Category: Discount Brokerage News

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Discount Brokerage Weekly Roundup – July 20, 2018

There might be no more teachers or no more books, but just because summer’s here, doesn’t mean that lots can’t be learned. In fact, it appears that several online brokerages are banking on the fact that investor education may not be coming from books (or teachers) for much longer.

In this edition of the roundup, we take a look at a slow-moving development that has finally reached an interesting juncture – the end of the in-person seminar for investor education. Find out which bank-owned online brokerage is driving the digital bus. Next, we cover the slow and steady plan for global supremacy in the online brokerage space by one ambitious online broker. As always we’ve got a great selection of DIY investor chatter from the tweets and forums for the past week.

Investor Education Goes Digital

For online traders and investors, especially the DIY kind, there’s always something new to learn when it comes to trading and markets. What has been fascinating to watch over the past several years is how ‘investor education’ has evolved at Canadian online brokerages.

Normally, the Weekly Roundup profiles things that are event-driven, however when it comes to investor education from Canadian online brokerages, the story here is that there has been a slow but noticeable shift away from in person education events to ‘on demand’ and digital content to cater to investors’ needs.

What piqued our interest in revisiting this topic, was TD Direct Investing’s transition away from their previous seminar website towards their new webinar focused one. Specifically, when trying to access TD Direct Investing’s old seminar and webinar site: http://tddirectinvestingseminars.com/ we were repointed to the Investor Education section of the TD Direct Investing website.

Yes, gone is the map of Canada that displayed the number of seminars in different regions around the country and in its place, there is a selection of video content, as well as FAQs, investor terminology and tools and resources.

For those looking to stay sharp or learn about different investing topics, fear not, there is an extensive collection of about 115 webinars available. With so many webinars available, TD has taken an interesting approach to the webinars page by creating filtering and search capabilities and categories of videos are accessible via a ‘hamburger’ menu icon.

The list of webinar categories include:

  • Upcoming & Recent Events
  • Most Popular
  • All Webinars
  • Getting Started
  • WebBroker
  • Advanced Dashboard
  • Thinkorswim
  • Mobile Trading
  • Account Types
  • Investment types
  • Portfolio Management
  • Researching Your Next Trade
  • Chart Tools
  • Options Trading
  • ETFs
  • BNN Money Talk Aftershow

Another interesting feature of these webinars is that many of them are available to Mandarin and Cantonese speakers – something that none of the other Canadian online brokerages’ investor education tools have managed to do.

In fact, in comparing the webinar and recorded investor education video sections of other Canadian online brokerages offering investor education webinars, really the only competitors are Scotia iTRADE, National Bank Direct Brokerage and Desjardins Online Brokerage. Of those, it is only Scotia iTRADE which has taken a highly structured approach with their ‘Knowledge Navigator.’ Even then, the webinar archive for Scotia iTRADE, which is available on YouTube, 66 videos long and not segmented out as extensively as TD Direct Investing has done it.

Of course, we couldn’t talk about TD Direct Investing and digital content without mentioning the Money Talk site, which is by far one of the most comprehensive approaches to finance media published by any Canadian financial services provider – event to the point where it rivals a news channel for in-depth topic coverage.

Why this matters to DIY investing in Canada is because strategically, financial news content (especially video) in Canada is hard to come by – BNN and Bloomberg were once competitors but then joined forces in order to sustainably compete in the Canadian space. On a relative basis, TD’s digital content strategy and implementation is very far ahead of their peers, including and especially in the online brokerage segment, which means TD can keep themselves top of mind to a lot of curious consumers.

DIY investors looking for free, insightful content that on demand and frequently updated can (and might inevitably) turn to TD (and TD Direct Investing) to stay current on market news or to get a pretty decent handle on key topics.

For both the evergreen topics of investing basics and strategies, to the event-driven market moving information, TD (and by extension TD Direct Investing) has successfully made the transition from being a powerhouse in investor education seminars to being dominant in digital content – including educational webinars.

Clearly, TD’s digital content teams are putting on a master class of their own when it comes to content production and it will be genuinely interesting to see how or if other online brokerages can step up to the content challenge.

All Roads Lead to Interactive Brokers

Whether it’s Game of Thrones or Risk, global domination is not a game for the faint of heart. What does that have to do with online investing? Well, interestingly enough, it appears to be the (very) long term vision of Interactive Brokers – specifically of founder and CEO, Thomas Peterffy.

Interactive brokers held their Q2 2018 earnings conference call this week to walk investors through the strong performance of the company and to provide context and ‘colour’ to the direction of the business. Without spending too much time on numbers, perhaps some of the most pertinent are the record high number of customer accounts – up 27% in a year to 542,000.

While the growth streak continues at Interactive Brokers, the part of the conference call that piqued our interest was the following statement made by Thomas Peterffy in which he stated:

“Our introducing broker segment continues to benefit from two major trends, the increasing regulatory burden worldwide and the growth of the new investor class in developing countries. First, in developed and developing markets around the world there are thousands of brokerage firms, some just being newly formed. For a new firm it is almost impossible in terms of time, knowledge, and money to create the compliance processes and technology needed to be in business. For an existing firm new, more onerous regulations constantly come up so an existing broker must either increase its personnel and regulatory cost significantly to comply or come to us. In both cases the brokers optimal choice is to outsource their account opening, order routing, and back office functions to us. That means our platform will be used for the introducing brokers trading, clearing, and custody so what the brokers customers see is a front end with the brokers logo.”

This is a significant position to take for several reasons.

First, especially within a smaller marketplace like Canada, the odds of a new online brokerage setting up shop to seriously compete with existing players is low. In order for that to be true, there would likely have to be some kind of hybrid (which we’ve seen unfold already) with a larger financial services firm essentially providing resources to an online brokerage to compete against a larger firm.

Alternatively, if there were to be a ‘new’ brokerage, in all likelihood, the new brokerage would take care of the customer service while Interactive Brokers would take care of the trade execution. In other words, Interactive Brokers still benefits. Thus, the current Canadian online brokerages are essentially playing a game of chicken with one another to see who may flinch on pricing. What they may not fully realize, however, is that Interactive Brokers has already got pricing in their favour and may come to play a role in the Canadian investing space the way that robo-advisors may start to play an increasingly prominent role in reducing the operating costs for wealth management firms. The key will clearly be technological supremacy which is integral to keeping operating costs low.

Another statement that should concern existing online brokerages (which was also made by Peterffy) is that Interactive Brokers isn’t just going to stay in the ‘online trading’ space. They’ve been steadily widening the scope of their financial services business to include integrated cash management, introduction of a mastercard, bill payment functionality and very soon, payroll direct deposits. According to Peterffy, “This means our customers will have less and less reason to leave our platform to transact any of their financial business.”

Of course, other online brokerages and financial service providers are not going to gingerly stand by, however Interactive Brokers has been living lean for a long time and continue to operate with remarkable efficiency by relying extensively on automation.

With far too many Canadian online brokerages, including several bank-owned online brokerages, still sorting out how to transition to online account opening or have stable, feature-rich, trading platforms, the Canadian space seems particularly fertile ground for disruption. Because of the size of the Canadian market, innovation in the online brokerage segment is slower however it’s clear that Interactive Brokers’ global ambitions and our proximity to the US market, might disruption might happen sooner than anyone had planned for.

Discount Brokerage Tweets of the Week

 

From the Forums

Looking at the Fine Print

Terms and conditions can contain some pretty extraordinary stuff. When it comes to online brokerages, however, one DIY investor, in this reddit post, felt the Questrade terms and conditions attached to the “online security guarantee” were worthy of a second opinion. Find out what the community had to say.

Cents and Sensibility

Having a bank-owned online brokerage account holds a great deal of appeal with online investors. One investor who was somewhat on the fence about going the online brokerage route, asked what fellow DIY investors in the reddit forums, thought about the benefits of a bank-owned brokerage.

Into the Close

That brings another week to a close. For Raptors fans, the word trade has a particularly strong sting to it, however just as in basketball, the markets thrive on trade – so let’s hope the Raptors made the right move. Wherever this weekend takes you (even it if is to San Antonio), have a great weekend!!

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Discount Brokerage Weekly Roundup – July 13, 2018

It’s Friday the 13th and National French Fry Day. Just like a market, depending on your perspective this is either a pretty awesome way to end the week or a fittingly ominous one. One thing is for sure, perception rather than reality drives the bus when it comes to market moves.

In this edition of the roundup, we profile the latest new trading platform to come to market from a Canadian online broker – likely just in time to play the uptick in trading volatility. From there, we take a summer-style approach to interesting news from around the online brokerage world, including shortening of customer service hours, bullish investor sentiments and crypto-currency trading that might inspire a Canadian brokerage or two.

Virtual Brokers Making Waves with New Platform

For most of Canada’s online brokerages, progress, in the near term, will likely be evolutionary rather than revolutionary. We’ve already observed this trend over the past several years in website upgrade/refresh after website upgrade, and a concerted effort by many online brokerages to focus on continuous fine tuning of user experience.

One important incremental change was recently spotted at Virtual Brokers, with the unveiling of a new trading platform, called VB wave.

We first spotted the presence of Virtual Brokers’ new trading platform on their website a few weeks ago and mentioned it on Twitter. Since that time, we’ve gathered a few more details on what has been a rather quiet unveiling of this new product.

VB Wave (1.0) is a desktop-based trading platform that has been developed for Virtual Brokers to be able to cater to active or very active traders. Like most active trading platforms, VB Wave provides a lot of features traders like, including a customizable dashboard that consists of trading charts, market depth, watchlists as well as important account and position details. Users of VB Wave can trade equities and options.

It is worth noting that Virtual Brokers is somewhat unique among Canadian online brokerages in that VB offers a variety (8 in fact) of trading platforms – with several notable professional grade platforms. So, on a number of levels, it is interesting to see the launch of what is a key differentiator to their brand (i.e. another trading platform) emerge so quietly.

One of the reasons for the subdued entry is likely that the platform is still very much at the 1.0 stage. In an industry where users are very quick to note technical difficulties loudly and publicly, the VB team may be playing it safe by getting the feedback from early users.  As such, VB Wave appears to be in an ‘open-beta’ style situation where early users will help in identifying potential issues, bugs or enhancements that might need to be made before the marketing machine fully ramps up

Another interesting angle to the launch of the new platform is where it fits into the VB family of trading platforms. On either side of the new VB Wave, there is VB WebTrader which is a web browser based application that caters to the essential needs of a user. Then, on the active side, there is the application-based PowerTrader Pro which is billed to handle active and professional traders alike.

So where exactly does VB Wave fit in?

Simply put, it appears that VB Wave offers a desktop application experience for active investors or traders. A key area where VB Wave does differ from PowerTrader Pro, however, is in pricing.

VB Wave comes with a monthly platform fee of $75 CAD for standard commission account holders and $150 CAD for users on the commission-free plan. Compare that to the pricing on PowerTrader Pro, which is $250 USD and immediately there is a significant difference. Data fees apply on top of the platform fee so total pricing depends on the desired market data.

Currently, VB Wave is available only to clients on the standard commission plan however when VB Wave officially goes live – which is scheduled for the beginning of September – both commission plans will be supported on the platform.

As part of the initial roll out, there is a promotion that waives (no pun intended) the platform fee until September 1st.

The timing of the launch of VB Wave for the beginning of September also coincides with the time of year when marketing efforts pick up, so there is a good chance DIY investors will hear and see more about this platform then.

In the meantime, it’s a safe bet that VB will be refining and optimizing the platform until things roll out in a major way in September. Fortunately, there will also undoubtedly be some curious active traders who’ll be looking to kick the tires on Virtual Brokers as a result of the new platform, so one way or another, word of the platform is sure to ‘make waves’ this summer.

Lightning Roundup

Like a refreshing summer salad, we’ve got a light but fulfilling mix of interesting developments across the online brokerage space that might be of interest.

Scotia iTRADE Dials Back Client Service Hours

The days might be brighter but when it comes to customer service hours at Scotia iTRADE, it looks like the sun has set on reaching client service reps later on in the day and on the weekend.

Scotia iTRADE announced that as of June 30th their contact centre hours would change from 8am to 9pm ET (Mon-Fri) and 8am – 6pm (Sat) to new hours of 8am to 8pm ET (Mon-Fri).

This shift in client service rep availability is an interesting move, especially in an era where accessibility of a rep is still fresh in the minds of many DIY investors who were caught waiting in long call queues earlier in the year and who were told to try contacting their broker at less busy hours.

US Online Investors Bullish According to E*Trade

Economic and trading indicators can come from all over the place, however an interesting survey from US online brokerage, E*Trade Financial, points to somewhat optimistic investors south of the border.

According to E*Trade’s most recent survey of active investors, US online investors don’t see the current negative news headlines as a reason not to be optimistic about the direction of the stock market.

Bullish sentiment for Q3 was reported at 57%, 5 percentage points higher than Q2 of 2018 (52%). By comparison, however, bullish sentiment was at 68% in Q1 of 2018 and 63% in Q4 of 2017 indicating that while still positive, there’s definitely a pullback in the percentage of folks who see a rise in markets relative to the end of last year.

Robinhood Adds More Coins to Trade for Free

An interesting piece of news for followers of cryptocurrency trading emerged this week as no-commission online brokerage Robinhood added the ability to trade Litecoin and Bitcoin cash into its lineup of tradeable cryptocurrencies.

Robinhood continues to highlight the massive and pronounced appeal of the commission-free trading model, something that might yet be a signal to Canadian online brokerages to consider doing the same.

Discount Brokerage Tweets of the Week

From the Forums

Free trades agreement?

Getting something for nothing often feels too good to be true. In this post from reddit’s Personal Finance Canada, one user managed to not get dinged the usual commission from CIBC Investor’s Edge for purchasing an ETF but couldn’t quite deduce why.

Making money moves

With mo money, comes mo problems – like insurance on said monies. One reddit user queried whether Questrade was an appropriate destination for a large portfolio and received a slew of interesting and generally well-behaved responses.

Into the Close

That’s it for another wild and crazy week. With so much activity happening in Europe this weekend, it’s going to be anything but dull and realistically anything but relaxing. So, if you manage to find a way to take it easy and enjoy the summer weather, good work. For the traders out there, though, it looks like this will be a weekend to start shopping around (and because Prime day is coming up!).

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Discount Brokerage Weekly Roundup – July 6, 2018

There’s no mistaking it, summer is here (for most of Canada) and it’s a scorcher. Of course, for Canada’s discount brokerages, it’s not just the heat that’s causing them to sweat, it’s also the hurried pace they’re moving at to position for what’s shaping up to be a very busy fall season.

In this edition of the roundup, we kick things off with a recap of a hot topic for DIY investors – promotions at Canada’s discount brokerages. From there, we do a lightning round of interesting stories for DIY investors that crossed our radar during this shortened week. To keep things moving, we’ll close out with tweets of the week as well as interesting forum posts.

Summer Deals

With vacations, nicer weather and no looming deadlines for taxes, there aren’t a whole lot of reasons to be thinking about your online investing account. As such, summer is an interesting time for online brokerages to test or launch promotional offers. And, this month didn’t disappoint.

The July crop of discount brokerage deals and promotions are now live and even though the beginning of the month technically started off slowly because of the long weekend, this month is filled with brokerages making interesting moves.

Heading into this month, as we mentioned in a previous roundup, Scotia iTRADE took a measured step back into the deals pool by offering up a cash back promotion targeted at existing clients only.

It was interesting for a number of reasons, most notably because they are a bank-owned online brokerage, they launched an aggressive cash back offer and this offer was extended only to existing clients.

From a strategy perspective it is noteworthy because it seeks to incentivize individuals who have bought into Scotia iTRADE already (i.e. existing customers) and who are presumably happy with them to deepen their relationship. So, rather than spend resources on trying to win over new customers, Scotia iTRADE appears to be dedicating those marketing dollars towards preventing existing customers from considering their competitors.

Another bank-owned online brokerage also made some moves of its own early on in July. BMO InvestorLine launched their newest offer – a tiered cash back incentive that provides rewards of up to $1,000. While there was technically a brief lag between the expiry of BMO InvestorLine’s previous offer (which expired on June 30th) and the launch of the new offer (on July 3rd), for DIY investors, it was likely worth the wait.

Cash back promotions are generally preferred by DIY investors, so at this moment, the online brokerage offers available to the general public are with either BMO InvestorLine or Questrade. And, in comparing the two, they are reasonably close in value.

Which offer has the ‘edge’ comes down to a couple of factors. For instance, whether or not an individual can get a referral bonus of $50 from BMO InvestorLine tips the scales in BMO InvestorLine’s favour. Additionally, the offer from BMO InvestorLine is open to existing clients who bring in additional assets to an existing account whereas the offer from Questrade is for new clients only. Finally, depending on the assets being brought over, either Questrade stands out or BMO InvestorLine does.

What it all boils down to for DIY investors hunting for a new online brokerage account is that there are still interesting offers to consider – especially during the summer months. And, even though the National Bank Direct Brokerage commission-free trading offer has expired at the time of writing this roundup, there are still alternative offers available and there’s a good chance that promotions activities will offer some more summer hits before the season is out – so definitely stay tuned.

Lightning Roundup

Even though it was a ‘short week’ there were still a number of developments in the DIY investor and online brokerage space that are worth mentioning. While we don’t dive into these too deeply, it’s great to see that this space continues to be highly dynamic.

National Bank Direct Brokerage & Horizons Announce Biggest Winner Contest

Even though it was a competition based on fantasy money, one lucky contestant in the Horizons ETFs Biggest Winner competition walked away $7,500 richer. Joel Couture from Levis Quebec managed to take top prize in the competition by finishing with a 16.26% return after six weeks, handily beating the second prize winner who netted $2,500 for finishing with a return of 11.31%. Interestingly, some stats from the competition that the volatility oriented ETFs HOU and HOD (the 2x oil bull and bear ETFs respectively) were among the most popular as was the marijuana ETF, HMMJ. For more information on the contest including the full list of winners and commentary by NBDB, click here.

Senior Unfriendly

An article published in the Globe and Mail by personal finance columnist Rob Carrick highlights an interesting issue that is certain to draw more attention to the way in which DIY investors can be stuck paying more for their portfolios simply because they are older.

At the heart of the matter is that some Canadian discount brokerages don’t have USD registered accounts for RRIFs, which RRSPs must be converted to. While Carrick goes on to cite some intriguing work arounds, the fact remains that brokerages that can make the process much more smoothly will stand out more than those who can’t.

Some Whispers

TD Direct Investing was being whispered about in a few places online this week. Suffice to say we’re printing here because we find it interesting.

First, there was the mention of TD Direct Investing getting new features that older clientele would appreciate, namely in Rob Carrick’s article cited above. Specifically, Carrick stated that TD Direct Investing is actively working on bringing U.S. Dollar RRIFs into reality in late 2018.

TD Diect Investing journaling of trades via webbroker

Another interesting feature to cross our radar was described in a reddit post in which an individual relayed what the TD agent said to them about journaling trades, and that WebBroker would be getting that feature.

Discount Brokerage Tweets of the Week

From the Forums

Small Potatoes

Sound money management is something that needs to happen with any portfolio size. This post, from reddit’s Personal Finance Canada section, offered a number of really interesting perspectives for someone looking to beat the administration fees on an account balance of $1,000.

It Ain’t Easy Being Green

There was lots of chatter this week from forum participants about both TD Direct Investing and Questrade. Among the debate topics was choosing one or the other for a TFSA. Check out this forum post for more details.

Into the Close

Regardless of what you happened to be celebrating this week, for many soccer fans, there is still a lot more celebration on the horizon. It’s a big week in markets next week with interest rate announcements coming out however if you really want to see interest in action, check out any of the sports bars or restaurants where the soccer games are playing. Stay cool and hydrated out there and have a ball this weekend!

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Discount Brokerage Weekly Roundup – June 29, 2018

It’s hard to believe but the halfway point of 2018 is just around the corner. Heading into the Canada Day long weekend, it’s an opportune time to review the latest activities from the second quarter of 2018 and see what stories made waves, as well as some of the trends we see taking shape in the online brokerage space.

In this edition of the roundup, we’ll take a look back at the (calendar) Q2 of 2018 and review what we think are the most compelling stories and developments. Suffice to say technology has been a key driver of change, but it also seems like the fundamental economics of the space are experiencing a shift. As usual, we’ll also serve up some DIY investor content treats with DIY investor tweets and close out with interesting forum posts.

Making the Highlight Reel

Before jumping in to Q2, a quick recap of what happened in Q1 is available in this roundup from early April. In the first quarter of the year, some of the dominant stories included online brokerage outages, RSP season promotions and online brokerage rankings from the Globe and Mail.

At the end of the second calendar quarter of 2018 there are a number of interesting stories to reflect on as well as some hints dropped and telegraphed by Canadian discount brokerages as to what’s coming around the corner for the summer of 2018.

Acquisitions

One of the biggest news stories to emerge in Q2 was the announcement that independent online brokerage, Jitneytrade, was being purchased by wealth management giant Canaccord. The deal, the terms of which were not published, means that the small independent online brokerage players in the Canadian space have all but disappeared. Only Questrade stands out as the online brokerage that is not owned by a larger parent financial brand, bank or other significantly larger financial services company.

Last year saw the purchase of BBS Securities (parent to Virtual Brokers) and the merger of Qtrade Investor and Credential Direct. This trend towards consolidation or purchase by deeper pocketed investment firms is a signal that the online brokerage space is in transition. Some services, such as Jitneytrade, cater to a very select group of active/professional traders – so the requirements for a broader investor profile are not as prominent as firms such as Qtrade Investor or Virtual Brokers. With bigger backers, however, the online brokerage platforms will really be put to the test to see if they’ve got what it takes to challenge the big bank online brokerages.

Online Brokerage Reviews – Moneysense magazine

In late May, the online brokerage reviews and rankings prepared by Moneysense magazine were published. Our roundup post on the Moneysense reviews compared the ratings from last year to this, and looked at the categories that these rankings included this year such as:

  • Best overall online brokerage
  • Best discount brokerages for ETFs
  • Best online brokerages for mobile and market data
  • Best online brokerages for low fees
  • Best online brokerages for design and user experience

One of the big stories from this year’s Moneysense rankings is that Qtrade Investor came out on top, narrowly edging out Questrade in the category of “best overall” online brokerage. Interestingly the top four firms last year are once again in the top four this year. Joining Qtrade Investor and Questrade are Scotia iTRADE and BMO InvestorLine, although it should be noted that these latter two bank-owned online brokerages scored notably lower than either Qtrade Investor or Questrade.

Looking at the results from a category point of view showed that different online brokerages have particular strengths in certain areas. For example, HSBC InvestDirect and Questrade were ranked best for fees; Questrade was ranked highest for initial impression; TD Direct Investing was ranked best for Data while National Bank Direct Brokerage was ranked best for ETFs.

All told, when it came to online brokerage rankings, Qtrade Investor performed exceptionally well, managing to top both the Globe and Mail and Moneysense rankings and placing second overall in the last J.D. Power Investor Satisfaction rankings. From a competitive point of view, this provides a lot of positive momentum for Qtrade Investor as they transition into life as the dominant non-bank online brokerage brand in Western Canada (now that Credential Direct has merged). It will be particularly interesting to see how a considerably bigger Qtrade Investor decides to challenge bank-owned rivals in ways that Qtrade has traditionally avoided, such as with more prominent advertising or with platforms/products for active investors (or even traders) – the affiliation with Desjardins Online Brokerage (and in particular Disnat) – could present a compelling wildcard that would almost certainly cement Qtrade Investor’s status (among its peers) as the brand to beat going forward.

V for Volatility

The past several years since the financial meltdown, markets have been mostly on a steady track upwards. This year, however, that all changed. Since the election of Donald Trump, markets – in particular US equity markets – have done really well. But, as all seasoned traders know, the trend is your friend until it ends. For US online brokerage, Interactive Brokers, the move on their part to raise the cost of borrowing for clients requiring margin of US stocks was a direct response to the data pointing to a pending downturn. Well, they called it, and earlier in the second quarter of this year, Interactive Brokers published the results of having prepared well in advance of the pending volatility. The result, Interactive Brokers was able to limit losses to a fraction of the losses experienced by names such as TD Ameritrade and E*TRADE.

Uptick in Deals Activity

On the deals and promotions front, Q2 of 2018 presented a little bit of volatility of its own as the post-RSP dip in activity also took down a number of online brokerage deals and promotions. That said, it didn’t take too long for a rebound to take hold so that by the time the quarter was winding down,  offers were back on the table and during the quarter, a short lived but very intriguing offer from RBC Direct Investing also surfaced indicating that this big player is capable of some nimble promotional work.

Cash back offers in particular saw a resurgence in Q2, with BMO’s SmartFolio launching a new cash back offering and Scotia iTRADE also launching a cash back offer (in the form of a gift card) for existing clients.

Be sure to check out the deals action this summer as the online brokerages get themselves ready for the fall and invariably try to find some winning combination for investors active during the summer.

What’s Coming Up

In addition to setting the world on fire with the Yanny vs Laurel craze, social media also proved itself to be useful in providing DIY investors some hints as to what several online brokerages have coming up in the near future.

Keeping Currency

One great example comes from Scotia iTRADE, whose service staff let one tweeter know that USD registered accounts are ‘on their way’ (i.e. close to completion) for DIY investors. This kind of insight is easy to miss but will be a notable value driver when it does go live. We also expect there to be quite a bit of noise generated when it is released which means even more iTRADE commercials.

Platform Leap

Another interesting tip that came from social media was from TD Direct Investing, who let followers know about a webinar that provided a first look at the new Advanced Dashboard to be rolled out to clients. This new approach to rolling out feature releases appears to be something TD is testing the waters with – as a recent enhancement for French-speaking users was also telegraphed on Twitter in mid-May and was confirmed to be live as of this past week.  As for the Advanced Dashboard, we’ll be watching to see what the reaction is like to a new user experience and to upgraded trading features.

Also rolling out in the summer is a new trading platform from Virtual Brokers – VB Wave. We first spotted the new platform on the VB website in early June however it appears to still be in active development with the soft roll out intended to help iron out any wrinkles in performance or user experience that may arise. In any case, the addition of a new trading platform to the suite of Virtual Brokers’ product line positions them as having one of the most diverse selections of trading platforms available to any online brokerage in Canada.  Stay tuned.

Discount Brokerage Tweets of the Week

 

 

Into the Close

That’s a wrap for this pre-Canada Day edition of the roundup. Although markets are going to be closed in Canada on Monday, there’s no doubt that traders will want to keep an eye out for the fallout from the trade tariffs which are set to take effect July 1st. For all the folks in Ontario, stay cool and for the folks out west in BC, feel free to blame it on the rain. On behalf of the Sparx Trading team, Happy Canada Day to everyone!!

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Discount Brokerage Weekly Roundup – June 22, 2018

There are lots of reasons to cheer as summer officially started this week and, of course, its Friday. For Canadian DIY investors, and much of the world really, the news coming out of the US has dominated airwaves. And, while nobody really knows exactly what’s going to happen next, it’s interesting to see how the leaders of online brokerages in the US are positioning themselves in this uncertain environment.

In this edition of the roundup, we take a deep dive into a recent financial services conference in the US that brought together the heads of three large US online brokerages to provide insights into their particular companies and on the space for online investing in general. From there, we’ll tack on the tweets from DIY investors this week as well as some interesting forum posts on two popular online brokers.

Views from the Top: Perspectives from US Online Brokerage Leaders

In early June, many financial services providers gathered in New York City for the annual Sandler O’Neill Global Exchange and Brokerage Conference. The participant list included many notable names from the US online brokerage market, including the leadership from E*TRADE Financial, Interactive Brokers and TD Ameritrade, three of the four largest publicly traded online brokerage trading firms in the US.

As part of the conference, one-on-one interviews with the three US online brokerages were conducted which offered a unique window into what’s going on at each firm – as told by the leadership themselves.

Given their status as public companies, it is a balancing act to reveal something meaningful about what’s taking place either in the industry or in their firm, while being cautious not to let too many ‘secrets’ out of the bag. Suffice to say, it’s also kind of fun to hear how the different leaders communicate and pull it off.

There were a number of themes that emerged from the conversations with Karl Roessner (CEO, E*TRADE Financial), Tim Hockey (President & CEO of TD Ameritrade) and Thomas Peterffy (CEO & Founder, Interactive Brokers) as well as some interesting reveals and hints of things to come.

Of course, the human side of the interactions was also interesting to take note of – specifically the styles of each of the leaders. Before jumping into the details of what we learned, we’ll detour into some observations about the leaders themselves.

In Karl Roessner’s interview, for example, the energy and enthusiasm came through in the cadence and pace of his answers. It seemed to match the overall banner that E*TRADE appears to be marching under, which is a return to their core identity as a leading trading firm. By comparison, Thomas Peterffy was a much more measured speaker which seemed to also match the ‘slow and steady’ approach to continued success achieved by Interactive Brokers. Between the two was Tim Hockey, again another articulate and calculated speaker who seemingly matched the overall arc of where the firm has come from since he came aboard and where it may go under his leadership.

Getting back to important themes and discoveries from the Sandler O’Neill Global Exchange and Brokerage Conference, one of the most prevalent talking points was growth in accounts.

In the case of E*TRADE and TD Ameritrade, recent acquisitions of other trading firms have helped to contribute growth to the number of accounts and client assets. The fact that both of these firms opted to acquire to grow presented some intriguing comparison points.

For example, in acquiring another firm, the timing and nature of the impact to the clients of acquired firm is something that has to be carefully planned for. E*TRADE acquisition of OptionsHouse for $725 million in 2016 as well as the purchase of one million Capital One retail brokerage accounts in January 2018 have added a substantial number of new clients to the organization. In the interview, Roessner stated that to ensure the transition for the Capital One clients goes smoothly, E*TRADE is taking some extra time to get the client experience just right. Of particular interest is the fact that E*TRADE has made a concerted effort to go back to its ‘active trading’ roots for the past two years, however many of the Capital One brokerage account holders are typically not that active, so it should be interesting to see how E*TRADE tackles the challenge of having many more clients that don’t necessarily have the time, confidence or desire to trade actively. One way might be via E*TRADE’s own roboadvisor service – which they call “Core Portfolios.”

TD Ameritrade’s acquisition of Scottrade, which was announced in October 2016 and was finally completed in September 2017 brought the total number of accounts at TD Ameritrade to 11 million. In recounting that transaction, which was the first major acquisition at TD Ameritrade under Hockey’s leadership, it was interesting to hear how Ameritrade had modeled what was going to happen and when they could start to see the impact to clients when the platforms were finally combined (which happened in February 2018). The impact to clients really didn’t take shape right away, it was only after the existing Scottrade clients found themselves using TD’s platforms did they attrition (turnover) rate start to increase. Nevertheless, what was revealing was that once new clients familiarized themselves with the TD Ameritrade platform (Thinkorswim), there was an accompanying lift in the number of trades made by clients.

Also, while on the topic of TD Ameritrade, it was intriguing to hear that Investools, the exceptionally well-designed investor education program offered by TD Ameritrade is being translated to service the Asian markets (China) and that it is going to become an area of even greater focus as Ameritrade looks to pursue getting into the Chinese/Asian investor marketplace.

The growth-by-acquisition strategy was one end of the spectrum and squarely at the other was Interactive Brokers, which has seen incredibly strong growth almost from the get go of becoming a public listing. The interview with Thomas Peterffy was filled with nuggets of information that add depth and context to the IB approach and the realities of being an online brokerage.

 

One of the most interesting takeaways from the Interactive Brokers session is how Peterffy described the ‘ecosystem’ of online brokerages in the US. Namely that TD Ameritrade and E*TRADE clients that outgrow the experience, platform or pricing of these two firms naturally gravitate to Interactive Brokers. In other words, Ameritrade and E*TRADE act as feeders for Interactive Brokers – which is one of the reasons IB has been able to maintain its growth trajectory. Another important contributor to growth for Interactive Brokers has been their international footprint – in particular their longtime presence in Asia (they have been in Hong Kong for about 25 years). The account sizes of the Hong Kong investors rival, on average, those of the US clients.  Perhaps the biggest news that was revealed by Peterffy was that Interactive Brokers will be opening an electronic bank. There are already plans in motion to do so which will enable Interactive Brokers to offer an even broader array of banking services to clients in certain jurisdictions.

The US online brokerage space is always an exciting market to look into because it is dynamic as well as transparent about the kinds of performance metrics and initiatives that impact (or are result of) clients. Canadian discount brokerages, on the other hand, are not as large, do not report the same kind of granularity of data and typically don’t move at the speed and scale of the US online brokerages. Even so, it is worth noting that all the brokerages in the US don’t focus exclusively on order execution only anymore.

The online brokers in the US now include digital/managed advice services (e.g. robo-advisors), banking services and international expansion plans. That each of these US online brokerages have had to diversify their businesses from just online trading is a sign that Canadian discount brokerages are going to compete more heavily with both the banking as well as the managed advice services already in place. It is seemingly ironic that over the span of time that online brokerages have been around, the ‘DIY’ investing world seems to have come full circle as more individuals gravitate towards the managed wealth or digital wealth solutions – perhaps the most convenient is that there are now more one-stop-shopping options to choose from.

Discount Brokerage Tweets of the Week

From the Forums

Weighing in on the Best Online Brokerage

A perennial question among online investors is which online brokerage is best? In this recent post from the reddit Personal Finance Canada threads takes a long look at the pros and cons of Questrade as well as several other online brokerages as viewed by online investors.

Getting Started with TD Direct Investing

As one of Canada’s most popular online brokerages, TD Direct Investing’s recent enabling of online account openings is only going to help speed up the process of getting a new account opened. In this post from reddit’s Personal Finance Canada thread, one user is curious about the online signup and learns some interesting tips from fellow forum users.

Into the Close

That does it for (yet) another eventful week. With uncertainty continuing to grow in markets the upside is that the volatility of the ‘summer’ weather doesn’t quite seem to matter much. If you do find yourself out and about, try to find a way to make it enjoyable! To help get things along, here’s a fun compilation of dance moves – have a great weekend!!

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Discount Brokerage Weekly Roundup – June 15, 2018

There is no doubt that deal making is an art. Sometimes it’s a Michelangelo, sometimes it’s a Pollock, sometimes it’s a Vandelay. In either case, online brokerages know that like beauty, a good deal is in the eye of the beholder. This week we know we’ve seen all kinds of ‘deals’ make the news but we’ve spotted a few which might have flown under the radar with all of the other hubbub going on.

In this edition of the Roundup we take a look at some hot deals action from two bank-owned providers coming just in time for the summer. Next, we look at why gross can be good, especially for a few US online brokerages. As always, we’ve also got a fresh batch of DIY investor tweets and forum threads to close out the recap.

Deals start to sizzle

For many keen observers of the deals and promotions section, one of the important takeaways is that online brokerages need to continuously be thinking about how to grow and attract new clients and assets. It is perhaps a timely question to pose as news outlets report this past week that Canada’s population officially clocked in at 37 million individuals, up from 36 million just over two years ago and, it seems, that firms such as RBC are in the hunt to acquire new clients on a massive scale.

Of course, the tried and tested way to get attention and incentivize individuals to try out an online brokerage has been by using deals and nothing gets investors’ attention like cash back offers. This past week there were two cash back offers that came to market that appeal to online investors – the DIY type and those that want the ‘autopilot’ version.

Starting first with the DIY investor option, Scotia iTRADE launched a new campaign earlier this week that offers up a tiered cash back promotion of up to $1,500 (in the form of a prepaid VISA). Interestingly, it was not found on the promotions section of the Scotia iTRADE website but rather via an email campaign which appears to be because the offer is valid for existing iTRADE account holders (as of May 14th) only.

In all there are six deposit tiers to this offer, ranging from a minimum deposit of $25,000 (for which there is a reward of $100) to the top deposit tier of $1M+ (which results in a cash back offer of $1,500).

It is worth noting that the terms and conditions for this offer are written in an incredibly small font size, so anyone considering the deal is well advised to zoom in to make sure you don’t miss something important – like the condition that you can only take advantage of this offer if you haven’t participated in a cash, free trade or prepaid VISA or SCENE point promo since June 10th 2017. In case anyone was wondering the font size for the important legal text is set to 9 pixels while the ‘normal’ reading size of the font on the page is 18 pixels and those conditions are 459 words long. In a single paragraph. But I digress.

Aside from the small font size, this is a very big deal – sadly only for existing Scotia iTRADE clients but perhaps for new clients who read the deals section or weekly roundup and are prepared to negotiate, this might also be made available.

Perhaps the biggest news is that, when compared to existing cash back offers currently live in the market, this is the highest cash back offer for deposits of $25,000+, more than double in fact, and in some cases more than triple the highest amount being offered. So, as word spreads about this offer, it will be interesting to see a) whether iTRADE decides to roll out the offer publicly to all prospective clients before B) another online brokerage steps up with an even more aggressive offer.

Another cash back offer to cross our radar this week was from BMO SmartFolio. Specifically, the offer is for new or existing clients and offers 0.5% cash back on every dollar invested into a SmartFolio account up to a maximum cash back amount of $1,000.

The minimum deposit tier to qualify for this promotion is $25,000 (which offers up a $100 rebate)

While not an apples-to-apples comparison in terms of where to park your money, the SmartFolio cash back promotion is equal to and at certain tiers, higher than the cash back bonus offers at Canadian discount brokerages (including BMO’s InvestorLine). So, for online investors it is an interesting moment – if they have been curious about a ‘digital advisor’ or ‘robo advisor’ – the cash incentive certainly makes the case for giving it a try. It doesn’t hurt either that BMO SmartFolio will cover up to $200 in transfer fees if moving from another institution into this solution.

For online brokerages with a digital or robo advice arm, such as Qtrade Investor, Questrade and Virtual Brokers for example, competing on both the online brokerage side and now the digital management side just got even trickier. Right now, BMO has the field almost exclusively to themselves from this group and they’ve already got three promotional offers that users can take advantage of plus the transfer fee coverage, so as far as bank-owned robo-advisors go in Canada, they’re certainly setting the bar high.

Gross is Good

To paraphrase Gordon Gecko, gross, for lack of a better word, is good – especially when talking about growth in new accounts at online brokerages. This week, US online brokerages E*TRADE and Charles Schwab reported May activity metrics including new account data and client assets and the numbers paint a positive picture at both firms.

For the month of May, E*TRADE saw about 40,261 gross new brokerage accounts for the month created (and a total net new account number of 22,228) and finished the month with almost 3.9 million brokerage accounts. By comparison, Schwab also reported their metrics this week and opened 122,000 new brokerage accounts bringing their total up to 11.1 million. It’s worth mentioning that Schwab is the giant player in the US online brokerage space with $3.4 trillion in assets. At the end of March of 2018, Interactive Brokers had about 517,000 accounts and TD Ameritrade had 11.3 million funded accounts.

By all accounts (pun intended) May appeared to be a strong month for the online brokerage space in the US. Of course, there are bullish signals with US interest rates poised to rise which should also help push earnings higher at US online brokerages in the near term.

Comments from TD Ameritrade also seem to echo this sentiment with chief market strategist JJ Kinahan stating in a recent press release regarding May performance that “For the first time this year we saw clients taking on more exposure to the market, with millennials increasing their exposure at a faster rate than the rest of our client base, as market levels stablilized following an early May rally, clients were mostly net buyers the last two weeks of the month.”

Big picture, it appears that strong economic fundamentals are continuing to draw investors in off the sidelines, even in the midst of headline news and uncertainty. That’s good news for the online brokerages. And, although the market may have tempered somewhat, the fact it hasn’t yet fallen off a cliff despite the rhetoric of war suggests that it is pricing in growth (at least for now) rather contraction.

Discount Brokerage Tweets of the Week

From the Forums

Getting Settled

In the online investing world even though trading happens instantly on a screen, behind the scenes things take substantially longer to sort themselves out. In this post from RedFlagDeals.com’s investing forum, one user tries to fine tune exactly when money needs to be moved into their trading account to beat the settlement deadline.

Double Trouble

Like most Canadian DIY investors, peering over the fence at US online brokerage accounts generates a certain amount of interest and even, dare we say, envy. For one keen investor, the lure of US online brokerage account was sufficiently strong enough to open one before fully thinking it through. Find out what they learned about having both a US online brokerage account as well as a Canadian one in this post from reddit’s Personal Finance Canada thread.

Into the Close

That’s a wrap on another eventful week. With the ‘longest day’ of the year coming up, it’s a great time this weekend to enjoy some type of screen, whether it’s watching the World Cup or lathering up the sunscreen to enjoy the great outdoors responsibly. Whatever the case, we’d like to wish everyone a great weekend and a special shout out to all the dad’s out there for a happy Father’s Day!

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Discount Brokerage Weekly Roundup – June 8, 2018

As any seasoned investor knows, the stock market is one very big voting machine. And, while there is no ‘leader’ per se, those stocks that get to the top are those that enrich their shareholders. Heading into the end of this week, there’s certainly been a lot of news about politics, which has everyone guessing what’s coming next. For online brokerages, figuring out how to understand the human angle of this market is going to keep a lot of folks very busy these next few months.

It’s been a heavy week for rapid news so we thought we’d slow things down a little by focusing on an emerging trend from one Canadian discount brokerage that is likely to set the tone for ‘online investing’ in the near future. From there, we’ll take a snapshot of the latest tweets from DIY investors & online brokerages this week and close out with interesting chatter from the investor forums.

Going Digital, Getting Human

As a Canadian online investor, it’s not often that you get to hear from the head of an online brokerage outside of a quarterly newsletter. Despite the fierce competition among Canadian online brokerages, it seems that many of the leaders of these firms prefer to stay out of the spotlight, which is why a recent interview from the President of BMO InvestorLine, Silvio Stroescu, caught our attention.

The interview, which appeared on a BMO website – bmoforwomen.bmo.com – was part of a podcast by wealth psychology expert Kathleen Burns Kingsbury, and covered a number of interesting topics related to investing online, with a particular focus on women’s experiences with investing.

For added context, what makes this interview particularly interesting isn’t just the content of the interview itself, but also the bigger picture that it fits into. Specifically, it is interesting to see BMO InvestorLine (and SmartFolio’s) digital strategy take shape in a way that their peers aren’t keeping up with. More on that in a moment.

The overall theme of the interview was that ‘online investing really is for everyone’ which is an interesting premise to start from, and probably a reflection of where the “online investing” conversation has shifted to in 2018. Specifically (and especially for BMO InvestorLine) online investing doesn’t necessarily mean DIY investing any longer. The presence of digital/automated/robo advice services, as well as the hybrid AdviceDirect at BMO, mean that going online doesn’t require the same kind of time, mental or emotional commitment that comes along with DIY investing.

It was through this lens that this interview looked at ‘myths’ of “online investing” as well as the impact that technology has had and, perhaps the most interesting, the behavioural insights about investors and the role gender plays.

The latter portion of the interview in which Stroescu details the evolution of SmartFolio is particularly revealing. In this section he reveals how, though the use of Twitter chats, BMO discovered that there was a much deeper emotional component to wealth management and how big of a role that anxiety plays. It was especially noteworthy to learn that in the Twitter chats (which we’ve covered in prior Weekly Roundups) participation was largely female and that there was an open dialogue about the anxieties of investing. In contrast – and also fascinating – was the insights gained from focus groups in which male participants, through their body language, also displayed anxiousness and discomfort in talking about online investing even though they did not come out and state explicitly that online investing made them uncomfortable.

Specifically Stroescu stated:

What we noticed happening was, when we asked the questions about how comfortable are you with investing, the verbal response was, ‘comfortable.’ You wouldn’t hear a lot of anxiety in their voice, yet, when we looked at the body language and the facial expressions, if you could picture people cringing as they say the word comfortable, it showed us that verbally, we didn’t get a high degree of confidence, didn’t get a high degree of anxiety. It was somewhere in the middle. But the facial expression and the body language actually showed a greater tilt towards people being anxious about investing, period.

While there’s a lot to unpack from that statement, the takeaway is that building confidence is not necessarily the same as alleviating fear; it’s remarkable that it was the very human process of observing body language and non-verbal cues rather than the words people used that revealed this phenomenon.

Earlier it was stated that beyond the content itself, it was interesting that how this interview fits into a much bigger digital picture for BMO InvestorLine (and SmartFolio).

What makes this interview remarkable is that unlike many of their peers (both bank-owned and non bank-owned brokerages) is that BMO InvestorLine has made great strides in their online presence. This podcast, the Twitter chats that created a conversation around investing online and perhaps most notably, that their president has a Twitter account and uses it often are signals that there is a level of digital savviness that their competitors are not able to replicate.

In an era when ‘president with a Twitter account’ has come to cause people to hesitate, BMO InvestorLine enabling their president to have and use a Twitter account doesn’t come off as scripted, and even in an interview within a BMO site, the content delivers an interesting, engaging message (rather than being overly self-congratulatory or a sales pitch for services).

For DIY investors, and for the broader category of ‘online investors’ BMO’s approach to providing the ‘digital advice’ as well as the ‘self-directed’ services is probably a model that will be more widely deployed in the future. Of course, it is also their digital and social media savvy that might spur their competitors to “invest” more in creating more human, and ultimately more interesting, investor experiences.

Discount Brokerage Tweets of the Week

From the Forums

Voting for (keeping) Change

Savvy investors, no matter what stage they’re at, are always looking to maximize their gains. For beginner investors, however, it can be tricky to know exactly which move makes the most sense for the effort involved. In this post, from reddit’s personal finance Canada thread, one beginner investor is looking to the internet to help choose between Questrade and BMO for a TFSA.

Paid Parking

For many DIY investors thinking about online brokerages, the focus is generally on a lot of things like commissions or platforms, but very seldom does the topic of where to put uninvested cash come up. That said, this week there were two interesting posts about investors getting the best return on ‘dry powder’ – this post from reddit’s personal finance Canada thread looks at what to do with ‘spare’ cash in Questrade while another post, from the Financial Wisdom Forum, provides some insights from a thread on Interactive Brokers.

Into the Close

That’s a wrap on another frenzied week. The spotlight certainly had no shortage of movement this week, however it did land on a very tragic ending to a very inspiration person – Anthony Bourdain. Loss is always a tough note to close out on, but in that there is also the importance of remembering hope and encouraging one another to connect. So, on that note, have a great weekend and if you can, find a way to extend a hand to connect or reconnect with someone, perhaps over a simple meal. It all starts with hello.


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Discount Brokerage Weekly Roundup – June 1, 2018

Even though it was a tough week for hacking scandals, pipeline purchases and provincial politics, none of it mattered because Kim Kardashian visited the US President, J.R. Smith royally messed up game 1 for the Cavs, the US touched off a trade war with Canada and other trading partners. Even for traders who relish in volatility, this summer is going to be one heck of a ride.

In this edition of the roundup we take a look at the latest crop of discount brokerage deals, including a new trend for the summer season. From there we’ll review another emerging trend in the area of investor education topics that online brokerages seem to be more active in. As always, we’ll cue up the latest tweets from DIY investors and review the forum conversations on DIY investing.

Summer Deals

Even though summer is just around the corner, the fact that it is still spring means that the latest online brokerage deals are considered part of the spring crop – at least if you look at the promotional codes of some of the deals.

The latest update to the Canadian discount brokerage deals and promotions section is now live and the good news is there is a strong selection of offers for DIY investors to choose from, especially until the middle of June.

There are a couple of interesting observations to take note of in the deals and promotions section this month. The big news specifically is that National Bank Direct Brokerage has come to market with an offer of commission free trades which are good for up to one year. The other bank-owned brokerage with a similar time frame on their commission-free trade offer is RBC Direct Investing.

This is likely no coincidence. The move by National Bank Direct Brokerage has some similarities to RBC’s offer, notably that time to use the commissions is one year and the minimum deposit is the same ($5,000). That said, there are some differences such as the fact that NBDB is offering five more trades than the RBC Direct Investing offer and NBDB is throwing in a discounted commission rate in the first year for anyone who uses up the 25 commission-free trades.

Another interesting observation is that both BMO InvestorLine and Desjardins Online Brokerage elected to extend their current offers; the latter being exclusively a commission-free trading offer while BMO InvestorLine’s is a combination of cash back and commission-free trades. Unlike the offers from National Bank Direct Brokerage and RBC Direct Investing, however, the time to use the free trades from BMO or Desjardins is significantly shorter.

Two key bank-owned online brokerages coming to market in the summer with similar promotional offers might not signal a trend, but it does point to the market shifting tactics – especially on the length of time for the commission-free trading.

We’re curious as to what will happen at mid-month, as National Bank Direct Brokerage has now clearly upped the ante with a more competitive offering than RBC’s in terms of free trades and incentives after the trades are used up. It begs the question, will RBC call, raise or fold?

From a strategy point of view, the popularity of commission-free offers has opened up an opportunity. Cash-back offers are not as crowded, and as a result, it may be a compelling spot for an aggressive offer to come to market. We know from internal data that there is definitely an appetite for cash-back offers among DIY investors. So, the combination of a lack of competition with those offers coupled with high demand from DIY investors means a cash-back offer can command the spotlight. Currently, BMO InvestorLine and Questrade (through the referral offer) are the only widely available cash-back offers. And, because of the nature of the Questrade offer, it’s only BMO InvestorLine that is widely advertising for theirs, which means they’ve got the digital field to themselves – at least for the time being.

Optional Credit

Even though school has wrapped up (or will very soon) there seems to be an uptick in the investor education activities heading into summer. In particular, it looks like options trading is coming back into focus at several online brokerages.

Last week, the Options Education Day took place in Montreal and there were five online brokerages that sponsored the event.

Three of the five brokerages (National Bank Direct Brokerage, Desjardins Online Brokerage and Interactive Brokers) are all headquartered in Montreal so there was a home field advantage there, but for TD Direct Investing and CIBC Investor’s Edge, it was an interesting event to participate in.

According to the tweet posted on the Montreal Exchange’s Twitter account, there were over 200 attendees that participated which is a great draw for a Saturday session.

In addition to Options Education Day, National Bank Direct Brokerage has been broadcasting their options education video playlist, put together in conjunction with the Montreal Exchange, on their homepage for the past few months. And, coming up at the end of June, CIBC Investor’s Edge is holding a couple of options education webinars in English and French.

Even though we’re not quite over the line to summer, there is already a signal that online brokerages are ramping up their options education partnerships and content. With improved market volatility and some exciting stories coming to the stock markets through the second half of the year, it looks like options education might be a hot spot for new and interesting content.

Discount Brokerage Tweets of the Week

From the Forums

Interesting problem

Even though trading platforms have made it easy to buy and sell US-listed stocks, actually ensuring that the trade is being structured the way it is intended can sometimes be less intuitive. In this post from reddit’s Personal Finance Canada thread, one user learned the hard way about ensuring that cross border trades get executed and settled with the right currency conversions in place.

Simpler times

DIY investing is supposed to be less expensive but it hasn’t necessarily been a ‘set it and forget it’ experience until very recently. This post, also from reddit, is an interesting look at the alternatives now available for DIY investors who, like the author of the post, are looking to take a simple, low cost approach to investing on their own.

Into the Close

That’s a wrap on yet another wacky week. Fortunately the start of the new month falls on National Donut Day which means everyone wanting to emotionally eat their way into the weekend can feel a little less guilty for doing so. Of course, if you’re thinking to distract your way through the weekend with an Avengers movie, you might want to have some more donuts handy. Have a great weekend!

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Discount Brokerage Weekly Roundup – May 25, 2018

Though this was a short week because of the holidays, there was still a healthy dose of news to digest and trade around. For Canadian online brokerages, the race is on not only to report some of the big news but to put a creative spin on it.

In this week’s roundup we go to both extremes with in-depth analysis of the latest set of online brokerage rankings followed by a small but important revelation of one online brokerages upcoming features on Twitter. As usual we’ll close by taking a look at what DIY investors were chatting about on social media and in forums.

Moneysense’s 2018 online brokerage rankings go live

Earlier this week, MoneySense magazine published the 2018 edition of its Canadian online brokerage rankings. As with past years, Surviscor provided data for the analysis and presented a category-driven approach to presenting which online brokerages were “the best” in each feature measured.

The author of this year’s review was the well-known Canadian personal finance writer, Jonathan Chevreau, who added considerable depth to the commentary and analysis – more so than in previous editions of this article.

At SparxTrading.com, we’re always keen to review the comparisons of online brokerages, so we thought we’d take a deeper look at this year’s MoneySense rankings to get an idea of how DIY investors might be impacted by the ratings and to determine what trends or insights might emerge from the ratings themselves.

Before diving into the results in detail, we thought it would be important to review what was being measured in the MoneySense rankings and how this year’s rankings differ from last year’s.

Historically we’ve observed that there is considerable variation when it comes to Canadian discount brokerage rankings. There can be variation between different ratings of the same discount brokerages within the same year as well as variation between years for the same rankings. For example, the Globe and Mail’s online broker rankings use a different approach than does J.D. Power or Surviscor when evaluating Canada’s online brokerages for cost, service or accessibility.

For the 2018 MoneySense online brokerage rankings, the underlying data comes from Surviscor’s analysis of the online brokerage space, with specific parameters selected for the MoneySense report. The snapshot that the data is based upon comes from 2017, specifically from the 2017 online brokerage rankings conducted by Surviscor. As such, the ‘new’ information in the MoneySense rankings is really in the commentary as well as in some of the detailed category breakdown. The “best overall online brokerage” ranking, however, mirrors the findings published in December 2017.

2017 rankings vs 2018 rankings

To help add more context to this year’s results, we’ve summarized the MoneySense rankings data from last year and this year along with including the scores firms received for the 2018 edition.

The categories that were reported on this year were mostly similar to last year, although there were some notable differences.

This year the following categories were reported on:

  • Best overall online brokerage
  • Best discount brokerages for ETFs
  • Best online brokerages for mobile and market data
  • Best online brokerages for low fees
  • Best online brokerages for design and user experience

Interestingly, a category from last year, the ‘best online brokerage for reporting and record keeping’ was not included in this year’s review.

New for this year, however, was the mobile accessibility category which was intended to reflect the importance of mobile experiences to investors. Data for this category came from Surviscor’s 2017 mobile online brokerage review. There was also a name change for the ‘getting started’ category used in 2017 to ‘initial impression’ for 2018.

Category 2017 2018
Overview + Winner T: Qtrade Investor

H: Questrade

Bank-owned:

T: BMO InvestorLine + Scotia iTRADE

 Qtrade Investor – 22

Questrade – 21

Scotia iTRADE – 14

BMO InvestorLine – 14
ETFs T: Questrade + Virtual Brokers

H: National Bank Direct Brokerage

 National Bank Direct Brokerage – 17

Qtrade Investor – 16

BMO InvestorLine – 13
Mobility + Data Data:

T: TD Direct Investing

H: Qtrade Investor

 Mobile Accessibility:

BMO InvestorLine – 26

Questrade – 14

Qtrade Investor – 10

Data:

TD Direct Investing – 20

Qtrade Investor – 17

RBC Direct Investing – 9
Fees + Services Fees:

T: CIBC Investor’s Edge + Questrade

H: Qtrade Investor + Virtual Brokers

Service:

T: Qtrade Investor

H: Desjardins Online Brokerage

 Fees:

HSBC InvestDirect – 10

Questrade – 10

CIBC Investor’s Edge – 7

Service Interaction:

Qtrade Investor – 8

RBC Direct Investing – 7

Questrade – 6
Initial Impression & UX

(Getting Started – 2017)

 Getting Started:

T: Questrade

H: TD Direct Investing

 

User Experience:

T: Questrade

H: Qtrade Investor

 Initial Impression:

Questrade – 13

Scotia iTRADE – 9

TD Direct Investing – 9

 

User Experience (UX):

Qtrade Investor – 40

Scotia iTRADE – 31

BMO InvestorLine – 30
Reporting & Record Keeping T: BMO InvestorLine
H: Qtrade Investor
Legend: T = Top Pick; H = Honourable Mention

 

As shown in the summary table, one important change between last year’s report and the 2018 results is the number of discount brokerages being reported in each category.

In the 2017 online brokerage rankings, MoneySense reported the “top pick” and “honourable mention” in each category. This year, however, there are more online brokerages being reported in each category (typically three or four vs two) than last report. As a result, this presents “more data” for DIY investors to sift through when comparing online brokerages. In the best overall online brokerage category, last year this section was split into non-bank-owned online brokerages and bank-owned online brokerages however this year there doesn’t appear to be an explicit distinction being made. Interestingly, the same four institutions from 2017 were in the list of top firms overall in 2018.

Another important change between last year and this year is that there are now also numerical scores being reported. Specifically, the scores (points) earned by online brokerages in each category were reported.

While it was useful on a relative basis to compare brokerages within the same category (e.g. Qtrade Investor received 22 points while Scotia iTRADE and BMO InvestorLine each received 14) it was difficult to tell in an absolute sense how well a brokerage could possibly do in a category (i.e. what was the maximum number of points Qtrade Investor or BMO InvestorLine could’ve earned?).

In addition, the point system for each category was unfortunately not explained so there wasn’t any real context to what receiving 10 points vs 15 points meant. We can assume more points is better, but based on the scoring of best overall, does Qtrade Investor’s score of 22 mean that they are 1.6x better than either BMO InvestorLine or Scotia iTRADE?

Overall, however, the 2018 version of MoneySense’s online brokerage assessment offers readers a detailed look at the state of the online brokerage space with 12 online brokerages getting covered and a reasonable variety of factors that matter to investors – chief among them being pricing.

What’s interesting about the MoneySense online brokerage rankings?

While it likely wasn’t a surprise that Qtrade Investor took home top prize in the 2018 MoneySense rankings, the optics of yet another influential award being received serves to strengthen Qtrade’s perception in the marketplace as one of the premium online brokerages in Canada.

Typically strong performers on the rankings circuit, Qtrade Investor has had an especially strong year for recognition with top spot finishes in the Globe and Mail, Surviscor and now MoneySense as well as a close second place finish with JD Power’s rankings.

As mentioned above, there is considerable variation between rankings and what they’re measuring however Qtrade Investor has managed to score well on all of them, perhaps a strong sign they’re doing more than a few things right. On the MoneySense rankings, there were three categories in which Qtrade Investor placed first: best online brokerage user experience, best online brokerage service interaction and best overall.

It bears mentioning again, that how these categories are defined is very important as are the indicators that are used to measure performance within the categories. For example, what constitutes a strong service experience or effective user experience is likely more subjective than which broker has the lowest trading commission prices or fee structure. Yet, both components go into determining the final score.

So, with that caveat in mind, it was also interesting to note that in certain categories it was easier to see which online brokerages were further ahead than others.

The differences in the best overall online brokerage or brokerage with best mobile accessibility, for example, were very apparent. For example, the category of mobile accessibility, which was new for 2018, shows that BMO InvestorLine is very far ahead of its category competitors, Qtrade Investor and Questrade. Similarly, in terms of user experience (UX) Qtrade Investor scored much higher than either BMO InvestorLine or Scotia iTRADE.

In other categories, the race between brokerages was much tighter. Fees and services, for example, each had relatively close scores that made distinguishing first from third place difficult. ETFs was another category that posed a challenge for brokerages to stand out in.

Considering how important costs and fees are to DIY investor clients, the latest rankings data seems to suggest that when it comes to the lowest cost online brokerages, the differences in pricing are small, and as such, other criteria will be what tilts a decision one way or another when choosing a brokerage.

With prices being where they are for commissions, it is probably worth mentioning that it will be challenging to differentiate on price alone. That said, savvy online brokerages can use this to their advantage. One of the important factors in trading costs for DIY investors is ECN fees. So, highlighting “flat” fee commission pricing versus trades that charge ECN fees will be key to standing out.

For both DIY investors and online brokerages, the challenge in choosing an online brokerage comes down to what else beyond low commission pricing that online brokerages can offer.

Based on the results from the 2018 MoneySense online brokerage rankings, these opportunities might present themselves in the user/digital experience. As we’ve mentioned before, technology is the new benchmark for service – it enables the provision of a consistent experience at an unprecedented scale – something the ‘human’ touch cannot do.

The data from these rankings show that firms like BMO InvestorLine and Qtrade Investor are, at least in the Surviscor analysis, doing much better than their peers in the digital experience. Whether it’s improved navigation or ease of access, if using the product feels simpler, the process of managing your own investments doesn’t feel frustrating which is what DIY investors really value.

Finally, a third interesting observation about the online brokerage landscape in Canada is that aside from Qtrade Investor, it appears that there is a lot of diversity in who has been designated as a top performing firm. A surprise move onto the list by HSBC InvestDirect (best online brokerage for fees) as well as top podium finishes for Questrade, BMO InvestorLine and TD Direct Investing. Of all the category winners, Questrade was the first organization to make a splash on social media.  We have yet to see other category winners, including best overall category winner, Qtrade Investor, push something out on these results on their LinkedIn pages (as of the time of publication) or social media. No doubt things are busy in Qtrade’s tent with the merger taking place – which might be a tactical time for other Canadian online brokerages to try and gain mind share.

There were certainly a number of other interesting observations about the online brokerage industry in this year’s online brokerage ranking, however an important takeaway for both online brokerages and DIY investors is that the Canadian online brokerage space is crowded and the market is small. Even so, online brokerages are now locked in a race in which the nimblest providers will survive.

Chatter: Scotia iTRADE possibly launching USD registered accounts this summer

It’s summer blockbuster season. For online brokerages it will be an interesting time with independent online brokerages Qtrade and Credential Direct merging and with plans being made ahead of a typically big fall season.

This week we spotted two mentions of the possibility that Scotia iTRADE is getting USD registered accounts this summer.

The first was a mention in MoneySense magazine that the launch may be coming in the summer, while on Twitter, a representative from Scotia iTRADE mentioned to an individual that USD registered accounts are close to launch.

Discount Brokerage Tweets of the Week

From the Forums

Trust Issues

Creating efficient tax exposure is just one of several important financial planning strategies DIY investors have to consider. In this post from reddit’s Personal Finance Canada thread, it is interesting to read how one DIY investor’s journey with trying to set up an informal trust at an online brokerage is working out.

Exiting Times

When it comes to standard commission rates, Scotia iTRADE stands out among Canadian online brokerages as the highest. In this post, also from reddit, one client is looking to make an exit and gets a little math to help plan an escape.

Into the Close

That does it for another week. Monday is Memorial Day in the US so there is likely to be lighter trading action in Canada. Although, with the first of a wave of US-based cannabis companies listing on the CSE, lighters won’t be the only things being traded here in Canada. All the best to our US neighbours for a safe & happy long weekend!

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Discount Brokerage Weekly Roundup – May 18, 2018

Being online can sometimes be an occupational hazard. Case in point: Laurel or Yanny. Despite having captured the imagination of the internet and having squandered so many people’s valuable time there’s a lesson in here for online brokerages, which is to get attention online, you have to be interesting.

In this edition of the roundup we take a look at some interesting developments that crossed our radar this week. The first was a fleeting promotion from one bank-owned brokerage that tried to snag some new clients with the lure of snacks. From there, we look at how one US-based online brokerage is attracting massive amounts of capital and DIY investor love and how it will undoubtedly become a challenger to existing brokerages. As per our usual fare, we’ve got a great selection of tweets and forum posts for DIY investors to check out.

Scotia iTRADE wants to be SCENE

In what is becoming a bit of an annual tradition, Scotia iTRADE was spotted on Twitter offering up an interesting in-person promotion at their investor centre in downtown Toronto.

Specifically, a tweet caught our attention that was offering up 2,000 SCENE points for anyone who opened a new account with Scotia iTRADE with a minimum of $5,000.

For those keeping score at home, that’s the equivalent of a VIP admission for one, or if you’re into sharing, two general adult admissions.

The ultra-limited time offer from Scotia iTRADE could be a trial run at a broader promotion that enables them to leverage their partnership with the SCENE movie points program. In addition, it may also be an interesting response to the recent move by RBC Direct Investing who launched a commission-free trade campaign and also set the minimum requirement to qualify for a promotion at $5,000.

It will be interesting to see whether the ‘free movies’ are enough of an incentive to tip an individual in favour of opening an account with Scotia iTRADE versus free trades or cash back with one of their competitors. Since this was basically an ‘in person’ offer and relied on individuals coming into the Scotia iTRADE in downtown Toronto, it may be a very limited sample with which to test on, but nevertheless, early data is still data.

As delicious as the allure of free popcorn is, it may not be enough to entice people to put $5,000 into an investment account with Scotia iTRADE – especially considering that the standard commission rates of $24.99 per trade (and up) as well as account maintenance fees of about $25 per quarter for balances under $10K mean that those are some very expensive kernels for low balance, passive investors.

Still there are insights to this offer that are worthy of being mentioned.

First, it looks like RBC Direct Investing has stirred the pot by lowering the threshold for qualifying for a promotional offer at a major bank-owned online brokerage. There are currently no offers from RBC DI’s peers that would rival the value of their commission-free trade deal for the amount that has to be deposited in order to qualify. Scotia iTRADE’s latest move is a bullish sign that other online brokerages are watching and are likely to step forward with something compelling while the RBC DI offer is live.

A second important takeaway is that, in addition to free trades or cash back, there are also rewards points that bank-owned brokerages can rely on as part of their tactical mix.

The fact they chose movie points over commission-free trades or cash enables Scotia iTRADE to keep their own costs low while providing something of potential value to prospective clients. Ultimately, however, the market will decide if the promotion is valuable enough.

Another observation we found interesting is that, for a national brand, restricting access to this deal means there are lots of folks across the country that are left wondering whether they can access the same offer. At a time and in a market that is this competitive, leaving potential clients on the sidelines will definitely cause them to wonder about the price of admission.

Robinhood makes investors merry

Is it possible to let investors trade for free and still make money? Apparently, yes.

Last week in their company blog post, online brokerage Robinhood secured $363 million in Series D funding led by DST Global. The deal, which valued Robinhood Financial at USD $5.6 billion, means that it is now starting to encroach on the traditional players in the US online brokerage market. Though it is still far behind the market cap of Interactive Brokers (~$32B), TD Ameritrade (~$34B), and Schwab (~$80B), it is materially competitive with E*Trade ($17B) and with 4 million users, has actually surpassed E*Trade (3.7 million accounts) on that metric.

Some more interesting nuggets in the press release announcing the capital raise is that a number of new features have been released in a short span of time including commission-free options trading, commission-free cryptocurrency trading in CA, MA, MO, MT, CO, MS, WI, NM, FL, MI and, as of yesterday, to PA. In addition, they have also rolled out a web-based version of their highly popular mobile app all the while maintaining a solid excitement level for their product.

The new capital infusion will no doubt help to accelerate Robinhood’s ability to widen their user base in the US and even around the world. They are certainly not shy about wanting to challenge Coinbase as the leading cryptocurrency trading platform in the US also and are targeting being a significant competitor (if not leader) by the end of the year.

A quick scan of their recent announcements online also shows that the snowball effect is taking hold, with talent.

In another recent post about Robinhood an influential engineer, Lee Byron, joined Robinhood after a 10-year stint with Facebook.

What jumped out about the post was the appeal that the brand, mission and platform had with Byron.

Specifically, he states:

“They’re driven by a mission I believe in: to democratize access to America’s financial system. Despite having a popular service and established mobile apps, their web app is a newer effort and has only just scratched the surface of its full potential. There is so much of the mission the current product doesn’t reach.”

He goes on to state:

“One of the reasons Robinhood is unique is that it brings a much-needed focus on user experience and high-quality consumer products to the financial industry.”

And, based on the user comments and reactions to this article, he’s not the only one who seems to be putting a premium on the design appeal. The following comment by a reader (Ernesto Rodriduez) is particularly telling:

I’m an avid user of Robinhood these days, but prior to it I knew very little about investing and the stock market in general. Having such a beautiful, intuitive and well thought-out UX was and still is the main reason why I felt so attracted to it initially and inspired to want to learn more about trading in general.

Why is this important? For starters, the level of passion and enthusiasm for UX-driven trading/investing experiences in the Canadian online brokerage space doesn’t rival what Robinhood has managed to accomplish in the US. Improvements in online brokerages in Canada have been iterative not necessarily transformational.

Another, much more important, reason why this is a telling comment is because user experience/ease of use is one very important driver of whether or not someone feels confident enough to try out (and keep) investing on their own. Simply put, whether they view investing online as “too hard” “too complicated” or “too inconvenient” has a lot to do with how the experience is perceived.

With Robinhood now venturing into the web application space, they will be competing against more established players, however if they can maintain the same enthusiasm for their web app that they have for their mobile one, their next valuation can and will be cause for concern for their competitors.

As for Canadian online brokerages, the evidence is pretty clear. They can either wait for the no-cost commission train to arrive at full speed or they can get ahead of it – especially with a highly-prized market of younger professionals looking for a better experience – by investing in better UX and more compelling pricing.

Discount Brokerage Tweets of the Week

From the Forums

Daytrader Taxes

Although it’s not nearly as popular as it once was, there are still a few brave souls who want to take a stab at beating the market – and other daytraders. But, being a daytrader also means taking care of more complicated matters, especially taxes. In this post from RedFlagDeals.com’s Investing forum, one user was looking for a little input on how others have approached getting started as a daytrader.

Planning Ahead

While the bulk of what we focus on is directly related to online brokerages, for DIY investors it’s important to also think about the big picture when it comes to personal financial planning. While the internet is full of stories of individual experiences, this particular story (from reddit) is one that will likely be more common as the general population ages.

Into the Close

That does it for this week. While it was a bit of a slow week on the trading front, there’s no shortage of entertainment on screens of all shapes and sizes. Whether you’re watching a royal wedding or just looking to kick back and enjoy some long overdue good weather this Victoria Day weekend, on behalf of everyone here at Sparx have a safe and enjoyable long weekend!