World Money Show and co-sponsored Larry Berman’s cross-Canada education tour all of which are taking place this Fall. In order to compete with and perhaps get ahead of the Globe and Mail discount brokerage rankings, Scotia iTrade looks like they’re ramping up their own marketing efforts in a big way.

Second, Scotia iTrade is definitely positioning itself to compete for clients with larger assets. Whether someone will actually pony up $500,000 for $500 or that large number of trades is hard to predict, however landing just one of those clients would represent 10 to 100 times the value of clients being sought after by other brokerages’ incentives. On Scotia iTrade’s part this offer is also strategic in that there are no other advertised offers for clients with this level of assets (other brokerages do have offers for higher portfolio amounts but they aren’t advertising them as widely). As such, Scotia iTrade has created the field for this asset level and now is the only player on it.

Finally, Scotia iTrade’s offer dwarfs the only other advertised offer from a bank-owned online brokerage.

Currently, BMO InvestorLine is the only other bank-owned brokerage that is advertising a promotion for deposits of $100,000 or more. Its offer of 25 commission-free trades or $250 cash back has been topped substantially by Scotia iTrade which is offering 250 free trades or $250 cash back for the same deposit ($100,000). In addition to offering 10 times as many trades, the window of time to use those trades is three times as long (180 days for the iTrade offer vs 50 days for BMO InvestorLine).

Online brokerages such as Desjardins Online Brokerage and Questrade are offering comparable deals to the lower tiers of Scotia iTrade’s offer but at a lower deposit level. More details on these promotions can be found at our discount brokerage deals and promotions section here.

The Bottom Line

On several levels, the timing and scope of Scotia iTrade’s latest offer is an interesting play for investors and competitors alike.

While finding a high value client who would be actively investing/trading to use up the 500 trades would be a great catch for iTrade, it seems that they’re banking on the deal to generate interest and buzz and hopefully people through the online door.

As they head into the Globe and Mail discount brokerage rankings for this year, Scotia iTrade is ramping up its visibility and hoping that, in spite of their higher pricing, investors will look to them for value in the form of promotions and services. With Scotia iTrade pushing this hard, it’s now going to be up to their competitors to decide which brokerage is going to be viewed as second-best.

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Scotia iTrade Launches Loyalty Pricing Program

Here’s a question few people get asked in their day: what would it take to join a club that let’s DIY investors pay $9.99 in commission per trade? Well, if that ‘club’ is online broker Scotia iTrade, the answer is $50,000. At first blush the number may seem steep, however because of how that $50,000 threshold gets calculated, Scotia iTrade’s new loyalty pricing program has actually made qualifying for discounted trading slightly easier.

Getting Creative with Pricing

Without question, 2014 has been the year of falling commission prices. Many of Canada’s largest online brokerages, especially the bank-owned brokerages, have cut their standard equity trading commission prices from just under $30 to under $10.

Scotia iTrade, also a bank-owned brokerage, has opted to take a slightly different path. Instead of lowering their standard commission prices (currently $24.99 per trade) for all of their clients they have lowered commission pricing for certain segments. Earlier this year iTrade lowered the online trading commissions for active traders (defined as those who place at least 150 trades per quarter), to as low as $4.99 per trade.

With their newest plan, called the “loyalty pricing” program, Scotia iTrade is now offering up $9.99 per trade commissions. While they already have that commission as part of their existing pricing structure, they have changed the threshold of qualification for $9.99 commission pricing from $50,000 in assets with Scotia iTrade to $50,000 of accounts or products with Scotiabank and/or Scotia iTrade.

 

How loyalty pricing fits into Scotia iTrade commissions

The Details on Scotia iTrade’s Loyalty Pricing

So, how exactly does Scotia iTrade define ‘loyalty pricing’? According to their website Scotia iTrade clients are eligible for the $9.99 commission as soon as the total balance across eligible Scotiabank (and/or Scotia iTrade) accounts/products reaches $50,000.

The list of eligible accounts is significant and includes:

  • Mortgages
  • Lines of Credit
  • Credit Cards (Visa / American Express)
  • Chequing and Savings Accounts
  • Personal Loans
  • Investment Accounts (TFSA, RRSP, Non-Registered Accounts)
  • GICs
  • Mutual Funds
  • Non-Corporate Business Accounts

Another requirement to qualify for the loyalty pricing commission price is registration for paperless documentation. Scotia iTrade also has a requirement for mobile and iPad app users to log onto Scotia Online each quarter in order to confirm eligibility.

What Loyalty Pricing Means for DIY Investors

Having improved access to better commission rates is always a good thing for self-directed investors. The model picked by Scotia iTrade and Scotiabank means that the “convenience” factor of managing one’s personal finances with a bank-owned brokerage just got a lot more valuable.

Not only does doing everything in one place save time and reduce complexity (often big sticking points with investors juggling multiple accounts) but there is now actually financial incentive for doing so. Also, there is no “minimum number of trades” required to get the preferred pricing but rather just a maintenance or growth of business with Scotiabank.

If there is a downside for investors, it is that those who are looking to get started with investing may not meet the threshold for low pricing or, for whatever reason, may not be able to maintain it at which point they would be subject to standard commission fees.

Banking on Loyalty

The loyalty pricing strategy is not necessarily unique to Scotia iTrade. CIBC Investor’s Edge, for example, has had it in place for a number of years. While the commission-pricing given to CIBC Investor’s Edge clients via the loyalty pricing program is lower ($6.95 per trade vs $9.99 per trade) there are some offsetting factors, such as the higher dollar threshold ($100,000 vs $50,000) to qualify.

With the CIBC program the threshold for best pricing ($6.95 per trade) is set at $100,000 per household whereas with Scotia iTrade the third best commission discount is available (the $9.99 per trade) for $50,000 per client.

Building a Moat

Competing on price and being able to stand out from their competitors have been challenges for the Canadian bank-owned brokerages. Strategically, however, loyalty pricing is the kind of program that bank-owned brokerages can offer far more effectively than their independent brokerage counterparts can.

Whether the online brokerage side of the business helps grow banking or banking helps grow online brokerage, one side of the company can help the other. Thanks to the banking-side relationship, major bank-owned brokerages are able to provide a broader package of services and bundle them into an offer that independents are hard pressed to compete against.

For independent brokerages, the temptation to move into banking services is already apparent in the US. As US online brokerage E*trade has shown, however, wading too far into traditional banking can go horribly wrong if done at the expense of prudence and so winning market share without taking undue risk will be a challenge.

The Bottom Line

The move by Scotia iTrade to introduce loyalty pricing directly pits big-bank convenience against independent brokerage pricing. While $9.99 per trade isn’t necessarily the best price per trade, it is far better than the standard commission price that Scotia iTrade currently charges. Ironically, because of the options to qualify for the discount loyalty pricing, those not already with Scotiabank or Scotia iTrade will be starting to think about the benefits of being disloyal to their current provider.

 

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Looking for a Hot Date? Desjardins Online Brokerage’s Education Calendar Gets a Makeover

In a landscape littered with commission price drops, lowering price can only go so far in winning the attention and loyalty of potential and existing DIY investor clients. So, what is the secret ingredient Canadian online brokerages need in order to win the attention of self-directed investors? It’s no secret actually – build something really helpful.

With the update of their investor education calendar, Desjardins Online Brokerage has taken a bold move in committing to user experience for accessing education events. Their competitors, most notably those with significant investor education offerings such as National Bank Direct Brokerage, Scotia iTrade and TD Direct Investing, will most certainly be less enthusiastic about the new calendar roll out however for self-directed investors, the change is a signal of something significant across the industry.

Think Outside the Box

Of course, there are those that would ask (and rightfully so) what’s so exciting about a calendar? Well, coming from a site that continues to compile investor education events from Canada’s online brokerages, there’s actually several very interesting things the new calendar signals.

First, with pricing becoming less of a distinguishing feature between providers, there is likely going to be more of an effort required by Canada’s online brokerages to stand out.

This calendar is yet another example of benefits to investors that competition amongst brokerages brings. User experience and the ‘look and feel’ of an online brokerage on the front end are going to matter more.

Another important angle to this calendar launch is that it signals a significant commitment to investor education.

Desjardins Online Brokerage currently runs in the order of 350 events per year. TD Direct Investing, by comparison, runs closer to 3000 per year. While the ‘number’ of events may not be the most telling indicator, it does communicate the scale at which investor education has to be provided and resourced. For Desjardins Online Brokerage, however, they’re continuing to bet big on education, as seen with their partnerships with Stockscores, DayTrader Canada and a potentially wider set of education partners.

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