Category: Discount Brokerage News

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Discount Brokerage Weekly Roundup – January 4, 2021

2020 is now officially behind us. 2021 will be one of those years that most of us will not have any trouble remembering to write correctly, even in the first few weeks. And, speaking of easy to remember, this month and year are off to a memorable start. Once again cryptocurrency FOMO is sweeping through online investors, there’s a whole host of drama in the US in the lead-up to the inauguration, and RRSP season is now in full swing. Lace up your new sneakers because week one of the new-year news cycle is going to hit the ground running.

Keeping things manageable but exciting heading into week one is on our agenda for this Roundup. The first story of the new year is one that will definitely be worth diving into as we look at the huge volatility in deals action heading into 2021 and what online investors can expect in the weeks leading up to the RRSP contribution deadline. Up next are a series of fun announcements about new features to look forward to from Sparx Trading. We know time is a premium as everyone eases back into the workweek so we’ll keep this edition short and sweet. Happy New Year and enjoy!

Volatility Hits Online Brokerage Deals and Promotions

There’s no doubt that the end of 2020 couldn’t come fast enough. In the real world, it was a year of challenges and tragedies, and while there is no question it was a year that many want to leave behind, anyone looking at the “digital world” of equity markets or cryptocurrency would say there were at least some things that 2020 brought that were not bad.

For Canadian online brokerages, the start of 2021 is an interesting moment as it represents the convergence of several key factors that point to one heck of a year ahead. Already the latest deals and promotions activity forecasts a heavy dose of volatility (if not outright drama).

The first key factor to the start off the new year is that this is the time of year when Canadian discount brokerages kick into overdrive to get on the radar of online investors. The RRSP contribution deadline (March 1st) is behind the ramp-up of efforts to win over investors in the market for online investing accounts. And, DIY investors can expect to see even more advertising, offers, and other activities from asset-hungry online brokerages.

From a deals and promotions perspective, December was the busiest stretch since the start of 2020, signaling a return by online brokers to this popular tactic of attracting new clientele. Interestingly, the official start to 2021 (i.e. January 1st) was a holiday, and, as such, many of the offers that were scheduled to end on December 31st were left posted on the websites of several online brokers. It is unclear if the offers that were scheduled to expire at the end of December will actually be renewed or extended or if other offers will be launched to replace the outgoing ones. Suffice it to say, it will be a busy first week back to amend dates, update websites, or launch new offers. So, stock markets aside, we expect a bit of deal volatility to start the year.

Brokerages with offers that expired at the end of December include National Bank Direct Brokerage, Questrade, RBC Direct Investing, and Virtual Brokers. It would be hard to imagine a scenario in which all of these online brokerages stay on the sidelines for the duration of RRSP season, especially considering that all of the other major bank-owned online brokers have live offers and that, as of mid-December, Qtrade Investor jumped into the promotions pool with a new cash-back offer as well.

The second key factor that is bound to play a role in DIY investor demand for online trading access harkens back to the start of 2019. Similar to what took place two years ago, there’s been a huge run-up in the price of cryptocurrencies to start the year. What’s also on the menu this year (akin to the cannabis push in 2019) are rumblings of a new push into psychedelics. These “hot” new investor stories are compounded by enormous gains from tech companies benefitting from the work-from-home boom. The takeaway: Retail investor sentiment to jump into fast money seems to be driving markets to very frothy levels.

For Canadian online brokerages this a very bullish signal – something that could factor into either the scale or the duration of offers that might yet still come to market. Note that during the height of the market volatility here in mid-2020, many online brokerages pulled their deals altogether, with retail investor interest being sufficiently strong to render offering promotions and incentives unnecessary. We believe, however, that RRSP season is too tempting an opportunity to pass up, in spite of the retail investor sentiment, suggesting more offers to come from online brokerages this January. Also coming: increased urgency to open accounts and the accompanying frustration to get started right away.

Given the run-up in cryptocurrency prices, there is one Canadian online brokerage that stands to benefit disproportionately compared to its peers: Wealthsimple Trade.

Heading into the end of the year, we saw them launch a very short and creatively packaged cash-back promotion. Tearing a page out of the US online brokerage Robinhood’s playbook, Wealthsimple Trade pitched a “free stock” promotion that offered new users the equivalent dollar value to certain popular stocks traded on Wealthsimple Trade. The promotion ran for just about a month, and so it is curious from a timing standpoint as to what could be coming next for this online broker. Nonetheless, they are the only Canadian online brokerage to offer up direct cryptocurrency (Bitcoin and Ethereum) trading – something that would undoubtedly attract retail investor interest at this point. For that reason, there is a serious tailwind behind Wealthsimple Trade until (or if) cryptocurrency prices turn.

With so much happening in just the first week, we’ll be keeping our eyes on the deals activity among Canadian online brokerages throughout the month. There’s almost certainly going to be additional promotions updates coming and, if 2020 has taught us anything, probably a surprise or two before the month is over.

Announcements From SparxTrading.com

One of the fun things that the start of a new year affords us the opportunity to do is to change things up just a bit. Normally, we’d recap the latest developments in this section, but seeing as how we’re coming off a bit of a quiet spell in December (not counting the fact that Robinhood is in the crosshairs of financial regulators in the US), we’re going to take the opportunity to talk about a few big developments taking place at Sparx Trading.

Relaunching of Our Newsletter

Elon Musk won’t be the only one sharing epic launches in 2021. Sparx will also be launching a few big items, although ours will be into cyberspace and way less boring (pun intended).

The first of these will be an epic reboot of the SparxTrading.com newsletter. After being dormant for more than a few years, the newsletter is being completely remade and will feature a handy way for you to stay on top of the latest online brokerage news – and especially the Weekly Roundups. The newsletter is going to be published monthly and will feature quick recaps of the biggest stories across the online investing space over the previous month as well as any important updates taking place on SparxTrading.com (of which there will be more than a few!). Look for the first edition to launch in mid-January, and sign up using the following link:

Even More Perspectives on 2021

We’re thrilled with our latest Look Back / Look Ahead edition. Not only does it give readers a unique window into the world of the Canadian online brokerage industry during the pandemic – from the vantage point of those in charge of leading those brokerages – but it also provides previews on what’s coming up next in 2021.

Online brokerages, however, aren’t the only voices that have a unique and influential impact on how DIY investors navigate online investing. We’re excited to be launching a follow-up to Look Back / Look Ahead that features some of the most influential reviewers in the Canadian online brokerage landscape.

This exciting new edition is coming up at the end of January so be sure to follow us on one of our social media handles (like Twitter) for a first look. In the meantime, you can review the online brokerage edition of Look Back / Look Ahead.

A Shiny New Website

This one we’ve telegraphed already, but we’re getting close to launch and are really excited to be testing out features on the new SparxTrading.com website. A lot has changed about the online brokerage world since we started Sparx Trading, and much has also changed about the team behind the scenes at Sparx. With more hands on deck, and even more excitement about where we can take things, it was only fitting that we tackle something more ambitious. So, fingers crossed, we’re good to launch by the end of January, and users will be able to research online brokerages even faster, look for deals and promotions more intelligently, and track the latest developments at the online brokerages they’re most interested in more conveniently.

Discount Brokerage Tweets of the Week

Into the Close

That’s a wrap for this first-of-2021 edition of the Weekly Roundup. With cryptocurrency mooning and stocks in rally mode to start the year, there’s a welcome dose of green amidst some of the negative news still confronting us regarding COVID-19. Clearly, there’s a lot to take in for the week so best of luck catching up, and we look forward to a wild month and year ahead. Happy New Year again, and stay healthy and profitable!

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Discount Brokerage Weekly Roundup – December 21, 2020

The phrase that’s been a mantra for many of us in 2020 – aside from “You’re on mute” – has been “Is it over yet?” Finally, it’s a lot closer to being true than at any previous point in the year. Thank goodness. In keeping with the sentiment of a very long year, this end-of-year edition of the Weekly Roundup is itself longer than usual. Unlike 2020, however, it is intentionally long because so many interesting things took place.

Packaging so many big developments into one post was a challenge. So, for this final edition of the Roundup for the year, we offer up an homage to a movie franchise that seems to go on just about as long as 2020 has. This Fast and Furious edition of the Roundup recaps the year one quarter at a time. Keep reading for high-octane stories that powered the Weekly Roundup for the past year, including important feature releases, interesting trends, and the stories that were kind of a big deal.  In true Weekly Roundup form, we roll the credits on 2020 with DIY investor chatter from Twitter and the forums.

Buckle up, it’s going to be a wild ride.

Q1 2020: Everything Was Normal Until It Wasn’t

Looking back on the beginning of the year, the start to 2020 in the Canadian online brokerage space seemed pretty “normal” by most accounts.

One theme early in the year was pricing drops. Desjardins Online Brokerage, for example, significantly dropped their commission rates, especially for active investors, to under $1 per trade. Similarly, HSBC also teed up an offer for active investors: zero-commission pricing between April and December 2020. Although these two firms aren’t as well known in the Canadian online brokerage space as other mainstream firms or the big-five bank-owned online brokers, it was clear that commission pricing in 2020 would continue to be under pressure as smaller firms looked to gain market share. These moves were also timed around the start of the year because of the heightened interest in RSP accounts, and, as such, there would be a much larger audience of investors willing to consider these new pricing features. Interestingly, the rest of the Canadian online brokerage industry did not immediately move to lower commission prices. As it turned out, once the tsunami of investor demand for online brokerage accounts took hold, commission prices stayed largely untouched until the latter part of 2020.

Another important theme early in the year (prior to COVID-19 hitting with full force) was the release of online brokerage reviews and rankings. Both The Globe and Mail and Surviscor released their respective rankings of Canada’s online brokers in order to coincide with the time in the calendar when many DIY investors hunt out new online investing accounts and offers.

What stood out about the 2020 edition of The Globe and Mail online brokerage rankings (which happened to be the 21st edition of these rankings) was that a number of firms scored a respectable grade (B or better), but of the top three firms by letter grade, two of them were bank-owned online brokers: TD Direct Investing and Scotia iTrade. The firm that reappeared at the top of these rankings was Qtrade Investor, which earned an A+ rating overall. Ironically, TD Direct Investing suffered from a trading interruption (something that would become a lot more commonplace across the industry in 2020), and Scotia iTrade continued to face challenges responding to clients in a timely fashion over the phone.

In the Surviscor rankings, Qtrade Investor also took top spot, edging out Questrade and TD Direct Investing. Not to be outdone, Questrade earned a DALBAR award for client service, providing additional points for their brand in a year that started off strong in terms of rankings progress.

Of course, the major story during the first quarter of 2020 was COVID-19, and specifically how it roiled markets and caused a massive shock to trading systems, online brokerages, and DIY investors. For some, it was catastrophic, but to others, the opportunity of a lifetime. It was this latter group that won the day, however, as new investors jumped at the chance to invest in household-name stocks at incredible prices. Further, the “Robinhood effect” was cited as another reason the volatility seemed to skyrocket. The US online brokerage had moved to a largely commission-free model, and, as such, investors could “scalp” trade – making small and frequent trades – with no real downside (in terms of commission pricing). It turned out, however, that most online brokerage systems were not equipped to handle the surge in interest in trading combined with market volatility.

Some weird things happened. Among them, Wealthsimple Trade having to effectively halt new clients from being able to trade on their platform.

Major online brokerages also suffered trading platform downtime, slammed telephone reps, and the biggest surge in online brokerage account opening since the bitcoin craze in 2018. Oh, and they had to contend with all of this while being transitioned to a work-from-home model.

Also strange, people deciding to hoard toilet paper.

Q2 2020: Outages & Outrage

The start of the second quarter picked up right where the first ended, as things went from weird to certifiably insane. Volatility and trading volumes managed to take down trading systems at multiple Canadian bank-owned online brokerages, but that would not even be the weirdest thing to take place in April. As it turns out, prices for commodities, like barrels of oil, could not only fall to zero but also go negative.

Unfortunately for traders – and especially for Interactive Brokers clients – the oil contract price going negative wound up impairing (if not wiping out) a significant number of traders, and that was because of a programming glitch on Interactive Brokers’ platform that didn’t account for prices of contracts being able to turn negative. All told, Interactive Brokers ended up taking a $90 million loss because of the exceptionally rare move to reimburse traders caught offside by this issue. Of course, while embarrassing for Interactive Brokers, these were truly unusual times, and there were other traders who didn’t see it coming.

Nonetheless, Interactive Brokers also had a huge silver lining after the oil futures contract fiasco: They experienced record-breaking new-account growth. As the canary in the coal mine, Interactive Brokers telegraphed exceptionally strong account openings (+22% year over year) and revenue gains from the sheer volume of activity taking place. In fact, there were more accounts opened at Interactive Brokers in April 2020 than in the last six months of 2019 combined.

Against the backdrop of market volatility, another online brokerage ranking was published, this time from J.D. Power. The Self-Directed Investor Satisfaction Study was revealing in that even before many of the issues that came to light during the heavy volatility in the markets, the Canadian online brokerage industry was starting to slip in terms of investor satisfaction. The report card showed that online brokerages fared worse in 2020 than they did in 2019 when it came to overall satisfaction.

Questrade managed to take top spot in the rankings for 2020, an accolade that is the result of a long journey of constant improvement. Conversely, the bottom four online brokerages in Canada, according to J.D. Power, were from the big five: RBC Direct Investing, TD Direct Investing, CIBC Investor’s Edge, and Scotia iTrade, respectively, were the firms that scored the lowest on the 2020 edition of this ranking. One telling stat was that website stability and accessibility were areas where online investors felt underserved, with 46% of those polled experiencing a problem with their provider’s website.

Finally, the major development in the second quarter of 2020 (outside of COVID-19) was the death of George Floyd and the igniting of social justice movements in North America (and across the world) to a point not seen since the US Civil Rights movement. Though the stock markets were largely insulated from the headline risk, major names in the public markets (like Nike) took very public stands on the death of George Floyd and the Black Lives Matter movement. One potentially coincidental shift that we noted in the websites of two online brokerages at this time was the use of more inclusive and diverse imagery. What a DIY investor was “supposed to look like” changed in terms of the imagery used on the websites of Interactive Brokers and Virtual Brokers. Other online brokerages in Canada had already made the shift to more inclusive imagery, so it was nice to see these online brokers take a step in the right direction when it comes to representation.

Another important note on Virtual Brokers emerged during this time, which was that the parent company, CI Financial, had opted to consolidate the “Virtual Brokers” name under CI Direct Investing along with another key name in the digital investing space: WealthBar. Although no definitive timetable was published on this move, it means that a long-standing name in the online brokerage space will disappear, and DIY investors will have to learn another new name. To make matters even more challenging, the new online brokerage that formed from the acquisition of Jitneytrade by Canaccord is named CG Direct. These two names are bound to confuse DIY investors even more than the current challenge of sorting out Qtrade Investor and Questrade.

Q3 2020: Sun and Shade

With the nicer weather and relative calm in stock markets, it seemed like an opportune moment for several online brokerages to make big announcements and feature enhancements/changes. And there were a few.

Starting in June, TD Direct Investing announced updates to its mobile app that focused on enhancements to investor education. Interestingly, as it came to be seen later in the year, this move toward bolstering investor education was both a timely one, given the number of new investors coming into the stock market, and a well-calculated one, supporting the big reveal that would come in Q4. The trend of improvements to mobile trading experiences was something that surfaced several times in the year, notably with RBC Direct Investing as well as Virtual Brokers.

One of the biggest announcements to cross the tape was that Wealthsimple Trade would be launching cryptocurrency trading in Canada. Offering trading in both Bitcoin and Ethereum, this move by the “zero-commission” online broker in Canada was yet another step to appeal to a younger, more tech-savvy audience who wanted both an easier way to access these digital currency instruments and a more user-friendly way. This pilot program will ultimately help to inform whether cryptocurrency trading can be properly regulated by financial authorities in Canada. In 2020, Wealthsimple Trade continued to lean into its identity as a “Robinhood Canada,” given the success of the US online brokerage in winning over new investors to its platform.

One big feature roll-out that didn’t quite go as planned was from CIBC Investor’s Edge. Unfortunately, the feature upgrade’s first attempt resulted in trading interruptions that, in turn, prompted the online broker to offer commission-free trades to those who were impacted by the outage. Eventually, however, a new online trading experience was rolled out – in part – and set the stage for further improvements to the user experience.

After a very quiet stretch, signs of life in the deals and promotions section started to appear. National Bank Direct Brokerage launched a sizable commission-free trade offer, and, interestingly, Wealthsimple Trade launched a contest with a draw for $5,000 in cash. What made the latter offer stand out is that it was an early signal that despite offering zero-commission trades, Wealthsimple Trade also had to undertake some further effort to entice new clients to their platform (something that showed up again in Q4).

Q4 2020: A Few Good Mends

It’s hard to believe that the fourth quarter was actually just one quarter, given how much happened. The resurgence of COVID-19 via the “second wave,” the huge rally in the stock market to set new highs, and the US federal election all would have been massive stories on their own but, combined, they made it nearly impossible to keep from watching the news.

Despite all of the negative headlines, what did emerge for online brokerages and DIY investors was an interesting convergence of events.

While the first portion of the year showed unprecedented strength of interest by online investors to open up accounts and trade, by the time the fourth quarter rolled around, things had levelled off somewhat. Nevertheless, Canadian online brokerages, much like their US counterparts, were seeing elevated trading activity and, unlike their peers in the US, were generating significant revenue as a result. The fourth quarter in the year is also the time when online brokers in Canada typically start their ramp-up to campaigns for RSP season. What resulted from these events taking place simultaneously was that the deals and promotions activity in November just exploded. Offers came to market from all major online bank-owned brokerages as well as most other Canadian online brokers in one way or another. Even Wealthsimple Trade managed to jump into the deals and promotions fray, once again taking their cues from Robinhood and launching a promotion to give away cash in an amount equivalent to a particular popular stock.

Deals were just one part of what the fourth quarter of 2020 had to offer. Also on deck for the end of the year was a huge announcement from TD Direct Investing, which launched their new commission-free ETF trading platform, GoalAssist. While the platform only allows commission-free trading for TD-branded ETFs, it is a huge step in moving the needle forward on commission-free trading for Canadian DIY investors. Already ETFs are free to buy (at Questrade and Virtual Brokers) or free to buy and sell (all ETFs at National Bank Direct Brokerage and a limited selection at Scotia iTrade and Qtrade Investor). So, for TD Direct Investing, one of the biggest names in Canadian DIY investing circles, to launch this product (and in a mobile-only format to boot) means that they are directly going after the commission-free trading offering by Wealthsimple Trade.

Ironically, it appears that in the fourth quarter, Wealthsimple Trade was already at work to challenge the traditional Canadian online brokerage offering of a “desktop experience.” Prior to this year, Wealthsimple Trade had been available in mobile-app format only – something that ultimately ended getting Wealthsimple Trade disqualified from being included in some of the Surviscor online brokerage rankings.

As of the fourth quarter, however, Wealthsimple Trade has launched a desktop version of their web platform that is being tested by users. Given that fewer people are actually going into an office or are on the go to and from an office, more and more users are spending time on their laptops or desktop computers. So, this highly sought-after feature is another shot across the bow aimed at the online brokerage industry indicating that Wealthsimple Trade is getting up to speed on the features that online investors want.

New features didn’t stop there for Canadian online brokerages, however. BMO InvestorLine rolled out a 2.0 version of their online trading experience, which significantly streamlines their existing web interface, though it is still being updated in terms of features. At first blush, it looks like the trend among online brokerages has shifted away from completing all features before launch, moving instead to an “agile” model of shipping features out and enhancing/optimizing over the product lifecycle. Another big announcement from an online broker regarding features was from National Bank Direct Brokerage, which officially rolled out OptionsPlay as part of their offering to clients. This platform is intended to assist individual investors in manoeuvring through trading options.

Finally, one more noteworthy milestone took place in the quarter, as the Sparx team launched the fourth edition of the Look Back/Look Ahead series. This publication featured in-depth coverage of several of Canada’s most popular online brokerages, which offered a unique glimpse at how 2020 unfolded for them as well as what features and trends they’re looking to in 2021. In addition to the online brokerage space as a whole, the magazine also offered a sneak peek at the new SparxTrading.com website coming in 2021.

Even summarizing it a quarter at a time, this year had lots of other stories that we didn’t get a chance to highlight in the Roundups as well as in this ultimate year-end review of stories that shaped 2020 in the Canadian (and US) online brokerage industry.

2020 being what it is, there’s still room for some kind of unplanned surprise that could impact investors – whether it’s a new deal or feature launch – however, the good news is that with just a few more days until the official end of the year, online brokerage employees are going to be in holiday mode, too. As such, we don’t anticipate more feature releases going live just yet.

So, on that note, we’ll be doing something different and signing off for the Weekly Roundup for 2020 for the final stretch of December. We will be rebooting in early January, with a few other surprises to mention right out of the gate, as well as more exclusive content. Unless, of course, 2020 drops a story too big not to cover in the online brokerage space.

Discount Brokerage Tweets of the Week

From the Forums

A Sure Thing?

In this post, one investor asks for recommendations of stable, secure American companies to invest in for the next 10 to 15 years. The advice pours in, covering ETFs, the couch potato strategy, Canadian versus American stocks – and why you should avoid taking advice about specific stocks from random people on the internet.

Live and Learn

An investor who knows very little about their own investments asks about the best way to learn about the topic. Redditors share their favourite books, websites, courses, podcasts, and more, along with their personal financial journeys.

Into the Close

That’s it for the final Roundup for 2020. With vaccines now in place and hope on the horizon, there is lots to look forward to in the coming months. The next few weeks will be the most challenging; however, to pull a (final) line from the Fast and Furious franchise, “We do what we do best, we improvise.”

Stay safe, healthy, and connected, and see you again in 2021.

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Discount Brokerage Weekly Roundup – December 14, 2020

’Tis the season for gifts, and it seems like with recent fervour around IPOs, those gifts are coming in the form of jingling market bells. For both DIY investors and online brokerages, the excitement around recent IPOs and the optimism heading into 2021 bode well for the run-up to RSP season.

In this can’t-believe-the-end-of-2020-is-so-close edition of the Roundup, we review the least likely name to have experienced an outage and what that means for online investors in the brave new world of trading online. Next, we highlight one bank-owned online brokerage that has quietly launched a potentially disruptive feature that will challenge the rest of the Canadian online brokerage industry to find a way to follow suit. As always, we’ll toss in a healthy dose of investor commentary courtesy of the forums and Twitter.  

Trader Interrupted: Interactive Brokers Suffers Trading Outage

If there’s one lesson that DIY investors learned the hard way this year, it’s that online brokerage platforms are not bulletproof. Multiple platform outages across the year, sometimes in the same week or day, sometimes (always) at the worst possible moment, have plagued DIY investors and online brokers alike and eroded the confidence of many active online investors in the ability of their online broker to be functional when opportunity knocks.

Nobody is more keenly aware of this than those who actively trade. Active trading is inherently risky, but the risk of technical failures – which is an ever-present risk – is something online investors have had to contend with a lot more this year, it seems, than in any other year before.

One name that has largely stayed out of the outage spotlight this year has been Interactive Brokers. On several occasions leading up to forecasted volatility in the markets, they hardened their systems and reigned in risk exposure to deal with the impending storm. This past week, however, Interactive Brokers clients were greeted with something frightening, as a system failure during the market open essentially sidelined investors for almost half the day’s trading session.

Contextually, it is important to note that unlike most other online brokerages, Interactive Brokers is highly attractive to professional investors as well as retail investors because of the professional-grade nature of their pricing and market access. On average (per their latest investor presentation), they are home to over 980,000 clients and execute more than 1.8 million trades per day.

For this level of active trader, there is lots of money (and risk) on the line, so of all the types of investors, this lot seldom tolerates technical failures. Naturally, some of this group took to Twitter to express their frustration – and did not hold back. For context, we are well versed in Twitter reactions to online brokerages, especially when there are service interruptions. However, the reaction to the outage from the group of Interactive Broker clients on Twitter was swift, unpleasant, and, because of their client base, global.

Aside from the extraordinary fact that Interactive Brokers’ systems went down during the trading day (technically, before the opening bell), what was also interesting about how things played out was the acknowledgement and ownership of the issue by the CEO of Interactive Brokers, Milan Galik. Of the many service interruptions or outages that have taken place here in the Canadian online brokerage space, there hasn’t really been this level of personal acknowledgement before. Suffice it to say it was a big deal.

The lesson for online investors is that regardless of the calibre of online brokerage, the risk of failure due to technical outage is ever-present. The cause for the failure and service interruption was attributed to a failed data storage system from an external (unnamed) vendor. However, the reality is that architecture for modern trading systems continues to get increasingly complex, so it is likely a matter of when rather than if a system will go down. With more moving parts comes the increase in risk of something going wrong. This is a material consideration for active investors, especially those using margin to trade.

This year has been a bumpy one for Interactive Brokers. After the debacle with oil futures going negative in April, along with this outage, which happened on a relatively benign day in the market (can’t imagine what this would have been like on high-volatility day), there will be cause for concern for some investors. Still, industry and retail perspectives would likely both agree that one would be hard-pressed to find an online brokerage platform as invested in technology and automation as Interactive Brokers.

This past week also saw Interactive Brokers present at the Goldman Sachs US Financial Services Conference, and the key takeaway from that session was that Interactive Brokers remains on a healthy growth trajectory.

Clearly, there will be many clients who will remain unhappy about how things unfolded with regards to the outage, but, on balance, there appears to be significant momentum behind Interactive Brokers to continue their push higher in 2021.

RBC Direct Investing Navigating New Territory

For many individuals, 2021 can’t come fast enough. In addition to wanting to leave this wacky year behind us, the sentiment of having something better to look forward to (aka hope) is much more appealing than dwelling on 2020.

When it comes to Canadian online brokerages, the future is a bit of a touchy subject.

Understandably, for competitive reasons or simply to manage expectations, online brokerages have been coy about what they’re working on. From time to time, however, an online brokerage may mention a key feature that has been requested or even talk about something exciting, but those occasions are usually few and far between.

Against that backdrop, the launch of a new content offering from RBC Direct Investing stands in contrast to the historical way of doing things at Canadian online brokerages. Perhaps as a signal of change within the firm, and quite likely something that will (once again) prompt the Canadian online brokerage industry as a whole (in particular the bank-owned online brokerages) to consider matching the tactic, the latest communications move by RBC Direct Investing might be the snowball that starts an avalanche of information from their competitors.

This past November, as part of their Inspired Investor magazine, RBC Direct Investing launched a feature called “Navigators,” which is described as a “monthly go-to for what’s happening at RBC Direct Investing.”

Contained within this feature are updates about new or interesting features at RBC Direct Investing, as well as tips on how to navigate the RBC Direct Investing platform and the most read article from the preceding month’s Inspired Investor series.

The first issue, for example, telegraphed upcoming improvements to site navigation and improved stock screener experiences. In the most recent (also the second) issue, the new stock screener experience was showcased as well as a milestone of achieving full online account opening for RBC Direct Investing accounts – specifically, this feature is now available to non-RBC banking clients, too. Additional enhancements coming soon to the RBC Direct Investing experience were also mentioned and included improvements to the portfolio analyzer and filtering of order statuses on the mobile app.

Normally when incremental features are released, they get very little coverage from online brokerages – however, it is exactly these small enhancements that users often miss and that fill the gaps between major feature releases. Not only do they help to inform the DIY investor community (some of whom are already RBC Direct Investing clients in this case) as to what is going on, but they also serve to demonstrate that change and innovation are happening.

It is not an understatement to say that signs of innovation within the Canadian online brokerage space are difficult to spot, not because they don’t happen but because they are often underreported.

As we stated in the Look Back / Look Ahead series for 2020/2021, we believe that an emerging trend for how online investors will evaluate online brokerages will sway toward those that are always working on enhancements. We certainly don’t live in a static world, and online investing is no exception. When cars can get over-the-air updates, online brokerages ought to be able to continuously be upgrading the user experience. By letting users know which features are in the works, it may improve the odds of a client opting to stay rather than switch or open a new account simply to access a particular feature.

For those reasons, there is likely to be greater incentive and pressure on peer firms to a) innovate and b) discuss the kinds of features they’re working on improving. Of course, it will be crucial to then follow through on those improvements.

Taking a step back, this is clearly what market differentiation looks like. We saw what happened to the online brokerage space in 2014, when RBC Direct Investing opted to lower their commission price to $9.95 per trade: almost all of the other bank-owned brokerages quickly followed suit. Now that RBC Direct Investing has rolled out a way to keep DIY investors apprised of what’s “cooking in the kitchen,” they have thrown down the gauntlet for their competitors to try to do the same. With two issues now released, it is safe to say there are going to be more readers curious to see what RBC Direct Investing is working on next.

The simple question DIY investors will be asking Canadian online brokerages heading into RSP season is what they can expect to get from each one they’re considering. Fortunately for RBC Direct Investing, they have a lot more to talk about than just their pricing, which is not something most of their peers can say.

Discount Brokerage Tweets of the Week

From the Forums

A Match Made in…the Office

In this post, a Redditor asks if they should take part in their employer’s matching program for retirements savings. The problem? A very high Management Expense Ratio (MER). Redditors weigh in on whether receiving this “free” money is still a good idea with the high MER.

#LifeGoals

After landing a dream job at a pre-IPO start-up, a new investor with an incredible salary and low monthly expenses asks for help planning for the future in this post. Hundreds of responses pour in, with tips on everything from avoiding “lifestyle creep” to saving for an emergency fund to making the best use of TFSAs and RRSPs.

Into the Close

In “normal” times, this point in the calendar is when things would slow down, and other than the rush to pick up last-minute presents, there would be room for a little bit of a gear-down. Alas, this is a 2020 December. With hot IPOs hitting the market, and literally nowhere else to go for many of us, it will be a mad dash to the finish. Several stories hit our radar this week that were not covered here, so we’ll try to squeeze them in before the year ends. And, if you haven’t already done so, be sure to check out Look Back / Look Ahead for awesome insights and previews of what’s coming around the corner in 2021.

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Discount Brokerage Weekly Roundup – December 7, 2020

Take a deep breath. Believe it or not, December is here, and with it, news of several COVID-19 vaccines, stock markets making record highs, and hope on the horizon. Certainly not a coincidence. Another non-coincidence at this time of year is the appearance of special treats and the idea of wrapping things up with a bow.

In this special edition of the Roundup, we turn once again to the topic of deals and promotions, with a regularly scheduled check-in of the deals landscape to kick off the new month. From there, the big announcement: Sparx Trading’s exclusive Look Back Look Ahead series for 2020-2021 is now live! We’ve got a great overview of this unique series that features Canadian online brokers giving their perspective on the past year as well as on what’s coming in 2021. And, as always, we’ve got a full helping of DIY investor comments from Twitter and the DIY investor forums.

De(al)cember Update

The countdown to the end of the year has been going on for some time, but now that December’s here, the finish line to 2020 is in sight.

Despite the gloomy weather and even gloomier forecasts for COVID-19, the SparxTrading.com online brokerage deals and promotions section offers some brighter news. As is customary at the start of each month, we take stock (pun intended) of the deals and promotions landscape among Canadian online brokerages. The good news: this year is as strong as ever in terms of promotional activity among Canadian brokerages.

Although no new deals launched at the beginning of December, a very competitive offer from National Bank Direct Brokerage did get extended for another month. The 100 commission-free trade offer by NBDB is one of the most competitive offers for DIY investors interested in commission-free trades, and with zero deposit requirements, it also has the lowest hurdle.

Last month was a watershed moment for deals and promotions activity among Canada’s online brokerages. After being mostly dormant since the end of RSP season last year, almost all online brokerages decided to launch a cash-back or commission-free trade offer.

Interestingly, there are still a few brokerages currently not on the deals and promotions list, something we anticipate changing either this month or early next month. Firms we expect to see stepping into the promotional space soon are Qtrade Investor, HSBC InvestDirect, and Virtual Brokers, given the fact that other brokerages are already offering something.

Finally, another deal we’re watching this month is Wealthsimple Trade’s “free stock” offer, which is set to expire on December 18th. It is an unusual time for a promotion to end, but it is encouraging to note that the deal is happening at all, since offering zero-commission trading is a significant draw on its own.

With all of these offers currently in play, this is likely an ideal window for online investors interested in an investing account to maximize the selection of promotions.

So, while the weather outside is frightful, this might be the most wonderful time of the year for getting a little extra boost for opening an online brokerage account.

Sparx Trading’s Online Brokerage Look Back Look Ahead Is Live!

More countdown-related content continues to emerge this month, this time from yours truly at Sparx Trading.

Our highly anticipated fourth edition of the Look Back Look Ahead series is here, and – to borrow from Robinhood’s Market Snacks podcast (fair game to borrow from Robinhood, amirite?) – this is the best one yet.

This edition features in-depth submissions from six Canadian online brokerages that offer a fascinating set of perspectives on how 2020 unfolded and preview what they have in store for 2021. In addition, we’ve given our own perspectives on the online brokerages that did not provide a submission and outlined what we thought were noteworthy developments during the year. Finally, we’ve provided a detailed preview of what the next version of SparxTrading.com has in store for DIY investors.

Online brokerages featured in this issue include:

The series is now in its fourth iteration, and it’s interesting to see how things have evolved since we first launched it in 2014. One of the readily apparent changes is that in addition to a blog format, we also have a magazine edition, which we rolled out starting in 2018. Even though it takes considerable work to pull together a magazine format, we thought it was an opportunity to create something great-looking and engaging, which offered a different way to present stories about an exceptionally fascinating year.

One thing that has remained consistent about contributions to the Look Back Look Ahead series has been the unique perspective that only the voices of the online brokerages’ senior leaders can provide. It remains a rare opportunity to hear from senior stakeholders on how the year unfolded as well as their vision for the year ahead.

Another great feature of this year’s issue is that the Q&A format provides an interesting perspective on several points relevant to DIY investors, including:

  • What beginning investors can expect
  • What active investors can expect
  • Which online investing trends they think will matter to DIY investors
  • What user experience means to their firm
  • What sets their firm apart from their peers

As referenced in the beginning of the blog version of this series, there were a number of themes that emerged from the responses and analysis of the online brokerage landscape from 2020. Three big themes that stood out were the need for agility, the importance of communication, and the rising prominence of user experience.

Based on a macro view of what has transpired this year, the consensus is that COVID-19 helped accelerate the future into the present. For the world of online investing, it seems that DIY investors will be looking beyond just the headline price of commissions to the full experience of what it means to be “self-directed.” Case in point: Despite DIY investors having to pay commissions for trades, the industry as a whole saw record-breaking account openings and trading volumes during the height of the market volatility, from March through the summer.

What has become clear, now even more than in previous years, is the need for transparent and ongoing communication in order to create strong relationships with clients. With the heightened uncertainty, communication channels at online brokerages have been tested, and going forward, the hallmark of an online brokerage who “gets it” will be one that excels at communicating with clients proactively. Further, DIY investors will be looking for brokerages to harden the systems that matter in a crisis or in times of extreme volatility. Patience for service interruptions or delays has worn thin, and demonstrating “uptime” is also going to become a marker of quality.

On a lighter note, observant viewers will notice that our cover art tried to capture the work-from-home look, something that embodies the spirit of 2020 for many of us. There are some special details we tucked into the image that we’re sure DIY investors can appreciate. Sticking to the aesthetic for a moment, the soon-to-be-launched new website and content will feature our bull and bear prominently. Unless it’s sensationalistic, a lot of financial content is difficult to engage with, so we hope to continue to provide a more engaging way in which to consume DIY-investor-focused content.

Personally, I found this issue to be an enriching read, and I am excited by the prospect of DIY investors discovering something new and interesting about the Canadian online brokerage landscape as we move through the end of 2020 (thankfully) and into a new chapter in 2021.

To read the Look Back Look Ahead series, click here.

Discount Brokerage Tweets of the Week

From the Forums

And Baby Makes Three

A Redditor in Ontario with a baby arriving soon asks in this post how to establish an RESP and get the full benefit of it – and also wonders if they need to be actively involved after the initial setup.

Exasperated by Exorbitant Expenses

In this post, one frustrated investor wants to know why Canadian brokerages have such high fees compared to their American counterparts. Redditors weigh in with their best theories.

Into the Close

That’s a wrap on this early-December edition of the Roundup. Markets continue to price in optimism around the corner, which should continue to lift spirits for now. There have been some significant comeback stories this past week – including Blackberry – and even more excitement as IPOs like Airbnb and DoorDash prepare their public debuts. One thing’s for sure, there’s lots to keep DIY investors glued to their screens in what was supposed to be a quieter time of year.

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Discount Brokerage Weekly Roundup – November 30, 2020

Hard to believe but the end of 2020 is almost here. Then again, a lot of what’s happening is surreal. With stock markets continuing to rise alongside COVID numbers, and increasingly tightening restrictions here in Canada to try to wrestle the virus into control, it’s hard to believe there is good news to be found. Fortunately, hope springs eternal, and while there are definitely some challenging times ahead, we’re glad to be able to share a slate of stories of things to look forward to from online brokers.

In this month-end edition of the Roundup, we take stock of the activities that stood out in November – including the influx of deals and promotions for DIY investors. Staying on theme, we also dive into some important developments and exciting publications set to launch at SparxTrading.com that will shine a spotlight on the challenging year that was and how online brokerages overcame multiple challenges to deliver a record-breaking year. Being the month end, there’s a special addition, which includes coverage of some interesting things that crossed our radar that we didn’t get a chance to dive into more deeply this month. As always, we’ve got chatter and banter from DIY investors in the forums and from Twitter.

Days of Our Deals: Online Brokerages Lean Into Deals in November

It’s fitting that on Cyber Monday we get to talk about deals and promotions for DIY investors.

November has been filled with a constant stream of deals updates, as almost all Canadian discount brokerages either stepped back into the deals pool or dove in for the first time.

With nine advertised deals now in the commission-free trade or cash-back category (10 if you include the latest deal from Wealthsimple Trade), online investors are able to pick and choose which deal best suits their needs.

For anyone keeping score at home, within the first week we saw offers from BMO InvestorLine, BMO SmartFolio, CIBC Investor’s Edge, and TD Direct Investing come to market. Not far behind them came offers from Scotia iTrade and RBC Direct Investing. Finally, at the end of the month, we saw Wealthsimple Trade jump into the deals and promotions pool with a clever cash-back promotion.

At the time of publication of this Roundup, it appears that there is one promotion set to expire – the commission-free trade offer from National Bank Direct Brokerage – however, that might change heading into a new week. Not to worry, though, as there are numerous offers that are scheduled to be around until well into RRSP season, which ends at the beginning of March 2021.

Even though we’ve said this before, it is worth stating again. This massive influx of deals activity was a far cry from the promotional landscape we saw midway through 2020 when almost all Canadian discount brokerages removed their “top-tier” promotional offers.

The pullback in offering deals was largely the result of a tsunami of investors trying to get into the markets to take advantage of the COVID-induced volatility, and though COVID is still around, it appears that substantial market swings are not. The pace of investors opening up new accounts has also slowed down compared to the spring of 2020, which, according to some industry insiders, is a welcome reprieve.

As for the Canadian discount brokerages currently on the deals and promotions sidelines, we suspect they won’t be there for too much longer. The space is far too competitive at this point not to be actively courting DIY investors with an offer. The question is more when than if the brokerages currently not offering either a commission-free trade or cash-back promotion will step forward.

One theme that is clear this year is that there appears to be a greater degree of targeting of specific investor segments going on than in years past. As is usually the case, big assets are what all online brokerages aspire to attract. However, outside of that group, there is a definite interest in the entry-point investor.

With the big deal days of Black Friday and Cyber Monday in the books, it appears that the stretch between here and Christmas could bring with it a few bonus gifts for DIY investors.

Lots to Still Look Forward To in 2020

It’s been a storied year for everyone. For DIY investors, there have been once-in-a-generation opportunities to get into stocks that were panic-sold as well as to jump into stocks that have surged as a result of the shift to working from home.

All Canadian online brokerages were tested in multiple ways during and because of COVID, from having to be able to process the flood of applications for new accounts, to shifting operations and personnel to a remote-work model, to dealing with the ongoing challenges of the marketplace that demanded more features at lower commission prices.

Though there were certainly hiccups along the way, in hindsight, the Canadian online brokerage industry managed to weather an exceptionally challenging storm.

For that reason (and the fact that it is 2020), we thought it would be fascinating to hear from the leaders of Canadian online brokerages themselves, so we invited them to participate in our soon-to-be-released Look Back/Look Ahead series.

In this upcoming edition, readers will learn a lot about what 2020 has meant for various Canadian online brokerages, including the challenges they have faced (and overcome) as well as the opportunities for innovation that presented themselves during the year.

In addition to talking about the past, one of the most interesting features of this year’s Look Back/Look Ahead series is what online brokerages have shared about what they’re working on and what online investors can expect from them in the coming year. Stay tuned for our official launch announcement on Sparx’s social media channels.

And, speaking of fun things to look forward to, we’re still working away at the launch of a new Sparx Trading digital experience.

Our new website will feature streamlined organization and powerful new tools to help online investors looking for online brokerages. Exclusive sneak peeks will be shared on the Sparx Trading Twitter feed as well as featured in the Weekly Roundup.  

Lightning Roundup: More Interesting Developments

With so much happening this past month, it’s tough to cover all of the interesting developments in as much detail as we’d like to. So, here’s a quick rundown of things that crossed our radar.

Lots of Outages, Lots of Outrage

Twitter is generally a place where discussions can get heated, and people don’t hold back on what they’re thinking or feeling. In fact, it’s arguably THE place online to vent/share just that. For businesses (like online brokerages), however, in addition to being a place where clients share their experiences, there’s also an expectation of channels like Twitter to serve as a customer service channel.

November has been an abysmal month for many DIY investors across multiple Canadian online brokerages because of platform outages and downtime that occurred during trading hours at big bank-owned online brokerages and smaller operations alike. Many active investors found themselves ranting about outages as well as scary wait times to speak to customer service representatives.

For all of the good, the bad, and the (much) ugly, check out the tweets of the week from November in each of our Roundups.

Financial Literacy Month

November is Financial Literacy Month in Canada, and this past month marked the 10th anniversary of this initiative, which is aimed at helping Canadians be better informed about their personal finances.

There was a steady stream of content as well as activities online for individuals wanting to deepen their understanding of important financial topics. Interestingly, there were a lot of credit unions, independent personal financial bloggers, federal agencies or entities, and provincial securities regulators who were visible on social media.

When it came to investing – in particular DIY investing – there wasn’t much in the way of dedicated content from Canadian online brokerages, despite the wealth of information they have on hand or have historically provided about the way in which online investing works. It seems like an interesting opportunity to have more of a voice on an important issue that would enhance the general public’s understanding of what online brokerages are and how they function.

One telling gap in the current state of awareness and communication around financial services options for investors is highlighted in the introductory stock market video produced by the Nova Scotia Securities Commission.

This video series does a great job explaining the basics of stocks, but when it comes to describing the options that individual investors may encounter, the fact that “robo-advisors” don’t really get mentioned shows there are things consumers encounter in the world of investing online that don’t quite match up to what is being explained in this video. Granted, the video focuses on stocks (rather than ETFs), but given the popularity of these instruments and that they pull investors into trading online, it might be a great follow-up video to provide for investors.

Despite the wealth of information (pun intended) on personal finance that has been shared during Financial Literacy Month, there are still lots of opportunities for either online brokerages or other members of the online investing ecosystem to step forward with more investor-friendly content.

From the Forums

Time Is Not on His Side

What’s the safest and most practical way to start saving for retirement – at age 59? In this post, a Redditor asks for advice on behalf of their father, who is ready to start investing $2,000 per month.

Haters Gonna Hate

A Redditor asks in this post why the media seems to have a hate-on for TFSAs. A long and lively discussion ensues, debating whether TFSAs are good for everyone or just for the rich.

Discount Brokerage Tweets of the Week

Into the Close

If you’ve managed to survive the gauntlet of Black Friday and Cyber Monday advertisements and email promotions, congratulations! With the holidays now less than a month away, investors will have more than just visions of sugarplums dancing in their heads – tax-loss selling deadlines are now looming, and there are bound to be some stocks that investors would love to leave behind as much as they would 2020. Of course, for the bargain hunters, there are also opportunities to peruse the deep-discount bin. Maybe there are a few more deals to be had after all. Here’s hoping you have a profitable week ahead!

🌻Sunflower Timelapse from r/BeAmazed
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Discount Brokerage Weekly Roundup – November 23, 2020

With Black Friday just around the corner and Christmas about a month out, bargain hunters and buying sprees abound. It seems like stock markets are in the buying spirit, too, as investors continue to push markets and certain stocks into record territory. Even online brokerages are getting into the spirit of the promotional season and being ever more creative with their offers for DIY investors.

In this week’s Roundup, we take a look at a new twist on a rockstar promotional offer that DIY investors love and examine how one Canadian online brokerage has once again flexed its creative prowess. From there we take a peek at the latest online investing experience from a popular bank-owned online brokerage that is making measured progress. As always, we’ll highlight comments (and complaints) from DIY investors on Twitter and the investor forums to wrap things up.

Wealthsimple Trade Offers Free Stock (Sort of) Promo

If there was any doubt about Wealthsimple Trade taking their cues from Robinhood, the popular online brokerage in the US, this latest manoeuvre is likely to chip away at that doubt significantly.

This past week, we noted that Wealthsimple Trade has started to offer “free stocks” (sort of) as part of a new promotion to attract users to its platform.

Incredibly popular in the US, this is not something we’ve seen launched here in Canada since we’ve been covering the deals and promotions space for the past decade, which makes this offering especially novel for Canadian DIY investors.

Considering that Wealthsimple Trade can’t offer commission-free trades as a new promotion (because they already offer commission-free trading), their approach to structuring promotions has to be more creative. And creative they did get.

While cash-back offers might be an option, it’s clear that they wanted to make a bigger splash than that. So, instead of a run-of-the-mill cash-back promotion, the marketing team cooked up giving a cash bonus equivalent to the price of one of 15 stocks selected from those widely held among Wealthsimple Trade accounts. These stocks range in price from $1 to $4,500.

How does the Wealthsimple Trade Free Stock Promotion work?

Ironically, while so much about the Wealthsimple brand is about simplicity, this particular promotion is actually a bit complicated and is more akin to a combination of a “lottery” or draw versus a cash-back bonus (more on that in a moment).

Starting first with the conditions.

This free-stock bonus offer is open to new clients of Wealthsimple Trade and applies only to non-registered accounts. It is also significant considering how popular this online broker is for registered accounts and considering the timing of the launch, as online brokers ramp up around RRSP (and registered account) promos.

The promotional period is from November 17th through to December 18th, 2020.

In terms of hurdles to qualify, the $100 deposit minimum to be eligible for this offer is about as low as it gets among peer offers – especially for cash-back deals and promotions. That said, it is also possible to be eligible for this bonus without meeting the minimum deposit and instead submit an essay on investing.

OK, and now for the complicated part. This offer is structured in such a way that individuals who open a new Wealthsimple Trade account and make the necessary deposit will receive a cash bonus equivalent to the price of one of 15 of Wealthsimple Trade’s most widely held stocks.

The exact amount of the bonus offer depends on the following formula:

minmaxprobability
Tier 1$1$1056%
Tier 2$10$5035%
Tier 3$50$5009%
Tier 4$500$5,0000.20%

Without knowing the prices of each of the 15 stocks or the distribution of the prices of those stocks, and noting the very wide range of the prices in the tiers we’ve established (based on the probability of “success”), we decided to compute the expected value (EV) for this promotion (see table below).

minmaxprobabilitymidEV
Tier 1$1$1056%$5.5$3.08
Tier 2$10$5035%$30.0$10.50
Tier 3$50$5009%$275.0$24.75
Tier 4$500$4,5000.20%$2,500.0$5.00

Using the probabilities for receiving a cash-back offer in the stated range as a guide, the expected value of the promotion is about $43. That said, not everyone who opens an account will be getting the same amount and the overwhelming majority of new clients will receive less than $50 as a bonus offer.

Given that level of uncertainty – or, put another way, chance – individuals who would like to potentially receive a promotional bonus (but who do not meet the minimum deposit threshold) can instead write an original 100-word (or more) essay on “My Investing Strategy” and email it to Wealthsimple Trade during the offer period.

There’s a lot to unpack with this promotion, so we’ll start with the obvious one: that it is an exceptionally clever way to marry a popular feature being offered by a popular online brokerage into something that is actually more like a contest. In other words, the repackaging of the “cash-back” bonus is worthy of its own slow clap.

Additionally, by using a contest structure for this offer, Wealthsimple Trade not only fixes how much they’re going to pay per client but also creates something that could generate a lot of buzz. The expected value for anyone hoping to gain something is $43 but most likely will be somewhere between $3 and $11. When screening for Canadian stocks with values between $500 and $4,500 using Yahoo Finance, three stocks pop up – with one of them being Shopify (last traded at just under $1,295). It is also the only one of the three with an average daily volume of greater than 50,000 shares, a requirement to be able to trade on Wealthsimple Trade. Alternatively, on US exchanges, there are 1,400 securities to conceivably pick from that meet the criteria to qualify for this promo.  

As far as acquisition costs go for new clients, those are incredibly low compared to what other online brokerages are currently putting out into the market. Also, from a marketing point of view, it’s unlikely that DIY investors would pay attention to a “traditional” cash-back or commission-free trade offer the way they would with this particular offer.

Finally, this new offer also shows that Wealthsimple Trade, in spite of its already low commission price and enthusiasm from among online investors to get into trading, has also entered the deals and promotions competition. Wealthsimple Trade, like other online brokerages in Canada, will need to get the attention of investors who are increasingly aware that promotions are available and who use deals as a way to decide between various providers.

The fact that there is such a short window on this offer indicates that there is some degree of testing to see what happens. That it also focuses on non-registered accounts at a time when registered accounts are what lots of DIY investors (or would-be investors) are thinking about is also of interest. As any online broker hopes, if this promotion works out, new clients who like the experience with Wealthsimple Trade may stick around (and potentially tell their friends). That’s about as smart a gamble as any online brokerage can make.

BMO InvestorLine 2.0 Rolls Out Slowly But Surely

2020 has thrust a lot of change on just about everyone. Unlike the rapid change that has come to characterize this year, BMO InvestorLine has been gradually rolling out their new online investing interface, aptly named BMO InvestorLine 2.0.

As first promised in early 2019, BMO InvestorLine 2.0 offers a dramatically different user interface from their longstanding web experience, which had become incredibly feature-rich and thus out of step with a lot of the minimalist design and approach that characterizes “modern” interfaces.

BMO InvestorLine 2.0 has taken a “less is more” approach, with a complete redesign of the landing page experience and, quite notably, the elimination of menu-based navigation along with most of the menu items that characterize the InvestorLine post-login page.

The essential features that have made it into a live version of the BMO InvestorLine 2.0 site are the post-login landing page that summarizes holdings and individual account status – all within one click – as well as account-related news. Interestingly, the right-hand side of the screen is where a persistent watchlist and market watch view panel follow a user through various points in the site.

Core functions currently available on the 2.0 version of the site include the ability to view account details, move money, and place trades. Features such as MyLink and e-Documents redirect users to the original version of the website. On that note, there are a lot of features that have yet to find a home on the new version of the website – including a lot of the research tools – and one of the nice things about the 2.0 website user experience is how easy it is to revert back to the previous version, which is sure to placate users who are more used to the previous navigation and organization.

One of the reasons it appears that BMO InvestorLine is moving through this transition gradually is both to ensure that the new configuration is stable and to get feedback from a much larger group of users as to what is or isn’t effective in the new web experience. Given how many features did not yet make it into the new site, we can anticipate further changes to come in 2021. That said, one of the important driving factors of the new site is not to overload it with so many features as to make it unwieldy. That will be a challenge given the extensive features that the 1.0 site offers.

On a strategic note, there are some challenging forces at play that will have to be resolved by all online brokerages when it comes to balancing client desire for “more features” with the ease of navigation and simplified experience that come from having less information to wade through.

With so many new investors coming into markets, investor education is going to be incredibly important to provide to this user group. Doing that inside the post-login experience will require users to learn how navigate and where to go for answers to basic questions about investing online. It will be interesting to see how InvestorLine 2.0 tackles this issue and transitions some of the many useful features from their 1.0 into a 2.0 framework.

For the moment, BMO InvestorLine can afford to take the time to get feature deployment right. With new online brokerages and even new refreshes coming from their peers in 2021, however, it is likely BMO InvestorLine will have lots to keep announcing as we head into the new year.

Discount Brokerage Tweets of the Week

From the Forums

The (New) Customer Is Always Right

In this post and this post, Redditors discuss a new Wealthsimple Trade promotion that aims to entice new customers with the promise of free stock (sort of) – and lament that existing loyal customers were not rewarded with a similar offer.

Worthwhile Words of Wisdom?

An investor contemplates ditching their financial advisor and venturing forth solo, but their advisor tries to dissuade them. In this post, Redditors (including one former financial advisor) debate whether or not advisors ever earn enough to justify their fees.

Into the Close

That’s a wrap on another week. The big trend in the online investing space this month continues to be offers from online brokerages. Fortunately for investors, it’s a great opportunity to make their investment account value go that much further. No question that this week, bargain hunters will be “out” in full force. And with more lockdown measures coming, there’s a good chance folks will be turning to online trading again to pass the time.

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Discount Brokerage Weekly Roundup – November 16, 2020

If there’s one place where the news isn’t all bad, it’s the stock market. True to their nature, stock markets are always focused on the future, and the record highs being notched and funds flowing back into highly beaten-down names signal a view of the world that says things are likely to improve. For DIY investors, especially Canadian ones, the news continues to improve – at least for most.

In this edition of the Roundup, we take a look at a recent trading outage that negatively impacted investors trying to cash in on another historic trading day and examine how online brokers can set the record straight on system stability. Next, we review the gift that keeps on giving – deals and promotions – as more Canadian online brokerages jump into the deals race to make for an exciting run-up to RRSP season. As always, we have interesting perspectives to share from DIY investors, including forum commentary and real-time reactions to trading highs and lows on Twitter.

Volume Challenges Online Brokerages’ Trading Systems Yet Again

There’s no denying money is an emotional subject. Layer in fast-moving markets, fleeting opportunities, significant expectations about reliability, relatively high commission pricing, and online trading screeching to a halt, and you’ve got yourself a recipe for some serious online brokerage “haterade.”

This past week was déjà vu all over again when stock markets moved substantially higher on the news of the vaccine from Pfizer and the prospect of a clear winner to the US presidential election. The heightened enthusiasm, however, ended up translating into a surge of trading volume on stock exchanges across North America and, sadly, some online brokerage systems were unprepared for the volume.

In the US and in Canada, several noteworthy online brokerages suffered trading outages at the worst possible moment, leaving many investors angry and sidelined from making (or saving) considerable money. TD Ameritrade, Schwab, and Fidelity were among the big names in the US online brokerage space that were reporting issues with users being able to access their online trading accounts on Monday.

In Canada, some DIY investors were also greeted with a bad case of the Mondays. According to reports from users on Twitter, Questrade and Scotia iTrade suffered outages that impacted traders on Monday morning, sending users into a fury that made for some disconcerting reading on Twitter.  

Massive volatility in stock markets is not something new, and, in fact, it is something many online brokerages had already been bracing for in the lead-up to the US presidential election. For DIY investors, however, it is understandably frustrating, perhaps infuriating, when online brokerages go offline or have technical issues because of increased trading activity.

Interestingly, only one online brokerage in Canada, Wealthsimple Trade, has taken it upon themselves to proactively report and disclose issues regarding their trading systems on a separate, dedicated website. By automating this disclosure, it provides some measure of access to situations where trading systems are impacted – so users aren’t completely in the dark about what’s going on. More impactful, however, by making this disclosure public, DIY investors can also see for themselves just how “reliable” the trading system is.

For example, from September through November 15th, Wealthsimple Trade reports their trading system was up 99.89% of the time – something users can verify for themselves. It is worth noting that there were no outages reported on their systems status page on November 9th, the date that other online brokerage systems went down.

Going forward, investor patience for outages that take place at online brokerages will be very limited. The fact that “new kid on the block” Wealthsimple Trade can do so almost begs the question as to why other, larger, better-resourced firms that are competing with Wealthsimple Trade haven’t or won’t disclose this data. Seems fitting for a challenger brand.

That said, the majority of online brokerages are likely up and running without issue for most of the year. Having a site that objectively reports this uptime profile is much more likely to communicate what reality is versus what the subjective and emotional impressions are of the reliability of a platform. If an online investor is doing their homework into the stability and reliability of an online brokerage (and those burned by outages before likely will), then it seems like a bad idea to have the only record of system function be the trail of angry tweets that inevitably highlight when things go wrong instead of a site that communicates how often they got it right.

Big Deals Keep on Turning

If there’s one thing November can lock in its reputation for, it’s ushering in deals and promotions. From Singles’ Day to Black Friday, millions of shoppers around the world look forward to this month to get access to savings, and so too do Canadian DIY investors.

This past week saw three more offers come to market. Two of those promotions came from big bank-owned online brokerages, RBC Direct Investing and Scotia iTrade, which launched a commission-free trade and a combo, cash-back and commission-free trade deal, respectively. The third offer, courtesy of Virtual Brokers, was a discounted commission offer.

Compared to earlier this year, when Questrade was the sole online broker in Canada offering up promotions for new accounts, the sharp increase in promotions this month alone is cause for optimism for DIY investors who are interested in opening an online trading account.

Looking more closely at the new deals to cross the wire, the RBC Direct Investing commission-free trade offer is more of a “classic” than a new offer. They are bringing back a popular offer they have had for a few years that consists of 25 commission-free equity trades that are valid to use for up to a year from the time of account opening. The perks of this offer are the low threshold to qualify, a deposit of $5,000, and the long timeframe in which to use these commission-free trades. At a standard commission rate of $9.95, the equivalent value of the offer is just shy of $250.

By comparison, Scotia iTrade also leaned into a familiar strategy in offering up the choice to investors of accessing either a cash-back promotion or commission-free trades. The combined nature of this offer makes it one of the more interesting promotions currently in play among Canadian online brokerages. To further enhance the value, the discounted commission rate of $6.99 per trade equates to a 30% discount on the standard commission fee until June 30, 2021.

To see how the Scotia iTrade offer truly stacks up, however, it is worth comparing it to the other cash-back promotions currently in play.

Deposit TierBMO InvestorLineCIBC Investor’s EdgeScotia iTradeTD Direct Investing
$5,000$25
$10,000$50$50
$15,000$100
$25,000$100$100$200
$50,000$100$200$200
$100,000$250$500$400$300
$250,000$450$750$500
$500,000$950$1,000$1,000$1,000
$1M+$2,000$2,000$1,500

The first thing that jumps out about the cash-back offer from Scotia iTrade is that the minimum deposit threshold is lower than that of any of their peers. At $5,000 to qualify for a $25 cash-back bonus, there are no other offers in this range that would compete.

As we reviewed last week, there are certain deposit tiers that it is clear online brokerages appear to be most interested in targeting. In the case of Scotia iTrade, the segment where they (and they alone) have the highest offer is between $250K and $500K, with an offer of $750 cash-back. Their cash-back offer is also tied for top spot at the $50K deposit level with CIBC Investor’s Edge, with both of these online brokers offering $200. Similarly, Scotia iTrade is in a three-way tie for top offer of $1,000 cash-back at the $500K to $1M deposit range.

When it comes to the commission-free trade comparison picture, however, Scotia iTrade’s promotion is unique in that it is the only online brokerage (at the moment) to use tiered deposits to qualify for higher quantities of commission-free trades. And, beyond deposits of $100K, it is the only online brokerage offering commission-free trades of greater than 100 trades. That said, currently National Bank Direct Brokerage has, hands down, the highest commission-free trade offer, with 100 trades and no deposit minimum required to qualify.

Of the offers that have come to market thus far, Scotia iTrade is the most versatile of the bank-owned brokerages. It spans the widest range of deposit tiers, from $5K through to $1M+. It has a combined discounted commission and cash-back or commission-free trade offering. And, the bonus offers can be combined with their existing referral program, which means that there is an opportunity for extra cash-back or free trades to be added onto either of the base-free-trade or cash-back promotion offers.

Finally, a different category of deal that was launched this month was from Virtual Brokers. This offer waives the minimum spend per trade of $1.99, which is a part of the standard commission price structure. Interestingly, this offer does not apply to odd-lot trades – defined specifically by Virtual Brokers according to the price of the security. Also, this offer is available only until the end of December 2020, and in order to maximize savings from this offer, investors would likely be trading securities priced at $1 or more (likely significantly higher than $1).

As predicted, November has been a watershed month for DIY investors looking for a deal to open a new online investing or trading account. With market volatility likely to stay elevated (if last week is any indication), there will undoubtedly be interest from investors who are still on the sidelines or who are contemplating other account types (or moving online brokerages) to kick the tires on these offers. There are still a handful of online brokerages that have yet to jump into the deals pool, but we anticipate there to be at least one or two more offers coming to market before November ends.  

Discount Brokerage Tweets of the Week

From the Forums

A Chunk of Change

An investor who’s tired of high commission fees asks about switching partially or fully between two specific brokerages in this post. Fellow Redditors share their experiences with transfers – the good, the bad, and the ugly.

In Case of Emergency

In this post, a Redditor asks if anyone else has put investing on pause to focus instead on substantially increasing their emergency fund during this time of COVID-19 and an uncertain job market. The ensuing long and lively discussion touches on inflation, debt, how “safe” different types of investments really are, and how much of a rainy-day fund is enough right now.

Into the Close

That’s a wrap on another historic week. There are definitely lots of scary historical records being broken as well as incredible achievements happening simultaneously. For the first time in quite some time, markets are pricing in a return to normal and some good news to follow. Here’s hoping there are more treats to come.

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Discount Brokerage Weekly Roundup – November 9, 2020

It’s official, sort of. With the US presidential election now (just about) over and a clear winner declared in the contest, markets and the world can turn their attention to what comes next. Regardless of the direction things take from here, though, it’s safe to say that the vote was a very big deal.

Serendipitously, the focus on the one big story that is kind of a big deal for DIY investors in this week’s Roundup is, in fact, a story of big deals. In this edition of the Roundup, we take a deep dive into the flurry of deals activity that took place last week against the backdrop of the US elections. Find out which three Canadian discount brokerages got a jump on RSP season by launching their latest offers now. Also included in this week’s Roundup, a healthy dose of social media and investor forum commentary.

New Deals Spell Green for DIY Investors

While there was nothing quite as big this week as the outcome of the US presidential election, in the Canadian DIY investing space, November continues to make history when it comes to deals and promotions.

Though “normal” is a word that has taken on a different meaning in 2020, in relative terms, this is about the time of year when Canadian discount brokerages would begin their ramp-up in marketing and promotional activities in anticipation of RSP season.

Despite everything that has changed in 2020, however, we’re happy to report that as expected, discount brokerage deals activity has suddenly spiked. This past week we saw three big deals come from three of Canada’s big bank-owned brokerages and, wait for it, they were all cash-back offers.

Despite a significant pullback in promotional activity among Canadian discount brokerages over the spring and summer, this definitely counts as coming back with a bang. Among the offer types that these online brokerages could have come to market with, cash-back offerings are sure to get the attention of deal-savvy investors. Indeed, they already have.

News of these offers has already been posted to DIY investor forums – notably on RedFlagDeals.com – and investors have weighed in on the series of offers that have been launched by BMO InvestorLine, CIBC Investor’s Edge, and TD Direct Investing.

The details of these offers are interesting in and of themselves; however, so too is the picture that emerges when comparing each of these offers against one another. With cash-back offerings ranging from $50 to $2,000, there is an equally wide range of investors that these incentives could appeal to.

As you’ll see below, the amounts of the cash-back offers and the deposits required in order to qualify reveal which segments of the DIY investor market certain online brokerages are interested in targeting.

First, let’s dive into each of the offers to see what’s coming to market and then compare them all to see how they stack up against one another

BMO InvestorLine Deal

The latest cash-back offer from BMO InvestorLine ranges between $100 and $2,000 and was the first of these big bank-owned brokerage offers to launch in November. The minimum deposit required to qualify for any of the cash-back offers is $50,000 (which lands a cool $100 bonus), and for deposits of $1M or more, clients can be eligible to receive a cash-back bonus of $2,000.

The range of deposit requirements for BMO InvestorLine’s new deal appears to be geared to more established investors, higher-net-worth individuals, and likely those with more sophisticated investing needs. Interestingly, this offer is timed to expire in early January, which enables BMO InvestorLine the flexibility of changing its offer strategy in line with the realities of other offers planned at that time. Importantly, this offer was posted to the homepage of BMO InvestorLine’s website and prominently on their pricing page, too.

CIBC Investor’s Edge Deal

The next deal to cross our radar last week was from CIBC Investor’s Edge, which stepped into the deals competition with an interesting cash-back offer that spans from $50 to $2,000.

Of the new offers that were launched last week, this one has the widest dollar-figure range, likely a reflection of the desire to appeal to as many DIY investor types as possible. The minimum deposit to qualify for CIBC Investor’s Edge cash-back offer starts at $10,000, and even though the cash-back is a modest $50, it nonetheless sticks out in a field where there isn’t much at that deposit level in terms of cash-back offerings, especially among bank-owned brokerages. At the top end of the deposit range, CIBC offers up $2,000 for new clients bringing in at least $1M in assets. In the world of DIY investing deals, the $2,000 offer makes for a catchy headline, and it is exactly that which gets displayed on the CIBC Investor’s Edge homepage. The expiry date for the CIBC Investor’s Edge promotional offer is March 2nd, 2021, which is just after the contribution deadline for RSPs. As such, it looks like CIBC Investor’s Edge is locking in for a ride for the next few months regardless of what other brokerages bring to market.

TD Direct Investing Deal

TD Direct Investing, Canada’s largest online brokerage, is also not shying away from competitive cash-back offerings this year.

Their latest cash-back offer ranges between $100 (for deposits of at least $15,000) and $1,000 (for deposits of $500,000 or more). An interesting component of this offer is that users can receive another bonus of $100 for setting up automated deposits. So, it is conceivably possible without the use of extra referral bonus offerings to add $100 into each cash-back category, making TD Direct Investing offers (in total) some of the highest at various deposit tiers. Also interesting for this offer is that TD Direct Investing requires users either to set a goal or to execute at least one commission-generating trade in order to qualify for the cash-back bonus. Comparable to CIBC Investor’s Edge, this deal is set to expire at the beginning of March 2021, to coincide with the RSP-contribution deadline.

Unlike their peers, however, the offer for TD Direct Investing is not directly or prominently visible on the TDDI homepage. In fact, at the time of publication, it was also not visible on their current offer page tab on their pricing page. The lack of presence of their flagship promotion on the website homepage (yet) is an interesting decision, as it is clearly visible in different online advertising campaigns.

Comparing the Cash-Back Promotions

In comparing the three cash-back offers, some interesting trends and strategies become clear.

The first interesting observation is that there isn’t one Canadian online brokerage that is leading across all deposit tiers. Instead, it looks like there are specific ranges that online brokerages are putting their efforts into being most competitive at.

Deposit TierBMO InvestorLineCIBC Investor’s EdgeTD Direct Investing
$10,000 $50 
$15,000  $100
$25,000 $100$200
$50,000$100$200 
$100,000$250$500$300
$250,000$450 $500
$500,000$950$1,000$1,000
$1M+$2,000$2,000 

At the entry-level deposit tier, $10K, CIBC Investor’s Edge has the best offer, of $50. Moving up to $15K, however, TD Direct Investing has the most competitive offer, of $100. In fact, from deposit levels of $15K to $50K, TDDI either has the best offer or is tied for the best offer with CIBC Investor’s Edge.

At the $100K deposit tier, however, CIBC Investor’s Edge has the upper hand over both BMO InvestorLine and TD Direct Investing, offering up $500 cash-back compared to $250 and $300, respectively, at the other bank-owned brokers. From the $250K to just under $1M deposit tiers, both CIBC Investor’s Edge and TD Direct Investing are tied for having the highest offers, starting at $500 and going to $1,000.

Beyond deposits of $1M, however, TD Direct Investing drops out of the race and BMO InvestorLine steps in to compete with CIBC Investor’s Edge, with both brokerages offering $2,000 cash-back.

The strategies emerging reflect BMO InvestorLine’s priority on DIY investors with assets greater than $50K. In contrast, both TD Direct Investing and CIBC Investor’s Edge have cash-back offers under the $50K deposit threshold, which should make both of these online brokerages more appealing to younger or more-novice investors. Interestingly, TD Direct Investing elected not to put out a tier above deposits of $500K, while both BMO InvestorLine and CIBC Investor’s Edge did.

Of the three firms, CIBC Investor’s Edge has the widest range of deposit tiers – from $10K to $1M+ – a signal that they are looking to drive growth across all customer segments. Perhaps a bit of a step change from years past is that this year TD Direct Investing is being the most aggressive with its promotional offers at the lower deposit segments – something that may have to do with its new offering (TD GoalAssist) and a general push to grab market share away from competitors.

The race to RSP season is clearly heating up among Canadian discount brokerages. With the entry of three cash-back offers from big-name online brokerages in the span of a week, we anticipate other brokerages will follow suit very quickly.

This year, we believe, will create an added sense of urgency among Canadian online brokers to come to market with something bigger than what they would have in years past. The offer from TD Direct Investing is going to make waves because of TDDI’s size in the market; however, layer in the launch of their new commission-free trading option (TD GoalAssist) and the regular contribution bonus of $100, and this is a year in which TD Direct Investing is throwing down a challenge to other peer firms and non-bank-owned brokerages alike to get on the radar of DIY investors.

For DIY investors, the increased competition is good news – especially heading into what is likely to be a year filled with market volatility, opportunity, and a very active conversation about DIY investing, thanks to the tsunami of new investors who flooded the market in 2020. We’ll be monitoring the deals section for more activity through the month, so be sure to check back in for new developments as they occur.

Discount Brokerage Tweets of the Week

From the Forums

Safe Mode

A Redditor asks in this post if one online brokerage is as secure as the others, sparking a lively debate that focuses a lot on two-factor authentication.

Gamble on the Gambit?

In this post, an investor asks if it makes sense to switch from one online broker to another solely for a single feature: to be able to do an easy Norbert’s Gambit – possibly saving thousands of dollars a year.

Into the Close

Phew.

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Discount Brokerage Weekly Roundup – November 2, 2020

Just because Halloween was seriously curtailed this year doesn’t mean there can’t still be a few treats dished out in a socially distant way. Besides, at this point, we’re all probably in need of some kind of boost to see us through what is going to be a wild week.

In this extended version of the Roundup, we kick things off with the launch of a new month and that means an update to see what’s been happening with online brokerage deals. From there, we continue coverage of the growing trend of DIY investor content that showed up in October, and how for one online brokerage, it was the lead-up to something big. And, for a bonus treat, we have included a handful of stories that we were watching but which didn’t make it into the full Roundup format – enjoy these bite-sized updates. As always, we close things out with updates from the investor forums and DIY investors on Twitter.

Cold November Rain, Warming Discount Brokerage Deals?

For Canadian deal-hunting DIY investors, the start of November is when the stars align. Not only is it the month in which Black Friday deals surface, but it also is the start of a new fiscal year for many online brokerages in Canada, and – the best part – it is the ramp-up to the busiest stretch for online brokerage deals.

Even though RSP season is still several months away, November is typically the month in which online brokerages start launching some of their best offers of the year.

Out of the gate, the activity in this month’s discount brokerage deals and promotions section is quiet. No new offers launched as of the first day of the month (or at least no offers were advertised), but the fact that the new month started on a Sunday might have had something to do with that.

Thus, the picture for the start of the month is that the official deal count dropped by one, as the HSBC InvestDirect commission-free trade offer officially expired at the end of October (30th).

The news for DIY investors looking for a deal wasn’t all gloomy this past month.

Questrade announced that they have removed their inactivity fees. In doing so, they are now one of two online brokerages that have no inactivity fees regardless of account size. That simplifies not only pricing but also the terms and conditions investors have to keep track of.

In the past, November has been a very big month for online brokerage promotions to come to market. We suspect that despite 2020 being a historic year for account openings and new investors flooding to online brokerages, the strategy going into 2021 and RSP season, in particular, will be to bring some splashier promotions online, since the deals activity for most brokers was relatively quiet in the spring and summer.  

This month, probably more than any other November, is going to be full of (hopefully pleasant) surprises. Stay tuned!

Online Learning in the Spotlight for DIY Investors

Anyone new to the markets in the past several months is getting an interesting lesson in the strange relationship between economic fundamentals and the stock market. Despite a wide range of negative news, there are certain stocks that have continued to rally, fueled in large part by the beliefs of investors who are putting their capital and hopes on some generational changes.

With so many new investors now participating in the market, it seems that investor education was especially relevant this year. For its part, TD Direct Investing has leaned heavily into their investor education programming, with a series of events including two webinars with notable personal finance voices.

Earlier this month, we reviewed a webinar held by TD Direct Investing with YouTube investing personality Brandon Beavis. This session, entitled “Become a More Resilient Investor,” covered the basic principles of investing and provided Beavis’s perspectives on taking a balanced approach to getting started in the markets.

Another interesting webinar held by TD Direct Investing for Investor Education Month featured personal finance author Sandy Yong. Her presentation, entitled “How to Start Investing on a Budget,” was aimed at beginner investors (very beginner investors) and mapped out several steps that individuals who think they do not have money available to invest could follow to help them on their journey. As with the Beavis presentation, the perspective on investing provided by Yong was to take a balanced and diversified approach.

While the presentation itself was informative to anyone looking for a very basic primer on how to go about getting started in planning for an investing journey, some of the Q&A topics dug into specifics like dollar-cost averaging and the differences between TFSAs and RRSPs.

These sessions seemed to set the stage for an important full release of the new TD GoalAssist feature that officially debuted last week. After being in development since 2019, the new app-based offering from TD Direct Investing tackles a number of items that investors (especially TD Direct Investing clients and DIY investors) have been clamouring for, such as commission-free ETF trading (on the app only) of TD ETFs. Other big benefits: There are no account minimums required, and TFSA, RRSP, and cash accounts are supported.

We’ll have more to say about this new service in the weeks to come. However, the investor education efforts at TD Direct Investing recently and the launch of the new GoalAssist seem strategically aligned at this point.

Now, to shift gears from focusing on the lead-up to a product launch to shining a spotlight on one very shiny new industry, this month also featured another big bank-owned online brokerage, BMO InvestorLine, sponsoring a fascinating webinar on an increasingly popular industry segment: eSports.

Presented by Evolve ETFs – a Canadian ETF provider that gives investment exposure to the eSports sector – this webinar helped to explain the opportunities available in the eSports and eGaming sectors and outlined how investors can look at participating in them. Because they offer an ETF aimed at the eSports sector (ticker HERO on the TSX), there is clearly an interest in bringing general awareness and understanding to the sector. However, there is also clearly an audience of investors – especially younger investors – who have witnessed firsthand the popularity of this growing industry.

Providing access to interesting investment themes via ETF providers is one way that online brokerages, like BMO InvestorLine, can easily relay information about market opportunities without having to create content themselves. With DIY investors looking to understand many of the new and emerging sectors, this kind of niche ETF provider presentation is something we anticipate seeing more of at other online brokers.

A Quick Tour Through Other Stories

Despite the already-long format of the Weekly Roundups, there are often several stories that don’t make it to being covered but that could be of interest to DIY investors and are definitely relevant to the world of DIY investing. Starting this month, we’ll be sharing these stories at the end of each month as a way to bring these topics to light, even if we don’t do our usual deep-dive format with them.

Raising Margin Requirements

Two points do not necessarily make a trend, but when it comes to a batting average for online brokerages, Interactive Brokers is batting 1,000 for volatility planning. And this time around, they aren’t the only ones.

Although it might have been a self-fulfilling prophecy heading into election day in the US, the reality that has played out over the past week has shown that raising margin rates ahead of the storm of uncertainty proved to be a smart move. Read more here.

Interactive Brokers Earnings Report

All things considered, it was a pretty good year for Interactive Brokers. What counts as good? A 47% year-over-year increase in the number of accounts and growth in “all client segments and all geographic regions” ought to do it. Also discussed was the launch of another new feature: the ESG-driven Impact Dashboard. Dive into the full transcript and more details here.

Class-Action Lawsuit

DIY investors who purchased or hold mutual funds through their discount brokerage are the focus of several class-action lawsuits, specifically on the issue of trailing commissions.

Read more about which online brokerages (several of the big bank-owned online brokerages are named in these actions) are impacted, and find out how to stay on top of developments in these cases, here.

Discount Brokerage Tweets of the Week

From the Forums

A Day Late & A Dollar Short

In this post, a Redditor gets frustrated by delays for fund transfers and asks which online brokerages “have same-day deposits?”

The Smart Money

A twentysomething in a new job asks in this post if it’s smarter to put their signing bonus money into a TFSA or RRSP. Fellow Redditors weigh in.

Into the Close

That’s a wrap on the pre-election, once-in-a-blue-moon, I-can’t-even edition of the Roundup. There’s really only one big story that matters this week, so here’s hoping everyone finds a little reprieve by the end of it.

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Discount Brokerage Weekly Roundup – October 26, 2020

With just a few days to go, the news cycle is now going into hyperdrive. Not a day goes by without some reference to an election – mostly likely THE election that the entire world has its sights set on. For Canadian DIY investors and online brokerages alike, the news coming out of the US is very much on our radar, and more than just the election is influencing the discount brokerage space.  

In this pre-Halloween edition of the Roundup, we focus on a scary issue for any investor to confront: cybercrime, and how the consequences of some bad actors in the US have prompted worry here in Canada. Next, we get a sneak peek at a thriller move by one of Canada’s newest online brokerages to make the leap to the big screen (we mean desktops!). As always, we’ll feature some thoughtful conversation from DIY investor forums and a collection of interesting tweets from DIY investors.

Robinhood Accounts Get Hacked

If you want to talk about a DIY investor nightmare scenario, it’s probably close to something that has played out for some clients of US online brokerage Robinhood. According to reporting earlier this month from Bloomberg, close to 2,000 clients of the popular online brokerage have had their accounts compromised and in many cases cleared out.

While the number of accounts that were compromised is noteworthy, when compared to the total number of clients Robinhood has, which is about 13 million, the number is relatively small by comparison (0.015%).  

According to what Robinhood has commented on so far, the breach was the result of individual clients’ emails being compromised. The kinds of activities undertaken by the criminals seemed fairly advanced, with the hackers successfully creating fake identification documents to pose as the clients.

What is most troubling to hear is that in spite of some clients having set up two-factor authentication, their accounts were nonetheless compromised. To make matters worse, Robinhood does not have a customer service line for clients to call for additional support – everything is done online.

In Canada, the only online brokerage that does not have a dedicated phone support line is Wealthsimple Trade (interestingly, it’s also the online broker in Canada most similar to Robinhood). That said, this year has shown that even if an online brokerage does have a customer service line, DIY investors hoping to connect by phone could be forced to wait excruciatingly long to talk to a representative.

Cybersecurity is part of the “new normal” reality for online investors, and even more so in the time of COVID-19, where many individuals are being forced to navigate all kinds of services online that previously they may never have thought to.

The kind of breach of account activity in the case of Robinhood certainly sounds fraudulent to the reasonable observer, but whether a brokerage is ultimately responsible for reimbursing clients is not as clear-cut. Among Canadian online brokerages, security policies tied to coverage for reimbursement vary between brokers. This means that in order to be covered by the security guarantee, online investors need to demonstrate that they have taken all of the precautionary measures prescribed by their online brokerage.

Interestingly, in light of the news regarding the breach of Robinhood, there were Canadian DIY investors who were curious as to the kind of security coverage they would receive from Wealthsimple Trade, and they asked about it in a forum post in the Wealthsimple Trade Reddit thread.

While the response from Wealthsimple Trade is interesting, the fact that events in the US online brokerage market also prompt Canadian DIY investors to think about (and potentially ask questions about) factors related to their online investing experience is important to take note of. Despite there being significant differences between the size of the two markets, when it comes to features – including security – Canadian DIY investors are paying attention to the developments at US online brokers.  

The latest breach of Robinhood customers’ security serves as a warning for Canadian online brokerages and Canadian DIY investors. Unfortunately, we suspect that this won’t be the last time we hear of a security breach at an online brokerage. However, there are clearly steps that online brokerages and DIY investors can take to prevent it from happening.

Wealthsimple Trade Testing Desktop Platform

It’s been an eventful few weeks for the folks over at Wealthsimple and Wealthsimple Trade, from launching cryptocurrency trading in late September, to attaining the elusive unicorn status (aka billion-dollar valuation) earlier this month on a recent fundraising round, to the latest initiative: rolling out desktop trading.

This past week, several users on the Wealthsimple Trade Reddit thread shared the “good news” of being selected for an invite-only trial of the new desktop trading platform.

Unlike other Canadian discount brokers, Wealthsimple Trade opted to start with “mobile first” – which positioned their brand as something completely different from the standard online DIY investing experience. Of course, even getting onto the platform required making it past a “waitlist,” which made it all the more exclusive to be able to have a Wealthsimple Trade account.

The decision, of course, was not without its share of controversy. In terms of online brokerage ratings and rankings, Wealthsimple Trade did not qualify for the Surviscor online brokerage rankings specifically because it was not up to the “standard” experience provided by other online brokerages.

Rankings and some customer alienation aside, the numbers of clients at Wealthsimple Trade and the recent valuation increase of the parent company Wealthsimple to a “unicorn” valuation more than validate the decision to start and grow with mobile. In many ways, this playbook was established by the online brokerage in the US that Wealthsimple Trade often gets compared to: Robinhood. From pricing (zero commission) to platform (mobile first) to products (including cryptocurrency trading), there’s a lot that parallels the Robinhood story. Of course, the valuation and customer growth are also part of that same story, too.

For other Canadian online brokerages, the list of new releases and features at Wealthsimple Trade these past few weeks has been met with relative quiet. That is not something we expect to last for too much longer, however. There are already new platforms and web experiences actively under development at several Canadian online brokerages, and as we near the end of the calendar year, there will almost certainly be a significant ramp-up to promotional and new-feature announcements.

If there wasn’t already enough drama coming in the next few weeks of 2020, this latest development by Wealthsimple Trade has added the right kind of excitement into the final stretch of the year. A lot of DIY investors are still stuck at home – including working from home – so having a desktop version of an already popular trading platform is sure to be a welcome addition to the many browser tabs competing for attention.

Discount Brokerage Tweets of the Week

From the Forums

Zero Is the Hero

A Redditor on a quest for the holy grail of zero-commission investing asks in this post what Canada’s closest equivalent to Robinhood is. The answers are somewhat surprising.

Limited Options

A twentysomething investor accidentally went over the year’s TFSA limit and asks for advice and guidance in this Reddit post.

Into the Close

They say too much of a good thing is not a good thing. Just ask NASA scientists trying to hang onto the galactic trick-or-treat run on OSIRIS-REx. For traders, these next two weeks are going to be filled with more uncertainty than a Seahawks fourth quarter. For the non-football fans: it means that just about anything can happen to the markets, so be prepared to move quickly.