Discount Brokerage News – Page 17

Posted on December 7, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – December 7, 2018

Only in the stock market does everybody get more when everybody gets less. The cuts in oil supply provided a much-needed relief to an otherwise dour stretch into the final month of the year. With most of the gains of 2018 now erased on major indices and selloffs despite good jobs news, the good news is, it could be worse.

Fortunately, there is actually good news for online investors to be had. In this edition of the roundup we review the latest crop of deals that will add some Christmas cheer for DIY investors hunting for a great deal on an online trading account. Of course heading into the end of a year, it’s also a timely opportunity to review a portfolio – which is what we do by taking stock of the year that passed and what’s coming around the corner (hint: it’s exciting!). As always, we capture the reactions and questions of online investors on the forums and on Twitter.

December Deals

It’s the holiday season, and, true to form, there are lots of presents and still a few surprises left for Canadian DIY investors. December kicked off with a healthy count of 25 discount brokerage deals and promotions ranging from cash back deals and commission-free trades to transfer offers.

The big stories in this month’s deals section include the return of Desjardins Online Brokerage’s commission credit offer (along with some festive imagery befitting the season); the promotional offer accompanying the launch of RBC InvestEase as well as the return of Scotia iTRADE to the deals section with a cash back or commission-free trade offer.

With participation by Canadian discount brokerages at a healthy level, DIY investors hunting for a bargain on an online trading account certainly have a lot to choose from.

Of course, December wouldn’t be complete without a few surprises. There are already whispers of two online brokerages keen on launching some interesting promotions. Whether they get here in time for Christmas is a bit of a jump ball at the moment, however it’s a safe assumption that those brokerages currently on the sidelines without a commission-free trade or cash back offer won’t be staying off the promotions field for too much longer.

As a segue into the next story, it’s important to remember that last year at this time, the world was going crazy about “investing” in cryptocurrency and marijuana stocks. It’s likely that the enthusiasm for trading these was amplified across the holiday season with friends and family gathering to talk about these “investments” – so there’s still a good chance that, in addition to talking turkey, there’ll also be talk of investing.

We’re also really excited to see what happens to the promotional landscape next year as Wealthsimple Trade starts to roll out live trading accounts. Competing against commission free trading will be a challenge for the incumbent online brokerages, however our bet is that many DIY investors would still be open to cash back offers and incentives which is something Wealthsimple Trade may find difficult to match (since they’re already taking a hit on commission fees). Making a few trades a year (even at a “nominal” cost) may not be worth as much as the cash incentive on the way in.

In light of that, one interesting scenario that could play out in 2019 is that strong cash back (or better commission credit offers) could majorly slow the roll of Wealthsimple Trade. At that point it will be a faceoff between low pricing and design technology (i.e. user experience) and a mature functionality in the form trading platforms with news, research, screeners and more.

Looking Back & Looking Ahead

With just about three weeks until the end of 2018, it’s an opportune moment to reflect back on the year that was and where things are going in 2019 for online investors.

Last year at this time we were knee deep in crypto mania; it’s a good thing weed has been legalized because there are some people who are going to definitely want/need to chill after the drop in both cannabis and crypto stocks over the past few months.

Also around this time last year, SparxTrading pulled together a collection of 9 voices from across the Canadian online brokerage space to provide a platform for them to share what the year was like in their own words and what DIY investors could look forward to in 2018. In that piece, we highlighted three important themes that seemed to emerge from all of the submissions:

There’s a technological arms race
Delivering more value to DIY investors
Focus on better trading experiences

Although these three items are interrelated, we saw evidence of distinct activities to address these themes over the course of the year.

From multimillion-dollar investments in the technology stack from firms like TD Direct Investing, to the adoption of youth or ‘student’ friendly pricing at major bank-owned online brokerage CIBC Investor’s Edge to trading platforms to roll outs of upgrades of custom-built trading platforms at Questrade there were numerous examples of these themes unfolding at many of Canada’s online brokerages.

One thing that also stood out over the past year was the consolidation of the online brokerage market.

After the merger of Qtrade Investor and Credential Direct under the umbrella of Aviso Wealth, the acquisition of BBS Securities by CI Investments and the acquisition of Jitneytrade by Canaccord Financial, the war chests of non-bank owned online brokers have gotten much stronger. The industry as a whole seems to be in a ‘rebuilding’ phase – with investments in their business and technology taking place to enable them to serve investors of the future. Case in point, the launch of robo-advisors/digital advice platforms at RBC and the announced roll out of one at TD clearly signal this as a product line ‘must have’ for 2019 and beyond. They’ll have their work cut out for them, though, as Vanguard is also reportedly pursuing a launch of a robo-advisor as well.

Coming up next week we’ll launch the online brokerage look back on 2018 and look ahead to 2019 and this is definitely (and literally) going to be a page-turner.

With an exciting new look and rendering for this unique piece, interesting new themes on where online brokerages are focused as well as the unique opportunity to hear what online brokers have to say about themselves and what they’re looking forward to in 2019, we’re thrilled to be rolling this out. Be sure to follow SparxTrading on Twitter for exclusive sneak peeks at this year’s set.

Lightning Roundup

There were more noteworthy developments that took place this past week in the online brokerage space here in Canada as well as in the US.

Interview with Interactive Brokers Founder

Earlier this week, founder and CEO of Interactive Brokers, Thomas Peterffy was interviewed at the Goldman Sachs Financial Services Conference. In this informal fireside chat, there were a number of very interesting nuggets shared by Peterffy.

The first was his perspective on the “zero commission” trading trend emerging in the US online brokerage market. He specifically mentioned Robinhood and JP Morgan in this respect but he had some rather ominous words for the latter. Peterffy mentioned that JP Morgan’s decision to also do so was “a big mistake” and that ultimately “they will regret this.” Within that conversation about commission-free trading, he also laid out the simple truth to online brokerages which is that they need to make money or break even in order to exist so the money will have to come from somewhere – including with administration fees. This could be an important consideration for those online investors contemplating platforms like Wealthsimple Trade or who might be hoping for online brokerages to lower their trading commission pricing.

Another major development shared by Peterffy is that as of January 1^st 2019, Interactive Brokers will be paying interest out to accounts with balances underneath $100,000. Specifically, the interest paid on an account will be indexed against the $100,000 threshold so that investors who, for example, have a cash balance of $50,000 will get an interest rate that is half the rate of an account with $100,000 or more in cash. This will definitely spur a larger segment of investors to consider kicking the tires on Interactive Brokers who simply want a better deal on their uninvested cash.

Mobile Trading Apps Spinning Their Wheels

Interactive Brokers was once again in the spotlight but this time in Canada where financial research firm Surviscor released the findings of their mobile online brokerage experience study. The mobile trading experience at Interactive Brokers blew the doors off its competitors according to the Surviscor study.

According to the rankings, Interactive Brokers’ mobile trading experience scored a 94% followed next by Questrade at 64% and then BMO InvestorLine at 57%. Perhaps most surprising is the number of firms who scored under 50% (8 out 11 firms). Desjardins Online Brokerage’s mobile trading experience ranked last with a score of 24%.

Glenn LaCoste, President and CEO of Surviscor cautioned that while the scores may appear shocking, that “it is important to understand that they do not reflect the overall merits of any of the firms. The take-away is that most industry firms fail to provide a seamless mobile accessible experience for the base online offering.”

Earlier this year, a similar sentiment was echoed by J.D. Power in their Canadian Self-Directed Investor Satisfaction Study in which Mike Foy, Senior Director of the Wealth Management Practice at J.D. Power stated “Investment firms in Canada, in general, are significantly behind the curve when it comes to their mobile app offerings, capabilities and customer engagement.”

From the Forums

Robo-Wars

Vanguard Canada is the latest wealth manager to join the robo-advisor phenomena. The news hit the forums this week as one user kicked off a discussion on the global investment company’s choice to compete in the growing market. Check out the discussion points here.

Passive or Active Retirement

One forum user took to personal finance Canada on reddit this week, wondering if a DIY investment approach would be the way to go after years of a passive strategy. With a personal aversion to financial matters at the age of 60, this proves an interesting post both for those looking for advice on what to do with their finances after retirement and for those who are curious to know if they’re on the right track.

Discount Brokerage Tweets of the Week

Discount
Brokerage Tweets – Curated tweets by SparxTrading

Into the Close

With just over two weeks to go before Christmas, the procrastinators among us are still not worried about getting that great gift in time for the holidays. For the traders, however, that deadline day for making trades in 2018 is coming. Circle December 27^th as the final day to make trades in Canada that will settle in 2018 (Dec. 31^st). Speaking of settling and end games – now that the weekend is here, it’s a great time to relax and marvel at the great indoors, starting with a trailer for the Avengers Endgame. Have a great weekend!

Posted on November 30, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – November 30, 2018

To some, the word boring means something unexciting. For the Elon Musks of the world, however, boring is really exciting. Of course, that second kind of boring requires doing some digging to yield interesting results.

In case you didn’t see this one coming, this edition of the roundup digs deep into an interesting set of developments in the US online brokerage market that, at first blush, might seem small but actually reflect a new playbook for brokerages here in Canada. From there we’ll cruise through some interesting investing-on-auto-pilot-related news as well as present the latest updates from Twitter and what investors where chatting about in the forums.

Thinking Big by Thinking Small

As anyone in Canada who’s ever shoveled a driveway or sidewalk full of snow knows, small changes add up.

A recurring theme that we’ve observed in the online brokerage space is that change is taking place with online brokerages incrementally rather than in a sweeping fashion. With the exception of commission price drops, there hasn’t been an incredibly exciting product or feature that has gotten people talking or investors clamouring to sign up for an online brokerage account.

This month, there were two modest developments that took place among two popular US online brokerages that stood out not so much because they were “big” but rather because they were small yet still reported on.

The first was from Robinhood – the zero-commission online brokerage – which announced that they have developed a new “news filtering” system that rapidly screens and delivers ‘meaningful’ news about stocks or cryptocurrencies that investors are invested in or are watching. This feature was mentioned on not one Robinhood blog, but two. On their primary blog but also on their data team blog. More on that in a moment.

Their new news delivery system is the kind of thoughtful feature that, in theory, should improve the user experience of a DIY investor – especially the active kind. Active investing is interesting in part because it relies on being able to digest a lot of information very quickly and make decisions based on that information.

Even for technical traders who focus primarily on charts understand the value of a good news feed.

Unfortunately plug and play RSS feeds are often unwieldy and embedded news streams are middling at best. Alongside the growth in interest in DIY investing and trading has also come the hyperfragmentation of information sources to the point where it is remarkably difficult for a DIY investor to find fast, reliable (trustworthy) news on particular stocks.

Often times stories are generated about a particular company by bots that report on the movement of a company’s share price or earnings but lack real depth or insight. The sites are also crammed with advertising so the user experience is often terrible without an ad-blocker.

Enter Robinhood’s new news filtering feature. Robinhood has developed a new ‘smart’ filter that incorporates machine learning to intelligently filter out news stories that appear to be generated by bots and can do so incredibly quickly so that online investors can receive relevant information soon after it gets published from its source

A second, less obvious, observation about this feature release is that Robinhood pushed the information out on its company blog as well as on a more specialized company blog that focuses on the ‘nitty gritty’ details of the projects or products they’re working on.

This level of transparency and coverage on seemingly small developments reflects the ‘tech’ approach of fintech.

Technology is constantly improving and iterating, and many technology startups are not afraid to share what they’re working on or talking about the details of what they’ve worked on. So, for Robinhood to push out two blog stories on this feature release reflects that they not only ‘get technology’ but they also understand that telling people about what they’re working on enables the evangelists to stay connected to the brand. The people who love Robinhood have something to read about and are reassured that Robinhood is constantly evolving instead of being a static enterprise.

On the other end of the news spectrum when it comes to reporting market information, TD Ameritrade marked an important milestone in their own content and news feed ambitions – namely the one year anniversary of the launch of their TD Ameritrade Network.

The network consists largely of original market-driven content that now stretches across 14 hours each weekday. Coinciding with the anniversary is the small but important expansion of their network to the Amazon Fire TV platform. In its first year, TD Ameritrade’s network received just over 1.8 million unique visitors. Estimates on the number of Fire TV exceed 19 million monthly users internationally, so the opportunity to expand their content presence is certainly what Ameritrade is banking on.

Interestingly, as part of the press release announcing the update, one of the stats of a survey conducted on behalf of TD Ameritrade revealed that 62% of investors ranked “expert market analysis” as the most important content in financial or market news and that for 14% of investors, irrelevant content is considered a barrier. While these stats reflect US audience dynamics, it is nonetheless interesting to see that filler content or ‘irrelevant’ content can get in the way of people tuning into (or even reading) content.

The takeaway lesson here for online brokerages in Canada is that what counts as “news” in terms of feature developments is likely to be too small for major news outlets to cover. As such, the tendency to wait for a big development means that unless you have your own audience tuning in, very few people are likely to pay attention. Conversely, when technology fails, that WILL get headlines and coverage (see earlier in 2018 for evidence of that). The smarter move, it appears, is to put out smaller pieces of content more frequently.

As Robinhood and TD Ameritrade have both shown, it is possible to sidestep or work in parallel with traditional media by publishing stories about what’s happening, as Robinhood so aptly put it, “under the hood.” In TD Ameritrade’s (and even TD Canada’s) case creating custom video content to compete with traditional news streams is possible and audience growth, while modest in size, is likely prominent when considering who those viewers are and what kind of assets they bring with them.

Trust and transparency in the new world will be defined not so much by the ‘established’ reputation per se but rather the reputation for producing content on a regular basis. Scanning a Twitter or Instagram feed is just one of the due diligence tasks that younger investors are prone to doing since those are the channels they themselves will turn to.

If discount brokerages are able to effectively share that they are working on interesting or new things, then that in and of itself should boost the credibility of their firm as an innovative one. Fortunately, for Canadian (and US) online brokerages, there are likely lots of little improvements being made all the time. Similar to shoveling the snow in the driveway, it’s best to do it in stages rather than wait until its all on the ground to try and dig out from under it.

Lightning Round

No Longer a Tease

This week, the big news from RBC was the public roll out of the InvestEase robo-advice platform. After a year of testing pilots with staff and select groups, the new digital advice service is live. And, to sweeten the deal for individuals to try it out, for anyone who opens an account by March 31^st, 2019, the annual management fee of 0.5% will be waived until October 2019 (hooray for new deals!).

Still a Tease

Rumours of Wealthsimple Trade now going live for some users are starting to trickle out. The zero-commission trading option appears to be surfacing for some DIY investors in Canada. Stay tuned as we find more chatter on the platform as it continues its rollout into RSP season.

Penalty Box

As we reported last week, Questrade Wealth Management got dinged by market regulators for violations of the best interest standard as part of its digital advice program Portfolio IQ. This week, the fine Questrade Wealth Management agreed to pay was made public and came out to $2.9M along with $100,000 in associated legal costs. Interestingly, even though there was some news pick up on the story, the response by investors in the forums was largely indifferent.

Discount Brokerage Tweets of the Week

Discount Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Testing Patience

Yet another DIY investor took to the forums this week enquiring about their index funds performance (or lack thereof) with Tangerine as well as interpreting their dashboard. Check out this thread to see the useful advice offered from other redditors and why being passive requires active effort.

Ease on Fees

The week of Cyber Monday seemed apropos for the launch of RBC’s new robo-advisor, InvestEase. The reddit Personal Finance Canada forum weighed in on the arrival of InvestEase as well as the introductory promotion. Read more here.

Into the Close

That’s a wrap on a very busy week for investors. Even though Cyber Monday is in the rear view mirror, be sure to keep your deal radar on as a new month is starting as is the ramp up to RSP season. On top of the offers from online brokerages, it appears that there are still interesting deals cropping up in the market – the best part is the shipping charges and delivery times are much better than a certain postal services. Whatever screen you find yourself at this weekend, stay warm and have fun!

Posted on November 23, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – November 23, 2018

Welcome to the Black Friday edition of the weekly roundup! No crazy lineups to fight here however if you were inundated with offers and merchants trying to get your attention, you’re certainly not alone.

In keeping with the spirit of the day, this edition of the roundup has more that you might have bargained for. Specifically we take an in-depth look at the most potent form of attention grabbing media – commercials – being put forward by Canada’s discount brokerages and robo-adivsor firms. With so much going on we’ve also included quick snapshots of important developments and close out the roundup with a look at the investor forums and tweets for the week.

Commercial interest

Heading into RSP season, Canada’s discount brokerages and online investing firms are ramping up their battle for the eyeballs and attention of online investors. This month, we’ve noticed an interesting uptick in video activity among online brokerages and robo-advisors that highlight some interesting trends in the way that online investors are being depicted and the kinds of messages that are being sent their way.

Before diving into the commercials themselves, it’s interesting to get some context. When online trading first launched and for a good portion of its lifespan, the visuals painted a very distinct portrait of ‘fast money’ or ‘action packed’ markets. While this brand of ‘exciting’ pace still exists on financial news stations like CNBC, within the Canadian context the messaging from online brokerages – the conduit into the markets – has shifted to become more about ‘personal finance’ and ‘wealth management’ than the exciting and dynamic world of online trading.

Interestingly, fast money sectors like cryptocurrency and cannabis have emerged in a similar fashion to the ‘dot com’ era, bringing with them the volatility and the lure of getting rich quick. In turn, younger investors have been pulled off the sidelines from late 2017 and through most of this year.

Aside from the catalysts of cannabis and crypto, millennial investors are also interested in messages of purpose, equality, inclusiveness and social responsibility. So, it is interesting to see what the latest crop of commercials/videos from online brokerages and digital advice firms are doing to depict the conversation around ‘money’ and investing.

RBC Direct Investing

We spotted two videos posted to Vimeo that are presented from the perspectives of two different investors – both of whom are women.

The first video tells the story of “Milene”. Her story highlights her approach to investing, what got her started as well as what her goals are as someone who has recently turned 40. The approach of “being boring” is her preferred route to building wealth over the long term.

RBC Direct Investing w/ Milene from Official Pictures on Vimeo.

The second video tells the video of Carrie. At 33, she recounts her path into investing as well as what her experience was like when placing her first trade. Like the first video, Carrie shares her goals with respect to investing and what she hopes it will translate into at retirement.

RBC Direct Investing w/ Carrie from Official Pictures on Vimeo.

There are several interesting points about these videos that provide some insight into the strategy of RBC Direct Investing. The first very interesting thing is that they use the stories and voices of women who work for RBC Direct Investing. This is powerfully authentic and even though it comes from people who work for RBC Direct Investing, there isn’t a direct sell or push to consider RBC DI. This doesn’t sound like a commercial for RBC’s DIY investing solution so much as it sounds like a story of an everyday investor.

In addition to being highly relatable, they’re also very well targeted to people at the age or life stage of the two people featured in the videos. With powerful ad technology in place that enables advertisers to show content to particular users based on their demographic profile (e.g. video advertising through Facebook) this is an especially powerful medium (video) and message.

Last but not least, the production quality on the videos is excellent. The videos are colourful, engaging and feel like a well narrated story rather than a forgettable series of stock photos or footage of people checking their balance from a coffee table.

There’s a good chance that this will be an impactful campaign for RBC Direct Investing and will certainly raise the bar on ‘story telling’ for other online brokerages who are hoping to use video to make compelling stories about personal finance resonate with DIY investors.

Scotia iTRADE

What to rocks, blocks, cards and candy have to do with DIY investing? These childhood staples play a key part in the sentiment that Scotia iTRADE is hoping to connect with. Specifically, the recurring theme in their most recent set of commercials is that “trading” is familiar and almost nostalgic.

Scotia iTRADE Rock from Paul Constantakis on Vimeo.

It is an interesting approach to use childhood as a base around which trading takes place. Perhaps it is to communicate that trading can be a win-win or that trading is something that many of us remember mastering as children. Nonetheless, the messaging is clear about positioning Scotia iTRADE alongside the messaging that ‘there is a trader inside all of us’.

It is encouraging, once again, that there is a visual direction that embraces diversity – both ethnically and with gender, that reflects a more modern and progressive view of what an everyday investor “looks like” and where they live.

Unlike the focal point of RBC Direct Investing, this messaging appears to be targeting traders rather than investors, and evoking the emotion associated with making a winning move.

It’s a tad cynical to read too deeply into the accuracy of the transaction portrayed in the advertisements. For example, there are no intermediaries in the trading portrayed in these commercials. No portions of a caramel are eaten by a broker as commissions, nor are there appendages of a robot or pieces of a plastic block taken by the facilitator. Nonetheless, when it comes to making an emotional connection with active investors and traders, the ‘joy’ of trading is definitely long-standing.

Caramels

Scotia iTrade | Caramels from Marie-Eve Tremblay on Vimeo.

Caramels 2:

Scotia iTrade | Caramels from Marie-Eve Tremblay on Vimeo.

Yellow Piece:

Scotia iTRADE Yellow Piece from Paul Constantakis on Vimeo.

Questrade

Questrade has certainly ramped up its video presence over the past two to three years, with a noticeable uptick in visibility around major sporting events here in Canada. While the ‘online brokerage’ side of their brand hasn’t been in the spotlight nearly as much, their digital advice / roboadvisor now known as Questwealth Portfolios has been receiving a fair bit of coverage.

In terms of what an investor “looks like” in their videos, Questrade is targeting young adult investors. While there is a gender balance that shows a young man and young woman as the investors, the notion that only a woman would be caring for a young baby or that two men should be having a conversation in a board room seem a tad anachronistic and run somewhat contrary to the message that “times have changed.”

Their latest set of Questrade’s videos clearly depict millennial investors telling their financial advisors that ‘times up’ when it comes to paying for investment fees and specifically naming Questrade as the solution. The setting of “the conversation” is in keeping with their recent campaigns that depict that moment when an investor meets with an advisor.

On an emotional level, Questrade’s commercials continue to pass along that uncomfortable and awkward feeling of being privy to watching someone about to lose their job. Some may feel it is deserving however it is a bit of an emotional tight rope to vilify people who charge money for financial services. Nonetheless, these commercials to evoke and provoke responses (especially on social media) so for better or worse they do get people talking about Questrade.

Wealthsimple

This brand was originally not going to be included since these videos were geared, it seems, towards a US audience however they were too compelling a counter-point to not share. That in and of itself is a sign of a winning piece of content however in a broader context, Wealthsimple has been dictating the pace for content among financial service providers for the better part of two years.

With this latest video, Wealthsimple is asserting its identity as a challenger-brand in the financial services space. In fact, when contrasted with any of the videos mentioned above, this video takes a genuinely resonant approach to messages that would connect with millennials who are aware of and passionately advocate for equality and change.

This video takes the emotional impact of finance an order of magnitude deeper to challenge the viewer in a way that the Collin Kaepernick video did for Nike. Wealthsimple takes social responsibility, in this case with regards to pay equity, and weaves it into the conversation about money and demonstrate why they are gaining popularity and mindshare with younger investors.

Wealthsimple “Equal” from Public Record on Vimeo.

Investing in focus

While Canadian online investing firms don’t have the same scale of budgets set aside for marketing and advertising that US online brokerages do, the handful of online brokers and investing firms here that are using video to connect with investors show a more contemporary view of what investors look like and the things that they are interested in. To stand out in a noisy world of content, videos have to be engaging and impactful. Heading into RRSP season and with a bump to TFSA contribution levels, Canadian online broker commercials are likely going to be more frequent and visible. The real question for online investors though is which will leave a lasting impression.

Important Bits and Pieces

Robo-advisor Comparison

Personal Finance columnist at the Globe and Mail, Rob Carrick, published his comparison of 14 Canadian robo-advisor firms this week. The comparison looks at 18 different parameters of the robo-advisor experience including:

Provinces and territories served
Minimum account size
Types of accounts
Annual fees
Online account setup capabilities and more

The comparison is also available for download as an excel file for even more detailed analysis and review.

Questrade to Settle with Regulators

Questrade Wealth Management was named in a proposed settlement agreement with the Ontario Securities Commission over a misstep with Questrade’s Portfolio IQ. At issue was a transaction that took place in July 2017 that involved Questrade Portfolio IQ purchasing 8 WisdomTree ETFs. The statement issued by the OSC alleges that Questrade executed the purchase without having done the due diligence to determine if the purchase met the ‘best interest’ standard Questrade is obliged to follow. The statement of allegations that outlines what happened is available here.

TFSA Contribution Limit Rises

The annual contribution limit for TFSAs has been raised to $6,000 for 2019, up from $5,500 in 2018. The total contribution limit for someone who was 18 or older as of 2009 and who has never contributed to a TFSA will be $63,500. Click here for a good primer on the update.

Discount Brokerage Tweets of the Week

Discount Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Late to the party

A newbie investor took to the forums this week for some advice on getting started in the investment world. Beginning in their late thirties, the thread offers useful information on factors typical at this life stage and as ever, lots of valuable advice and sources for anyone looking to start investing at whatever stage of the game, from ETF’s to help with choosing where to trade.

Conversion Conversation

Earlier this week, a little more news about Wealthsimple Trade surfaced as their forex conversion rates became a topic of discussion. Find out about the rates and what DIY investors had to say about the fees in this post from reddit’s Canadian Investor rates.

Into the Close

That’s a wrap on this week’s action. With a shortened week of trading in the US, things were a little quieter here in Canada than normal. Given the slide that stocks have been on, however, that might have been a good thing. With winter weather ramping up, it’s an ideal time to be huddled over a computer in search of a good bargain or three. Good luck with the bargain hunting in stores and the stock market (it looks like both have some interesting sales)! Have a fantastic weekend!

Posted on November 16, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – November 16, 2018

There’s always two sides to a market. While oil prices continue to run out of gas, people are lining up at Tesla dealerships in Norway. Stock markets are always trying to figure out where the next big opportunity will come from and not unlike the online brokerages that enable investors to trade those markets, sometimes the waters can be choppy when trying to figure out a direction.

In this edition of the roundup, we turn the spotlight onto a recent new deal launched by a bank-owned online brokerage and the impact it could have on investors as well as other online brokerages in Canada. From there we look at a long-awaited security feature that went live at another Canadian brokerage and highlight how one online brokerage is taking the lead in investor education going digital. As always, be sure to check out the latest tweets and forum posts from DIY investors this past week.

Big Deals Keep on Turning

After a few months on the deals and promotions sidelines, Scotia iTRADE jumped back into the mix this week with a new promotion offering DIY investors either up to $1500 cash back or up to 300 commission-free trades.

Unlike many of Scotia iTRADE’s previous offers, and split commission-free trade or cash back offers generally, this latest offer from Scotia iTRADE shows that online brokerages can get creative with how they structure promotional offers as they offer a surprising versatility to work with.

In this case, eligibility for commission-free trades starts at deposit levels of $10,000 and goes all the way up to $1M+. For the cashback offer, however, the minimum deposit required to qualify for the $100 base tier is $25,000. The funding requirements and associated rewards are summarized in the table below.

There’s also another interesting feature on the commission-free trade side that shows up for deposits of $250K or more. At this deposit level and higher, the maximum number of free trades an individual can receive is 300. Capping the number of free trades at 300 is an interesting decision seeing as how there is no incentive for anyone who brings in more money to get more free trades.

Of course, with all promotional offers it’s important to read the fine print – and in this case, the very fine print on the terms and conditions state that the window of time to use the commission-free trades is 120 days or about four months. This might help to explain why offering more than 300 commission-free trades might not be that ‘valuable’ to most clients since only a very active trader could possibly use up this offer.

Scotia iTRADE’s latest offer appears to provide a little something for a wide range of investors. But how does it stack up against other cashback promotions from other Canadian online brokerages?

The answer to that question can be looked at from two vantage points – on a relative basis as well as on an absolute basis; both of which provide interesting insights for DIY investors looking for extra value when opening an online investing account.

First, on a relative basis, Scotia iTRADE has positioned their cash back promotion quite aggressively compared to the other two bank-owned online brokerages who have publicly available cash back promotions currently running, BMO InvestorLine and CIBC Investor’s Edge.

According to the table below, Scotia iTRADE appears to be outbidding BMO InvestorLine and CIBC Investor’s Edge on a cash back basis, especially for deposits of $100,000 or greater. It should be stated that BMO InvestorLine’s current offer includes 30 commission-free trades which can be used in February and March of 2019 while Scotia iTRADE and CIBC Investor’s Edge are purely either cash back or commission-free trades.

When weighed against competing offers, Scotia iTRADE’s cash back incentive is more than twice as much as BMO InvestorLine’s at deposits of $250,000 and almost twice as much at the $500,000 deposit level.

On an absolute basis, it is curious that Canadian online brokerages don’t offer the same proportion of cash-back amounts (or even higher amounts) as investors deposit larger asset amounts.

In terms of which deposit tier is the most attractive from Scotia iTRADE’s latest promotion, for example, the highest ROI for cash back is at the $100,000 ($500 works out to 0.5%) deposit tier. At the $1M deposit tier, however, the ROI drops substantially to 0.15%.

At a time when competition for online investors, and in particular their assets, is only increasing, expecting more for less doesn’t seem like a winning strategy. Getting 10 clients at $100,000 a piece is much more expensive (it seems) than 1 client of $1M.

It will be interesting to see how other online brokerages who are not currently running a cash-back offer approach this particular situation. For a bank-owned brokerage looking to step up to the plate, there is clearly an opportunity to offer proportional cash-back incentives that would make for a very compelling offer for deposits greater than $100,000 (assuming the 0.4% or 0.5% rates were matched to that point).

The commission-free trade option of the new Scotia iTRADE offer is also signalling where in the market Scotia iTRADE is looking to compete. Their latest offer is clearly a much pricier proposition than the offer from National Bank Direct Brokerage, whose 50 commission-free trades (which are good for up to one year) for a deposit of $5,000 is in a league of its own against deposits up to $50,000. Even at the $10,000 deposit level, RBC Direct Investing’s offer (which only requires a $5,000 deposit) offers 20 commission-free trades that are good for a year whereas Scotia iTRADE offers up 20 which are good for up to almost four months. That said, for deposits greater than $50,000, Scotia iTRADE sits uncontested with its offer of 100 or more trades.

Scotia iTRADE’s latest offer definitely spices things up between Canadian bank-owned online brokerages and with several other online brokerages still on the sidelines, the end of this year could reveal even more compelling offers for DIY investors heading into the RRSP contribution deadline.

By not creating proportionate incentive offers, the current set of deals might end up creating an unwanted situation – namely without a value-added incentive to add more capital than would be required to qualify for a deal, why would savvy DIY investors do so? Case in point, for DIY investors with a million dollars to move around, splitting their deposit across the three brokerages’ offers instead of pooling it with one would generate a reward bonus of $2200. Combining these offers with a refer-a-friend offer which is possible at both Scotia iTRADE and BMO InvestorLine means that the total cash back obtained could reach $2350 for a total deposit of $950,000.

The bottom line for DIY investors is that there is additional value that can be asked for when signing up for a new online brokerage account. If an online brokerage is willing to compete for greater share of wallet with investors, it appears they are going to have to start opening their own wallets a bit wider.

Questrade Launches Two Factor Authentication, Finally

For anyone who follows the minutia of the Canadian online brokerage, this week has finally brought to an end a very, very, long, public and sometimes dramatic saga to have two-factor authentication enabled for Questrade accounts.

A quick Google search of Questrade and two factor authentication (2FA) turns up a rich trove of entertaining reading which documents the ongoing “wait and see”.

As seen by the sheer number of comments and upvotes on reddit’s personal finance Canada reddit (58 comments and 178 upvotes at the time of writing) this was an itch waiting to be scratched. To help address this spike in the conversation about Questrade, once again the Questrade support account was present and leaving comments in the discussion on the reddit thread.

Questrade’s new 2FA feature enables users to verify access to their online trading account via SMS or email, as well as via password adding an extra layer of security to the login process. While the choice to use SMS is itself not without controversy (again, see the latest reddit thread for this) the consensus appears to be gratitude (and relief) that this feature is in place.

Attendance Optional: TD Direct Investing Takes Options Education Day Digital

The digitization of investor education continues and this past week, something very interesting happened as TD Direct Investing became the title sponsor of the digital version of Options Education Day.

Earlier this month, the traditional ‘in person’ version of the event took place in Montreal with four online brokerages sponsoring this event, however the tweet shown below from TD Direct Investing shows that TD Direct Investing has managed to be the first sponsor of the digital event and the solo sponsor.

Since TD Direct Investing has been holding webinar-style investor education events for several years, this is a uniquely appropriate fit for them to be hosting/sponsoring. On a number of strategic levels, this helps TD Direct Investing get in front of its competitors and gain exposure in a product segment (options) that many online brokerages are hoping to have their client base start trading.

Given the complexity of options trading relative to ‘plain old’ stocks and ETFs, the biggest hurdles for investors are sufficient understanding of and confidence in trading options, so naturally educational content is going to be critical to supporting beginner and intermediate options traders.

This latest move by TD Direct Investing shows that the Canadian online brokerage space is still dynamic and with downward pressure on commission pricing on the horizon, it may be a sign that online brokerages will push even further into making investing make sense.

Discount Brokerage Tweets of the Week

Discount Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Slow Jam

It’s safe to say there are a few hoops to jump through when you’re trying to get started with investing. This unhappy DIY investor took to the Personal Finance Canada Forum this week to ask whether the many bumps in the road of slow progress with their chosen bank were just teething problems or a sign of things to come. See what advice was offered in the forums here.

Side Effects

One new investor posted an interesting question to the Personal Finance Canada forum this week. With the rise of robo-advisors, they outlined their proposed plan – wondering if there is room for self-directed investing on the side and how would this play out with potential market downturns. Read the discussion here.

Into the Close

Nobody is happier than oil prices that the weekend is finally here – just in time for Black Friday. Not only is this the time of year that folks are out bargain hunting for all sorts of things, but it is also a great opportunity for investors to take advantage of tax loss selling to potentially pick up some portfolio bargains. Whatever you’re shopping for this weekend, stay warm and have fun!

Posted on November 9, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – November 9, 2018

Midterms are finally over. It’s a phrase that university students and now most of the world are glad to hear. If there’s one thing that both market and political pundits are obsessed with, its speculation. That said, even though the stock market acts like a big voting machine, the favourite candidate of the market is always growth-focused.

In this edition of the roundup, we take a look at the zeitgeist – or spirit of the times – for online investing in Canada. Kicking things off, we start with a look at a slow-moving trend towards socially responsible investing and how there may be a catalyst for online brokerages to quickly adopt and support this style of investment. And, speaking of support, the next story in this week’s roundup looks at a very interesting snapshot of an interaction with customer support that showcases what life is like for a DIY investor actively trading a hot sector. As usual, we’ve got the latest chatter about online brokerages from Twitter and from the DIY investor forums.

Looking for a Win-Win

Trying to figure out “what’s next” taps into our natural human desire for certainty. In that way markets of all sizes are not that different than the people that comprise them. In the case of major financial service providers such as discount brokerages and robo-advisors, they too would like to have some certainty (even if its just less uncertainty) when it comes to figuring out what features or products their rapidly evolving client base will tap into next.

The good news, is that there may already be a hint of what online investors want and what service providers are gearing up to provide.

One interesting example of a trend that appears to be gathering momentum in the Canadian online investing space – both at online brokerages as well as with digital or robo-advisors – is socially responsible investing (SRI). And, over the past several months, we’ve started to observe a few more important names in the online brokerage space start to deploy some kind SRI-related product offering to their client base.

Within the discount brokerage space, one of the biggest (and perhaps earliest) firms to get behind the socially responsible investing theme for DIY investors was Scotia iTRADE. In early 2017, Scotia iTRADE launched their socially responsible investing tool that enabled DIY investors to research and analyze companies based on their environmental, social and governance (ESG) profiles.

Fast forward to the latter half of 2018 and socially responsible investing has now found its way into two important touchpoints for online investors: the homepage of Desjardins Online Brokerage in the form of Desjardins’ Responsible Investing ETFs; and Questrade’s latest managed portfolio product – Questwealth Portfolios – with a new line of socially responsible investment (SRI) portfolios. Also joining in the SRI space is Interactive Brokers who recently added the ability of traders to use their trading platform, TWS, to scan for ESG factors courtesy of a new integration with Thomson Reuters.

A quick scan of other Canadian discount brokerage sites shows that at this point, the SRI conversation has yet to make it into the spotlight, which means that for the time being there are only a very select group of online brokers who are aligned publicly with ESG or SRI-related themes.

Given the length of time its taken for SRI to take root in the online brokerage space, one might ask whether it is something investors actually want i.e. is there a demand for it? Based on some key data points and some strategy (and speculation), to quote a magic 8 ball, the answer points to yes.

First, and perhaps most importantly, if it matters to millennials, then that ought to be enough to put it on the radar of online brokerages. There are a number of research studies of purchasing habits and expectations of millennials that show that having access to purpose-driven products matters and can differentiate between why they would choose one brand over another.

Secondly, in a world where commission pricing is less of a differentiating factor between online brokerages, what they offer and what they stand for will increasingly influence where the DIY investors of the future place their trades.

Of course, the broader picture for socially responsible investing is also bullish.

A 2018 report from the Responsible Investment Association stated that “Responsible investing now makes up a majority of Canada’s investment industry, as RI assets now account for 50.6% of all Canadian AUM – up from 37.8% two years earlier.” With respect to ETFs from 2015 to 2017, it goes on to state “Assets in exchange-traded funds dedicated to RI have more than doubled over the last two years, from $97.9 million to $240.6 million.”

While Scotia iTRADE tends to be a difficult choice for beginner investors, Questrade – and in particular Questwealth, has a much lower barrier to entry to open an account and to ease into SRI investing. Similarly, popular roboadvisor Wealthsimple also offers up easily accessible socially responsible investing options for investors.

For an online investor who wants to “do good” with their investing dollar (and stretch that dollar as far as possible), they can purchase one of many SRI ETFs through any online brokerage, and if they choose to do so through Questrade’s online brokerage or National Bank Direct Brokerage, they can do so while potentially not incurring trading commission fees to purchase these.

Although it has taken quite a bit of time for socially responsible investing to find its way into the spotlight at Canadian online brokerages, the latest moves by Desjardins and Questrade appear to help serve as a catalyst for broader adoption of SRI. The move by Interactive Brokers also opens this style of investment strategy up to more active traders.

Fundamentally, the data is clearly pointing to market demand for consumers wanting to do good and to do business with brands that are purpose-driven. As such, it will be interesting to see which Canadian brokerages also jump into the SRI pool in terms of content as well as products or incentive offers. There’s clearly a win-win-win for DIY investors as well as the online brokerages and of course, the planet as a whole.

Trading Documentation

With so much happening in terms of feature development or deployment at online brokerages here in Canada and the US, there was one fascinating story that we didn’t get the chance to highlight last week.

One of the more interesting realities of the world in 2018 is the impact of social media. While celebrities, such as Dwayne ‘The Rock’ Johnson can command 120 million followers on Instagram, there are examples of the reach ordinary people have too. Case in point, an Instagram post in March 2018 by Judith Kasiama highlighted a lack of diversity in the popular outdoor brand Mountain Equipment Coop’s marketing and advertising campaigns. That one Instagram post then became a catalyst for change in the way in which MEC represents its clients in their marketing and advertising.

According to a U.S. national parks study, only 7 percent of black folks visit national parks. While 78 percent of all parks visitors are white. There seems to be a narrative that BIPOC don’t enjoy the outdoor compare to their white friends. This is not rooted in actual reality but a myth perpetuated by marketing that caters to predominately white audience. If you don’t believe, check out companies such as @mec, @arcteryx @arcteryxcanada @hellyhansen who fail to diversify their adds. Painting a narrative that people like me don’t enjoy the outdoors. I love nature and spending time outside! I hope these companies can diversify their adds. Sadly I couldn’t find any studies in Canada. #truthfultuesday Pc: @neverbadtimeforchanges

A post shared by Juju Milay (@jujumil) on Mar 6, 2018 at 3:38pm PST

Having covered what gets said about Canadian online brokerages on social media (and Twitter in particular) over the past four years, it was a tweet that contained a YouTube video last week that caught our attention.

In the following video there is a YouTuber Richard De Sousa from RichTV Live who also is an active trader who documents his frustration and interaction with TD Direct Investing’s client service representative for almost a solid 15 minutes.

This video is fascinating on so many levels. From the consequences of UX decisions in trading platforms to the kinds of communications scenarios that online brokerages have to be prepared for, being any brand in 2018 means being subject to the very public scrutiny that takes place on social media. Mix in an individual with a substantial subscriber base and an incredibly impactful medium like video, and you have what could be a volatile situation.

So why is it worth watching almost 15 minutes of a customer service call? For starters, because it is possible.

Often times there are only angry rants that are summarized in tweet format or in long walls of text in forums or on Facebook. In this case, even though only a portion of the total call is shown, it offers a unique vantage point into the world of DIY investing and what the experience of talking to a rep at TD Direct Investing is like.

Another interesting angle to this video is that for many DIY investors, there is a lot of DIY learning that comes as a result of trial and error as well as from talking to customer service reps. In this case the trader in the video discovered what was essentially a “problem” with the way in which prices that were longer than 2 decimal places were being displayed. The trader learned the hard way that there can be disparities and surprising blindspots when executing a trade – such as getting the detailed information on the exact price of an order fill. Those blindspots can also be internal – without knowing where on a platform to get detailed information on an order fill, for example, the interpretation of events that something went ‘wrong’ is more likely.

This last point highlights the impact of the importance of user experience testing.

As we referenced last week in the roll out of National Bank Direct Brokerage’s website, there can be bugs or oversight of user issues when a piece of technology rolls out (note that National Bank Direct Brokerage has tidied up those issues we flagged last week) however those bugs can result in customer service agents left dealing with irritated (and valuable) clients for large chunks of time. Clearly there’s a business value to doing more time testing.

A third interesting observation of this interaction is that it captured the professionalism of the representative. Yes, the call started with an irate customer however it ended with a conversation and the client stating their general satisfaction with TDDI. Like volatile stocks, so too are the emotions that active traders experience and bring with them onto phone interactions. Being a front-line service representative is no small feat.

Finally, in terms of zeitgeist, the latest enthusiasm for cannabis (and crypto) stocks has gone beyond just traditional investor forums and made the leap into channels like YouTube where it is now easier than ever to ‘watch’ in real time people trade the market. For a generation of investors (and future investors) that are very familiar with watching how-to’s or consuming content on YouTube, this video showcases how relatively simple it is for anyone passionate enough about what they’re doing to chronicle it online and build an audience.

Discount Brokerage Tweets of the Week

Discount Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Money across the Miles

A long-term former resident of BC asked the Personal Finance Canada forum this week about options for foreign currency investment in their TFSA. Find out how this tricky request was answered with lots of help from the reddit forum here.

How Safe is a GIC?

It’s always good to learn from the mistakes of others. On that note, this forum user caused a number of responses in this post on the Personal Finance Canada forum on the topic of safety and reliability of GIC’s within large banks. It begs the questions, is anything ever really guaranteed? Check out the advice from the thread here.

Into the Close

That does it for another wild week. In all of the hustle and bustle, please take a few moments to remember and pay tribute to the brave men and women who have made the ultimate sacrifice and for those currently serving our country. Have a wonderful weekend.

Posted on November 2, 2018December 31, 2021 by user — Leave a comment

Discount Brokerage Weekly Roundup – November 2, 2018

November is here and wow did it ever make an entrance. Stock market and political volatility, the launch of Financial Literacy Month, a new fiscal year for online brokerages and it happens to be the most important milestone in the calendar year for bargain hunters. With so much going on, it happens to be a fitting sentiment for this week’s roundup as there are big moves (and to quote Cardi B) and money moves. Never thought Cardi B would make an appearance here, but it’s been that kind of a week.

This is definitely a marathon edition of the roundup, so it’s worth stating up front, you may want to get comfy. Kicking things off, it’s the start of a new month which means taking a look at the latest discount brokerage deals and promotions as well as a commission-free trading offer that is bound to cause more drama (but less shoe throwing) than a Cardi B encounter with Nikki Minaj. Speaking of bold and provocative characters, the next story dives into the launch of a new website by one bank-owned brokerage looking to reshape its approach to online investors. As always, we’ll supply some DIY investor drama from the discount brokerage tweets as well as look at what people were curious about in the investor forums.

Savings are Coming

Black Friday and Cyber Monday may be what November is famous for, but for Canadian DIY investors, the enthusiasm for deals this month has undeniably spilled over to the online brokerage market. Unlike either of the major shopping days, however, what’s taking shape in the Canadian online investing space is much more profound and longer lasting than the fleeting bargain hunting days.

This month’s discount brokerage deals saw the arrival of what might be the first in a set of responses to commission-free trading by Wealthsimple Trade’s announcement in the summer that commission-fee stock trading is coming to Canada.

Specifically, National Bank Direct Brokerage launched an incredibly aggressive offer for new and existing clients: 50 commission-free trades, which are good for up to a year, as well as a threshold to qualify for the offer of ‘only’ $5,000. While all of the features individually are not unique to online brokerage offers, the combination of these offers is. The only other online brokerage that has a commission-free trade promotion that let’s investors take up to a year to use them is RBC Direct Investing – and that promotion (which also requires a deposit of $5,000) is for 20 trades and is currently targeting healthcare workers.

The first important observation is that commission-free trades could be a popular choice for online brokers to turn to and the way they can deliver more utility (and value) to DIY investors is to give them a long time to use them up. Normally (and even currently), DIY investors would have anywhere from 30 days to 6 months to use commission-free trade credits, with the most popular range coming in at about 60 days, so having one year do any commission-free trading is comforting.

A second important observation here is the threshold to qualify for the deal. By setting the minimum discount so relatively low, this offer naturally appeals to younger investors or those who are just getting started – or who want to experiment – with online investing. What better way to try out online investing than with a little bit of capital and no commissions to pay for 50 trades?

It’s certainly an interesting move to keep a fixed number of trades as opposed to many of the tiered promotions, which offer additional incentives as the deposit balance grows. In the case of NBDB’s offer, there is no financial incentive per se for bringing a larger deposit.

This month NBDB wasn’t the only online brokerage to use commission-free trading to sweeten the deal for investors, BMO InvestorLine also launched a new series of offers for online investors that combined a tiered cash back component with a commission-free trading component.

In the case of BMO InvestorLine, they’re offering between $100 and $1,000 cash back for deposits ranging from $50,000 to $600,000+. On top of the cash back component, individuals are also being offered 30 commission-free equity trades which are eligible to be used in February and March of 2019 – the precise window of time when activity related to RRSPs ramps up ahead of the contribution deadline.

With some notable online brokerages still on the sidelines, the uptick in value of now live offers will almost certainly increase the stakes and urgency to participate.

Currently, CIBC Investor’s Edge and BMO InvestorLine’s uncontested cash-back offers are giving them considerable exposure to DIY investors keen to open an online investing account. With National Bank Direct Brokerage’s latest aggressive promotion also now in the mix, there will almost certainly be new offers coming from bank-owned brokers that will have to ante up to the value being tabled by other online brokers. As we had mentioned in last week’s roundup, there is a clear signal from the parents of Canada’s bank-owned online brokerages that customer growth is a top priority which means the online brokerage arm could be a way to bring those clients into the brand.

For DIY investors, the bottom line is clearly that Canada’s online brokerages are going to have battle harder for new clients and to hang onto existing ones. This is an ideal time to start kicking the tires on an online investing account for those curious about making a switch or simply opening up a second (or third) online brokerage account. Of course, for valuable clients, it is also an ideal time to be negotiating for better commission or margin rates or better promotional offers for bringing assets to a new (or even existing) brokerage. In other words, don’t be afraid to ask for a better deal, this happens to be a moment where online brokers are much more motivated to make one.

National Bank Direct Brokerage Charts a New Direction with New Website

2018 has been a year of many significant changes at National Bank Direct Brokerage. Earlier this year their parent brand, National Bank, put down some serious real estate roots in Vancouver and the online brokerage unit saw a new president join the team to lead the organization through an important digital transformation in wealth management. After many months (feels like longer for those involved), 2018 has also brought with it a new consumer-facing website at NBDB.

The new front end of the website is a complete overhaul with a much more modern look and feel to it than the previous site. Gone is the rotating slider, information-dense homepage and somewhat utilitarian design of the key information pages.

There’s lots of space in the new National Bank Direct Brokerage website and information is well laid out so users can focus on important elements and sections without being overwhelmed. That kind of user experience consideration on new websites must be par for the course. And, it is definitely built around being more mobile friendly rather than desktop friendly. More on that in just a moment.

One of the most interesting elements of the new website that is pointedly different than other brokerages is the focus on women. That tone is set from the homepage hero image that is bold and confident and extends through the imagery on the top-level menu item landing pages of the website that consists exclusively of women.

The sections in the top-level menu are:

Invest with NBDB
Start investing
Pricing
Trends and tips
Events

Not only are the pictures well chosen, but they represent a diversity of women. This is a stark contrast to many other online brokerages and certainly a deliberate shift in the visual identity of the “typical” online investor. On that note, the pictures of the ‘male’ investors are also ethnically diverse and inclusive of investors younger and older.

In sum, there is strong visual appeal to the design and branding associated with the new website and it feels not just like a more representative and inclusive design, but a forward-thinking one.

Of course, when it comes to design, the devil is always in the details and for the new National Bank Direct Brokerage website, there are a few (easily fixable) rough edges.

The first is accessibility. In reference to what appears to be a heavily mobile-friendly website design, the contrast on the text on the desktop site menu is not as sharp/legible as it should be for older users nor is the text large enough to easily view. So, it is clearly built for younger eyes to be viewing the site on desktop or geared towards being viewed on mobile – again a preferred device for younger investors.

Another series of user experience rough edges encountered are the links pointing to unintended or non-functional pages. There is a neat feature that NBDB has built to let users determine whether they are beginner or advanced investors by taking a short (3 question) quiz. This interactive element is actually quite exciting to see on an online brokerage website, however, getting to the end of the quiz page yields a couple of unfortunate shortcomings.

The first is that it’s clearly unfinished with both English and French copy appearing in what should just be the English version of the site.

The second is when clicking the “learn more” button, an English user gets taken to a French version of the website (see image below). Although there is a translate option at the top of the page, a user would generally have to know that option exists on a multilingual website and then be motivated enough to hunt for it.

Then there’s just the grammar or spelling nut who will wonder how the footer text suggesting folks “stay tunes” made it through to the live version of the site.

Ironically, younger visitors might think elements like this are NBD (no big deal) especially given how much havoc autocorrect has wreaked on a texting generation but for a bank-owned brokerage and financial services provider, getting the details right matters to building trust and confidence.

In the grand scheme of things, these unfinished or quirky roll out bugs are easily fixed. In an agile world, there is a clearer preference to build and publish things and fix as needed – if there’s one thing that can be relied on, its user feedback to point out where things aren’t up to snuff. Interestingly, however, some of these oversights are on pages that face potential clients rather than actual clients, so the impact to the brand if these get left unaddressed could be more negative than they need to be.

Although there are even more interesting angles to cover about this new website, it is sufficient at this point to say that National Bank Direct Brokerage is signalling that they’re moving in a bolder and more assertive direction, visually and functionally.

Their new website won’t make a lot of waves on its own, however, the visual identity choices will have greater impact on new and existing clients as will their new commission-free trade offer which will more than likely drive a lot of curious traffic to the website. So long as NBDB can quickly close the gaps in the front-end presentation of their site, this new design positions them to resonate with the highly prized younger investor segment as well as other segments, like women investors, who can more readily see themselves as clients. For those reasons, with the roll out of this particular website, National Bank Direct Brokerage is setting themselves apart from some of their slower moving peers.

Discount Brokerage Tweets of the Week

Discount Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Advice for a Newcomer

A newcomer to investing and to Canada took to the Personal Finance Canada forum on reddit for some advice this week on where to open a TFSA and thoughts on their plan of action for the next 3 years. Check out some interesting discussion points from fellow forum users over questions of timing the market and deciding on long and short-term approaches. Read more here.

Fee Exchange

The questions of fees are always a hot topic in the forums. This DIY investor is looking to cut down on the dreaded mutual fund fee scourge and looks first to switching over to a Robo-advisor. But will paying one fee actually work out to be any cheaper? Read what interesting advice was offered here.

Into the Close

That’s the buzzer on another wild week. Not only were things hectic for traders, there was a lot that we didn’t get a chance to cover in this week’s roundup so stay tuned to SparxTrading over the next few weeks as we shine a spotlight on some really interesting developments we’ve spotted. Fortunately, there’s now an extra hour to get all that extra research and writing in (sounds fun right?). Don’t forget to set your clocks back and to spend the saved hour wisely! Have a great weekend!

Posted on October 26, 2018January 10, 2022 by user — Leave a comment

Discount Brokerage Weekly Roundup – October 26, 2018

Trading is definitely a numbers game. This week for most investors the numbers weren’t that great (unless you were short) yet, as many of the bank-owned online brokerages are well aware of, it’s not so much today’s numbers that are giving them cause for concern, but rather, the numbers of the future.

In this edition of the roundup, we take a deep dive into the story of one bank (who owns an online brokerage) who is publicly putting out a target of customer growth. Scroll down to learn more about the market fundamentals that may finally be the catalyst for some big changes to Canada’s online brokerages and other financial services. Following that, we’ll scan over a few minor developments by online brokerages including some interesting sponsorships for investor education. As usual, we’ll be sure to include conversations of DIY investors on Twitter as well as from the investor forums.

BMO Looking for One Million New Clients

There’s been lots of talk lately in the news about winning big. For one Canadian bank, however, the jackpot consists of customers, one million customers to be precise. While it has a certain Austin Powers ring to it, for the Canadian market, a million new customers is not as simple as it sounds however that is just what BMO is very publicly going after.

To make things a little easier, the timeframe BMO has given themselves to hit that target is 5 years. Of course, getting past the headline numbers, the challenge in front of them (and their peers) is not only to get one million new customers, but to keep those (and their existing) customers as well as keep everyone happy and wanting to deepen their relationship with BMO, which is a lot easier said than done. For some additional context, as of Q1 of 2018, BMO reported having 8 million customers in Canada.

First some math (yay) – the population of Canada in 2018 was reported to be just over 37 million people (as of July 2018) and by 2023, the forecast under the most optimistic projection puts the population at 40.7 million people, which means that there will be a net increase of 3.7 million people into the system. Of course, it’s not just about how many are coming in, it’s also about composition of the population – how many folks 18+ will be in the system from now through 2023?

One model of the Canadian population puts the proportion of individuals aged 15 to 64 at 65.7% in 2018 (24.3 million people) which will then contract to 62.9% by 2023 or about 26 million people – even so, that’s a net gain of 1.7 million people in that key segment over that time. In the 65+ segment, the estimate for 2018 sits at 16.9% or 6.25 million. By 2023, that number (again under the best growth forecast) would reach 19% of the 40.7 million forecasted population – or about 7.7 million people.

So, on a net basis there is forecasted to be about 3.3 million more people (give or take) who could open a personal bank or investment account by 2023 under the best of scenarios.

For some additional context, the significant driver of population growth is projected to come from migratory increase rather than natural increase.

Finally, another important set of details, according to the Financial Post, was that RBC mentioned that they too are looking to grow their client base by 2.5 million clients by 2023 (which would work out to just over 900K per year) and the Bank of Nova Scotia is working hard to win 1 million clients also from Canada and around the world. Assuming TD sets its sights on a figure like RBC’s and CIBC sets its sights on a projection similar to BMO or Scotia, that means the big five banks would be looking for about 8 million new clients (presumably they mean “net” new clients) collectively when there will only be about 3.3 million more people in Canada by that point in time – which is a huge discrepancy.

What could this mean for DIY investors in Canada – and the online brokerage market in general here in Canada?

Probably the first thing that jumps out is that the projections for desired new customers (which also don’t factor in other smaller financial services providers) doesn’t really add up with amount of “new” customers in the system. Clearly, there will likely be several banks (and the online brokerage units within those banks) that will underperform. It’s safe to say that the banks will be looking beyond just Canada as a source for new customers, however, competing and winning on home turf is much easier (and less risky) than having to venture out into other markets.

Another really important implication is that there will likely be a significant push to cater to new immigrants. Over the next decade or so, the majority of growth in the Canadian population will be from immigration. Thus, from a branding point of view, the banks and financial service providers will need to reshape their visual and brand identity to be in line with an evolving definition of what it means to be Canadian.

For DIY investors, there’s also a strong likelihood that online brokerages will be pushing harder to get clients. From aggressive switch campaigns to stronger incentive offers or greater investment in technology to deliver value, Canada’s discount brokerages still have a few levers they can pull.

Finally, with such aggressive growth targets set by the banks, it is not inconceivable that we see further consolidation in the online brokerage space in Canada – after all why fight to acquire new clients when you can acquire them directly? At some point soon, the valuation on that strategy will make more sense if it doesn’t already.

While BMO (and by extension their online brokerage BMO InvestorLine) was the focal point of this story, they are clearly representative of their peers in this space.

The challenge for financial services providers to grow in Canada is genuine and the race to innovate here in Canada is proof that financial services providers must become more efficient and scalable in the delivery of their services. There are already signs they are pushing the ‘innovation’ agenda – earlier in the month BMO announced the roll out of a digital wealth advice tool called WealthPath which should help simplify the provision of financial advice and in September, TD announced the partnership with The Hydrogen Technology Corp to provide a digital advice platform to TD Direct Investing clients.

If the US online brokerage market is any proxy, Canadian DIY investors can also look forward to technology playing an even more meaningful role in streamlining the online investing experience as well as lower commission prices. As the race for market share outpaces the growth in the Canadian investor market itself, the million customer question is which online brokerage or financial service provider will make something that Canadian investors will truly get excited about?

Quick Roundup

While there weren’t many seismic moves taking place in the Canadian online brokerage space this week, there are some interesting developments making small waves.

Options Education Day Coming Up

In just about two weeks, the fall edition of the Montreal Exchange’s Options Education Day will be taking place in Toronto. Now largely confined to Toronto and Montreal, Options Education Day offers the chance for DIY investors interested in learning about trading options to hear from practitioners and experts. Given the size of the Toronto market and its importance, there are four Canadian discount brokerages who are sponsors, with three of them having a significant footprint in Montreal. Sponsoring this event are CIBC Investor’s Edge, Desjardins Online Brokerage, Interactive Brokers and National Bank Direct Brokerage. This event is a great opportunity to meet and connect with fellow DIY investors in the options trading space while also learning some interesting perspectives or suggestions on options trading.

CIBC Investor’s Edge Sponsors Trading Competition

Trading competitions are typically a way to get a hands-on feel for trading in the stock or options markets. While not novel in and of themselves, the Capitalize for Kids organization has done something unique by melding a trading competition with raising money for kids’ mental health.

This unique organization brings together some of the most prominent figures in Canadian (and in some cases global) capital markets to collectively support improving mental health care in Canada for children. Since launching in 2014, Capitalize for Kids has raised over $5 million dollars for various children’s mental health organizations.

For their part CIBC Investor’s Edge is this year’s key sponsor of the trading challenge and has provided the top prize of $10,000 in a CIBC Investor’s Edge account as well as the opportunity to meet with CIBC executives. The runner up in the competition gets $2,500 in cash credited to a CIBC Investor’s Edge account as well as a meeting with a CIBC Executive.

The trading competition runs for most of an academic year (October through March) and participants are given a virtual one million dollars to manage. The winner at the end of the competition is the individual with the best performing portfolio. Participants are only allowed to trade equities, ETFs and REITs listed on the TSX, NYSE and NASDAQ with a $500M or higher market cap. No commission fees are charged on these simulated trades. Interestingly, the trading platform participants get to use is powered by IRESS, so there is a unique opportunity to access top shelf trading software.

Even though there are a number of dynamics at play that would impact what these participants might choose to invest in, it was nonetheless interesting to see that the top 5 most widely held securities were:

Amazon
Canopy Growth Corp.
Aurora Cannabis Inc.
Tesla Inc.
Aphria

In addition to holding a trading competition, the Capitalize for Kids organized a conference featuring high profile capital markets personalities and executives from across the globe. That conference took place earlier this week and provided exclusive access to investment ideas from the pros and where these individuals would be putting their money to work. Click here for a recap of the conference including what professionals had to say.

Progress on the performance of students in the competition can be monitored here.

Discount Brokerage Tweets of the Week

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Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Too Many Financial Cooks

When it comes to DIY investing, looking at the bigger picture is always a wise approach in fine-tuning your finance strategy. This investor put their financial “master plan” on the Personal Finance Canada forum for feedback and for help to tell them where they were going wrong. Have you got a master plan? See what others had to say here.

Tomayto, Tomahto

This curious investor was looking into robo-advisors and draws an interesting comparison between two seemingly similar institutions, Wealthsimple and Wealthbar. But with any comparison of online investing services it comes down to other factors aside from features and deals. Read how the two compared in this Personal Finance Canada thread.

Into the Close

That’s a wrap on another turbulent trading week. With markets clearly pulling back and a myriad of other sources working against equities, this has not been a dull week by any stretch. Of course, with baseball, basketball, football and hockey going on, the hardest decisions will undoubtedly be what to tune into and what to tune out of. Oh and for those who are celebrating Halloween (or just the weekend), have a spooktacular weekend!

Posted on October 19, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – October 19, 2018

This fall, the colours of the leaves in Canada were distinctly green as legalization of recreational cannabis officially took effect. There was lots of excitement in the months and weeks leading up to this major milestone. For DIY investors, that has translated into lots of volatility and trading which online brokerages are always happy to receive.

Even though Canada was clearly in the spotlight across the globe this past week, for this edition of the roundup, we shine a spotlight on the US online brokerage space yet again. Earnings for major US brokerages were reported as well as what management at these brokerages had to say about some very weighty issues, so continue reading to get more details on what those reports mean for online investors on both sides of the border. As usual, we have the tweets from DIY investors and a pair of interesting forum posts to share.

Mind on My Money, Money on My Mind

Like all good students of any market, it pays to do your homework. So, when it comes to tracking movement in the online brokerage space, the publicly-traded US online brokerages provide ample reading – especially at this time of year when they publish their quarterly earnings results. Unlike many quarterly earnings calls and discussions in the past, however, there was definitely one event/issue on the minds of analysts and online brokerages alike: zero-commission trading.

While Robinhood was or is perhaps best known for their “zero-commission” trading model, it was the announcement last fiscal quarter by J.P. Morgan that they too will enter the commission free trading game that sent shockwaves through the online brokerage space.

This week it was the shockwave of that announcement and the maneuvering the industry has done in response that appeared in earnings calls (and calls with management) at Interactive Brokers, E*Trade Financial and Charles Schwab.

For many online brokerages, the launch of Robinhood in 2015 and their no-cost trade model certainly raised the notion that trading commissions could go to zero a lot faster than anyone had ever anticipated. Still, Robinhood faced many hurdles and incumbent online brokerages were content with monitoring the situation and reacting accordingly. Fast forward to 2018 and as Robinhood has crossed above six million accounts, which put them at least for a time ahead of E*Trade Financial.

Because there is so much back-story to each of these organizations, it is tricky to distill the path that each has taken to respond to zero-commission trading but the short version is that they will really only entertain a zero-commission model if there is no other choice, and right now, it appears that there are still many options on the table. That said, price reductions for equity commission trading are already on the minds and the financial models of both Schwab and E*Trade. Interactive Brokers, at least for the moment, is content with their pricing structure standing firm for some time.

Just for posterity, it’s important to mention that Q3 of 2018 for publicly traded US online brokerages was a massively profitable one. The number of accounts at Interactive Brokers is at its highest point, DARTS are incredibly strong and the pretax operating margin of 66% is enviably efficient. E*Trade is doing so well that they announced they will be distributing a dividend for the first time and on top having performed a $1B share buyback program in 2018, are also planning to do another in 2019. Schwab saw a net income for the quarter jump of 49% year over year to $923 million, with 1.2 million new accounts opened year to date.

The take away: the major players in the US online brokerage space are extremely well capitalized, have very large war chests, and are highly motivated to defend their market position.

So, how are US online brokerages preparing for a world of declining commission prices? For starters, diversification of service delivery is one key strategy.

If online brokerages aren’t reliant on direct online investing commissions alone then commission revenues have less of an impact. For Schwab, there are digital and in-person advisor services that are generating material revenues. At Interactive Brokers, they are looking to offer more traditional banking-style features like paying high interest on cash balances, direct deposit and a Mastercard tied to an individual’s portfolio account. And, at E*Trade, their corporate services division is bearing significant fruit and enabling them to differentiate relative to their peers.

Diversification for online brokerages also means encouraging or facilitating online investors’ use of higher margin (i.e. more profitable) products, in particular options. In both Interactive Brokers’ and E*Trade’s calls options were specifically cited as a product that, because investors weren’t trading as much, impacted revenues. For Canadian DIY investors, this is especially important because, like the US, options trading in Canada is highly profitable for the Canadian online brokerages, so there is likely going to be more emphasis on enabling and/or training individuals to be able to trade options.

Another strategy to defend against zero commission trading is to go on offence. In this regard, online brokerages have a number of interesting levers to pull.

For example, both Interactive Brokers and Schwab stated that advertising campaigns are going to be key. In fact, founder and CEO of Interactive Brokers, Thomas Peterffy will be looking to have the narrative around commission-free trading to be a net negative for consumers stating:

“So, this is a serious issue for us now that JPMorgan joined Robin Hood offering free trades. We have to take this very seriously as I said. So, we are currently working on commercial to explain to people why that is bad for them, but the fact is that if you look at our [track record] for example, we regularly gain customers, two, three, four customers a day from Robin Hood and I’ve never seen a customer who went from us to Robin Hood.”

Of course, there’s also the use of incentive offers and promotions to try and win over new customers or court them to switch. Not all brokerages are crazy about the use of promos, however, as noted by Walth Bettinger from Charles Schwab who stated:

“That’s always been an area of competition…where incentives are offered to new clients around possible cash or free trades. It’s certainly not something that we necessarily like because it’s not an ideal way to build a long-term relationship with a client. Unfortunately, I would say, in some ways, promotions like that work. And so therefore, as long as they are commonly utilized in the industry, it’s difficult to take a hard stand that we’re not going to have similar types of promotional offers. But they are inconsistent with our long-term approach of building trust-based relationships with clients.”

It’s important to note that despite their traction and growth, firms like Robinhood still have many challenges to overcome.

This week, for example, the co-founder of Robinhood Vlad Tenev appeared on stage at a technology conference hosted by Bloomberg, and struggled with the explanation as to why Robinhood sells its clients order flow. Although there was a response posted on their company blog, the communication around selling order flow is a bumpy topic.

Ironically, also this past week, Robinhood found itself in the spotlight for selling client orders to large market making firms in order to benefit from trade rebates. As such, even though they are doing well, Robinhood cannot really afford to fail or take too many missteps.

For Canadian DIY investors, this offers a very interesting perspective on the various kinds of scenarios that could play out here in Canada once a Wealthsimple Trade goes live or if another commission-free trading player were to enter the market. Either way, it’s reasonably certain online brokerages in Canada are having the conversation about what can be done and how to avoid taking commission costs to zero. As is playing out in the US, however, Canadian online investors are also likely to see advertising from Canadian brokerages ramp up as well as promotional offers start to get richer. While it will sound good on the surface, DIY investors are soon going to have many more options to choose from so it looks like there will also be a lot more homework for discerning shoppers to have to do.

Discount Brokerage Tweets of the Week

Discount
Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

Gateway Trade

The general advice from financial professionals is to never try and time the market. That didn’t stop this curious investor from turning to Personal Finance Canada forum to debate if it would be worth moving out of mutual funds into a lower cost ETF’s at the end of a market cycle. Find out what the forum had to add here.

Puff Piece

For DIY investors it’s important to think about the bigger picture when it comes to personal financial planning. This investor turned to the forums after years of “living recklessly and frivolously” when it came to saving, and now wants to utilize his upcoming funds wisely. Read some interesting advice and opinions in this Personal Finance Canada thread.

Into the Close

That’s a wrap – or roll – on this edition of the roundup. While there may be no shortage of sports drama or political intrigue this weekend, there might be a shortage of weed. Howsoever you choose to relax this weekend, just don’t forget to bring the Doritos!

Posted on October 12, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – October 12, 2018

The week wasn’t the only thing that was short for Canadian DIY investors. After what seems to have been a pretty steady upward run for the better part of the year, the “fall” season presented a stark reminder that markets can turn quickly. For this week at least, volatility is back however that isn’t the only excitement going on in the markets – as it turns out, there has been lots of activity in the US (not including rappers showing up at the White House) which collectively signal a different kind of step change in the pace at which online brokerages will have to be ready to change.

With last week offering a little extra on the roundup menu, we thought we’d balance things out with a focus on some of the many stories we haven’t yet had a chance to cover, specifically with respect to what’s happening in the US online brokerage space. So, in this edition of the roundup, we’re taking a look at what the many recent feature launches at US online brokerages signal for online investors and the industry as a whole. From there we’ll hear from DIY investors on Twitter and close out with interesting chatter from the investor forums.

Innovation in the USA

As any good student of charts or trends knows, there are times when it pays to step back to a longer time frame to put things into perspective.

This past week, volatility – and in particular stock price plunges – took centre stage. Steep declines in short order are understandably concerning but it takes stepping back to longer term trends to really appreciate whether this appears to be the confirmation of a new trend or simply a healthy pause of a continuing one.

Within the US online brokerage space, there has been a lot of concern (by online brokerages) about drops in commission pricing. The big picture forming, however, is not so much that commission prices are falling (that’s just the turbulence) but rather that innovation is accelerating. Perhaps the writing is on the wall about commission prices falling and the response by industry is to figure out how to mobilize.

For the past several weeks, in spite of all of the stories we have reported on in the weekly roundup, there have been a number of developments which haven’t been published or focused on to a significant degree.

In particular, there have been numerous interesting stories relating to US-based online brokerages such as TD Ameritrade, E-trade Financial, Schwab and Robinhood which have been eclipsed by developments in the Canadian online brokerage space.

The collective picture from many of these developments in the US online brokerage space point to a heated arms race to innovate which is almost certainly going to inspire and influence Canadian online brokers to accelerate their own pace of innovation (even if it will lag what’s happening in the US).

Enough of the vagaries, here are some of the details.

Ai, Ai, Oh

One of the first things that leapt out of the news cycle came from TD Ameritrade announcing earlier this month the launch of an AI-driven investor education content engine. The “Content Intelligence Platform” is intended to provide an even more optimized experience to clients for investor education.

To industry observers, TD Ameritrade already has an industry leading investor education arsenal. According to a recent press release, they reportedly have close to 500 videos, 7 courses and over 2,000 articles on investor education. They also have one of the strongest investor education curricula available in their Investools program.

Pairing the power of AI with investor education, however, is definitely next level stuff. To be fair, AI-driven investor education sounds cool but without actually seeing what’s under the hood and how the content optimization experience works, it remains to be seen how impactful the technology is. At the same time, they were announcing AI-driven investor education content, there was also news that TD Ameritrade invested in a cryptocurrency spot and futures exchange called ErisX. Other firms investing in the exchange include Virtu Financial and Cboe Global Markets (as well as half-a-dozen other rather notable names) with the goal of eliminating the barriers to institutional adoption of digital asset trading within a trusted, regulated ecosystem. In a nutshell, TD Ameritrade is making some big bets on frontier technologies in hopes of being future-ready.

Sherwood Like to See What’s Next

Also crossing the news radar this past week was the announcement by online brokerage Robinhood that they moved trade clearing in house (which is not that uncommon) but did so by building their own clearing system from scratch – and within two years – while doing everything else they have been doing (including prepping for an IPO).

Oh, and to boot, as part of their prep to go public (did we mention they’re prepping to go public), Robinhood has been sharing all kinds of interesting information including the fact that they added 1 million users between May and July of this year, effectively doubling in size of accounts to where they were last year and now sitting at 6 million accounts. Another nugget they shared – they plan to look like a full services consumer finance company in the “next couple of years.”

Traction by Interaction

At Interactive Brokers, things have been equally as busy. Their move away from being listed on Nasdaq to join the startup IEX has been reaping dividends in terms of media exposure. They took the risk of being first and are being summarily rewarded for doing so (at least for now).

On top of that, however, they have also sponsored the new state-of-the-art Bloomberg broadcast studio in the heart of Bloomberg’s New York headquarters. And, just to keep things even more interesting, Interactive Brokers announced this week that they are opening up a portfolio management tool called PortfolioAnalyst free to the general public. That’s correct, a portfolio tracker freely available to the public is not something new but after Google finance dropped this feature there’s clearly a demand for something well-built to keep track of one’s portfolio (and get stock quotes + news). With the experience and technology stack Interactive Brokers brings with it for investors, PortfolioAnalyst will and should give rival brokerages a reason to be concerned; this kind of a tool for Interactive Brokers moves them further forward into the being able to provide ‘traditional’ banking-style services to their clients (sound familiar?).

For context, at the time of publishing, we’re still not two-weeks into October.

We also haven’t mentioned E*Trade’s launching of “themed investing” comprised of investment themes and their associated ETFs. What are the themes covered? Artificial Intelligence, Clean Energy, Clean Water, Cybersecurity, Gamers, Gender Diversity and, wait for it, Millennials.

So, while each of these developments probably merits its own story, taken together, the timing, nature and number of these new features, services, technologies and developments across the brokerage industry in such a small span of time point to something far greater than turbulence.

This activity has the signature of an industry that is in transition and who understand that the next waves of opportunities will require being able to connect with millennial investors in a meaningful and significant way. Part of the future path will undoubtedly require content and design-driven thinking. More substantially, however, survival for online brokerages depends on technological capability and creative foresight. With so much going on in the news, it’s going to be increasingly more difficult for online brokerages on both sides of the border to make a splash. Instead, brokerages are going to or at least should try to, invest heavily (if possible) in delighting their users with great design.

Discount Brokerage Tweets of the Week

Discount
Brokerage Tweets – Curated tweets by SparxTrading

From the Forums

RRSP Regret

When seeking financial advice, it can sometimes be hard to listen to the professionals, especially when it’s tempting to go in the opposite direction. One investor turned to a forum and was reflecting on their decision on a growth strategy for their RRSP and the ratio of certain mutual funds to bonds. Read what the forums’ verdict was here.

Crowd Surfing

They say there is safety in numbers, which likely prompted one newcomer to turn to the Personal Finance Canada subreddit for some advice. After maxing out their TFSA and RRSP they were looking to take the plunge into a taxable account, but the question of “how much is too much?” was a tricky one to answer. See what others had to say here.

Into the Close

That does it for another wild week. From incredible rocket launches to incredulous UFC fights to the double black diamond drop off on the charts this week, perhaps legalization of marijuana can’t quite come soon enough. On the plus side, Halloween is just around the corner so anyone looking for a costume idea (market sell off?) or little bags to cure the munchies is in luck. Have a great weekend!

Posted on October 5, 2018 by user — Leave a comment

Discount Brokerage Weekly Roundup – October 5, 2018

As with any good Thanksgiving meal, there’s usually a generous helping of something good. In keeping with the spirit of Thanksgiving, we’re dishing out an extra helping of interesting developments in the Canadian online brokerage space. Whatever the equivalent of eating pants are for your brain, we hope you’ve got them on.

In this edition of the roundup, we take a look at a very interesting move by a bank-owned online brokerage to become more accessible to younger investors. From there, we’ll take a look at a perennial crowd pleaser – deals and promotions, including one special offer that we spotted being chatted about online. As a bonus, we continue coverage of the celebratory year from another bank-owned discount broker who dropped some very interesting stats on their business and how it has grown over time. As usual, we’ll dish up the latest conversation starters on Twitter and in the investor forums. Bon appetit!

CIBC Investor’s Edge Launches Student-Friendly Pricing

Getting into DIY investing just got a little cheaper for some investors this past week. CIBC Investor’s Edge rolled out a new pricing structure geared specifically towards students that offer friendlier pricing and account maintenance terms. The new student commission pricing lowers the standard commission per trade to $5.95 from $6.95 and waives the annual $100 fee associated with accounts that have less than $10,000 in them.

While not a novel idea, providing a different pricing tier for students and/or youth does provide some extra incentive to try out a particular brokerage, especially for those new to investing. For CIBC Investor’s Edge, their already low commission rate makes them a natural contender for DIY investors looking to save on commission fees so, for students, who are typically on a budget, this is an attractive option.

One important requirement to qualify for the Investor’s Edge student pricing is that individuals have to open up a CIBC Smart Account for students before they can qualify for the Investor’s Edge student rate. Taken together, the fact that only those with student banking packages can access the student commission rates suggests that Investor’s Edge is looking to build a deeper relationship with this (mostly) younger demographic of client.

Interestingly, starting a banking relationship with CIBC also opens up the opportunity to get other products, such as a credit card, which a recent Rob Carrick article in the Globe and Mail is an important strategic decision that young people (typically post-secondary students) should consider to build a credit history.

While student-friendly pricing may not move the needle right away for CIBC Investor’s Edge in terms of higher commission revenues (except for those riskier clients who like the pot and crypto stocks), the fact this program exists might be enough to tip someone away from a competitor bank-owned brokerage. And, because of the requirements of the student bank account, there is a relatively low cost to using CIBC’s banking services while still getting the convenience associated with a large bank.

For other Canadian online brokerages, it will be interesting to see which of the bank-owned brokerages follows suit. Being friendlier to students and younger investors is one way to maintain a relationship with a key demographic. While user experience is key, at some point it’s hard to ignore the cost for services. So, for the non-bank-owned brokerages, there has to be more value to offset the inconvenience of having a separate funding source for an online trading account.

An example of an online brokerage getting creative in terms of retention is Interactive Brokers. One way they’ve pursued keeping a tighter rein on their clients has been to offer services like direct deposit and credit cards. Although that service is not available to Canadian DIY investors (yet) the reasoning is similar – the goal is to keep clients from trying out (and potentially liking) a competitor brand.

For CIBC Investor’s Edge, they’re hoping that they can build a long-term relationship with a generation in which Tinder is a thing; it will be interesting to see if these new features will have younger DIY investors swiping right to find a good match.

Discount Brokerage Deals & Promotions Update

The fall crop of Canadian discount brokerage deals is looking a little leaner than usual as we head into October. As mentioned a couple of weeks ago, CIBC Investor’s Edge launched an exclusive cash back offer for SparxTrading visitors towards the end of September and as a result, pits them against BMO InvestorLine as the only bank-owned brokerages (for now) with a cash back promotional offer.

This past week, we also had another deal from RBC Direct Investing cross our radar. The offer is for 20 commission-free trades that are good to use for up to one year. Although this offer from RBC Direct Investing is aimed at healthcare professionals, according to several forum users and looking through the terms and conditions, the deal is technically able to be accessed by non-health care professionals.

As we approach the end of the year, there is usually an uptick in activity with respect to TFSA’s and shortly thereafter, RRSPs. An interesting trend at Canadian discount brokerages over the past two to three years is that they are starting sooner in the year with their marketing efforts. The result for DIY investors is not unlike the experience of shopping at Costco where merchandise for Christmas shows up on store shelves in September. Perhaps they’re onto something.

For DIY investors in the market for interesting offers in October, the news is somewhat mixed. On the one hand, there’s strong variety in transfer fee coverage and, interestingly, in referral programs. On the other, previously popular categories such as cash back promotions and commission-free trade deals are leaner. That said, these latter two categories still have some strong offers for DIY investors on the fence about the brokerages offering up the promos.

With the year now in the home stretch and many financial services providers hitting their fiscal year end, the next several weeks will be interesting to watch. There are whispers of new offers coming to market soon and we are still watching out for the Wealthsimple Trade launch to officially start rolling out which may also create a sense of urgency for brokerages to step up with some interesting offers.

BMO InvestorLine Reflecting on 30

There continues to be interesting content emerging from the 30th-anniversary celebration of BMO InvestorLine. Instead of frosting or sprinkles, however, this treat came in the form of interesting data on the online brokerage and how it is reaching DIY investors.

Late last week, the president of BMO InvestorLine, Silvio Stroescu, highlighted some of the milestones and interesting stats associated with the online brokerage and ‘digital advice’ segments of the business (aka SmartFolio). One of those stats had to do with the total number of online brokerage accounts, which was quoted at 400,000. For context, the number of accounts at online brokerages in Canada is typically very opaque, unlike their publicly traded US online brokerage counterparts. So, it is interesting to see them share these stats publicly. Further, it was also interesting to learn about the number of SmartFolio and AdviceDirect clients (5,000 and 4,000 respectively). It is certainly a bold decision to telegraph numbers but it does help put into perspective the scale of how fast the online investing space is changing. Given that the number of accounts at the online brokerage unit was quoted as “over” 400,000 that could represent a much higher number, however for some perspective, the waiting list for Wealthsimple Trade stands at just over 76,000 interested parties and they haven’t even launched publicly yet. While it remains to be seen how many of those interested in this account actually open a trading account (and subsequently use it), there is clearly a competitor brewing in the DIY trading segment.

Another point highlighted by Stoescu that stood out was the bimodal distribution of the online investing demographic. Simply put, there are “younger” and “older” investors who appear to be gravitating towards online investing via the self-directed platform. There is clearly an interest in the younger tier with upgrades planned by TD Direct Investing also referencing this group and the story mentioned above relating to CIBC Investor’s Edge and the launch of student-friendly commission pricing.

Perhaps the most fascinating stat, however, was the reference to the growth of the adviceDirect platform, a service that blends DIY investing with accessibility to support from licensed wealth management professionals. In the period from January to September, they have seen more transfers of accounts worth more than $1 million compared to the past six years since the service launched. While the numbers and specifics are somewhat opaque, it nonetheless points to an interesting level of confidence in the service.

BMO InvestorLine has definitely earned quite a bit of coverage in the roundup for their 30^th anniversary, however as a milestone year, it appears that there are reasons to celebrate. What also seems pretty clear, however, is that things are changing in the online investing space quite rapidly. Paradoxically, how old a financial institution doesn’t determine how quickly they will grow nor does it determine how well it will handle the future wave of technology-driven challenges. This alone is proof enough that age is just a number. And, for Canada’s online brokerages, it’s also an instructive lesson on staying agile to keep up with the younger generation of investors.

Discount Brokerage Tweets of the Week

Discount Brokerage Tweets – 10-05-18 – Curated tweets by SparxTrading

From the Forums

Sow it Begins

How challenging is it to get started with online investing? One “newbie” investor posed an interesting question in this Reddit’s Personal finance Canada thread, drawing a comparison between two well-known passive investing options. Find out where the discussion led, and why so many comments favoured index funds and ETFs.

Mutually Beneficial

An overwhelmed investor took to this Personal Finance Canada forum seeking direction on which mutual fund to invest in. Willing to opt for a more risk tolerant profile, check out the helpful advice that was offered with some useful links too.

Into the Close

That’s a well-seasoned turkey wrap on the cusp of Thanksgiving weekend. This weekend is not really known for self-restraint, so whatever you choose to indulge in, on behalf of everyone here at the SparxTrading.com team, we hope you have a safe and happy long weekend. Just a reminder that Canadian markets are closed on Monday for Canadian Thanksgiving but US markets are open. Have a great weekend!