As part of its 30th anniversary, Disnat has put together a fun promotional infographic that celebrates 180 years of stock trading in Canada as well as its own history as a pioneer in the Canadian discount brokerage industry. To learn more about the deal they’re offering as a part of this promotion, click here.
We’ve collected the results from the J.D. Power and Associates Investor Satisfaction survey from 2012 (Table 1) as well as historical results from 2009-2012 (Table 2). To help visualize how the different discount brokerages have performed on the surveys relative to other discount brokerages, we’ve created small graphs called “sparxlines”. Each graph shows a series of dots that represent the order in which a company ranked according to the survey results and ordered from left to right (with 1st being on the far left). A red dot on each graph corresponds to the company referenced in the same row. The average for the industry is presented on the graph for a point of reference to identify which companies are at, above or below average. Lastly the scores are provided for a numerical reference point. To find out more about a particular discount brokerage, simply click on the logo of the company to be taken to the brokerage profile.
| Sparxline | Company | Investor Satisfaction Survey Score | Rating |
|---|---|---|---|
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768 | 5/5 |
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720 | 4/5 |
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719 | 4/5 |
 |
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707 | 3/5 |
 |
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690 | 3/5 |
 |
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687 | 3/5 |
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686 | 3/5 |
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686 | 3/5 |
 |
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678 | 3/5 |
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656 | 2/5 |
Source: J.D. Power and Associates 2012 Discount Brokerage Investor Satisfaction Study
We recently attended a roundtable event provided by TD Waterhouse Discount Brokerage entitled “Stock Chatter” at their downtown Vancouver Investor Centre.
This educational session lasted an hour and a half and provided the audience with an overview of current stock market conditions and two different approaches to equity valuation. The presentation also covered two case studies that provided a better understanding of stocks and important variables to consider when choosing them. The session also included opportunities for the audience to ask questions.
Two different approaches to equity valuation that were covered were Discounted Cash Flow Techniques and Relative Valuation Techniques.
Discounted cash flow techniques covered the following topics:
The relative valuation techniques covered included:
Questions about both topics were answered well by the presenter
Another important subject covered during the session was the return on equity (ROE), which is composed of profit margin, total asset turnover and financial leverage. ROE is a measure of a firms profitability and is often known as a way of measuring the performance for shareholders. [Note: to learn more in detail on measures of company profitability and financial statements, click here]
Overall, the session was very informative and well structured. The presenter encouraged the audience to ask questions and was able to successfully answer them. Despite the small audience, discussions were informative and beneficial. The presenter also provided the audience with various handouts including presentation slides, charts and a dividend-focused report.
We were informed that the TD Waterhouse discount brokerage roundtable events would take place at the Investor Centre in downtown Vancouver on the first Wednesday of the month(excluding January)
Interactive Brokers made the news this week as it released its trading metrics for the month of November. While not a perfect proxy for the rest of the investment market, Interactive Brokers’ transaction volumes, known as Daily Average Revenue Trades (DARTs) help to provide an indirect measure of the ‘health’ of the stock market participants including discount brokerages. November’s data from Interactive Brokers show a substantial month over month increase (14%)in DARTs from October to November. Even more interesting is the rise in trading volumes since the lows in August. DARTs are now up over 23% from the August lows signaling an increased level of participation in the financial markets. DARTs cover several types of trading including futures contracts, options contracts and trading in shares. Another metric that seems to validate that observation is the increasing number of new account openings. As this is the picture for US investors, this data could be a signal that investors are jumping into the market ahead of the fiscal cliff or are they tactically preparing themselves to be able to respond. A recent report by Investor Economics has mentioned that Canadian investors have sat on the sidelines for quite some time presenting some challenges to the Canadian discount brokerage industry for commission revenues.
A Canadian discount broker that we do not hear about very much, CIBC Investor’s Edge, is getting a makeover. The new interface is appears to be an improvement from its prior layout, with some clearer and more intuitive sections. For a peek at the site and its new features, click here.
Event Horizon
As we round out the year, webinars and seminars are giving way to Christmas/holiday cheer and holiday parties. The next event of interest is the seminar, hosted by Disnat and presented by iShares on using ETFs in an equity portfolio on December 19th. For more details, click here.
Best Discount Brokerage Tweet of the Week
It was slim pickings from the discount brokerages this past week in tweets. One interesting tweet that linked to a great moneyville article on ETFs came from Scotia iTrade. To read the tweet and article, click here.
The People Have Spoken
This week, a discussion focused on the two discount brokerages that offer very low commission charges on trading, Interactive Brokers and Virtual Brokers. Read what users had to say in the RedFlagDeals investment forum about Interactive Brokers vs Virtual Brokers.
Three key points that are covered in this chapter of The Mindless Investor all revolve around investors taking responsibility for their financial decisions. Understanding that trading is a battle, that the market is filled with competing interests and that “the market” itself can be a source of information are key for self-directed investors to ingrain into their perspective of markets.
The first powerful bit of insight is the way in which Bollhorn frames trading as a war. In the case of trading or investing, a conflict of opposing beliefs about the future of a stock happens with every trade. It makes total sense, therefore, that the participants in the market are out to make money from other participants and why protecting your capital should be taken seriously.
The market also has many moving parts – entire industries are built around bringing companies into this market and attempting to influence the purchasing (or selling) behaviours of its participants. Brokerages, and the analysts they employ, have a tendency to be optimistic about everyone they either do work with or want to work with. As a result, there is a high degree of self-interest (and possibly “contrapreneurship”) that sometimes line up with investors’ goals but more often than not runs contrary. The best ‘defense’ in this environment is a healthy dose of skepticism. Asking “how the source of my investment information is being compensated” is a simple but powerful way to decide whether your goals and that of your source are aligned.
If you missed the first part of our J.D. Power & Associates Discount Brokerage Rankings series, read it here.
The two main objectives of this section are to provide readers with:
When choosing a discount brokerage, you can either “go it alone” and find out for yourself what a discount brokerage is like or you can turn to the opinions of other self-directed investors to help you decide. Even though both approaches exist, surveys of Canadian investors have shown that many of them like to do research, turning to friends or family for recommendations, as well as third party reviews and research, before making a choice to go with a particular discount broker. While external opinions are valuable sources of information to help avoid potentially costly or unpleasant experiences they can also help to find a service provider that can hopefully keep you a satisfied customer.
Looking at what thousands of other self-directed investors have said about their experiences can certainly shed light on what you’re likely to encounter with a particular discount brokerage and at the very least help to provide some context around informal discussions with friends or family. There are some questions, however, you may want to consider when looking to these sources. Questions such as:
Also, because numbers and statistics often get presented to support marketing and sales, we thought it prudent to state several “qualifiers” readers need to consider about such numbers up front instead of at the end. First, it’s worth stating that the range of data this section references covers four years of results of the investor satisfaction survey. This four year time period is a small time frame, especially since the interval that the survey is conducted on is annual. Second, the number of companies in the ‘pool’ is fairly small so we must be cautious about inferring too much about the performance numbers and possible trends of the industry as a whole. Instead, looking at a particular company’s change in performance over time is probably more reliable an approach than comparing companies to one another. Lastly, not every year had the same number of discount brokerages covered. In 2009 and 2010 for example, the number of discount brokerages covered by this survey was 6 and 8 respectively. Smaller or newer discount brokerages, therefore, are less likely to appear on the survey and so the inferences made about “the industry” actually apply to the discount brokerages covered in this list.
Investor satisfaction with the overall discount brokerage industry in Canada
Over the four years the investor satisfaction survey has been conducted, more than eleven and a half thousand individuals have been consulted about discount brokerage services in Canada.
When looking at the four year picture, the average industry satisfaction scores have fluctuated year over year, bouncing between a low of 679 in 2011 and a high of 707 in 2010. The four year average score for the industry is 696 (out of 1000) with an average standard deviation of 27.5 points. When graphed, it is clear that as a group no clear industry-wide trends in the satisfaction of Canadian discount brokerage investors are visible.
We recently attended the educational seminar by TD Waterhouse discount brokerage entitled “Everything You Need to Know About Income Investing” at the downtown Vancouver investor centre.
This lunchtime session provided attendees with an overview of different fixed income investment vehicles such as corporate bonds and convertible bonds. In addition, the session also touched on preferred shares as well as dividend-paying companies.
According to the presenter, when deciding on companies to invest in, self-directed investors should consider the following three points:
During the session, some examples were covered in order to provide a better understanding of the power of dividend growth.
Both conservative and growth income portfolio types were also explained and exemplified during the session along with recommendations on what these portfolios should consist of.
Finally, the session offered the following list of investment planning tips:
For newcomers to investing, this TD Waterhouse presentation was full of useful information. The presenter encouraged the audience to ask questions and was well informed in answering them all throughout the presentation. The examples provided during the session were also very useful in order to provide a better idea about the concepts and how they actually work in real life.
On the heels of the results from the annual Globe and Mail Canadian Discount Brokerage rankings, the 2012 Morningstar Canadian Investment Awards were handed out on November 28th and included a “Best Discount Brokerage” category. While not nearly as well known as the J.D. Power and Associates award for Investor Satisfaction, the Morningstar Awards offer discount brokerages the chance to submit themselves (for a fee) for consideration by a panel of judges for the title of “Best Discount Broker.” This year, Qtrade took top spot and maintained their three year reign as the title holder of this award. Certainly it’s a bright spot for them after recently having been displaced from the top of the Globe and Mail rankings by Virtual Brokers. To learn more about the Morningstar methodology for “Best Discount Broker” click here. BMO Investorline’s “Advice Direct” also earned recognition for “Best Use of Technology” (another category for which entrants had to submit a fee to be considered). Unfortunately, neither the list of candidates nor the scores were published so we are not sure how many discount brokerages participated in this year’s submission.
Another big piece of news for self-directed investors came in the form of an increased contribution limit to tax-free savings accounts (TFSAs). Most Canadian discount brokerages offer TFSAs so for those who choose to invest via their TFSAs, the news is definitely welcomed. Starting in January 2013 Canadians will be allowed to contribute a maximum of $5500 dollars (instead of the previous limit of $5000 per year). To learn more about which discount brokerages offer TFSAs, click here.
If you want to learn more about TFSAs themselves, check our special “The Mighty TFSA.”
Event Horizon
As we turn the corner into December, an interesting opportunity for individuals to sit and discuss some investing related topics is being held at the TD Waterhouse Discount Brokerage centre in downtown Vancouver. The event, entitled “stock chatter” will take place on December 5th from 1:30 PM to 3:00 PM.
Best Discount Brokerage Tweet of the Week
This past week saw the finale of Financial Literacy Month but also it was the conclusion of the now infamous “Mo-vember”. @Jitneytrade deserves a tip of the hat for getting their team on board and actively participating in this great event. Check out their tweet here which has the link to their movember ‘stache pics.
The People Have Spoken
Questrade is one of the most active discount brokerages when it comes to offering discounts and promotions. Recently they’ve offered individuals either an iPad mini if they transfer in $100K or a chance to win one of 10 ipad minis for a smaller deposit. The retail value of an ipad mini is $329. In our discount broker deals section, we’ve seen deal “value” far higher for smaller deposit sizes, and so it piqued our curiosity – what do others think of this Questrade promotion? Is an iPad mini enough value to deposit $100,000? Sure enough, the Questrade promotion caught the attention of some folks on the following Red Flag Deals forum.
Vancouver was the last Canadian city to play host to the series Global Economic Forecast – The World in 2013 and Beyond that toured across Canada in November of 2012. Put together by HSBC’s Business without Borders unit, this seminar featured perspectives on what is facing the world in both the immediate and not too distant future from two high-caliber speakers: HSBC’s Chief Economist David Watt and Director of the Waterloo Institute for Complexity and Innovation, Dr. Thomas Homer-Dixon.
The first session, presented by David Watt, was an overview of several economic trends and issues that he believes will be key drivers for business opportunities in the near term as well as for the decades ahead. Among the topics covered were how the shortfall in oil production will influence the oil services industry and the potential impact of the “currency wars” being waged between central banks on the Canadian dollar. He also made a call on the forecast for the Bank of Canada to hold Canadian interest rates steady in 2013 in the face of the global economic conditions and actions of international central banks.
One of the most interesting portions of this talk came when David Watt referenced how global economies are expected to unfold into 2050. As part of the report, “The World in 2050” prepared by HSBC Global Research in January 2012, regions such as India and China are expected to have substantial impacts on the rest of the globe’s economies, with the young demographic profile of India being particularly interesting in the decades ahead. Other economies that have been previously overlooked as areas of strong economic growth, such as Peru and the Philippines will also be areas to watch for opportunities.
The next half of the session was presented by Dr. Thomas Homer-Dixon. This portion took a much higher level view of some fairly somber issues confronting the global community. Echoing themes from his book, “The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization”, Dr. Homer-Dixon focused on the capacity of systems to withstand multiple shocks or what he called synchronous failures. Issues such as population growth, environmental change, energy shortages and economic shocks happening all about the same time form a perfect storm to destabilize current societal systems’ abilities to cope in times of crisis. After presenting the daunting statistics about extreme weather events that are being forecast to occur and oil well decline rates for the much hyped shale oil wells, Dr. Homer-Dixon talked about the opportunities for innovation in the face of crisis.
The first innovation strategy is development of general purpose technologies in the energy sector which can alter how energy is gathered, stored, transferred or used. Given the immense challenges facing the world in accessing affordable energy, the type of innovation required is substantial and the need urgent. The second major strategy that can be employed is building resilience. Of the many ways in which this resilience can be built, a particularly interesting one was to mitigate some of the connections in key systems that currently exist today that let things like “flash crashes” cascade as quickly as they do. As a civilization it appears that humankind has a struggle ahead to properly reign in its own capacity for “innovation”.
Overall this event was a great opportunity to get exposure to some unique perspectives about the possible directions the world may head in and the reasons why it might go there. While ‘predicting’ the future is always a tricky exercise, especially when looking so far into the future, going through the evidence and arguments is genuinely value added, especially when ideas for innovation are linked to possible investment themes. When most of the financial media is fixated on reporting momentary fluctuations in markets and politics, it is refreshing to take a step back and look out to where the longer-term trends and megatrends are pointing our society.
In addition to the complimentary admission and breakfast, and some great speakers, organizers gave out some serious food for thought as a bonus for attending the session: audience members received free copies of the World in 2050 report by HSBC as well as the book by Thomas Homer-Dixon, “The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization.”
To learn more about the Business without Borders website and their future events, you can access their website at http://www.bwob.ca/.
For self-directed investors, it seems like the gift of discount brokerage deals has already been given in November. As it stands, the deals offered by discount brokerages into the end of the year are largely carried over from last month.
The most noteworthy deal announced mid-November was the unlimited trading offer by Questrade. Similar to the Scotia iTrade offer, these deals offer unlimited trading but for a limited time. If you’re looking for promos that have a much longer time frame to use up those free commissions, the deal by Disnat (celebrating their 30th year) gives investors up to 6 months. National Bank Direct Brokerage is offering its best rate on commissions for 6 months.
A number of deals (six by our count) will be expiring in December. These deals include the Scotia iTrade unlimited trading offer for 100 days which expires December 14th and deals from CIBC Investor’s Edge, Disnat, BMO Investorline, Virtual Brokers, Scotia iTrade and Credential Direct coming to an end by the end of December.
For those looking for a deal, it is an interesting time of year because on the one hand there are some compelling offers, but on the other, the busy season for attracting new customers (i.e. RRSP season) is right around the corner and so there is likely something in the works with most discount brokerages.
With the introduction of unlimited trading, the bar for discount brokerage deals has definitely been raised by Questrade and Scotia iTrade. Whether or not that is enough of an incentive to get consumers to choose a discount brokerage based on this kind of promo, however, is something we’ll find out if these offers persist. One thing is certain going into the holidays, those discount brokerages not willing to give deals or promos are also those less likely to receive the business of self-directed investors looking for a little holiday cheer.
| Company | Brief Description | Minimum Deposit Amount | Commission/Cash Offer Type | Time Limit to Use Commission/Cash Offer | Details Link | Deadline |
|---|---|---|---|---|---|---|
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A Sparx Trading exclusive offer! Use the promo code “Sparx Trading” when signing up for a new account with Jitney and receive access to their preferred pricing package and a massive 45% discount on the Real Tick trading platform. | n/a | Discounted Commission Rates | none | For more details click here | none |
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Open a new account (TFSA, Margin or RRSP) and receive $50 commission credit . Use promo code: kdkfnbbc | $1,000 | $50 commission credit | none | none | none |
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Open and fund a new registered, margin or TFSA account and fund it within 30 days with either A)$1,000 B )$25,000 or C)$50,000 and you will be eligible to receive either unlimited free trading for A) 1 month, B) 2 months or C) 3 months depending on your deposit amounts. You must the code INFINITE to qualify. This is open to new and existing clients. There’s lots of fine print so be sure to read the details link. | A) $1,000 B) $25,000 C) $30,000 | Unlimited trading (No commissions charged on any trades placed) | A) 31 days B) 62 days C) 90 days | Unlimited Free Trades Promotion | January 15th, 2013 |
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Refer a friend to Questrade and when they open an account you receive $100 and they receive $50. To receive this deal you must be an existing client with an equity account and refer a person that does not reside with you and who has not previously opened a Questrade account. | $1,000 | $50 commission credit (friend) $100 commission credit (referrer bonus) | 60 days | Refer a friend | none |
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If you are a client of North Shore Credit Union, you can qualify for 5 free trades as well as a $125 transfer fee credit to cover transfer fees from another discount brokerage ($10,000 minimum transfer in value). To qualify, you must enter NSCU-05Trades on your application. | $10,000 | 5 free trades | must use trades by Feb. 28/2013 | North Shore Credit Union Promo | December 31, 2012 |
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Get up to 100 free trades when you fund an account with a minimum of $10,000. You must open this account by November 15th, 2012 and fund it with $10 000 within 30 days of account activation to qualify. You must enter promo code “100FREEQ”. There are quite a few other details, including a minimum balance requirement, so be sure to check the details link. | $10,000 | 100 free trades ($495 value @ cheapest commission rate) | 60 days | 100 Free Trades | January 15, 2013 |
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If you refer a friend/family member who is not already a Scotia iTrade account holder to them, both you and your friend get a bonus of either cash or free trades. You have to use the referral form to pass along your info as well as your friend/family members’ contact info in order to qualify. There are lots of details/conditions to this deal so be sure to read the details link. | A)$10,000 B)$50,000+ | A) You(referrer): $50 or 10 free trades; Your “Friend”: $50 or 10 free trades (max total value:$199.80) B) You(referrer): $100 cash or 50 free trades; Your “Friend”: $100 cash or 50 free trades (max total value: $999) | 60 days | Refer A Friend to Scotia iTrade | February 28, 2013 |
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Open an account with $25,000 or more and receive 10 free trades. This offer is only valid at the downtown Vancouver TD Waterhouse Investor Centre. 10 trades must be completed within 6 months of account opening; reimbursement based on $9.99 commission rate. | $25,000 | 10 free trades | 6 months | scanned photo of flyer | none |
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Open and fund a new Scotia iTRADE account with at least $25,000 before December 31, 2012 and the commissions associated with your first 100 trades placed within 60 days of the date the account is activated and funded. Also, the new FlightDesk platform is being offered for free for 60 days. See details link for further terms and conditions. | $25,000 | 100 free trades ($999 value @ $9.99 commission rate) | 60 days | Scotia iTrade 100 free trades + FlightDesk | December 31, 2012 |
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Open a new account with $25,000 before December 31st, 2012 and receive 150 trades free. (Applies to the first 150 trades placed within 60 days of account opening at a maximum of $6.49 per trade with a total maximum value of $973) | $25,000 | 150 free trades ($973 value @ $6.49 commission rate) | 60 days | New Account Promo | December 31, 2012 |
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Open and fund a new account with National Bank Direct Brokerage with $25 000 or more, and your commission rate for 6 months will be $6.95 Flat. | $25,000 | $6.95 Flat commission rate | 6 months | Take Control of the Markets Promo | February 28, 2013 |
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Open an account with either: A) $25,000 or more and receive a $100 cash credit and 25 free equity trades. or B) $50,000 or more to receive $200 cash back and 50 free equity trades. | A) $25,000 B) $50,000+ | A) $100 cash credit + 25 free equity trades ($823.75 (min)total value @ standard equity rate $28.95) B) $200 Cash credit +50 free equity trades ($697.50 total value @ active trader rate $9.95) | 60 days | Cash back offer | December 31, 2012 |
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Existing BMO Investorline clients who refer a ‘friend’ who then opens an account, (and the “friend” too) can qualify for a cash bonus, depending on the deposit amount. For deposits of between $50,000 and $249,999, the referral bonus is $200 and the “friend” receives $50; for deposits of over $250,000 the referral bonus is $300 the “friend” receives $100. To qualify for the deal, the referral reference code needs to be included in the application – see the details link for terms and conditions. | $50,000 | $50 cash (friend) $200 cash (referrer bonus) | 60 days (see details) | Refer a Friend Promo | December 31, 2012 |
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Open one or more new Scotia iTrade account(s) by November 16, 2012 with at least $50,000 in cash or net equity and receive 100 days of commission free trades. Also, you get to try FlightDesk free for100 days. To qualify you must enter promo code ” F’12 OFFER” when submitting new account application. See details link for more information. | $50,000 | unlimited free trades | 100 days | 100 Days Commission-Free | December 14, 2012 |
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Disnat is celebrating its 30th anniversary by offering new & existing clients $300 in commission credits which can be used for up to 6 months. To be eligible, new/existing clients need to deposit $50,000 into a Disnat account. You’ll have to call 1 800 268-8471 and mention promo code Disnat30. See details link for more info. | $50,000 | $300 commission credit | 6 months | Disnat 30th Anniversary Promo | December 31, 2012 |
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Open a new account with $100,000 or more (or for existing clients make a deposit of $100,000 or more) and get $150 cash back and 150 free trades. Use the promo code BONUS when opening a new account (or when making a new deposit of $100,000 or more). See the details link for qualifying account types and conditions. | $100,000 | $150 cash 150 free trades ($1492.50 value | 60 days | Path to Online Investing Promotion | January 3, 2013 |
Below are the discount brokerages that are offering deals that cover transfer out fees from other discount brokerages.
| Company | Brief Description | Maximum Transfer Fee Coverage Amount | Deposit Amount for Transfer Fee Eligibility | Details Link | Deadline |
|---|---|---|---|---|---|
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Move your brokerage account to Questrade and they’ll cover the transfer-out fee up to $150. | $150 | $25,000 | Transfer Fee Promo | none |
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Transfer $25,000 or more to a National Bank Direct Brokerage account and they will pay up to $135 plus taxes in transfer fees | $135 | $25,000 | Transfer Fee Rebate | none |
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Virtual Brokers will cover transfer fees from your transferring institution to a maximum of $150 per account. This offer is only applicable to accounts opened with at least $25,000 in equity before December 31, 2012. | $150 | $25,000 | Transfer Fee Promo | December 31, 2012 |
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Qtrade Investor will reimburse your transfer fee up to $125 when transferring a balance of $25,000 or more. For reimbursement, please mail or fax a copy of your statement from the transferring institution that shows the transfer charge to Qtrade Investor at 604.484.2627 and indicate your Qtrade Investor account number. | $125 | $25,000 | Transfer Fee Promo | none |
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Disnat is celebrating its 30th anniversary by offering up to $150 to cover the cost of transfer fees from another institution. To be eligible, new/existing clients need to deposit $50,000 into a Disnat account. You’ll have to call 1 800 268-8471 and mention promo code Disnat30. See details link for more info. | $150 | $50,000 | Disnat 30th Anniversary Promo | December 31, 2012 |
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If you are a client of North Shore Credit Union, you can qualify for a $125 transfer fee credit to cover transfer fees from another discount brokerage ($10,000 minimum transfer in value). To qualify, you must enter NSCU-05Trades on your application. | $125 | $10,000 | North Shore Credit Union Promo | December 31, 2012 |