Category: Discount Brokerage News

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Discount Brokerage Weekly Roundup – February 25, 2019

Whether it was the spectacle of having no host, the spectacle of who wore what or of who won what, there was a lot of hype leading up to the Oscars and after it was all said and done, the controversy persists. Of course, Canadian online brokerages are caught in a swirl of hype as well, with the RSP contribution deadline looming, this is perhaps the most buzzworthy week for anything and everything related to investing online.

In this edition of the roundup, while there may be no big celebrities or shiny statues, there is no shortage of commentary (albeit not about outfits). Starting first with one Canadian online brokerage who made a subtle but important shift on their commission pricing page which could tilt them out of favour with active traders. Next, we review the interesting last minute moves made by a pair of online brokerages to put their deals for RSP season in the spotlight and keep them on the radar of DIY investors. Of course, in keeping with the awards season theme, we profile some very interesting highlights from the latest online brokerage ranking to come out of the US. As always, we’ve got a great selection of DIY investor chatter from Twitter as well as from the investor forums.

Virtual Brokers Quietly Tweaks Trading Commission

Sometimes a small change can have a big impact. This past week, we took note of a small change to the Virtual Brokers pricing & commissions page, that at first blush, might not seem like a big change but is, in fact, an important one.

Late last year, Virtual Brokers announced a new commission pricing structure that lowered their commissions from $9.95 to between $1.99 and $7.99 per ticket. This pricing structure put the standard commission per trade at Virtual Brokers under most of their competitors – certainly those of most bank-owned brokerages (with the exception of CIBC Investor’s Edge) as well as under the standard commission range of their long-time rival Questrade. There was, however, an important detail to take note of.

Commissions at Virtual Brokers were advertised “per ticket” rather than “per trade” which was uncommon for most of the other online brokerages who priced commissions per trade. For most everyday investors, per ticket pricing, though uncommon, wouldn’t actually work out to being anything different. For active traders, however, the difference is important.

We previously reported that having a ‘per ticket’ system could favour active traders who wanted to scale into (or out of) positions by buying (or selling) multiple orders of the same security in the same day. Now with pricing moving to the per trade pricing, this removes that cost efficiency.

So, even though the terms used to describe trade commission pricing might be easier to understand for a wider audience or user base, the pricing advantage is no longer as clear to the active segment. Another point of possible confusion – the terms & conditions underneath the commission pricing table available on the website at the time of writing this Roundup still refers to the ‘per ticket’ pricing. We’ve reached out to VB for clarification and will post an update when received.

Deals Action Down to the Wire

With the RSP contribution deadline within reach, the deals action in the online brokerage space it is at an all-time high. Even so, there were still a few interesting moves heading into the final stretch to the March 1st deadline.

The first, and most obvious, is RBC Direct Investing ramping up the visibility of their ‘pay with points’ promotional offer. Specifically, the homepage of the RBC Direct Investing has this offer splashed in big, bold letters where it cannot be missed.

For a quick refresher, until March 1st RBC Direct Investing is giving points holders 20% more value by lowering the required minimum point redemption amount from 3000 points to 2500 points.

Points can also be used to pay for trading commissions, and with the current promotion, fewer points are required for a trade. Instead of the 1200 points normally required, clients can use 995 points instead.

Another bank-owned online broker running hard to the RSP contribution deadline extended the deadline for their offer from the end of February to the first few days in March. BMO InvestorLine extended the deadline for their current cash back promotion from February 28th to March 4th – a move that enables the ultra-last-minute contributors to benefit from the promotion especially if they’re on the west coast.

As the clock ticks closer to the deadline, keep in mind that there is also another deal set to expire – TD Direct Investing’s tiered commission-free trading offer. This deal is timed to expire on March 1st so, for any procrastinators, this is crunch time.

Best Online Brokerages in the US Announced

In the spirit of the Academy Awards, and continuing the streak of awards for best online brokerage that have taken place in February, south of the border there was also a rather high profile announcement for the best online brokerages for 2019. Barron’s magazine published their 24th edition of their US online brokerage ranking which profiled 14 US brokerages.

From the Canadian vantage point, it is interesting to peer over the fence to see what some of the more noteworthy features are in the US online brokerage space. According to Barron’s, the five categories of features or experience that DIY investors expect in 2019 are comprised of: personalization, accessibility, convenience, thoroughness and sophistication or “PACTS”.

In terms of the top performers in this year’s ranking – which reports performance using a five-star ranking – Interactive Brokers came out on top with 4.5 stars. The top performer last year as well, the repeat performance is impressive considering the speed and scope of changes taking place in the US online brokerage marketplace.

One interesting observation of the field that we also have noted on several occasions is that “active trading” firms are increasingly targeting less active clients with features geared towards less frequent traders. Interactive Brokers is a great example of this, with features like a credit card, bill payments and high interest on uninvested cash, there are certainly mainstream investors as well as active traders who might find that feature stack appealing.

The top five performing firms in this year’s ranking were:

  1. Interactive Brokers
  2. Fidelity
  3. E*Trade
  4. TD Ameritrade
  5. Merrill Edge

So, what is life like for DIY investors on the other side of the border when it comes to online brokerages?

One interesting feature is substantially lower cost per trade. Although Canadian DIY investors have started to see zero commission trading start to emerge, the reality is that the US has a greater variety of lower cost or no cost trading options. For example, Merrill Edge now offers 100 commission-free equity trades per month for clients with assets over $100,000.

Commission-free ETFs are also another area where the US online brokerage space has a considerable advantage over Canadian brokerages. With catalogues of commission-free ETFs that range into the hundreds, there is certainly lots Canadian online brokerages can take note of from the performance of their US online brokerage counterparts.

Perhaps the biggest difference in terms of online brokerage experience for DIY investors in Canada compared to the US is when it comes to technology. While online account opening is still a work in progress at some firms here in Canada, there are virtual reality portfolio management tools already under advanced development from firms like Fidelity, or AI integrated trading experiences with firms such as TradeStation or Interactive Brokers, or smart home connectivity with trading applications at TD Ameritrade. Over the fence, it is truly a brave new world when it comes to technology.

On a side note, this edition of the Barron’s ranking was written by an author new to the Barron’s ranking, Matt Miller. Up until last year, these rankings were conducted and written by Theresa Carey (for the past 23 editions!) who has since moved over to Investopedia. One of the features that appears to be sorely missed by readers is the full spreadsheet of comparisons that appeared in year’s past.

What is interesting to take note of in the US online brokerage rankings that may impact Canadian DIY investors as well as online brokerage firms here is the rapid ascension in ratings that tastyworks has demonstrated.

Largely focused on options trading and founded by Tom Sosnoff, (who also founded and sold Thinkorswim to TD Ameritrade), the playbook of tastytrade (the media arm that is associated with the brokerage tastyworks) is impressive. The brokerage arm – tastyworks – was launched in 2017 so to rise to a middle of the pack ranking overall in such a short span of time is a sign that they are making significant strides with investors.

Why this is worth watching as a force within the online brokerage space here in Canada is because tastytrade’s second largest audience comes from Canada. Already, tastytrade has a nascent relationship with TD Direct Investing – having done joint events with them in the past. This definitely give TD Direct Investing a leg up on the other Canadian brokerages who would want to deliver access to a unique personality and product in the options trading space.

The key takeaways for Canadian online brokerages is that as Canadian DIY investors get to see what’s going on across the border, there will likely be a similar demand for a more rapid and innovative technology experience, lower cost for trading commissions, greater diversity of ETF trading commission-free and exceptional trading-related content. In a nutshell: they have to figure out how to do way more than they’re currently doing now, and do so in a falling commission-rate environment.

Discount Brokerage Tweets of the Week

From the Forums

Straight to the Points

Value investing is all about getting more for your dollar. It’s no surprise then that DIY investors sparked a conversation on RedFlagDeals.com’s investing thread about RBC Direct Investing’s pay with points promotion set to expire at the beginning of March. Check out what investor’s had to say about the merits and limitations of this offer.

Trader’s Remorse

Despite the different coloured logo, things may not always be greener on the other side of the online brokerage fence. One investor had second thoughts about their move from Questrade to BMO InvestorLine, in this post in the Financial Wisdom Forum. Read about what fellow forum users had to offer in the way of sage advice.

Into the Close

That’s a wrap on the action for another week. If you’ve watched any major sporting event or TV event or even surfed around online, you’ve likely seen at least one discount brokerage or robo-advisor pushing hard into the RSP contribution deadline. For those who’ve already tied a ribbon around their RSP contributions for the year, congratulations, there’s one less thing to worry about this week – but if you’re looking for anything to get your nerves frayed, good news, there’s lots on the US and Canadian political scene to keep you from resting on your laurels. Have a winning week!

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Discount Brokerage Weekly Roundup – February 18, 2019

Even though markets took a pause for Family Day in Canada and President’s Day in the US, the calm before the storm is officially over and when the market bells ring again on Tuesday, it will be a mad dash to the RSP contribution deadline. With first time and seasoned DIY investors alike kicking the tires on Canadian online brokerages, the good news is that there is plenty on the table in terms of offers as well as ranking data to help make those important decisions.

In this edition of the roundup we take a deep dive into yet another deals & promotions development in which two Canadian discount brokerages launch late-stage offers. Next, we profile another online brokerage ranking dealing with customer service that revealed some very interesting trends as well as challenger brands that will shift the online brokerage landscape in Canada in the years to come. Of course, we’ll also serve up a healthy dose of online brokerage tweets as well as chatter from the investor forums.

No Country for Old Deals

With the RSP contribution deadline just a few days away, Canadian discount brokerages are pulling out all the stops to try and get DIY investors’ attention (and business) while investments are on their mind. This month has seen a flurry of activity ranging from commission price drops at Scotia iTRADE, something that they have resisted doing for about five years, to just about all Canadian online brokerages putting forward either a commission-free trading or cash back offer.

The trend of posting new offers continued last week with offers from non-bank-owned online brokerages, Questrade and Virtual Brokers, both posting promotional offers.

Questrade’s offer is actually one that deserves a bit more discussion since it is unlike anything we have observed take place in the industry since we have been tracking deals and promotions. Questrade’s latest promotional offer is a transfer-fee coverage offer (something almost all online brokerages offer) however the big development is that Questrade is offering to cover the transfer out fee for any deposit level. This is a massive development for two reasons.

First, the normal deposit threshold for qualifying for a transfer fee coverage offer is between $15,000 and $25,000. Even then, there are times where there is a sliding scale of coverage, so only larger deposit amounts qualify for the full coverage. Occasionally, Qtrade Investor has lowered the transfer fee coverage threshold from the standard $25,000 down to $10,000. So, for Questrade to drop the deposit transfer requirement altogether (for a limited time) is an aggressive move to get accounts that normally would not have qualified for transfer fee coverage to consider switching.

The second reason this offer from Questrade is a big deal is because it reflects their doubling down on a segment of the market that is largely underserved by their competitors. In response, Canadian online brokerages are almost certainly going to have to decide how valuable customer accounts with deposits less than $15,000 to $25,000 are worth, because it now is possible for online investors to ask their brokerage how much they’re prepared to offer to keep their business.

For DIY investors stuck paying fees at online brokerages because their balances are too low, this is an amazing exit opportunity. To be clear, Questrade also charges low balance/inactivity fees, however the threshold to have those fees waived is lower than at their competitors. Questrade charges inactivity fees of $24.95 per quarter on accounts with less than $5,000 in total assets and waives those fees for placing a commission generating trade in a quarter; for individuals under 25 years old; subscribers to a data package and to anyone depositing at least $150 per quarter.

Finally, one more interesting observation with regards to Questrade’s promotional offer is that this is the first time in many years that Questrade has launched a new mass market offer. Earlier on in their history, Questrade was the most active among Canada’s discount brokerages in terms of offering promotions however that activity essentially plateaued with Questrade keeping their same suite of commission-free trading offers. This uptick in their promotional behaviour is a signal that Questrade is revisiting their promotional offers which is one more thing that their competitors now have to factor in.

Also crossing the deals wire last week was Virtual Brokers, who launched a $50 cash back promotion tied to RSP season. Their latest offer, which also comes after having been on the deals sideline for some time, coincides with their being named as Canada’s best online brokerage by the Globe and Mail (alongside TD Direct Investing).

Virtual Brokers’ latest promotion is open to both existing and new clients and offers up a $50 cash back reward for a deposit of $10,000. In comparing the current cash back offers on the market, this is one of the most aggressively priced ones.

To start, they are the only online brokerage offering a cash back amount for a deposit at that level. The next available cash back offer requires a deposit of at least $25,000 – at which point there are three different offers to choose from. Interestingly, the aggressive nature of this offer really stands out when compared against Qtrade Investor, who is offering a cash back amount of $50 for a minimum deposit of $50,000.

Another feature of the latest Virtual Brokers deal that stands out is the timing for when the cash back award will be deposited. According to the terms and conditions of the offer, the cash back will be deposited “after July 1st” which, compared to other offers, is a shorter payback time. To be fair, the exact date was not specified so it does leave considerable wiggle room for that repayment to be issued

Brokerage Minimum Deposit Cash Back Amount
Virtual Brokers $10,000 $50
HSBC Invest Direct $25,000 $188
CIBC Investor’s Edge $25,000 $100
Scotia iTRADE $25,000 $100
BMO InvestorLine $50,000 $400
Qtrade Investor $50,000 $50

 

It should be noted that Questrade does have a referral offer in place that is easily accessible for investors that would also be similar in value to Virtual Brokers’ offer (i.e. $50 cash back for a deposit of $10,000). Scotia iTRADE also has a referral offer however the process of accessing that offer is more difficult than entering in a code.

With over 35 offers now available for DIY investors to choose from, this is a record year for choices and incentives. Not only are there more offers in play for DIY investors to be able access but also the amounts of those offers have increased relative to last year – especially in certain deposit segments.

There have clearly been benefits to anyone who’s waited to see what the online brokerages would come forward with in terms offers. But, for online brokerages, has waiting until RSP season to launch a deal/promo been a good thing?

One hazard of waiting for the RSP season is that consumer expectations shift. If DIY investors look back over the past three to five years, there’s clearly a pattern of Canadian online brokerages offering deals and promotions in the new year or, more recently, from November onwards. Not unlike consumers and Black Friday, however, online investors may start to withhold their account opening or selection until they see the full set of offers available.

What we suspect will unfold is that online brokerages will want to establish a more regular or tactical approach to offering promotions through the year. At the very least, finding a way to stay on investors’ radar throughout the year will be important when it comes to the ‘high season’ of being able to stand out from all of the different offers that will go on display.

The most recent activity from Questrade and Virtual Brokers show, however, that if you’re going to be advertising a promotion later into the RSP season, that in order to get noticed, you will have to go big – which is a great development for DIY investors.

Qtrade Earns Top Customer Service Scores from Surviscor

Earlier this month, Qtrade Investor managed to notch yet another award win in an online brokerage ranking, this time in customer service. Financial services research firm Surviscor announced the results of their service level assessment of the Canadian banking and online brokerage sectors and found that in the brokerage segment, Qtrade Investor provided the strongest service experience.

The results of this year’s service level assessment provided some eye-opening scores, and will undoubtedly cause some furrowed brows across the Canadian online brokerage sector as many of the scores came up less than flattering. More on that in just a moment though.

At the top of the board, Qtrade Investor scored 84% and narrowly beat out RBC Direct Investing who came in second at 82% followed by Questrade in a distant third at 68%. For some context, the average score was 39% while the standard deviation was 27%, which means on a relative basis Qtrade Investor and RBC Direct Investing substantially outperformed the rest of the field.

With an average score of 39% however, this evaluation is indicating that Canadian online brokerages are struggling when it comes to providing what Surviscor defines as quality service. Laurentian Bank Discount Brokerage came in last at 4% while Virtual Brokers landed at 8%. Some big bank-owned-brokerage names also were included in the below average group: Scotia iTRADE, CIBC Investor’s Edge, National Bank Direct Brokerage, and (perhaps the most surprising) BMO InvestorLine (16%).

Of course, while these rankings provide a snapshot of performance over the past year, what is even more interesting – and perhaps telling of a trend in the online brokerage industry – is comparing results year over year.

Online Brokerage 2017 Score 2017 Ranking 2018 Score 2018 Ranking Score Change (y/y)
 BMO InvestorLine 12% 13 16% 11 4%
 CIBC Investor’s Edge 16% 12 30% 8 14%
 Desjardins Online Brokerage 74% T3 52% 5 -22%
 HSBC InvestDirect 28% T8 12% 12 -16%
 Interactive Brokers 54% 6 62% 4 8%
 Jitney Trade 28% T8 24% 9 -4%
 Laurentian Bank Discount Brokerage 4% 15 4% 14 0%
 National Bank Direct Brokerage 28% 10 20% 10 -8%
 Qtrade Investor 90% 1 84% 1 -6%
 Questrade 36% 7 68% 3 32%
 RBC Direct Investing 86% 2 82% 2 -4%
 Scotia iTRADE 66% 5 38% 7 -28%
 TD Direct Investing 20% 11 50% 6 30%
 Virtual Brokers 8% 14 8% 13 0%

Looking at the year over year results, one of the first things that jumps out is that the top two firms are the same this year as last, however the absolute scores are lower. So, last year, Qtrade Investor took top spot with 90% however this year they fell by six percentage points to 84%. Similarly, RBC Direct Investing was in second place last year at 86% and declined to 82% in the most recent set of rankings. While still strong relative to the rest of the field it appears both of these firms took their foot of the gas pedal slightly in 2018.

Who did put more effort into service in 2018, however, was readily apparent. Questrade leaped by 32 percentage points from 36% for 2017 to 68% for 2018. Similarly, TD Direct Investing also shot up by 30 percentage points to 50%, moving from 11th place up to 6th. CIBC Investor’s Edge also showed double digit improvement, climbing by 14 percentage points to 30% for 2018.

In the other direction, the most remarkable drop off in service was from Scotia iTRADE, who fell 28 percentage points from 66% in 2017’s rankings to 38% in the 2018 analysis. Desjardins Online Brokerage, who was tied for third place last year with 74%, fell this year to 5th place (which is still a strong finish) despite a drop of 22 percentage points to 52%.

For DIY investors hunting around for an online trading account, getting a sense of the service experience is partly an exercise in reviewing what other investors have to say about their own experiences as well as relying on rankings and ratings. The interesting contrasts in the service experience appear when compared with the Globe and Mail’s online brokerage rankings – specifically for firms such as Virtual Brokers (which took top spot in the online brokerage ranking this year) and bank-owned brokerage BMO InvestorLine (who also scored well). The wide difference in scoring suggest that there are some areas of the online trading experience where some firms are doing well and others where those same firms might be lagging their peers.

By the same token, for online brokerage firms that are doing well in different rankings/evaluations, this could be a strong indicator of a generally strong (positive) experience. Qtrade Investor, for example, scored well in Globe and Mail ranking as well as taking top honours in the Surviscor evaluation, which indicates that they will likely be a go-to consideration for DIY investors who use rankings/ratings to decide which online brokerages to choose.

Perhaps the most interesting takeaways from the Survsicor results relate to the performance of two particular firms.

The first is Interactive Brokers Canada. Largely relegated to the category of “active trader” online brokerage, this broker has often (anecdotally) been cited by investors as hands off and not providing much in the way of support or service. In the case of the latter, however, there is clearly a disconnect. Interactive Brokers scored fourth in terms of service in 2018, improving 8 percentage points over 2017. While bank-owned brokerages would be assumed to have a lock on offering quality service, in reality 3 out of the top 4 online brokerages in terms of service ratings are non-bank-owned online brokerages.

Another firm to watch, in terms of rankings performance, is Questrade. Rob Carrick stated that “This fast-growing independent is riding an improvement trajectory that will most likely put it on top of this ranking in the next several years.” The surge in performance in service quality rating for 2018 also seem to reflect this trend. So, in terms of driving feature development and client experience across the online brokerage space in Canada, Questrade appears to be taking a leadership position.

As for the firms out of the spotlight, or worse, in the bottom end of the service pack, it will be interesting to see whether the latest Surviscor ratings prompt any notable changes. Interestingly, if the service experience is as good or poor as reflected in the latest Surviscor results, there’s a good chance we will see the spillover in forum and social media posts.

Discount Brokerage Tweets of the Week

From the Forums

Some Q-onfusion

For frequent watchers of the deals and promotions section, Questrade’s latest move to cover transfer fees is a significant event in the marketplace. In this post, from RedFlagDeals.com, there seems to be some confusion regarding the Questrade offer that just launched and a historical offer from different brokerage, Qtrade Investor, whose name tends to trip up forum posters who like to abbreviate.

Passive Aggressive

When it comes to passive investing, it seems like everyone in the business of providing ETFs is jumping on the passive train. In this post, from RedFlagDeals.com, it’s clear that BMO was not about to let some big moves in the ETF space go unchallenged. Check out the reactions to the launch of some new ETFs, ZGRO, ZBAL, ZCON and ZMI.

Into the Close

With another week in the books, it looks like the market storms that spooked investors in December are well behind us. One thing that hasn’t really gone away, however, is the consensus that volatility will be a big part of the market experience for the remainder of the year. As this weekend’s NBA All-Star game showcased, it’s best to be prudent when it comes to the markets. Even though certain trades might seem like a slam dunk, your portfolio can still end up in the loser’s circle by trying to get too fancy.

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Discount Brokerage Weekly Roundup – February 11, 2019

Now that February is here, there’s all kinds of buzz surrounding the entertainment industry awards shows like the Grammy’s and the Oscars. For Canadian discount brokerages, this month also marks an important awards window with long anticipated online brokerage rankings getting published.

In this edition of the Roundup, we take an in-depth look at the latest Canadian online brokerage rankings from the Globe and Mail’s Rob Carrick. Of course, that wasn’t the only big news to drop this past week, as the last bank-owned online brokerage standard commission fee above $10 finally capitulated to join the sub-$10 party. As always, we’ve also got some interesting DIY investor chatter to share to round things out for the week.

Who is Canada’s Best Online Brokerage? Hint: It’s a Tie

It’s incredible how fast time flies. This past week Rob Carrick from the Globe and Mail, published the  20th edition of his popular online brokerage rankings (this is the longest running evaluation of Canadian online brokerages) that delivered its signature mix of insight, evaluation and a dash of sass to report the state of the Canadian online brokerage marketplace in 2018.

As arguably the most popular online brokerage ranking in Canada, there has been a lot that has changed in the industry since this ranking first launched two decades ago. Having witnessed and reported on it all, it is especially interesting to see what Carrick homed in on for this year’s rankings.

Canada’s online brokerages were analyzed and evaluated on the following categories:

  • Client experience
  • Cost
  • Investing experience
  • Tools
  • Website

In keeping with the more recent format, letter grades were assigned to brokerages (as opposed to numerical scores) and there was a mix of objective and subjective elements to the scoring. This year, there was also one less online brokerage on the list, as Credential Direct merged with Qtrade Investor, which resulted in 12 Canadian online brokerages being measured.

Of course, the first question everyone asks of the rankings is: who won best online brokerage? Interestingly, for 2018 it wasn’t just one firm that took home the prize as Canada’s top online brokerage. This year both Virtual Brokers and TD Direct Investing shared the top prize displacing last year’s winner Qtrade Investor from the winner’s circle.

While TD Direct Investing and Virtual Brokers couldn’t be more different in their size, scope of services and recognizability with investors, they nonetheless both took home top marks for their efforts in catering to the mainstream investor in 2018.

Comparing scores this year to last, it is interesting to note that a significant portion of the brokerage pool made strides to improve their overall appeal to mainstream investors. In fact, in the latest online brokerage rankings, there were five online brokerages who scored A- or better compared to only one last year (Qtrade Investor). This bodes well for DIY investors who now have a strong pool of firms to choose from when it comes to selecting an online brokerage.

Online Brokerage 2018 Rating 2017 Rating
BMO InvestorLine B B
CIBC Investor’s Edge C C
Desjardins Online Brokerage C- C
HSBC InvestDirect C- C
Interactive Brokers B+ B+
National Bank Direct Brokerage B- C+
Qtrade Investor A- A
Questrade A- B+
RBC Direct Investing B B
Scotia iTRADE A- B+
TD Direct Investing A B
Virtual Brokers A B

Firms who improved slightly were National Bank Direct Brokerage (C+ to B-), Questrade (B+ to A-) and Scotia iTRADE (B+ to A-). By comparison, both TD Direct Investing and Virtual Brokers improved by a whole letter grade going from B to A, albeit because of different features and improvements.

There were four firms that remained unchanged year over year: Interactive Brokers (B+), BMO InvestorLine (B), RBC Direct Investing (B) and CIBC Investor’s Edge (C).F

Finally, three firms did slightly worse than last year, including Qtrade Investor (A to A-), HSBC InvestDirect (C to C-) and Desjardins Online Brokerage (C to C-). It is worFFth noting that the drop in scores is likely more because of improvements at other online brokerages rather than something that these brokerages did i.e. the rest of the field just did better.

Of course, it helps that the detailed comparisons of features were also published so that we can more closely examine where some of the variation between last year and this year appeared. One of the first differences that jumps out is the foreign exchange conversion fees. While Interactive Brokers Canada remains first in terms of having the lowest fees for forex conversions (USD to CAD), Questrade slipped from 2nd to 12th. Interestingly, Qtrade Investor moved from 6th to 2nd and National Bank Direct Brokerage from 8th to 3rd. This volatility in currency exchange fees is an interesting observation however what hasn’t changed is the extent to which Interactive Brokers is ahead of other online brokerages in terms of this fee category.

Although not as drastic as forex fees, another category that had some interesting shifts compared to last year was the website experience. One of the most notable improvements from the last set of rankings was Virtual Brokers. In 2017 they scored 2.5 (out of 5) but moved up to 4.5, on par with Questrade and behind TD Direct Investing who maintained their 5 out of 5 score. Interestingly, there were a number of scores that declined – even in spite of changes made to their websites over the time between the previous rankings and the latest one. National Bank Direct Brokerage’s website experience score stands out with a score of 1 in spite of a website overhaul that took place in November 2018. Their previous site scored 2 (out of 5) so the drop is a particularly tough break.

As a group, it was also interesting to see how bank-owned brokerages fared. TD Direct Investing (5) and Scotia iTRADE (4) had the strongest website experience scores however their peers didn’t do nearly as well. In fact, the average score of remaining big five bank-owned online brokerages was 1.8, an indication that, according to Rob Carrick, there is still considerable room to improve.

When it comes to determining which online brokerage is best, it is always important to understand exactly how that title is defined.

The 2018 Globe and Mail online brokerage rankings are now in their 20th year and arguably Rob Carrick has one of the best perspectives and context on how the industry has evolved over the time he has been covering it. Even so, it is important for anyone shopping for an online brokerage to note that these are primarily his opinions of what brokerages are doing well (or not). One of the most helpful components aside from the rankings themselves is actually the comparison details which accompany the rankings and provide additional information on features each online brokerage offers.

What is also interesting about this year’s rankings is that they are open only to subscribers of the Globe and Mail.

By putting this highly coveted ranking behind a paywall, there are already ‘gripes’ from online readers who have come to expect this information to be available freely. Of course, the internet being the internet, the popularity of this content means it already has surfaced almost in its entirety on a forum thread for DIY investors.

Why this matters is because unless these rankings are made more publicly available, they will be restricted to the readers of the Globe and Mail (and savvy, forum dwelling investors), which in turn erodes the reach and impact of the ratings. Although this is not the first time this content has been put behind a subscriber paywall, it will no doubt challenge investors to wonder whether they really want to subscribe to the Globe and Mail just to access these rankings. For frugal, tech savvy DIY investors, that’s going to be a tough sell.

Scotia iTRADE Quietly Lowers Standard Commission Prices

If a commission price drops but nobody is paying attention, is anybody going to save? Despite what is an important development in the Canadian online brokerage space, there has been almost zero chatter, buzz or activity online related to the drop in standard commission pricing at Scotia iTRADE last week.

The standard commission price at Scotia iTRADE is now $9.99 per trade, down from the $24.99+ which it has managed to maintain since the wave of commission price drops kicked off by RBC Direct Investing back in February 2014 (for those keeping score, that’s five years ago).

The decision to remain defiant on dropping commissions for so long, however, has appeared to have taken its toll on the most vocal digital users – young investors. By effectively pricing out this group from adopting and potentially evangelizing this online brokerage, Scotia iTRADE is now forced to play catch up.

The issue, however, runs deeper than that. Scotia iTRADE’s $24.99 commissions routinely earned the ire of some DIY investors on Twitter, which means that there is also a lot of negative earned media that iTRADE has to overcome on top of trying to tell their story to DIY investors in a very crowded market.

In fact, it was an interesting decision to drop commission prices to almost exactly the levels other bank-owned brokerages are currently offering and not use this opportunity to introduce a lower standard commission price.

Given the absence of excitement about this move in the DIY investor space (and even nothing on the iTRADE website itself), it is clear that Scotia iTRADE is going to now have to throw some significant marketing dollars to inform investors that standard commission prices have dropped to what everybody else is already offering (and others are offering even lower pricing).

And, they’ll have to do it at a time when their bank-owned brokerage peers and independent competitors are heavily advertising as well. So, unless they can generate some positive buzz, getting the word out and getting people excited are not going to be cheap.

Suffice to say, Scotia iTRADE lowering standard commission pricing is a positive development for DIY investors. A major bank-owned brokerage with a strong platform, commission-free ETFs and (now) competitive pricing means that fellow bank-owned brokerages will be working a little harder to attract clients with less than the $50,000 in assets that the standard commission rates impacted.

The big hurdle for Scotia iTRADE now will be overcoming the years of negative press and doing something bigger than a giant Lego banana that will make DIY investors pay attention (in a good way).

Discount Brokerage Tweets of the Week

From the Forums

Chatter on the Rankings

Readers of the investor forums weighed in on the latest online brokerage rankings from the Globe and Mail. See what users had to say about the winners and other brokerages in this post from RedFlagDeals.

Sorry to Bug You

With any big technology roll out, there are bound to be a few hiccups. When it comes to handling peoples’ investments, however, the chatter around the rollout of Wealthsimple Trade reveals some simultaneously fascinating and frightful scenarios of glitches being detected. Check out this reddit thread to see what DIY investors encountered with their shiny new accounts.

Into the Close

It’s time to roll the credits on another edition of the roundup. The week ahead should be interesting as marketing departments from award winning online brokerages will find clever ways to showcase their accomplishments as investors head into the last few weeks before the RSP contribution deadline. Also coming up this week is Valentine’s Day, which is timely given that investors have been showing the market lots of love to start of 2019 – which may (or may not) change with all of the big earnings announcements also poised to be published this week too. As any seasoned trader knows, however, it’s best not to get emotional over (or fall in love with) any stock, no matter how attractive it might seem. Have a great week!

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Discount Brokerage Weekly Roundup – February 4, 2019

Welcome to the Super Bowl edition of the Weekly Roundup. Just like Tom Brady winning Super Bowls, discount brokerage deal announcements never get old. And, just like the big game itself, for DIY investors, landing a great offer when opening an online brokerage account is also a reason to celebrate.

Fortunately, this edition of the roundup makes scoring a great offer even easier. We kick things off with a highlight of yet another online brokerage deal announced last week and then go deep with an analysis of the deals being offered – specifically the commission-free trade promotions. Also on the field for this roundup: tweets about online brokerages and what DIY investors were chatting about in the forums.

Drill down on discount brokerage deals

There’s an old saying that if you chop your own firewood, it keeps you warm twice. For DIY investors hoping to lower their own costs for investing, hunting around for a promotion or deal will result in even greater savings – especially this month.

Just in time for the final push towards the RSP contribution deadline at the end of February, one more Canadian online brokerage launched a promotional offer, marking the third consecutive week in which a new online trading account deal has launched.

This past week, RBC Direct Investing launched a commission-free trade promotion that offers 20 commission-free trades for a minimum deposit of $5,000. These commission-free trades are good for up to one year and the offer runs until March 29th.

While RBC Direct Investing launched a similar offer late last year (that offer is still technically live) targeted towards healthcare professionals, this latest offer is being widely promoted to the general public and comes with a new (and interesting) deadline.

Now that RBC Direct Investing has more publicly joined the fray, all of Canada’s major online brokerages have an offer of some type to try and entice DIY investors into opening an account. With over 30 distinct offers for DIY investors to sift through, there’s a new challenge to deal with (ie figuring out which deal is best) however fortunately, the two most popular categories of offer fall into either cash back promotions or commission-free trade offers respectively.

We have covered the cash back promotions in previous roundups so in this roundup we’re going to drill down on commission-free trade offers to see what these offers reveal about the brokerages offering them as well as what it means for DIY investors.

Currently, there are six Canadian online brokerages offering a commission-free trade or commission credit offer. As shown in the table below that compares these offers, there are a couple of moving parts when it comes to comparing these offers, including how long an investor has to take advantage of these free trades, what the minimum deposit required would be to qualify and when these offers are set to expire.

Long time readers of the roundup and the discount brokerage deals section will note that the commission-free trade promotions currently being offered now come with a longer duration of time that investors have to take advantage of them has increased. Historically, the duration made available to investors to use the commission-free trades typically ranged between 30 and 90 days. Now, the shortest duration to use these trades is 60 days (Questrade) and the longest at one year, is available at RBC Direct Investing and National Bank Direct Brokerage. It is worth mentioning that this is not the first time RBC Direct Investing has used this promotion. Last year, for example, RBC Direct Investing also offered the 20 commission-free trade promotion with one year to take advantage of commission free trades. With National Bank Direct Brokerage also throwing their hat in the ring with year-long free trades, we couldn’t help but wonder whether the appearance of Wealthsimple Trade’s commission-free trading model has forced Canadian online brokerages to make the “free trade” period longer or if it’s simply competition between larger players driving these dates being extended. Either way, this is a positive development for DIY investors.

Another interesting observation is the expiry dates on the offers themselves. While RSP season was clearly a catalyst to prompting online brokerages to create promotions, the expiry dates of the promotions reflect the various strategies of the online brokerages to stay visible and accessible at a point in the year when money is on peoples’ minds.

In addition to RSP contribution deadlines, there is also tax season, specifically the deadline to file taxes (end of April) that only a handful of brokerages are currently poised to have offers live for.

What individuals who receive a refund ultimately decide to do with money is something that online brokerages like Desjardins Online Brokerage, Questrade and National Bank Direct Brokerage would be in a position to benefit from. The expiry dates for these offers enable them to be visible to anyone shopping around for an online trading account along with the potential cash to fund it with.

The tax season strategy is not new, however this year there is something worth paying attention to. Notably, this year Wealthsimple and TurboTax announced a partnership/integration that would enable individuals who file their taxes through the TurboTax software with easy access to sign up with Wealthsimple.

Although discount brokerages have offered discounts to users of the tax filing software in the past, this integration offers Wealthsimple privileged access to a pool of individuals who are already investing (or thinking about it). Canadian online brokerages with offers that expire close to the RSP contribution deadline may want to consider either extending offers or putting in place other offers geared towards Canadians thinking about what to do with their income tax refunds.

Finally, it’s worth taking a look at the numbers driving the appeal of the offers themselves. In terms of comparing offers to one another, we analyzed commission-free trade offers at each online brokerage that factored in what the maximum number of trades would be for every dollar deposited as well as for the duration of time available to use these offers.

[note: TD Direct Investing’s offer stipulates that trades made prior to July 1, 2019 qualify for rebates. Time to use trades was calculated from Feb. 1, 2019]

On a strict ROI basis, Questrade’s $88 in commission credits offers up a return of 1.7% (trades per dollar deposited) followed by National Bank Direct Brokerage (1%) and RBC Direct Investing (0.4%). Of course, there are other factors to be considered when choosing a commission-free trade offer, most importantly how long an investor would have to take advantage of this offer.

When compared that way, the offer from National Bank Direct Brokerage stands out as providing the best combination of value and availability.

With 50 commission-free trades for a deposit of $5,000, this works out to a 1% return on every dollar deposited. What really adds value here for investors, however, is the duration. With one year to use these free trades, investors can pace themselves with purchases, sales and any other opportunistic strategies. Interestingly, RBC Direct Investing’s latest offer puts them in second place in the group, albeit with a significantly lower number of trades, because the time to use the trades is one year. Rounding out third place was Questrade who had a much lower hurdle to qualify for up to 17 trades (assuming purchases that work out to $4.95 per trade).

Like all comparisons, it is important to acknowledge that different investors will have different priorities.

In this case of the above analysis, it assumes that how many free trades you get is as important as how long you have to use them, which may not be the case for all investors. Some investors might value the flexibility of being able to make a trade later on in the year whereas others are looking for get started with a smaller balance and basic portfolio building.

By comparing the latest crop of Canadian discount brokerage deals, it is evident that less popular online brokerages who want to compete against bigger and better-known online brokerages have to be willing to spend more in order to get the attention of DIY investors.

It is also important for DIY investors to consider what they’re ‘buying’ when they choose an online brokerage. Promotional offers are good consider after due diligence is done on a brokerage rather than as a starting point. Deals shouldn’t be a substitute for determining what features and pricing best suit their needs.

Discount Brokerage Tweets of the Week

From the Forums

Commission-free ETFs

With ETFs continuing to grow in popularity with DIY investors as well as commission-free ETF trading options now available, investors interested in passive investing strategies have more choice than they’ve ever had. In this post from the Canadian Investor thread in reddit, one DIY investor is looking to the forum for building a portfolio through a popular online brokerage.

Mutual funds cheaper than ETFs?

If you think Stranger Things is just a Netflix show, here is something to challenge that. In a recent article in the Globe and Mail, there was a look at some situations with passive investing strategies in which low cost mutual funds end up being less expensive than their popular ETF counterparts. This post in the Financial Wisdom Forum sparked some interesting responses.

Into the Close

That’s a wrap on another action-packed week. Despite a rather sleepy Super Bowl all around, it was fun to witness both the longest punt in Super Bowl history and see Tom Brady collect yet another championship ring. Fortunately, the week ahead will be much more exciting. All the best to everyone celebrating the Lunar New Year and as a gentle reminder, Valentine’s Day is coming up and nothing says ‘I love you’ quite like getting a deal on an online trading account. Just saying. Have a profitable week!

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Discount Brokerage Weekly Roundup – January 28, 2019

It’s hard to believe but the end of the first month of 2019 is almost here. In the short time the new year has been around there has been no shortage of activity in the markets. As timing would have it, however, we’re just a few days away from Groundhog Day, the Super Bowl and despite the reopening of the U.S. government, a possible round two of a government shutdown.

With news clearly going to tilt towards what’s happening in the U.S., we thought it would be a propos for this edition of the roundup to take a deep look at slate of quarterly earnings calls from US online brokerages, to gauge what sentiment was like with these leading firms and as a proxy for what DIY investors here in Canada can expect to see over the course of the year. Of course, there is also some regularly scheduled Canadian content to look forward to in the roundup, with DIY investor tweets featured as well as what online investors were chatting about in the investing forums.

Reviewing U.S. Online Brokerage Trends for 2019

With the Super Bowl just around the corner, it was fortuitous timing to also check in on US online brokerages as their calendar Q4 earnings calls took place this past week. Even though the primary focus for SparxTrading.com is on the Canadian discount brokerage market, the fact remains that the U.S. online brokerages offer a very interesting window into the business of being an online brokerage and can serve as a proxy for what Canadian DIY investors can expect to see (or not see) anytime soon.

We reviewed the earnings call transcripts from three major online brokerages in the U.S. – Interactive Brokers, TD Ameritrade and E*Trade Financial and while there’s certainly lots of inside baseball about the financial performance of each of these companies that was discussed, there were also a number of interesting insights about the state of each business and the industry as a whole that was revealed.

While the financials and quantitative side of the earnings discussion describe an interesting perspective of online trading in the U.S., we zeroed in on a few qualitative items that we think are shaping the U.S. online brokerages and, in turn, that could impact how Canadian online brokerages ultimately end up delivering services to Canadian DIY investors.

Byting More Off

One of the first themes that jumps out across the three online brokerages is that there is a concerted push towards automation.

Interactive Brokers is by far the leader when it comes to automation, with an ingrained culture of attempting to automate “anything that moves” this kind of wholehearted commitment to automation has, in their view, enabled them to offer low cost trading, stringent risk management and incredible scalability.

Fundamentally, they are not only becoming the choice of retail investors but also institutional investors and advisors who believe in the technology. The proof, as it were, is in the earnings pudding. Interactive Brokers operates at an enviable 60%+ operating margins while offering among the lowest cost of trading. The implications of this culture of automation are vast, but one crucial area that it impacts is account growth.

Interactive Brokers’ growth strategy is to build a trading experience that clients will want to refer to other investors to. In fact, according to Nancy Stuebe, Interactive Brokers’ Director of Investor Relations on the conference call – “The majority of our new customers come to us by recommendation of existing customers, so the more we do in order for our customers to have a successful experience, the more likely they will enthusiastically recommend our platform to others. The more new customers we onboard now, the more customers they will bring to us in the following weeks and months.”

Again, we have yet to see a month in Interactive Brokers’ history over the past decade where client account growth has contracted. On a year over year basis, their client accounts are up a staggering 24%.

Why we’ve spent so much time on Interactive Brokers is because their playbook is one that other online brokerages are clearly chasing when it comes to automation and digitization. Both E*Trade’s CEO Karl Rosser and TD Ameritrade’s CEO Timothy Hockey cited the importance of technology and innovation as drivers to competing in the online investing space going forward.

Pragmatically, this means organizations switching to agile development environments (something we’ve seen in Canadian online brokerages). As Hockey also highlighted, this path towards increased digitization means removing the inefficiencies that accompany filling/keying in client information manually (e.g. paper forms).

What that means for Canadian online brokerages is clearly that online account openings and digital experiences are going to be the standard. With several online brokerages in Canada still working on online account opening and still requiring some forms to be printed, signed and submitted, the “old way” of doing things will actually make certain online brokerages less accessible to younger investors who don’t have a printer and don’t want to bother trying to get access to one.

Focusing on China

Another really big talking point that emerged in the different conference calls was China. Specifically, Interactive Brokers – who has clear ambitions to become the world’s most dominant online brokerage and TD Ameritrade, who is venturing into the Chinese online investor market space, clearly see online investing in the Asian markets as another path to growth.

What was interesting about the conversations is the fact that these two leading American online brokerages referenced deploying WeChat integrations and citing dynamics in the Chinese markets as impacting financial performance of the online brokerage itself. In other words, there are idiosyncratic experiences of Chinese investors that U.S. online brokerage leadership have had to familiarize themselves with and stay on top of.

For Canadian online brokerages, there are really only two online brokerages (HSBC InvestDirect and Interactive Brokers) that offer a well-telegraphed access to foreign – and Asian in particular – equity markets.

With Lunar New Year just around the corner, it will be interesting to see which Canadian online brokerages also recognize this as an opportunity to tap into a highly prized investor base with direct and indirect ties to trading in Asian markets. We had noted some interesting developments at National Bank Direct Brokerage, for example, in 2018 with their sponsorship of an Asian-focused investing conference in Vancouver and prior to that, Questrade’s special promotion for Chinese New Year as well as TD Direct Investing offering educational sessions in Mandarin and Cantonese.

Clearly there is already activity from a handful of Canadian online brokerages to connect with segments of the Chinese-Canadian population and the movements from TD Ameritrade and Interactive Brokers also reiterate the importance of this trend across the industry.

Suite Tooth

A third (but by no means final) interesting theme to emerge from these conference calls is that the “new” business model for online brokerages goes beyond just DIY investing.

Even though TD Ameritrade, E*Trade and Interactive Brokers may have started as pure DIY investing platforms, the reality of trends in the past three to five years has been a realization that digital wealth management and advice services, are services that their clients may actually be interested in taking advantage of. Extending this point out a bit further, it clearly appears that online brokerages in the U.S. want to become more than just places for an investor to place a trade.

There is a clear effort to go beyond just DIY investing and provide digital wealth management (i.e. robo-advisors), banking services and human advisors as potential service offerings to DIY investors.

Even though Robinhood spectacularly blundered the roll out of their cash management program, Interactive Brokers did not, and launched a new program to pay interest to clients holding less than $100,000. E*Trade, by comparison, has seen a direct benefit for offering a high interest savings account option to clients.

The line between online brokerage and wealth management firm and traditional bank is blurring.

As financial services gets increasingly more digitized, the comments and activities highlighted in each of these three conference calls clearly point to a convergence of financial services. For Canadian DIY investors this likely means a combination of more choice when it comes to services available at the non-bank owned online brokerages (Questrade’s shift to include traditional wealth management is a good example of this) as well as being marketed to about advice services (digital or human) at the bank-owned online brokerages.

What it Means for Canadian Online Brokerages

In looking across the online brokerage industry in the U.S., it is evident just how different in terms of scale their market is to the Canadian one. That scale becomes important in the Canadian space since the smaller market size in Canada restricts the speed of innovation or the scale of undertaking simply because the business case is harder to make here.

For that reason, it is important to keep a pulse on what’s going on in the U.S. because there are developments to trading platforms, account services, and more that will surface in that market before they show up in Canada. Only the most compelling features, however, will seriously get discussed and acted upon at Canadian online brokerages.

Nonetheless, there is one principle that stands firm at U.S. online brokerages: putting the customer experience first. Fortunately this is something that transcends borders, however tactically, what Canadian online brokerages are able to do versus U.S. online brokerages is evidently quite different.

For a lengthy but informative example of the thinking by U.S. online brokerages on how to become a best-in-class online brokerage, Karl Rosser from E*Trade, provided an answer (quoted below) worth reading.

“So, when I think about customer experience, I think about and I talk about quite a bit what our vision is internally right, as E*TRADE. And when we talk and it’s plastered on all of our walls around our sites it’s on our employees’ desks and their computers, it’s to be the number one digital broker and advisor to traders and investors known for ease of use and completeness of offering, right.

So, the last two I think address your question in the biggest way which is ease of use and completeness of offering. From the first touch, as a customer, you need a mobile device, a mobile application, easy to download, easy to sign on to, ease of use on an online application, easy to find tools and services, a very simple chat pop that you can interact with if you don’t like to talk to a human being or a very nice customer service rep on the other side if you need help and you want some handholding, right. That’s the beginning of it all.

And then, what happens once you sign in and you log into that environment and now you’re in E*TRADE’s site, right. So, you’ve gone in, you’ve logged in, you are a customer. Does it look the same? Does it feel the same? Is it easy to move around? Can you get what you look for in one click, right? Can you drop down a menu, not a hamburger and one of the sites that you have that’s very hard to pull down, but can you sort of hover above it and see everything you want to see on that site and get right to it without getting confused? Is the education offering complete? Is it easy to use? Is it easy to understand, right?

So, I like your time horizon, but we need to get there a lot quicker. I think we are very good today. We need to be great tomorrow, right. That’s what E*TRADE has to be. We’ve always been the innovator and a disruptor in this space. To me, today, innovation has to start with what does your customer want, right. What kind of interaction does your customer want from you? What do they demand out of the device? What do they demand from your platform? You have to read that upfront, you have to have the right data and analytics and you need to drive it home all the way across your platform and site and every person in your organization from the first touch all the way through senior management, all the way up to our Board, needs to know that that customer is first and foremost in our existence and reason for being, right.

So, it’s a long-winded answer. But over a three-year period, that’s where we need to be. But, it doesn’t stop at three years. You’ve got to constantly innovate. You have to constantly listen to the feedback loop. What are your customers saying? What are the new market entrants, right? We talk about all the time as a management team. Yeah, there’s a lot of really cool technology out there, really easy apps to use, really nice things that people can do. What can we learn from that? What type of customer does that draw? What type of account does it open? How often do they interact? What types of balances do they bring? Do we want to offer that type of service? Does it cannibalize what we have? That’s what we think about every day.

So, the question you just asked is at the centerpiece of everything we strategically do as an executive committee here at the firm, all the way through our reason for being. So, it’s a great question and I think it has to start with customer first, completeness of offering, ease of use. It’s as simple as that.”

Discount Brokerage Tweets of the Week

From the Forums

Go Short

This forum user is changing the pace with short term investment options. See what these forum users suggest in tailoring plans to get the best options with what’s currently being offered.

Investing Playbook

Due diligence goes a long way as this forum user notes their investment process and takes to the Financial Wisdom Forum to see if there’s room for improvement. Fellow forum users jumped in to provide their feedback with their advice on managing investments. See what they had to say.

Into the Close

That’s a wrap on the biggest online brokerage news for the past week. From political footballs to actual footballs, the news channels and social media channels alike will be scrambling to keep up with all of the action. Layer in earnings announcements and it’s bound to be a volatile week. Regardless of whether you’re bullish or bearish though, it’s best to remember that past performance doesn’t predict future results. Unless you’re Tom Brady.

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Discount Brokerage Weekly Roundup – January 21, 2019

If there’s one way to beat the cold, it’s to keep moving. For Canada’s online brokerages, the sprint to the RSP contribution deadline is on and as a result they’re pulling out all the stops to keep the activity level high with new pricing, advertising and promotional offers.

In this edition of the roundup, we profile yet another cash back promotion that launched last week, this time from an online brokerage that has been popular on the awards podium. From there we’ll look at some smaller developments that crossed our radar, including new ads promoting a revised commission plan as well as a platform outage that serves as a good reminder of the hazards of trading online.  As always, we’ll take a look at what online investors were talking about online on social media and in the forums.

New Cash Back Promotion from Qtrade Investor

Groundhog Day isn’t until February 2nd but anyone reading the Weekly Roundup will have noted that yet again, there is another new cash back promotion launched by a Canadian online brokerage. This time around, it’s Qtrade Investor, whose latest cash back offer brings the tally of this category of promotions DIY investors can choose from to 6.

Qtrade’s is typically very calculated as to when it releases promotional offers, so it is particularly interesting to note how they’ve priced their offering, considering that they are one of the last online brokerages to do so ahead of the RSP contribution deadline next month.

One of the first things that leaps out about their cash back bonuses is that it lags competitor firms in all deposit categories – especially so for deposits under $250,000. That said, Qtrade Investor has a unique advantage in the online brokerage space, namely that they have a reputation for strong finishes in all of the most influential Canadian online brokerage rankings. And, with the Globe and Mail online brokerage rankings just around the corner, their timing couldn’t be better.

For that reason, Qtrade Investor has an advantage when it comes to reputation that can offset having to provide the “best” price for a cash back value – or at least that’s what they’re banking on.

For DIY investors with $50,000 to deposit, for example, Qtrade Investor will have to demonstrate significant value when compared to BMO InvestorLine, for example, whose offer is $400 – or 8x more – than Qtrade Investor’s offer of $50.

Another interesting observation about Qtrade’s promotional offer is that the deposit tiers are segmented the same way as other competitor firms, all the way up to the 1M+ category. So, although Qtrade’s offer lagged other cash back offers up to the $500,000 deposit level, they aggressively raised their offering at the $500,000 and $1M+ tiers. In fact, at the $1M+ deposit level, they are tied with Scotia iTRADE for the second highest cash back offer and have outbid HSBC InvestDirect – a strategic competitor in Western Canada – by a substantial margin at this deposit tier.

In what is the tactical equivalent of a ‘limit order’, it appears that Qtrade Investor has clearly marked out where they see the greatest value in competing aggressively with cash back offers and where they are content to let investors enjoy a modest bonus.

For DIY investors, the fact that one of the most popular and highly ranked online brokerages also now comes with a cash back promotion is a bonus. With the Globe and Mail online brokerage rankings just around the corner and a recent victory with the Surviscor rankings, online investors looking for a well-ranked online broker now have a little extra incentive to consider the brand.

With just over a month to go until the RSP contribution deadline and almost all of Canada’s major online brokerages now offering up incentives, it’s a sprint to the finish line for DIY investors. Happy hunting!

Virtual Brokers Rolls out New Ads

With the roll out of their new commission pricing and buzz starting to build around it, Virtual Brokers launched a new commercial featuring their latest offer.

Targeting the mobile & texting crowd (e.g. millennials), this new ad stays true to Virtual Broker’s historical use of animated characters to describe their service offerings. While it won’t likely generate the same kind of buzz that either the Wealthsimple, Questrade or Scotia iTRADE ads have, it will nonetheless be interesting so see how this new ad starts to spark interest and curiousity among DIY investors who can’t help but find the prospect of $1.99 per trade (well technically per ticket) tempting. See the ad below.

Scotia iTRADE Platform Spins Out

It seems like the beginning of a new year is a tough time for Canadian online brokerages. This year, it was Scotia iTRADE who suffered a trading platform outage during market hours. While crypto and weed stock mania can’t really be singled out as the issue, it is nonetheless an important reminder to DIY investors that online brokerages big and small can suffer from a wide range of connectivity issues. And, even though trading desks and call centres may exist, they’re not necessarily a great alternative if they get overloaded by large volumes of calls and emails.

From the Forums

Good Catch

For DIY investors interested in capitalizing on commission-free trading, there is an interesting way to access popular passive investing ETFs XBAL and XGRO from Qtrade Investor and Scotia iTRADE. This forum post highlights to fellow forum readers the option to take advantage of these popular ETFs.

Open & Shut case

For active traders, looking for opportunities to trade the markets sometimes stretches to pre or post market action. Unfortunately for one DIY investor posting in this forum on reddit, they learned that trading Canadian markets is limited compared to the US.

Into the Close

That’s a wrap on this edition of the roundup. US markets will be closed on Monday for Martin Luther King, Jr Day. On our radar heading into the new week will be earnings for US online brokerages. After a healthy earnings surprise for Charles Schwab, eyes will be on Interactive Brokers and TD Ameritrade to see how recent volatility will translate into earnings as well as on what trends they’re seeing for DIY investing. Also, with the US Government shutdown still in the mix, the World Economic Forum (as well as a bunch of cannabis companies heading to Davos too) and lots of other earnings means traders will be looking for the markets win streak to continue.

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Discount Brokerage Weekly Roundup – January 14, 2019

As any avid sports fan or seasoned trader knows, sometimes there are lucky bounces, sometimes not. Fortunately, for many DIY investors, it was the market bears who got the bad bounce off the uprights. For many online brokerages, it’s also good news as long as the bounce sticks.

In this edition of the roundup we’ve got a stacked line up of developments for DIY investors to stay on top of. First, another week in 2019 and another new cash back offer to announce – this one also from a bank-owned online brokerage. Next, we look at a slew of stories that crossed our radar last week, including the big news of the ETF alliance between RBC & iShares, leadership changes at Interactive Brokers, how Twitter is being used by DIY investors to connect with Canada’s online brokerages as well as couple of great stories of online brokerages supporting good causes. As is customary, we’ve also got chatter from the DIY investor forums to share and what folks were saying on Twitter about (or to) Canadian discount brokerages.

HSBC InvestDirect Launches New Cash Back Offer

After a long break from the deals & promotions section, HSBC InvestDirect is stepping back in with a new cash back offer for DIY investors and also offering up some serious competition for its fellow bank-owned online brokers. The new tiered promotion, which is open to both new and existing clients, offers between $188 and $1288 in cash back bonuses for deposits ranging from $25,000 to $1M+.

There are two important observations about this new offer from HSBC InvestDirect that are worth noting.

The first is that for the deposit range between $25,000 to $50,000, this happens to be the best cash back promotion by a substantial margin (88%). On the heels of the aggressive cash back reward on their banking side, this new offer by HSBC InvestDirect is one that might cause DIY Investors to at least kick the tires on this discount brokerage. And, even though this offer is not the best for investors with deposits between $100,000 and $250,000, it does come close to other bank-owned brokerage offers.

Another important observation for this offer is the duration of it.

This cash back promotion is set to expire at the end of April – which is much later than offers from BMO InvestorLine (expires Feb. 28th), CIBC Investor’s Edge (Mar. 24th) or Scotia iTRADE (Mar. 31). This sets up an interesting scenario heading into the spring where, in addition to folks thinking about their RSP contributions, there’s also going to be consideration given to what to do with any income tax refunds as well. As it stands, that would leave HSBC InvestDirect with very little competition in the cash back promo segment.

Of course, there are also important details for DIY investors to consider about this offer. Unlike other cash back offers currently in the market, in order to qualify for this offer, DIY investors have to execute a minimum of three trades before the end of April, which at HSBC InvestDirect’s standard commission rate (for North American equities) of $6.88 works out to be about $20.64 that DIY investors have to pay.

Even so, at certain tiers, it still works out to being a relatively small price to pay to qualify for a cash back reward and, bonus win for HSBC InvestDirect, DIY investors will know how low the trade commissions are per trade and might just be impressed enough to stick around.

As we had mentioned in last week’s roundup, the competition for DIY investors’ assets is heating up.

With another bank-owned brokerage jumping into the mix, it is going to be hard for those not in the deals pool to stay on the sidelines for much longer. The same could also be true for DIY investors considering opening an online trading account.

This is probably the ideal time of year to consider opening an online account if getting an extra incentive is at all important – especially for cash back promotions.

Based on this latest move by HSBC InvestDirect, we suspect it won’t be the last announcement of a new promotion for a Canadian discount brokerage before the RSP contribution deadline of March 1st, 2019. Stay tuned!

Lightning Roundup

Blackrock Canada’s iShares Teams Up with RBC

This past week there was a colossal shift in the wealth management space that surely sparked intense conversation (perhaps some panic) among some of the major ETF providers in Canada.

RBC Global Asset Management and Blackrock Asset management announced earlier this week that they would be forming a strategic “alliance” and combine forces to create RBC iShares. The new ETF powerhouse will have about $60 billion in assets under management and roughly 150 ETFs. Most notably, however, it gives RBC a leg up on BMO’s ETF selection and position in the Canadian ETF marketplace.

While things should largely stay the same for DIY investors, there will be a few changes made to the rosters of funds being offered which appear to be scheduled to take place around early April 2019.

Importantly, there will be no change to the names or ticker symbols of RBC ETFs or iShares ETFs as a result of the alliance, which means trading them should be seamless.

For more information on the new RBC iShares offering, the website: https://www.rbcishares.com/ offers up more details.

Interactive Brokers’ Founder Hands Over the Reins

Some big news for Interactive Brokers this past week as founder, chairman and CEO of the online brokerage announced that he is “retiring” as CEO and appointing long time president of the company, Mr. Milan Galik, as his replacement. According to the press release, Galik has been with Interactive Brokers for 28 years and has served as its president since 2014.

DIY Investing on Twitter

This past week we noted an interesting development on social media – specifically about what DIY investors are talking about when it comes to Twitter.

Even though it was a small ‘blip’ on the radar it was nonetheless important to flag that DIY investors – many of whom are on Twitter and actively trading or watching developments in the markets via their Twitter accounts, have called out bank-owned online brokerages for a lack of presence on the social media channel.

To clarify, this tweet indicated one user’s frustration with being able to access RBC Direct Investing via Twitter when – according to this user – other bank-owned online brokerages offer a direct route to their self-directed investing units on this channel. For RBC, the Twitter handle @AskRBC is the single point of contact for all of the banks brands – so often answers about the specific arms are routed to those divisions.

What stood out about this encounter, however, was that an influential voice in personal finance and consumer advocacy, Ellen Roseman (at the Toronto Star), also weighed in on the presence of online brokerage-specific Twitter accounts.

Further, someone at the senior level of RBC wealth management also responded directly on Twitter to this DIY investor. And, while not unprecedented, it is rare to see executives at these institutions weigh in on individual issues. Of course, we’ve noted that an online brokerage doesn’t need its own Twitter handle for executives to get involved.

The president of BMO InvestorLine, for example, does have a Twitter handle and has personally responded to individuals even though BMO (like RBC) has a central Twitter handle. Conversely, we haven’t really seen Scotia iTRADE’s senior executives take to the Scotia iTRADE Twitter handle to respond directly to a user in the same fashion – that is typically handled by their social media team.

The conversation about the conversation on Twitter among DIY investors and online brokerages is an interesting one.

On the one hand there is typically a lot of sensitive information that neither party would want to disclose to the general public. On the other, part of the strength of a platform like Twitter is that it provides a very public and documented opportunity to call attention to the strengths and shortcomings of a particular brand – in this case an online brokerage – to a wider audience.

Moreover, it appears that at least at some bank-owned brokerages, comfort with engaging directly on Twitter is growing (albeit slowly). Most importantly, however, it shows that it is important for online brokerages (not just the parent brands) need to consider making themselves accessible to DIY investors on the online channels that they’re clearly spending time on.

Capitalize for Kids Student Competition Deadline Approaching

Also spotted on Twitter this past week was a notice from Capitalize for Kids, the non-profit organization dedicated to helping raise funds for research in children’s mental health.

Another trading competition for students across Canada is being launched with the top prize of $10,000 going to the winner of the contest. The lead sponsor of the competition is CIBC Investor’s Edge. Visit the Capitalize For Kids website here for more information & be sure to share.

Questrade Delivers on Massive Donation to Food Banks Canada

Another very inspiring bit of news to kick off the new year (also spotted on Twitter) was the tweet from Food Banks Canada announcing the support given by Questrade to donate the equivalent of 250,000 meals to the organization.

In many respects it is a win-win-win with. The benefit for Questrade is that they’re demonstrating their commitment to being a socially responsible organization. For a certain demographic (i.e. millennials) what a brand stands for (and what they actually impact) is an important component in deciding whether to work for or purchase from that brand.

Questrade’s recent tv/video commercials have also positioned them as a challenger to traditional fee-based advice, so this initiative amplifies some of the messages about their brand they’re trying to create. And, as a bonus, organizations such as the Food Bank of Canada stand to benefit and in turn, provide assistance those in need.

https://twitter.com/foodbankscanada/status/1083406906243325954

Discount Brokerage Tweets of the Week

From the Forums

Don’t Be Fooled by Rocks We Got

The wealth management waters are getting choppy. This forum user notes RBC’s move to partner with Blackrock and takes to the forums to see what this means for investors and how it changes the landscape for other wealth management firms.

Lip Service

Despite digitization taking hold of the world, there are clearly pockets of the wealth management space still working on analog. This forum user was shopping for portfolio managers and tried to find tips on where and how to find the right fit.

Into the Close

If the pace of 2019 already being set is any indicator, this is going to be a very eventful year. Interest rates may not have made the same new year’s resolutions as a lot of others, and instead look to be taking a breather – which will be good news for equity investors – for now. Perhaps the best news is that we now know the official date that Winter is Coming – which will be later this spring. Go figure. Either way, investors will want to stay frosty for the volatility ahead.

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Discount Brokerage Weekly Roundup – January 7, 2019

Welcome to 2019 and Happy New Year! The arrival of a new year brings with it the promise and opportunity for change and so, we’re happily announcing a change of our own to the Weekly Roundup, now moving to a new day and time, launching on Monday mornings. Of course, we’re not the only ones starting off the new year with some big changes – as Canadian online brokerages and financial services providers ring in 2019 with some interesting moves of their own.

In this edition of the roundup, we take a look at the latest new discount brokerage promo to cross our radar and what it means for DIY investors looking for a new online brokerage account. Next, we dive into another possible game changer from a wealth management firm that is doing its best to reshape the conversation about investing in 2019. Of course, some great traditions in the weekly roundup persist into the new year, including our lineup of DIY investor tweets as well as what investors were talking about in the forums.

BMO InvestorLine Launches New Promo Offer

There’s nothing quite like starting off the New Year with a win. And for DIY investors, despite the market volatility, the good news is that BMO InvestorLine has launched a new cash back promotion.

Launched on January 3rd (and through February 28th) the new cash back promo offers between $400 and $1600 cash back for deposits ranging from $50,000 to $1M+. The offer is open to new and existing clients so long as the qualifying deposit amounts are “net new assets” to BMO.

There are several interesting observations about this latest promotion from BMO InvestorLine that are worth noting for anyone watching the Canadian online brokerage deals activity.

First, this cash back offer, in absolute terms, the highest cash back offering currently available. With $1600 now being offered for deposits of $1M+, BMO’s offer outbids Scotia iTRADE’s offer of $1500 for the same deposit tier. Interestingly, when compared to last year, the cash back amount for this deposit level is 33% higher. Last year around this time, the highest cash back amount being offered for that tier of deposit was $1200 from Scotia iTRADE.

It got us curious, however, to see how other deposit tiers for cash back offers stacked up against last year’s analysis so naturally we compared them to see how things have changed – and that was super interesting.

 

Upon closer inspection, another important point about that jumps out about the latest cash back offer is that it reflects a change compared to last year in terms of who else is offering up these kinds of promos. Last year there were five online brokerages: BMO InvestorLine, CIBC Investor’s Edge, Questrade, Scotia iTRADE and TD Direct Investing. This year, however, TD Direct Investing elected to go with a commission-free trading offer instead of a cash back so in terms of cash back offers, it’s BMO InvestorLine, CIBC Investor’s Edge, Questrade and Scotia iTRADE. Questrade is being included in this set even though their offer is part of a referral campaign (see below for further explanation).

Another interesting observation of last year’s cash back offers compared to this year’s, is that there aren’t as many areas in which there are at least two brokerages tied for the best cash back offer. In fact, this year only at the $25,000 deposit level is there a tie between CIBC Investor’s Edge and Scotia iTRADE (both of whom are offering $100 cash back).

When it comes to online trading account deals at the outset of 2019, it appears BMO InvestorLine has come out swinging and has the best cash back offer at the $50,000 deposit level and from $250,000 and up.

What is particularly interesting about the cash back promo from BMO InvestorLine is that the amount being offered at $50,000 deposit level is double what the best offer was last year ($200 from CIBC Investor’s Edge). This year also, BMO InvestorLine’s cash back offer at deposits of $50,000 to $100,000 are double that of their bank-owned brokerage peers CIBC Investor’s Edge and Scotia iTRADE and more than four times that of Questrade’s offer of $100.

Another substantial increase (80%) compared to last year was noted at the $250,000 deposit tier. BMO InvestorLine’s offer of $900 cash back is much higher than last year’s offer of $500 cash back from TD Direct Investing. This year, however, Scotia iTRADE isn’t that far behind at this price tier with an offer of $800 on the table – a signal that competition for this level of assets has jumped dramatically.

It wasn’t all good news for DIY Investors hunting for a cash back offer this year. In the deposit tiers between $10,000 and $25,000 there was a decrease of 50% compared to 2018. Last year, TD Direct Investing’s offer of $100 gave it the best cash back offer in these deposit tiers however this year, Questrade is the lone standout in this segment via their referral offer of $50. It should be noted that BMO InvestorLine, Qtrade Investor and Scotia iTRADE also have similar cash back referral offers in place but theirs are not as accessible as are Questrade’s and for that reason they are not included in the table below.

Overall, the cash back promotions reveal that competition for investors with certain levels of assets is increasing in 2019. For DIY investors with at least $50,000 in assets, there’s clearly a battle going on between a couple of bank-owned online brokerages to win clients in this segment.

Interestingly, for cash back promotions, the segment of investors with less than $25,000 have been largely overlooked. This is a curious circumstance as it creates a perfect storm for any online brokerage that is targeting younger/millennial investors to get significant attention with that segment (see who might be interested in our next story below).

Given how competitive the online brokerage space is, there’s a strong likelihood that many online brokerages will not want to leave the sub $25,000 client on the sidelines or subject to just commission-free trade offers. And, we’re wagering that it won’t be left to the sidelines for very long as RSP season is now upon us. Stay tuned.

Wealthsimple Makes Online Investing Human

As the world of online investing gets more digital, there’s an interesting paradox playing out by those who are providing those service, namely they’re trying to shift the focus of the experience to being more human.

Ironically, last week the poster child for robo-advice, Wealthsimple, revealed that they are launching a mutual fund investment firm, with actual humans providing advice and managing clients. Even so, this story isn’t about their move into the human world of advising, but rather with Wealthsimple’s latest blog post which once again casts a light on how they’re changing the wealth management conversation in Canada.

This blog post, in which they’ve revealed their latest ad campaign, showcases nothing about finance yet capture exactly what “personal finance” is intended to support: living life.

Their blog post goes into more detail as to their intention behind this series of commercials, including who they chose to collaborate with when putting these spots together. It’s worthy of a read to see just how different it looks and feels when compared to almost anything else that’s being produced at Canada’s online brokerages.

The choice to talk about life instead of numbers or features is a gamble in such a fee-driven space, but it is precisely that which sets them apart their peers.

Even though the management of money ought to be rational and free from emotion, in the real world, money is an emotional subject. In these commercials, do you learn about Wealthsimple’s fees? No. Do you learn about robo-advisors? No. Investing? Zilch. Client experience? Nada. In fact, nobody is heard saying anything – the scenes speak for themselves and more importantly, and powerfully, these scenes speak to just about everyone.

These are commercials about hope and the future – which taps into what people invest for. Just like the name of Ellen DeGeneres’ new comedy special on Netflix, these commercials from Wealthsimple are relatable.

Another financial services brand, Questrade, has also been ramping up its use of “real life” situations to convey the broader point of the human side of their digital wealth solutions. Although not as artistic, they are impactful. Their series of “difficult conversations” about money have provoked many reactions on social media – Twitter in particular – a sign that they’ve successfully struck a chord with investors.

Why this is important is because when it comes to online investing and trading, yes commissions and pricing matters, but how consumers feel about what a brand stands for also matters. For online brokerages in Canada this is a glaring gap that Wealthsimple is clearly hitting into. And, even though Wealthsimple isn’t a discount brokerage just yet, their zero-commission Wealthsimple Trade product will, for all intents and purposes, compete with Canada’s online brokerages.

That also raises another important point: semantics. The notion of who is managing money is getting blurrier now that robo-advisors or digital advice is a thing. For DIY investors, it started with “discount brokers” however a “discount brokerage” is inherently associated with price. The base case: it’s cheaper to manage your own investments than to have someone do it for you.

The language shift over the past five years has been subtle, however, as “discount brokerage” has given way to “online brokerage” and recently “direct investing” or “self-directed investing.” Regardless of which label is used, in many respects the experience at the “discount brokerages” still feels transactional and commoditized whereas the new breed of wealth management service providers appear to be appealing to more human-centered themes.

There are lots of online brokerages in Canada competing on commission price, but very few online brokerages competing on values.

Yes, larger bank-owned brands do have very deep corporate social responsibility initiatives, but they also have all of the friction that being a large financial organization brings with it in terms of communicating authentic values. Challenger brands, like Wealthsimple or Robinhood and even Questrade in their earlier years, get attention precisely because they don’t represent the status quo.

What will be interesting to watch for 2019 is whether Canada’s online brokerages will be able bring a more human side to their business and whether they will be able to tap into the hearts (and wallets) of DIY investors.

Ultimately, choosing a discount brokerage (and any financial services provider really) shouldn’t be emotionally driven. That said, emotion is always going to be part of the financial services equation. For DIY investors, however, it is wise to use that emotion to help pose one fundamental question: “How well will my needs be looked after?”

Wealthsimple’s latest campaign is clearly demonstrating to consumers that “they get it” when it comes to the journey. To Wealthsimple’s credit, this new campaign is likely going to break through the noise of a lot of other advertisements and get people’s attention and curiousity. The next challenge will be following through on the promise to help investors through their ‘tomorrows’ which, given the state of today’s markets, will be a formidable challenge.

As for other Canadian online brokerages, they have been dealt one more hurdle to figure out for 2019, which is how to go beyond “price” and stand out by standing up for something. This year, if there’s one thing that shouldn’t be discounted, it’s that there are people on the other side of the screens.

Discount Brokerage Tweets of the Week

From the Forums

Margin Caller ID

As consumer experiences in other parts of the digital world shape expectations for DIY investors, one forum user shares how one online brokerage’s notification of a “margin call” type event could end up leading to them switching. Find out more in this post from RedFlagDeals.com

Dipping into a New Pool

One DIY investor took to the forums to test the waters on switching brokerages for a no fee service from Questrade. See what these forum users had to say in this post from Canadian Money Forum.

Into the Close

That’s a wrap on what was an eventful first week of 2019. Falling apples have typically been symbolic of gravity, and poetically describe markets out of the gate in the new year. Of course it might be precisely because things are more unpredictable than normal that the theme of 2019 will be volatility and everyone will trying to figure how best to capitalize on it. One thing you can bet on, it won’t be boring.

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Discount Brokerage Weekly Roundup – December 21, 2018

In addition to frenzied shopping, and trading platforms flashing more red than Rudolph’s nose, if there’s one thing to look forward to in the end of year hustle, it’s blockbuster releases. And, here at SparxTrading, we did not want to disappoint.

This final edition of the roundup for 2018 ends on a high note with a review of the launch of our special series: the Canadian online brokerage look back on 2018 and preview to 2018. We’ve been teasing this launch for a few weeks now and we’re very excited to have rolled out the blog version earlier this week. To give loyal readers of the Weekly Roundup a little thank you for reading, this roundup also has a first look at the full magazine version here before it goes live on our blog (yay presents!). Of course, that’s not the only gift in this roundup. In time for Christmas, there’s also a new online brokerage deal to announce from one of Canada’s largest online brokerages that will be sure to excite investors shopping around for a new trading account. Also, we’ve got a great stocking stuffer with the latest set of Canadian online brokerage rankings and ratings. Finally, it wouldn’t be a proper roundup without the discount brokerage tweets as well as chatter from investors in the forums.

Look Back & Look Ahead: 2018 Online Brokerage Review & Preview to 2019

After lots of anticipation, coffee, trimming, cutting and wrapping it’s finally here (and just in time for Christmas)! The much-awaited third edition of SparxTrading’s exclusive Canadian Online Brokerage Look Back / Look Ahead series for 2018/2019 is now live.

This year’s edition features nine of Canada’s online brokerages big and small, who’ve shared their milestones for 2018 as well as what’s around the corner for 2019. And wow, are there ever some interesting announcements.

To recap, the annual look back & look ahead series is an opportunity for Canada’s online brokerages to directly, and in their own words, share with DIY investors what it is they’ve been up to and where they see the priorities for the year ahead.

The format we’ve developed is a unique one in the Canadian online brokerage space. Unlike the structure of a review or rating, this compilation provides a good look at what online brokerages accomplished in the year as well as their vision for their priorities into the next year. Given the highly competitive nature of the industry, it is a challenge and somewhat rare to find online brokerages providing as much detail as we saw this year – so this is a definite score for readers. To be clear, there were still several intentionally vague answers about what 2019 holds for some brokerages, however, judging by both the activity in 2018 as well as from those brokerages who have telegraphed what they’re going to doing in 2019, the industry is definitely not standing still. In fact, quite the opposite.

Among the themes that we review in this year’s piece, is the influence of millennial investors on so many different elements of the online brokerage industry. This digitally savvy segment of the market has forced a reimagining of online investing. From mobile-first design, to expectations about performance,  pricing and user experience to the access they demand to investment products, catering to the requirements of this increasingly important demographic is pushing technology teams at online brokerages into overdrive.

Another major theme that appeared to be a driver of online brokerage strategy is buffering against commission drops and the entrants of competitors, like Wealthsimple Trade.

While Wealthsimple Trade has rightfully grabbed the spotlight for their commission-free trade announcement in the summer of this year, a black swan competitor appears to be poised to challenge existing online brokerages. Jitneytrade, which was acquired by Canaccord Genuity earlier this year, announced that they are launching a mainstream-investor focused online brokerage trading experience.

After years of catering almost exclusively to professional or highly active investors and traders, Jitneytrade announced their intent to launch a more mainstream service. Without giving too much away, some of the features of their new brokerage offering will include free ETF trading, young investor pricing, digital account openings and mobile applications to name but a few. This feature set would put them on par (if not possibly ahead of) many other mainstream-investor-oriented online brokerage offerings from their competitors.

The result of consolidation and acquisitions in the Canadian discount brokerage space is that the bigger and better capitalized entities are able to make bolder bets on the Canadian DIY investor. These bets may be driven, in part, by a wager that even DIY investors will be open to having portions of their wealth in a ‘managed’ format.

From a big picture perspective, Canaccord Genuity, CI Financial and Desjardins via Aviso Wealth have collectively introduced serious competition for share of investor wallet to the standard bank-owned brokerages’ wealth management practices. In particular, they are equipped to provide a suite of services historically dominated by bank-owned brokerages. In the case of CI Financial and Aviso Wealth, there is the full spectrum of wealth management – including robo or digital advice – that investors can access.

While the launch of InvestEase by RBC, the coming digital wealth management offering by TD Direct Investing and digital advice programs at BMO, Questrade and HSBC, it is clear that those online brokerages that don’t currently have a digital advice product live, are likely in pursuit of getting this offering on a roadmap to launch soon.

And, speaking of what’s coming around the corner, there were several interesting clusters of developments that emerged as priorities for Canadian discount brokerages in 2019.

One of the clearest areas in which online brokerages appear to want to improve and focus efforts on is the mobile investing experience. Firms such HSBC InvestDirect, Jitneytrade and Qtrade Investor have each mentioned this as an area in which they would be looking to enhance their current online trading offering.

A second important area of focus for online brokerages will be content. From educational offerings, to product and platform orientation to market intelligence and personal financial planning, financial content production appears to be ramping up in 2019. In this regard, the larger bank-owned online brokerages have an edge as they have deep talent pools of analysts and existing stock market research that they can leverage and turn into content investors, especially DIY investors, would be hungry for.

Finally, one of the most interesting things that we noted in this year’s look back and look ahead series comes from what was NOT said – namely pricing. None of the online brokerages who participated in this series mentioned dropping their commission prices (yet) however it’s hard to imagine that online brokerages aren’t already planning out how to navigate in that (soon to arrive) commission-free trading world.

The sum total of activity reflected in the submissions of Canada’s online brokerages about 2018 and 2019 indicate that they are working quickly to build strong value drivers. While order execution may be something that can be commoditized, user experience and account management can’t. Similarly, great service, attention to details and support are also things that clients may be willing to pay a bit more for.

For DIY investors, 2018 saw brokerages make substantial enhancements that will start to pay off with more stable, scaleable technology experiences in 2019. Competition for DIY investor business continues to drive commission prices for online trading lower as well as introduce interesting incentives (such as deals), valuable resources and a concerted effort by online brokerages to win over (and keep) investors. In spite of market volatility, heading into the new year, this could be the best year yet to be a DIY investor hunting for an online brokerage account for the long haul.

TD Direct Investing Launches New Promo in Time for the Holidays

Just in time for the holidays, the online brokerage arm of the big green bank, TD Direct Investing, delivered some festive cheer in the form of a new commission rebate promotion. There were several interesting observations about this promotion that stood out – especially against the landscape of current offers – that might signal a subtle shift in how discount brokerage deals are run.

First, however, let’s take a look at the details of the offer. This is a commission-rebate offer which means that trade commissions that meet eligibility requirements, will be rebated by a certain point after the trades are placed. In this particular offer the number of trades that can be rebated are between 25 and 200. To qualify for this offer a minimum deposit of $15,000 is required.

In terms of the window of time that trade commissions can be rebated, the deadline to place eligible trades is before July 1st, 2019. This means that users that open accounts sooner derive more benefit from this offer than those who open an online investing account later, in that early birds have more time to use the commission rebate.

It is noteworthy that of the discount brokerage offers that are currently live, TD Direct Investing has elected to stick to commission rebates (e.g. a form of commission-free trading) rather than compete directly with cash-back offers. This pits TD Direct Investing’s offer against the other commission-free trading or commission rebate offers from National Bank Direct Brokerage, Desjardins Online Brokerage and Scotia iTRADE. Of course, TD Direct Investing enjoys a massive advantage in terms of recognition and market share so relatively speaking, they don’t have to bid as aggressively to win new assets.

Another very interesting feature of this offer is that individuals need to register first in order to qualify to be eligible. While other online brokerages, such as Questrade, RBC Direct Investing or Scotia iTRADE have attempted something similar, they have often disclosed codes in their terms and conditions which means that filling out a form is optional. In the case of this offer from TD Direct Investing, filling out the webform is one of the mandatory conditions attached to this offer. From a marketing point of view, this means that users who submit their information into TD’s system then become prospective clients that TD can follow up with. Though subtle, it is one way that TD may be able to improve their success rates at DIY investors opening an account with them.

Finally, the timing of this offer indicates that TD is once again focusing its promotional campaign squarely on the RSP season rush. 2018 was a big year for new account openings, spurred at the outset by strong momentum in cannabis and cryptocurrency stocks. With the recent volatility across markets, however, this should be an interesting RRSP season for online brokerages. With this offer from TD Direct Investing now going live, DIY investors have the best selection of deals that they’ve had since last RSP season, however they’ll have to weigh these incentives against the choppiness in the market. Either way, a new deal to choose from just before the holidays is a great present for all DIY investors.

2018 Online Brokerage Rankings from Surviscor Released

The latest online brokerage rankings from financial research firm Surviscor were released this past week. The big takeaway according to founder and president of Surviscor, Glenn LaCoste, who appeared on BNN Bloomberg, was that there was not much of interest that took place in the industry since the last ranking.

One thing that did stand out as a negative, according to the Surviscor analysis, was deteriorating service. According to their mystery shop data, response times for online enquiries at Canadian discount brokerages slipped, with no firm apparently responding faster than 12 hours.

Taking top spot again this year was Qtrade Investor followed by Questrade and BMO InvestorLine. At the bottom of the pool was HSBC InvestDirect. Interestingly, this set of rankings included Interactive Brokers which placed 7th out of 12 brokerages analyzed.

Discount Brokerage Tweets of the Week

From the Forums

Miss Understanding

With the changing representation of the DIY Investor in social media and some Canadian online brokerages recently (e.g. National Bank Direct Brokerage – who recently overhauled their website with a more balanced inclusion of women) there seems a shift happening in the visual identity of the “typical” online investor. Nevertheless this shift is not happening as quickly in the real world. One unhappy forum user shared on Personal Finance Canada this week her experiences with poor service and misinformation about ETF’s that suggests perhaps some people are reluctant to get past gender stereotypes at the expense of compromising customer satisfaction.

Flying in Coach

A newcomer to Wealthsimple – whose tagline is investing on Autopilot – took to the forums this week asking for advice on automated auto-rebalancing and fees. Wondering whether they should “copy the portfolios” themselves or put it in the hands of the online brokerage, the user put the two options up for debate.

Into the Close

That’s a wrap on a very eventful roundup on top of a very eventful year. With Christmas just around the corner, good luck to all the brave souls who live for thrill of the last minute gift chase! It’s been a great year here at SparxTrading.com so thanks to all the loyal readers and site visitors for making this year our best yet. We’re thrilled at what’s coming around the corner in 2019 and so to prepare we’ll be using the “down time” over the holidays to be doing some retooling and work behind the scenes.  On behalf of the whole team here at Sparx, have a very safe and merry Christmas and a happy New Year! Have a great weekend and we’ll see you again in early January.

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Discount Brokerage Weekly Roundup – December 14, 2018

If there’s one place in Canada that should be prepared to handle the rain, it’s Vancouver. And yet, even on the We(s)t Coast, this past week has shown that sometimes, when it rains, it really does pour. As it turns out, if you’re an otter, however, Vancouver is shaping up to be a pretty sweet place to hang out. CFO’s of major Chinese telecom companies, however, not so much. Like this past week in Vancouver, there has been a torrential downpour of information across the online investing world and it looks like there’s even more coming.

So, even though we can’t boil the ocean, in this edition of the roundup we nonetheless wanted to provide a solid run down of what crossed our radar this week, sprinkle in some analysis and for the faithful readers of the roundup, provide an exclusive preview of the look back/look ahead piece. As usual, there’s also an interesting selection of DIY investor tweets and forum posts to round things out.

Virtual Brokers Drops Commission Prices

There’s no question that things are busy across the online brokerage space heading into the end of the year. In the midst of all that flurry, however, there was a very important change that took place at Virtual Brokers at the close of market on Thursday (December 13th) and the start of trading on Friday, rain wasn’t the only thing coming down, commission prices did also. Namely, the commission structure for Virtual Brokers has now changed to as low as $1.99 commission per trade (technically per ticket – more on that in a moment).

That’s right Virtual Brokers now offers one of the lowest (until Wealthsimple Trade goes fully live to the general public) trading commissions for equities and options trading. The new pricing structure is $0.01 per share with a minimum charge of $1.99 per ticket up to a maximum commission charge of $7.99 per ticket. For active traders, defined as those who made 150 or more trades in the past quarter, the price changes to $3.99 flat per ticket

While it does benefit passive or minimally active traders, this is a huge development for very active traders. To understand why, it’s important to know the difference between “trades” and “tickets.”

A ticket refers to a collection of trades on the same side (either buy or sell) on the same day for the same stock. An example can help clarify.

Let’s say trader of TSLA purchases 3 separate orders of 200 shares a piece of the stock at multiple points in the day. Those 3 trades amount to 600 shares. Assuming they were all routed through the same market, those 3 trades would be on the same ticket because they’re the same stock, same direction, same day. At $0.01 per share x 600 shares, that’s $6.00 in commission charges. If on that same day a trader wanted to then sell 100 shares, that would be 1 trade which would also be one ticket at the $0.01 per share – which works out to $1.00 however the minimum commission charge is $1.99 so the final commission charge would be $1.99.

Unlike almost all other online brokerages (with the exception of Jitneytrade for example), using tickets instead of trades means that clients have to do a bit more math to truly understand the commission costs.

That said, if there’s one thing active or day traders are not afraid of, it’s a little order tracking, especially for a flat fee of trading that could be as low as $3.99 for an unlimited number of shares. In fact, for ETF swing traders the math is even more compelling – purchases of ETFs are free at Virtual Brokers so long as they are held for a minimum of one business day, which means anyone who is on the standard plan would only pay a max of $7.99 for a round trip on an ETF trade (assuming all units were sold same day). For passive rebalancing – especially for smaller accounts, this is also a great score as selling 200 shares of an ETF costs $2.00 in commission charges.

Clearly, in the commission price pool, Virtual Brokers has just made a massive splash.

Unlike lesser known online brokerages, Virtual Brokers has the benefit of having been featured in the Globe and Mail’s online brokerage rankings, including having achieved top online brokerage or a high finish for several years in a row.

Although prior to this move Virtual Brokers’ popularity was waning, they are certain to get the attention of investors of all stripes – but especially the active ones – who will now likely take a serious look at an online trading account with a provider that has professional grade platforms and the pricing to match.

It will only be a matter of time until word spreads among investors and if/when Virtual Brokers decides to advertise this widely – other brokers will be racing to figure out how to catch up.

Back to the Future: A Preview of the Look Back on 2018 & Look Ahead to 2019

From outages & outrage in early 2018, online account opening landing at TD Direct Investing, new website roll outs at BMO InvestorLine, Questrade and National Bank Direct Brokerage, and so many interesting promotions and deals, there was a lot that took place at Canada’s discount brokerages this past year.

We could go on (and on) about these developments (which we will next week!) but for the moment, we’re excited to hand over the spotlight to Canada’s online brokerages themselves to see what they had to say about 2018 and what they’re doing next in 2019.

Readers of the roundup will get a first look at this amazing edition of the Look Back/Look Ahead. Why is it so amazing? Without being too biased, firstly it offers a unique window into hearing from Canadian online brokerages themselves, in many cases directly from the leaders of the organizations that Canadian DIY investors entrust their business to. It helps to know and understand the vision these organizations have for building online brokerages that are suited for today’s world as well as tomorrow’s.

Second, this is a chance to spot interesting trends in the year that past as well as in what is coming around the corner at many online brokers. With RRSP season about to ramp up, consumers will be very hungry for information that helps them better understand the decision to work with a particular online brokerage. While there are rankings or ratings, those are generally focused on past performance. The look ahead component this year offers a fascinating window into what 2019 is going bring for DIY investors in terms of new features, technology enhancements, pricing (potentially) and more.

Finally, this particular edition has exclusive information on how the landscape of online brokerages will have another competitor to contend with this year. That’s right, one of the biggest stories in this year’s series is the upcoming launch of a ‘dark horse’ competitor. It’s not Wealthsimple Trade – who’s commission-free trading is certainly going to make waves, but rather an existing online brokerage who has some very ambitious plans. Who is this mystery online brokerage? Tune into Sparx next week to find out!

To provide some more intrigue, here is the list of online brokerages who we received submissions from and who will be featured in this upcoming year in review & preview to next year piece:

Also new for readers this year will be a digital magazine format that provides another way to experience this informative and unique piece. Here’s a preview of the cover art:

This format is the first from SparxTrading and is also a reflection of our growing team and focus on delivering great DIY-investor information about Canadian online brokerages.

Since you’ve read this far here are some early teasers from three firms covered in the look back on 2018 & look ahead pieces for 2019:

  • CIBC Investor’s Edge: Invested in online education content, young investors and trading platforms in 2018; for next year (and beyond) enhanced trading & reporting features
  • Qtrade Investor: Listening to clients helped drive improvements in service & support, financial planning tools and access to premium market research; coming up, big technology enhancements including mobile improvements
  • National Bank Direct Brokerage: Enhancements to the website, promotional offers and special educational events provided improved user experience; coming in the new year are new trading features and improved online account opening experiences.

Stay tuned!

Lightning Roundup

Here are some interesting online brokerage stories that crossed our radar this week.

Robinhood Online Brokerage Launches Banking Feature

The US-based zero-commission online brokerage continues to make waves in the online investing and financial services space. This week they took a literal swipe at the banking industry by launching checking & savings accounts that pay 3% interest to users. That, according to CNBC, is more than 30x the national average. Check out this interesting interview that has an ironic moment talking about technical glitches.

CI Financial Acquires Wealthbar

After acquiring BBS Securities, parent of Virtual Brokers, CI Financial is again going shopping just ahead of the holidays with an acquisition of Vancouver-based robo-advisor Wealthbar. This acquisition provides an interesting spectrum of services for CI Financial as they will now be equipped to provide direct online investing as well as digital advisor services.

Scotia iTRADE Movie Deal

With more foot traffic passing through downtown Toronto’s underground PATH, it was an opportune time for Scotia iTRADE to launch a short promotion for 2000 SCENE points for a deposit of $5,000. We’ve spotted ice cream in the summer, popcorn in the fall and now hot drinks with winter around the corner.

Questrade Spreading Holiday Cheer

We’ll end the lightning round with a feel-good move by Questrade. Spotted on their Twitter feed this week was a message stating that Questrade will donate a meal to the Daily Bread Food Bank for every retweet the message gets until the end of December. In addition, Questrade has also committed to providing a day’s worth of meals for every account opened with them in 2019. This is a great example of corporate social responsibility in action and gives DIY investors who open an account with Questrade something extra to feel good about while they’re doing it.

 

Discount Brokerage Tweets of the Week

From the Forums

Questwealth Query

One user took to the Personal Finance Canada forum on reddit this week with a question on growth portfolios for their RRSP. With the user considering a switch to Questwealth, read what helpful advice was given on how to dissect some “complicated” portfolios.

Checking in on Wealthsimple

Robinhood’s recent announcement of checking and savings accounts with 3% earnings and no fees, led the discussion on to whether Wealthsimple Trade, the commission-free trading Canadian analogue, would also follow suit as their “next logical step”. Read more in this thread from Personal Finance Canada forum.

Into the Close

That’s another rocky week in the bag for the bulls. Ironically the Christmas colours of red and green are flashing red as major support levels are being challenged. Of course, it’s all a matter of perspective at this point as bargain hunters continue to get more and more excited for interesting entry points. Speaking of interesting entry points, if you’re out holiday shopping in the malls, may the parking gods be forever in your favour! Have a great weekend!