Tag: Desjardins Online Brokerage

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Discount Brokerage Weekly Roundup – December 13, 2021

Inflation isn’t the only reason interest is heading higher at the end of the year. For the online brokerage industry in Canada, it seems that new features and announcements are also grabbing attention and fueling speculation as to what’s next as we head into the new year.

With just a few weeks left in 2021, and some big announcements of our own to report on, the Weekly Roundup is shifting gears into “year-end” mode. To kick things off, we look into the newest big feature drop announced by Wealthsimple Trade and unpack what it means for investors and competitor brokerages heading into RSP season. Next, we launch into rewind mode and review the big milestone developments from earlier this year as a prelude to the launch of our exclusive Look Back / Look Ahead magazine later this week. Finally, we wrap up with DIY investor chatter from the investing forums.

Wealthsimple Trade Launches SaaSy New Subscription

Just in time for the holiday season, Wealthsimple Trade rolled out a brand-new enhancement that has caused quite a stir among Canadian self-directed investors.

Wealthsimple Trade Plus, a new subscription model-based program offered by Wealthsimple Trade, will soon be removing per trade currency conversion and replacing it with a modified currency conversion option, adding in real-time data (though not streaming real-time data), and increasing the amount available for instant deposit to $5,000. The fee for this new service model is $10 per month, up from the current $3 per month being charged for Wealthsimple Trade Premium.

The new Plus program is slated to replace the Wealthsimple Premium plan. Premium is scheduled to be sunset in March 2022.

Like most big new features at Wealthsimple Trade, there’s a waitlist and a gradual rollout plan to contend with. However, despite what is clearly an attempt to address some of the most highly sought-after features by their clients, the early feedback from self-directed investors is mixed.

Arguably, the price tag is a sticking point. Paying $10 per month for a service might seem small; however, among the discount investor crowd, what amounts to an annual fee of $120 (if used through the year) is considered friction. In fact, introducing optional monthly fees at a time when other leading online brokerages, such as Interactive Brokers eliminate monthly fees (coincidentally, at $10 per month), and when competing online brokerages in Canada such as National Bank Direct Brokerage and Desjardins Online Brokerage have lowered their commission rates to zero (while providing access to USD accounts without forced currency conversions), means that the new Wealthsimple Trade Plus offering will have limited appeal.

For some clients of Wealthsimple Trade, this new capability will make financial sense – they can transfer a large dollar amount into USD and pay a one-time conversion fee of 1.5%. What hasn’t been made clear yet is how clients will be able to withdraw the funds, and whether it will have to first be converted back into CAD or if users can link directly to an external USD account. Additional questions have been raised, such as the ability to journal shares for cross listed securities and what will happen for clients with existing USD securities who sign up for Wealthsimple Trade Plus, and most importantly, what happens when a user opts out of the Wealthsimple Trade Plus program?

Of course, the timing of the announcement is certainly convenient given the proximity to RSP season; however, the fact that there is going to be a waitlist and a phased rollout of the new feature means that competing online brokerages have an opportunity to reposition themselves against this new offer. And the longer those questions about the new feature release remain unanswered, the greater the window of opportunity for competitors to provide a more tangible alternative.

The marketing and advertising for and in response to this latest development is sure to be heated. Already one key theme that existing online brokerages seem to be highlighting is “certainty” in what investors have to pay. Flat fees per trade are, arguably, more appealing than variable costs. The biggest test for Wealthsimple Trade, however, appears to be waning sentiment among millennial investors towards the commission-free offering which was once the exclusive domain of Wealthsimple Trade. One of the most influential sources of information for new and existing online investors is reddit, and it appears that National Bank Direct Brokerage and Desjardins Online Brokerage are both getting a lot of “earned media” from DIY investors who are leaving their existing brokerage (including Wealthsimple Trade) outright or redirecting a portion of their investment portfolio to these low-cost options.

Data from Robinhood, arguably, the best bellwether for Wealthsimple Trade, shows a substantial pullback in equities trading and user growth on the platform plateauing. Thus, the limits of design are going head-to-head with pricing, and in the self-directed investing space, while design might count for something, pricing (and features) usually win the day.

This latest move by Wealthsimple Trade will likely not spur existing Canadian online brokerages into action, nor will it likely be a significant catalyst to lower prices. Most Canadian online brokerages already offer the kinds of services (or better) that Wealthsimple Trade is bringing online in the new year.

As such, heading into the busiest stretch of RSP season, we anticipate Canadian online brokerages to step up advertising and awareness campaigns. If not to highlight their own features, then certainly to go on the offense to directly challenge competitors. The timing seems right for a big announcement from an online brokerage, and we’re probably not the only ones thinking that right now either.

2021 Online Brokerage Rewind: Part 1

It’s hard to believe that the end of another wild year is here. Time distortion is in full effect, thanks to the lingering impact that COVID-19 and all of its unwelcomed variants have had on the course of “normal” life. Now that we’re collectively almost two years into the global pandemic, there is clearly a shift – albeit a rocky one – towards a new equilibrium.

In January, a new reality was also thrust upon the online brokerage industry in Canada and across the globe at the beginning of 2021 when meme-stock mania and FOMO took hold and yet another surge of online investors wanting to join the world of trading online overwhelmed many Canadian online brokerages’ systems. Robinhood took centre stage as the zero-commission stock (and option and crypto) trading firm saw unprecedented customer growth and customer angst play out simultaneously.

Of course, all of this took place against the backdrop of a historic riot/coup in Washington, DC, a scene that provided a poignant reminder that even despite the chaos experienced in the real world, stock markets continued to drive higher. Regardless of what happened at the Capitol, capitalism remained intact.

At Sparx Trading, January was also busy (but nowhere nearly as tumultuous). We launched the first ever influencer edition of our Look Back / Look Ahead series, featuring contributions from the most influential folks in the Canadian online brokerage research industry, and hit restart on a long-dormant newsletter program.

Gamestonks continued to be a dominant theme heading into February, and the surge of (noted now as the “rise of”) retail investors grew, shattering trading and new account growth records at all online brokerages in Canada and around the world. The world, it seems, had shifted, and retail investors embraced markets and risk in a way that nobody really saw coming. That fact was laid bare as customer service wait times exploded in Canada just as RSP season was reaching its zenith, and the combination was not pretty. There were anecdotes of multi-hour wait times to get through to client service teams and it was clear that many (many) online brokerages in Canada were simply not equipped to service that level of rapid interest.

Despite the turmoil on the client service channels, the beginning of 2021 saw what would become an overarching theme across the Canadian online brokerage industry for the year: the release of new features. Twenty twenty was an exceptional curveball that all online brokerages had to figure out how to contend with; however, once teams had transitioned to working remotely (itself a phenomenal effort for the financial sector), the work restarted on launching new features. Big bank-owned brokerages, such as BMO InvestorLine and RBC Direct Investing, took the lead with new bells and whistles added into their offering.  

And speaking of shiny new things, the tail end of February saw the beginning of a new chapter in the digital life of SparxTrading.com, as we officially rolled out a new website. The brand-new look and feel of the site as well as the new features, such as an online brokerage deals calculator and new approach to delivering information on deals and promotions, set the stage for a new direction for the site. The big investments in new architecture were not without hiccups though, and behind the scenes we’ve been working hard throughout the year to continuously monitor and improve performance based on user feedback.

The end of the calendar quarter somehow managed to deliver equally headline-grabbing developments. Specifically, we noted on two separate occasions that month that new commission-free trading firms were positioning to come to market in Canada by the end of the year. Easier said than done it seems. Among the big names, Tastyworks, the popular US online brokerage that focuses on options trading, and Mogo Financial, who announced the launch of Mogo Trade, after the acquisition of Moka. Of course, we didn’t know it at the time, but March was also when National Bank Direct Brokerage set the stage for their eventual leap into being the first bank-owned online brokerage in Canada to offer commission-free trading. In March, however, National Bank Direct Brokerage tested the waters by dropping their standard commission rates by about 30% to $6.95 per trade.

There were, of course, many other stories, as well as copious amounts of silly gifs shared in the Weekly Roundups, that we didn’t mention here. To catch up on all of the stories from Q1 of 2021, check out our 2021 archives here, and in case you missed some of the fun artwork, be sure to check out the Sparx Trading Instagram page.

Stay tuned for more updates through the year in the next Roundup, as well as the big launch of the Look Back / Look Ahead magazine!

From the Forums

Fees Squeeze

With the launch of Wealthsimple Trade Plus, inevitably investors are asking whether existing online brokerages are going to drop their fees – even nominally – to offset the slow but steady growth of commission-free trading. In the crosshairs of investors this past week, Questrade, where users on this reddit post debated the current low-cost options for self-directed investing, and challenged the perception of Questrade as a low-cost leader.

On Better Terms

Another week, another interesting thread about the finer points of a popular bonus offer. In this post, reddit users weigh in on the tax treatment of cash back bonus offers, and the perspectives are interesting as they are varied.

Into the Close

That’s a wrap on yet another wild week in the markets. After shrugging off omicron, hot inflation, chip shortages, and crypto crashes, it seems like 2021 is determined to end on a high note. We’re also pretty excited about what’s coming just around the corner with the launch of our Look Back / Look Ahead series for 2021/2022 and to gear down for the holiday season. With so much activity in play, we suspect that January will be an exceptionally busy month, and we’d have it no other way! Have a profitable week!

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Discount Brokerage Deals & Promotions – December 2021

December is here – or should we say Deal-cember. With Black Friday and Cyber Monday behind us, the start of December is typically the time of year when people kick their holiday shopping into high gear. For Canadian self-directed investors, this is perhaps one of the best months to be shopping around for an added deal or promotion for opening a new account or bringing new funds into an existing one.

This month, there are no new deals officially launching at the beginning of the month. However, there was a flurry of promotional offers that arrived throughout November which means that out of the gate, December is an exceptionally strong month for offers from just about all online brokerages.

Before diving into the specific online brokerage deals that launched, it is worth pointing out that this year the online brokerage field in Canada is unlike any other time in recent memory.

There are not one, not two, but three Canadian online brokerages that offer commission-free trading. And, one of those, Wealthsimple Trade, is still running referral promotions including their most ambitious one yet that launched for Black Friday – a cash referral bonus equivalent to four (!!) stocks (instead of their normal one). The other two commission-free trading online brokers, National Bank Direct Brokerage and Desjardins Online Brokerage, offer the most compelling price point plus the big financial institution convenience and “peace of mind” factor. If that weren’t enough, there are reports of not one, not two, but three more new commission-free online brokerages looking to launch in Canada.

This brings us to the current state of affairs for deals and promotions.

It is worth pointing out that firms NOT offering an incentive or promotion this month are in the minority, which only increases the likelihood (due to competitive pressures) of more promotions coming to market between the start of this month and the start of the new year. It’s hard to envision larger bank-owned brokerages letting competitors with offers get too far ahead, and it’s also puzzling as to why smaller brokerages wouldn’t be aggressively competing with promotional offers if they still charge more than zero for trading commissions. At some point the physics (or economics) will have to kick in.

Throughout November we saw big cash back offers launch big names in the space. In a Weekly Roundup near the start of the month, we compared current cash back promotions from TD Direct Investing, CIBC Investor’s Edge, and BMO InvestorLine and found that there is an incredibly competitive effort to attract investors with lower starting balances, something that hasn’t really happened at this scale before. Later on in the month, Qtrade Direct Investing also launched their own cash back promotions (yes plural) with a traditional tiered cash back offer and additional bonus cash back for pre-authorized contributions.

Expired Online Brokerage Deals

The good news story heading into December is that there are no expired deals to report on just yet. Later on this month, there are several offers scheduled to expire so it is worth keeping an eye on these to see if they start landing in the “extended” category or get replaced outright with new offers.

Extended Online Brokerage Deals

No deal extensions to report on just yet to start the month.

New Online Brokerage Deals

Technically no new deals have launched at the beginning of December, but there are two noteworthy offers from some popular online brokerages to highlight.

The first is the “Black Friday” referral bonus offer from Wealthsimple Trade. It is, arguably, one of their biggest promotions to date using their referral structure, so it is likely that if you have friends who use Wealthsimple Trade, you’ll be hearing from them, as well as the long-lost friends you might not have heard from in a while.

Another important new set of offers are the Qtrade cash back promotions. There are so many (is there such a thing as too many?) promo codes associated with their latest cash back offer, which ranges from $50 for deposits of $15,000 to $2,000 for deposits of $2 million or more. For an extra boost of $50 cash back, clients can set up a pre-authorized contribution as well. Be sure to check back through the month for more deals and promotion updates or if you hear of any offers that other self-directed investors could benefit from, drop us a note and we’ll review it.

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Discount Brokerage Weekly Roundup – November 15, 2021

There’s a saying that goes, “when it rains, it pours.” It is a fitting comment in more ways than one, especially in November in parts of Canada, and especially considering that climate is driving much of the conversation in the news and now among online brokerages.

In this edition of the Roundup, we’re keeping things lighter than usual. It was oddly quiet (perhaps too quiet) across the online brokerage space here, so we’ve elected to shine a light on a new feature launch from one US online brokerage that is likely to prompt a trend of helping investors “go green.” From there, we’ll close out with a few quick updates on things that crossed our radar and wrap up with chatter from the investor forums.

Betting on Better: Interactive Brokers Launches new Sustainable Investing App

When it comes to getting ahead of the curve, it seems Interactive Brokers has a knack for good timing. Just as the conversation about the state of the environment is taking place all over the world, courtesy of the COP26 summit, Interactive Brokers announced the launch of their new “sustainable investing” app: IMPACT.

While the prime directive of Interactive Brokers is to generate shareholder returns (they are a public company, after all), the natural question to ask of the online brokerage is how this new app, which is designed to help DIY investors make more value-aligned investing decisions, will be better for business overall?

If there is one thing that Interactive Brokers appears to be deft at, it is getting creative at finding ways to connect to their existing and desired clientele.

Just before the start of the global pandemic, for example, Interactive Brokers launched a simulated sports betting platform targeting individuals who were interested in monetizing their talent and enthusiasm for professional sports. Despite the sports platform itself being quietly decommissioned earlier this year (no pun intended), the thesis of individuals who bet on sports being interested in trading stocks turned out to be wildly true. The crush of interest in trading online that occurred during March of last year and January this year was in some part due to individuals not having sports to be able to bet on.

In the case of the new IMPACT app, it appears it is yet another attempt in focusing in on a key client segment — in this case, younger investors that could use this app and the commission-free trading price point to boost new client generation. The founder and former CEO of Interactive Brokers, Thomas Peterffy, appeared on CNBC this past week and stated this when asked who this app was designed to reach.

Of course, in addition to the IMPACT app, Interactive Brokers recently launched the ability for its clients to trade cryptocurrency at a fraction of the cost of some larger names in the crypto space. After years of skepticism on the digital currencies, it was interesting to see Interactive Brokers capitulate and essentially jump into the crypto trading game because it was such a highly sought-after feature for clients.

Clearly, Interactive Brokers is no stranger to keeping a pulse on what it is their customers want and trying to deliver that service or experience through their services ecosystem. What stands out about the latest mobile app, however, is that none of their direct competitors have something similar in market. For its part, Robinhood published a blog post in October raising awareness of Latinx investors, and published their own ESG report; however, there was nothing near the Interactive Brokers experience in this segment of the market.

Socially responsible investing isn’t just a trend in the US. However, it is clearly a global thesis that has gained considerable ground over the past few years.

What makes the latest move by Interactive Brokers especially interesting, however, is that they have paved the way for other online brokerages to step up with something equally as compelling, especially the “challenger brands” whose identity is predicated on making the world of financial services “better.” In a macro sense, this kind of competition is great for the planet, as it better enables investors to throw their capital behind their values.

And, while the Interactive Brokers solution involves a well-designed mobile app (from a UI perspective anyway), this is the kind of innovation that Canadian online brokerages have been desperately in search of.

To that end, it is an interesting case study to see how little traction some existing players – such as Scotia iTRADE – have had with their socially responsible investing features. We reported on the launch of Scotia iTRADE’s ethical investing tool back in the summer of 2017; however, despite the macro trend supporting a tool like this getting more exposure and strategic expansion, things have been remarkably quiet at iTRADE on sustainable investing.

Among Canadian online brokerages, sustainable investing tools are a potential place to connect to self-directed investors (especially younger ones) who want to invest according to their values. The current approach of providing thematic choices is a decent starting point, but Interactive Brokers’ latest app demonstrates how much farther Canadian online brokerages need to be prepared to go to truly be seen as market-leading in sustainable investing.

In a small twist of fate, we at Sparx share a similar view to Peterffy when it comes to the power of capitalism being able to find a solution to the climate crisis faster than government action alone could. We think that investors, especially millennials, will be more informed about and willing to seek out brands that prioritize social responsibility as part of their business objectives.

The latest platform launch by Interactive Brokers is an example of their business interest in providing online trading services to as many people as possible overlapping with the next big wave of economic opportunity (imperative): saving the world.

Quick Online Brokerage Updates

Bandits in Sherwood Forest: Robinhood Security Breach

It was a tough week for some clients of US online broker Robinhood as the firm disclosed that five million of its customers had personal information compromised by a security breach. Ouch.

Apparently, the incident arose from a phishing scam that targeted an employee of Robinhood. The breach is yet another example of the hazards of operating online brokerages, and yet another strike on the reputation of Robinhood to contain phishing attacks.

Appy Days

If you can get beyond the characters on Twitter (looking at you, Elon), there’s all sorts of interesting data nuggets to uncover. This past week, an interesting thread started by The Globe and Mail personal finance writer Rob Carrick (famous for his online brokerage reviews) asked a very compelling question of the community of Twitter users. Check out what transpired when users were asked what they like and dislike about online brokerage mobile apps.

Looking Forward to Looking Back

The next edition of the Sparx Trading Look Back/Look Ahead series is just around the corner, and we are very excited to relay the updates shared with us by some of Canada’s largest and most popular online brokerages. We can see why there might be a slight dip in activity among Canadian brokerages this past week because there are clearly some big developments about to drop. Be sure to subscribe to our newsletter and Twitter feed for more details.

From the Forums

Need for Speed

If there’s one big lesson for self-directed investors over the past two years, it’s that when opportunity knocks, it helps to be able to get funded and get going. In this post from reddit, one user is looking for a non-bank-owned online brokerage that can offer faster deposits. Read what users had to say about the options available.

Departures and Rivals

There’s a lot of chatter these days about switching online brokerages. Because National Bank Direct Brokerage and Desjardins Online Brokerage are two of the first traditional online brokers in Canada to offer zero commission, naturally self-directed investors have questions. In this post from reddit, find out what perspectives users offered when considering a choice between these two new low-cost leaders.

Into the Close

That’s a wrap on another edition of the Roundup. We’re officially passing the halfway point in November and Financial Literacy Month is in full swing. It’s also Movember, and if you’re so inclined to mo-your support, we’re raising money at Sparx in support of the cause. Stay dry and have a profitable week ahead!

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Discount Brokerage Deals & Promotions – November 1, 2021

November is upon us, and if you’ve stepped foot in a Canadian Costco lately, you’ll know that Christmas is just around the corner. For Canadian self-directed investors, however, the beginning of November signals the “unofficial” start to a very different season: RRSP season.

As if on cue, November kicked off with a new online brokerage promotion, a cash back deal from CIBC Investor’s Edge. Though it is still early in the month, there’s a very good chance that other Canadian online brokerages will follow suit in short order, in particular the bigger bank-owned brokerages. BMO InvestorLine’s current cash-back promotion was officially live at the time of publication of this update, however, they too will likely have something new on offer at the start of the month.  

Of course, the big story this year among online brokerages in Canada is zero-commission trading fees gaining mainstream acceptance. Starting first with National Bank Direct Brokerage and followed shortly thereafter by Desjardins Online Brokerage, the fact that two large financial institutions have already rolled this out makes for interesting times ahead during the most competitive season among Canadian online brokerages. To overcome the natural pull of these ultra-low price points, competing firms who insist on charging trading commissions will have to demonstrate extraordinary value for their clients. And one of the fastest ways to do that is through incentives.

The news isn’t entirely great for online investors, however.

Large bank-owned online broker RBC Direct Investing retired their short-lived 50 commission-free trading promotion at the end of October. Recall that this promotion enabled users to have access to 50 commission-free trades over two years.

We will be keeping our eyes and ears peeled for new updates. However, if you find out about an offer you’d like to see shared on SparxTrading.com, drop us a comment to let us know.

Expired Online Brokerage Deals

The RBC Direct Investing 50 commission-free trade promotion officially wrapped up at the end of October. This promotion, which we first spotted in the late summer, was something new from the popular bank-owned brokerage. In particular, the duration over which investors could use the trades (two years) was longer than what we have seen being offered previously, or at competitor brokerages. Interestingly, the promotion was only available for a brief time, however, it is clear that RBC Direct Investing has found a way to go even bigger with promotions than they’ve done in the past, a trend we’re likely to see play out among Canada’s most competitive online brokers.

Extended Online Brokerage Deals

No deal extensions to report at this time.

New Online Brokerage Deals

The latest cash back promotion from CIBC Investor’s Edge is a tiered offer that provides between $50 and $2,000 cash back for deposits ranging between $10,000 and $1M+. This promotion runs from November 1 to March 1 inclusive, with payouts of the cash bonus taking place in June 2022 or August 2022, depending on when accounts are opened. Check out our online brokerage deals index page for deposit tiers and more information about this offer.

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Stay updated on all of the latest developments in the Canadian online brokerage space, with insights and links to highlights you may have missed, as well as snappy graphics, and occasionally impressive puns!

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Discount Brokerage Weekly Roundup – October 4, 2021

And just like that, October is upon us. Changing leaves, falling temperatures, and costumes are now part of the normal routine; however, this year it seems like this month (and those coming after it) are going to be filled with new features and deals from Canadian online brokerages.

In this week’s Roundup, we catch up on the latest activity in the deals and promotions section, and highlight how commission-free trading is starting to shape the kinds of promotions we’re seeing emerge from online brokerages heading into RSP season. From there, we review the rocky start to QuestMobile, the new trading app experience launched by Questrade and the lessons to be learned from rolling out a new platform. With all of the commentary on the Questrade story, forum chatter was paused for this week (not to worry, there’s plenty to dig into) but will return again next week.

Tricks and Treats: DIY Investor Deals Update

October is often associated with treats and for Canadian self-directed investors, it seems like this month is shaping up to be especially treat-worthy.

The start of a new month is a great time to check in on deals and promotions being offered by Canadian online brokerages, and this month did not disappoint. With two big names, RBC Direct Investing and Qtrade Direct Investing, electing to extend commission-free trade offers and another bank-owned online brokerage, HSBC InvestDirect, launching a commission-free trade offer, there was a clearly a trend towards leaning into commission-free trading.

This year more than any other, promotions and incentive offers are going to play an important role in swaying online investor opinion – and loyalty.

Since the seismic shift in the Canadian online brokerage landscape from National Bank Direct Brokerage and Desjardins Online Brokerage offering commission-free trading (on equities and ETFs), there’s no doubt that other Canadian online brokerages are discussing how they might position themselves in a commission-free trading world.

While none of Canada’s online brokers are in a hurry to go commission-free, there is also a sense that this might be the last year in which commission rates can stay where they currently are. As such, commission-free trade promotions offer a middle ground for existing players to entice new clients while they configure themselves for a commission drop. In both the commission-free offers from Qtrade Direct Investing and RBC Direct Investing, the timeframe to use up a healthy number of commission-free trades (50 apiece) ranges from several months to two years, respectively. In terms of RBC Direct Investing, it is the longest that we’ve seen a commission-free trading offer stretch out to, a signal that the need to do so has clearly come.

A subtle but important maneuver we have also observed is the movement of expiry dates of the promotions themselves.

While extending offers is nothing new (Desjardins Online Brokerage famously kept extending their commission-free deal for a few years), the duration of recent deals seems to be a bit shorter than in years past. Wealthsimple Trade, for example, has been using shorter time frames than their competitors, and with the latest offer from RBC Direct Investing, the extension of the promotion expiry date was only for an additional month. Historically, promotional offers would last for several months; however, the tide has clearly shifted given everything that has happened this year.

Looking across the online brokerage landscape, it’s almost a given that big-bank online brokerages that don’t have a big deal will have to come to market with something enticing. Cash-back offers are hard to come by these days, which is why BMO InvestorLine currently stands alone in this category – especially when compared with its bank-owned brokerage peers. That said, long-duration commission-free trades seem to make the most sense for “occasional” investors who would enjoy the peace of mind that for the next year or two, there is a low likelihood of them needing to pay much (or anything) for equity or ETF trades. It would certainly sway investors away from opening a “test” account at zero-commission brokerage and instead open a new account or deposit new funds into an existing account.

The fact that we’ve already seen two big deal extensions and a new offer come to market at the beginning of October is a clear signal that online brokerages in Canada are gearing up for a busy RSP season battle.

Promotions offer a strategic option to online brokerages that aren’t ready to drop commission prices just yet. And, even at online brokerages that offer commission-free trading, such as Wealthsimple Trade, promotional offers still play an important role in capturing new client interest. Whichever route that brokerages take this fall, Canadian self-directed investors are in for a treat.

A (Cautionary) Tale of Two Screens: Questrade’s New Layout Generates Mixed Reviews

If there’s one big theme to 2021, it’s been new features and offerings from Canadian online brokerages. This past week, Questrade was the latest online brokerage to launch a new (and long-awaited) mobile trading experience.

Unfortunately, it didn’t quite go as intended.

The launch of a new website or app experience is something that wouldn’t ordinarily generate a lot of discussion or coverage. So, in that regard, this roll out was unusual in the degree to which many online investors did not like what they saw.

In fact, on the Questrade reddit thread, we collected (and read through) no fewer than 20 different threads complaining about the changes to trading experience. Twitter and other online investor forums also had a similar set of responses. For reference, here are some of the comments regarding QuestMobile on Questrade’s reddit:

  1. https://www.reddit.com/r/Questrade/comments/pwgqko/kiss_keep_it_simple_and_stupid_is_a_great/
  2. https://www.reddit.com/r/Questrade/comments/pwgxeb/i_think_this_is_the_silliest_change_ive_ever_seen/
  3. https://www.reddit.com/r/Questrade/comments/pwgyox/new_layout/
  4. https://www.reddit.com/r/Questrade/comments/pwhgt1/i_wanted_to_see_what_everyone_was_complaining/
  5. https://www.reddit.com/r/Questrade/comments/pwhide/why/
  6. https://www.reddit.com/r/Questrade/comments/pwifuw/how_do_i_view_open_orders_with_new_layout/
  7. https://www.reddit.com/r/Questrade/comments/pwiln8/wow_this_is_so_brutal_this_new_layout_im_already/
  8. https://www.reddit.com/r/Questrade/comments/pwj9qk/horrible_ui_update/
  9. https://www.reddit.com/r/Questrade/comments/pwjlg9/the_new_user_interface_is_awful/
  10. https://www.reddit.com/r/Questrade/comments/pwjney/feedback_on_questrades_new_changes/
  11. https://www.reddit.com/r/Questrade/comments/pwjqzw/new_ui_is_ridiculous_considering_leaving_after_4/
  12. https://www.reddit.com/r/Questrade/comments/pwjvr4/new_layout_heres_whats_wrong/
  13. https://www.reddit.com/r/Questrade/comments/pwkf2z/we_cant_see_the_bidask_spread_anymore/
  14. https://www.reddit.com/r/Questrade/comments/pwmg3r/go_back_to_old_ui/
  15. https://www.reddit.com/r/Questrade/comments/pwnymp/this_new_questrade_ui_is_god_awful/
  16. https://www.reddit.com/r/Questrade/comments/pwocab/new_ui_on_the_website/
  17. https://www.reddit.com/r/Questrade/comments/pytgrc/voicing_displeasure_with_new_ui/
  18. https://www.reddit.com/r/Questrade/comments/pwu4g8/the_biggest_problem_with_the_ui_update_imo/
  19. https://www.reddit.com/r/Questrade/comments/pwr4s6/new_mobile_app/

There is definitely a lot to unpack in reading through the investor comments and reactions to the new interface. Through some detective work, it is evident that online investors seemed to take issue with the fact that the desktop and mobile experiences were rendered in the exact same way, something that clearly didn’t sit well with desktop users.

While the new QuestMobile experience was designed around keeping things simple and easy to navigate, the biggest ask for users of the desktop experience was how to revert back to the way things were.

Unlike other rollouts of new platforms we’ve seen over the years, it wasn’t just the case that things were unfamiliar either, it was that information that users on desktop were used to seeing was no longer there. Information such as bid/ask spreads or watchlists were not part of the “new” default view. To find those features, users had to navigate to and install Questrade Edge, a separate platform that was what desktop users were used to seeing.

As feedback from the new rollout started to emerge, the responses from Questrade on reddit and social media seemed to reflect an understanding that something had not gone according to plan. Though it was clear they were aiming to simplify things, the reality is that many online investors were confused by the move.

The fact that Questrade now has two mobile apps, Questrade Edge and QuestMobile, is also a source of confusion (or choice) for users. What will need to emerge over the coming weeks is a clarification to existing clients as well as to prospective ones, as to the differences between the platforms.

The reality of the QuestMobile app, however, is that despite the issues and reactions mentioned in regards to the “desktop” experience, mobile users of the new app were generally positive on new layout and experience. On Google Play and on the Apple App Store, for example, ratings for the new app were relatively high (compared to the other Questrade mobile app), a sign that although not perfect, it was resonating with clients who tried it out.

It is also important to note that in addition to the “basic” overview of trading online, Questrade has also telegraphed that they are working on a new mobile app experience tailored for active traders as well.

As mentioned above, there is clearly a lot to unpack. For a few years now, Questrade has signaled to online investors that a new mobile trading experience was on its way. And, granted, while it took quite some time to arrive, it is clear that they have taken design cues from competitors like Wealthsimple Trade to try and simplify how trading information is presented in a mobile-first experience while also enabling a simplified navigation experience as well. The new QuestMobile is lighter than its Questrade Edge counterpart, for better or worse.

Although it is unclear when or if Questrade will adopt the commission-free trading model that peer firms in the online brokerage space have, it does seem like the QuestMobile trading experience hints at a path for lower cost online investing to happen. By effectively unbundling features from their current platform experience into a “lite” and “full featured” combination, it seems like Questrade could create two different pricing structures around those features. This is all speculative, of course. However, Wealthsimple Trade has shown that they are willing (and able) to charge users for a more premium experience, as has Robinhood in the US, so the precedent is established for zero-commission online brokerages to charge for specific features.

After 20 years in the online brokerage space, Questrade has learned a few things about handling missteps. One can go back to their decision to charge inactivity fees in 2012, for example, in which they had faced a similar firestorm from clients who were not happy with the move. Eventually, they phased them in anyway and then as market forces shifted, they phased them out.

Granted, there is now a renewed interest in trading online and there are even more channels to which investors can turn for information about online investing. So, the stakes for getting things wrong now are certainly higher than they were almost a decade ago. And yet, as was the case in 2012, Questrade is adapting to the times.

The new QuestMobile app was developed for a simpler use case for investing online and it is precisely because it has fewer features than what existing clients were used to that they voiced their discontent. But, those existing clients represent a different use case than potential new clients, in particular those who are not “active traders.” Individuals who are contemplating switching from other online brokerages, including Wealthsimple Trade, who are looking for a simple-to-use interface will find exactly that on the new QuestMobile platform. And, it seems with a bit of work on the communications front, making it easier to find and take advantage of the Questrade Edge interface can help with supporting more complex investing/trading needs – at least until the “active trader” version of QuestMobile gets released.

If there are any lessons for other online brokerages to glean from this roll out, it’s clear that giving existing users a clear way to opt out of a new platform is key to managing the transition between old and new interfaces. BMO InvestorLine did an especially good job of this in the roll out of their new online trading experience. Although the switch to a “new” platform experience took quite some time, users had the ability to toggle between the “old” and “new” and it is clearly stated in multiple places that users were able to do that.

Another important lesson to draw from the QuestMobile experience is the difference between mobile and desktop interfaces. Going “mobile first” doesn’t mean that mobile UI/UX translates well into desktop. They clearly do not map onto one another 1:1, which is something many of the responses pointed out.

Finally, it turns out that one of Questrade’s greatest strengths, the ability to reach self-directed investors on social media and in forums, is not without its risks. Building those strong communities online has helped propel Questrade’s growth. But as the reddit threads, investor forums and Twitter comments have shown, in 2021, online investors also on those channels are also much more willing to be vocal about what they don’t like. If there seems to be consensus across forums and social media that something needs to change with the QuestMobile experience, Questrade would be wise to pay attention.

From the Forums

With all of the forum chatter from this week, it seemed appropriate to cap coverage of investor commentary. Forum chatter will return again next week.

Into the Close

That’s a wrap on another week. It was an important week on many fronts – Canada marked the first National Day of Truth and Reconciliation and at Sparx Publishing Group, we also launched our first edition of Make The World Better Magazine. We know there is a lot of news that can be sad and disheartening; however, there is also a lot of great work being done by individuals and organizations who are out there trying to make a positive difference in the world, which is exactly what we wanted to feature.

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Discount Brokerage Weekly Roundup – September 20, 2021

With the Canadian federal election finish line in sight, whatever the decision, there’s likely to be a shakeup for self-directed investors and wealth management in general. It’s a toss-up, though, on whether any candidate will get more votes than Ted Lasso at the Emmys.

In this edition of the Roundup, we kick things off with one US online brokerage that continues to gain traction by listening to clients and is poised to grow with the launch of a new feature that is the envy of other brokerages. Next, we look at one Canadian online brokerage poised for a name change and potentially much more heading into the fall. Finally, we close out with some interesting chatter from self-directed investors about US-themed topics.

Interactive Brokers Positioned for Growth

Earlier this month, Interactive Brokers reported their activity metrics for August, and though they continue to show strengthening core performance stats, one figure in particular caught our attention: continued growth in new accounts.

Given that Interactive Brokers typically targets and appeals to active traders, the continued growth in new accounts despite month/month declining volume of trades presents an interesting picture. There is clearly an appeal to individuals seeking out Interactive Brokers despite them having a paid commission structure. To be clear, Interactive Brokers also has a zero-commission option called IBKR Lite; however, the majority of their trading accounts come from their paid commission structure.

As Canadian online brokerages contemplate the shift towards zero-commission trading, there might be a clear lesson to being able to provide clients with a quality trading experience that they would be willing to pay for.

New Account Growth Momentum Continues

As the chart below clearly illustrates, new account growth at Interactive Brokers has been on a bit of an upswing after bottoming out in May.

One of the reasons that traders might be turning to Interactive Brokers is because of market volatility. When markets are volatile, it tends to attract in active traders and “fast money” seekers. While it may not be predictive of a volatile turn in the market (especially since the data was from August), there’s a sense that some kind of big market downturn is nearing. Recent comments by founder of Interactive Brokers Thomas Peterffy about upcoming “compression” in the markets is also a sign that certain online brokerages are thinking about a market downturn as well.

Another factor driving new account growth could be driven by Interactive Brokers eliminating inactivity fees in July.  By preventing clients from leaving, the hurdle to positively impact net new accounts is lowered. Though Canada makes up a very small portion of the Interactive Brokers business, chatter from online investors in Canada nonetheless shows that bringing over less active accounts, such as TFSAs and RRSPs, makes more sense now that those additional accounts won’t incur inactivity fees. This fits with the view that accounts are continuing to be opened despite trading activity falling.

Cryptocurrency Trading a Catalyst for Customer Growth

Another catalyst for account growth at Interactive Brokers will likely come from their latest decision to launch cryptocurrency trading.

As we reported two weeks ago, the roll out was interestingly quiet. However, this past week, the PR machinery kicked off with the official announcement and appearance by Peterffy on CNBC.

The shift in messaging by Interactive Brokers regarding cryptocurrency trading has been interesting to watch. For quite some time, there was a notable skepticism about digital “currencies,” however, it seems that now there is a different thesis emerging: a small but important risk associated with individuals losing faith in traditional currencies.

While a billionaire is hardly representative of the mass market, it seems that he, like the clients of advisors using Interactive Brokers, wanted direct exposure to cryptocurrencies. Despite Peterffy’s deep skepticism on digital currencies, he’s savvy enough to recognize that some exposure to them is now a requirement to hedge against the scenario that confidence in traditional currencies falters. Intriguingly, Peterffy admitted that he’s been a holder of bitcoin in his portfolio for at least three years.

Interactive Brokers launching cryptocurrency trading is a very big deal for the online brokerage space.

While regulatory uncertainty may still prevent other brokerages from following suit right away, that Interactive Brokers figured out a way forward will expedite other brokerages wanting to seriously figure out how to deliver this as well. Robinhood already does; however, they have not yet figured out how to grow without attracting significant regulatory scrutiny. The experience in navigating regulatory hurdles, however, is something that may work in favour of larger and more established brokerages.

The source of interest in cryptocurrency has now gone beyond the “fast money” and extends to the “smart money” that is using exposure to cryptocurrency as a hedge. And, if Peterffy is an indicator of “smart money” then he has already validated the thesis on crypto.  

For Canadian online brokerages looking at the US market is a little bit like peering into the future. Now that the zero-commission trading trend, which emerged in meaningful way in the US in 2019, has arrived in Canada, figuring out how to generate revenues outside of commissions on equities trading will be a priority. While the focus for revenue drivers from active traders will likely still be options trading (for those brokerages that offer them) in the near term, the convenience (and temptation) of crypto exposure and trading is on the horizon.

It will likely be some time before Wealthsimple Trade, the only online brokerage in Canada that has an associated product to trade cryptocurrency, faces competition from other online brokerages on the crypto trading front. Exactly how long, however, will be tough to tell. As was the case with National Bank Direct Brokerage launching commission-free trading, competition for online brokerage market share can come from unexpected places.

Looking at the latest stats for Interactive Brokers and the launch of cryptocurrency trading as well, we anticipate there to be continued strength in new accounts heading into the end of the year. Any kind of spike in cryptocurrency prices or volatility will. The lesson to Canadian online brokerages is clear on a few fronts. Despite what personal feelings executives may harbour about crypto, the reality is clients from entry level retail investors to sophisticated ultra-wealthy clients are looking for access to cryptocurrency. And, as Interactive Brokers has shown, listening to and delivering on what clients want is a great way to keep them.

Virtual Brokers Rebranding Moving Ahead

This past week Virtual Brokers sent out a notice to clients that they will be updating their branding…soon. It’s been in the works for a while but back in May of 2020, we reported that the parent of Virtual Brokers, CI Financial, announced that they would be consolidating brands they owned (including Virtual Brokers) to a streamlined CI-containing name: CI Direct Investing. When it comes to branding, the “direct investing” label has grown in popularity, replacing terms like “discount brokerage” and “online brokerage.”

Since the mention of the rebranding in 2020, advertising and marketing from Virtual Brokers has been notably quiet. Prior to their acquisition by CI Financial, Virtual Brokers was a visible presence online and especially in the Globe and Mail online brokerage rankings.

Now that a new moniker seems imminent, we expect that regaining the spotlight will also be a part of the plan.

What the CI-branded online brokerage has in store for a big splash could be interesting, especially given the timing. While traditional advertising and marketing might generate some curiosity, in a marketplace where zero-commission trading is now a reality at National Bank Direct Brokerage and Desjardins Online Brokerage and, to some extent, Wealthsimple Trade, getting noticed is going to have to come along with a hefty promotional offer and/or lower commission pricing.

In terms of timing, CI will not want to miss the opportunity to challenge other online brokerages this RSP season, the marketing ramp up to which typically starts in October and November. Already it’s shaping up to be a busy season.

Earlier this year, Qtrade Direct Investing also launched a significant rebranding effort and heading into RSP season they will likely be looking to make a bolder move to advertise to Canadian investors. We noted in an interesting reference to Qtrade Direct Investing’s new marketing strategy that their new agency, King Ursa, has a campaign scheduled for launch in November.

And, on the deals and promotions front, Wealthsimple Trade recently announced that they’re not doubling but tripling down on their referral program, offering triple the stock rewards to encourage new accounts to sign up.

While Virtual Brokers was a well-known name to the investors and traders, CI Financial’s move to rebrand under the parent entity makes a lot of sense for the long run. For their part, CI has been aggressively growing and it’s clear they’re not afraid to think big or punch heavy. With $320 billion dollars of assets under management and annualized revenues of $2 billion dollars, the CI brand brings with it much more financial horsepower than the Virtual Brokers brand alone ever could have.

There’s also another picture emerging too, based on the strategy to globalize their brand, which could see CI setting itself up to take some of its digital and direct investing/trading capabilities further than just Canada. Their aggressive moves to acquire US wealth management firms could be setting the stage for a wider push beyond Canada, and the digital platform could set CI Financial up to challenge online brokerages there too. After all, PayPal recently reaffirmed its commitment to roll out stock trading to its clients in the US, so there are still financial services providers willing to bet on direct investing as a way to gain or keep market share.

It won’t be too long before we see what the formal roll out for the new Virtual Brokers will be. Based on the recent developments across the self-directed investing space in Canada, we’re betting we won’t be able to miss the launch, and neither will Canadian online brokerages.

From the Forums

Taste Tested

The rumour mill keeps swirling around US-based online brokerage Tastyworks coming to Canada. In this post on reddit, find out what investors had to say about the potential arrival and the long wait.

Wealthsimple Trade USD…Coming Soon?

Also from the rumour pile, this post from reddit caught our attention regarding a highly sought-after feature from Wealthsimple Trade: USD accounts. Along with a potential update on the timeframe, the fact that the post was written by someone already transferring away from Wealthsimple was fascinating – especially in seeing what Wealthsimple is doing to get people to stay.

Into the Close

That’s a wrap on another eventful week. Technically this past week did feature an official announcement from Desjardins Online Brokerage lowering their commissions to zero, so the conversation around prices dropping for self-directed investors continues. It’s going to be a wild week of earnings announcements and now that the dominoes have started to fall with regards to commission pricing, it’s going to be anybody’s guess as to what online brokerages in Canada start doing heading into the end of the month. Hold on tight.

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Discount Brokerage Weekly Roundup – September 13, 2021

During the pandemic, it’s understandable to lose track of time. Yet, there are some dates that stand out, such as September 11th, that are forever etched into the minds of those who lived through the terrible tragedies of that day. Despite 20 years going by, it is still a vivid memory for many, and though painful to reflect on, the lessons learned from that day show that hope can ultimately triumph over hate.

In this edition of the Roundup, we kick things off with a look at the new features that launched on SparxTrading.com to help self-directed investors and industry enthusiasts track and research the latest developments in the online brokerage space. Next, we report on the latest zero-commission trading chatter, with a potential big move by one brokerage and another big brokerage potentially not moving. As always, we have some interesting commentary from the forums, including the launch of cryptocurrency trading at one brokerage that rolled out abnormally quietly.

New Features at Sparx Trading

It’s been a big year of changes across the Canadian online brokerage industry as well as at Sparx Trading. In addition to recently crossing the 10-year mark, earlier this year we launched a new website, affectionately named SparxTrading 2.0, given that it had been around pretty much from the time that Sparx launched in 2011.

Suffice to say, we felt it needed a makeover to keep pace with the new world of online investing. Little did we know at the time, 2021 would also be the year in which so much would change in the world of online investing. It seems like our timing was about right when it came to prepping a new look and feel for a brave new world filled with new trading platform features, zero commission pricing, and new providers (coming soon).

This past week, we rolled out some important updates to the website which we think will help self-directed investors (as well as industry observers who want to keep up with what’s going on in the space) stay on top of the big changes heading into RSP season.

Investor Feedback Added to Online Brokerage Reviews

When it comes to researching online brokerages, one of the biggest questions online investors have is what other online investors have to say. Community is a huge part of the self-directed investor experience, however, navigating the different online sources and forums can be a bit daunting.

To help make accessing user feedback easier, we have now integrated comments made about each online brokerage on channels like reddit and Twitter and directly connected them to each online brokerage review. So, for example, the latest comments made by online investors about Questrade or Wealthsimple Trade on reddit appear at the bottom of each of these respective online brokerage reviews.

Given that some of these brokerages generate a lot of conversation online, we added the ability to filter by channel, so readers can focus on the conversation taking place on reddit or on Twitter. To help combat spam and other nefarious activities, we also have developed a filtering system, so users also don’t have to scan through the questionable materials to find the good stuff.

Finally, to make things easy to verify, we’ve hyperlinked each of the comments so anyone researching investor comments from our website can go directly to the reddit or Twitter post to see what the rest of the conversation contains.

Our system is designed to evolve and learn over time so while it is not perfect at filtering out or capturing all of what we’d like, it’s a great advancement and beats having to sift through everything about a single brokerage manually. It’s something we’re going to continue to tinker with to improve, but we’re really excited to see this feature now in action.

Deals and Promotions Section Gets Reorganized

When we first launched the deals and promotions coverage on SparxTrading.com, we were able to capture most of the information in an “at a glance” format using tables.

Unfortunately, even though our website was responsive (a big deal circa 2011-2015), the tables that powered our comparisons and the deals and promotions were not. Despite that being the case, these tables were really popular because they provided a birds-eye view of the different offers and promotions out there – a great feature for people who were browsing and for online brokerage staff who wanted a handy reference when comparing offers across the industry.

It was a big decision (and a huge amount of work) to completely refactor the deals and promotions section, but we felt it was worth it to deliver a more relevant user experience and make it more accessible to users on mobile devices. In the new format, self-directed investors can efficiently compare online brokerage promotions and offers using filters to pick what attributes are most relevant, whether that be minimum deposit amounts, account types, or offers from specific online brokerages.

In terms of the latest updates, one of the first things users will notice on the deals index page is that we’ve tidied up the design and user experience on the filter to perform more efficiently. Users can filter deals by deposit amount, online broker, account type, and deal type. Those interested in browsing can also view all deals by selecting all.

To keep advertising to a minimum on the website in what is sure to be an increasingly crowded advertising market, we wanted to find an alternative way to feature offers. There are now two spots at the top of the deals index results list for specific deals to be highlighted. These are offers that we might be compensated for either through affiliate revenue and/or via paid placement by online brokerages.

Featured Deals Snapshot

Finally, we’ve adjusted the design of the deals cards themselves to display promotions and essential information more clearly. Data about the deal, such as the minimum deposit, expiry date, and promo code, are readily visible at a glance and the details about an offer are easily expanded when needed.

We anticipate deals and promotions to play an even greater strategic role in how Canadian online brokerages navigate the new reality of a bank-owned online brokerage offering zero commission trading.

Case in point, we’ve seen a big bank competitor to National Bank Direct Brokerage, RBC Direct Investing, offer a 100% increase in the number of commission-free trades and the duration in which to use them compared to their previous offer. Specifically, new accounts at RBC Direct Investing can qualify for 50 commission-free trades for up to two years. Most passive investors will be challenged to use that up within the time frame, so those self-directed investors looking for the features of a bank-owned brokerage like RBC Direct Investing and don’t mind the premium commission price, will find a promo that can be used for up to two years compelling.

Also, there’s a lot that can happen within two years now that commission-free trading is starting to surface (see article below) and innovation among online brokerages is accelerating. Using deals and promotions strategically enables online brokerages in Canada to effectively delay the switch over to full zero-commission trading.

More Zero-Commission Trading Chatter

Another week, another big development in the zero-commission trading [storm] and another week in which other stories get bumped because zero-commission trading in Canada is kind of a big deal.

In a piece published this weekend by the French-language newspaper, Le Devoir, Desjardins Online Brokerage was reported to be waiving commission fees for clients last week. And comments in this reddit thread also seem to corroborate the reporting as well.

While we generally don’t report on rumoured activity, in our in-depth analysis of the launch of commission-free trading by National Bank Direct Brokerage, it was clear that the closest rival to NBDB would not have much choice but to either match the offer or make a substantial cut to pricing to defend its business.

There are few details to report on at this point, however, what has come through online investor chatter has been reports of clients contacting Desjardins Online Brokerage directly and having commission-fees waived. Until a formal announcement is made, there is likely to be a flood of calls and emails from clients requesting the same, which is why we expect to see a definitive (and formal) response rather quickly.

Currently, the standard commission at Desjardins Online Brokerage (aka Disnat) is $6.95 for the “Classic” option and as low as $0.75 per trade for the “Direct” option – typically the choice for active traders (defined as making more than 30 trades per month).

If confirmed to be true, the roll out taking place in this fashion is evidence that Desjardins Online Brokerage is being forced to respond quickly, and likely, reluctantly.

Unlike other online brokerages outside of Quebec, the local competition between National Bank Direct Brokerage and Desjardins Online Brokerage is extremely fierce. National Bank Direct Brokerage has set its sights on expanding nationally, which then justifies its move to zero-commissions because it can win the volume of business required to make commission-free online investing. For Desjardins, however, it does not seem like they have the same growth path in mind. With their stake in Aviso wealth, they can simultaneously cater to their core market in Quebec while continuing to benefit from higher commission pricing being charged by Qtrade Direct Investing outside of Quebec for however long that can be continued.  

Though clearly an important development, Desjardins Online Brokerage potentially being the next online brokerage after National Bank Direct Brokerage to eliminate trading commissions on equities and ETFs is still something the whole landscape of Canadian online brokerages can absorb. TD Direct Investing going to zero, on the other hand, would be a game changer.

This past week at the Scotiabank Financial Summit, comments by outgoing TD CEO, Bharat Masrani, revealed the executive view of going to zero commissions. Below is an excerpt from a discussion with Meny Grauman, Managing Director at Scotiabank, host of the virtual summit.

Meny Grauman

You talked about TD’s Direct Investing business, definitely yes, very topical. So I thought to just touch on that. National Bank and Wealthsimple going to $0 commissions and the question is, will TD match that offer? What’s the competitive response? How do you see this all playing out in the market?

Bharat Masrani

You know, Meny, we’ve been in this business I think we were the first bank in Canada to get into it in the mid ’80s I think. And, we’ve seen price compression come and go. We’ve seen lot of different sort of business models emerge out of it, and we’ve been able to manage it very well. So, is this a shocker? Absolutely not. Ours is a very large business, fully segmented and very integrated to the rest of the TD offerings. In fact, 80% of our direct investing clients have other TD products and TD relationships as well, so tells you how integrated we are.

Secondly, the offerings we have, from a very sophisticated options trading to a offerings for active traders, for offering for long-term investors, so you know there are offerings, there are specialized products available in each of these segments. And is it, I mean, you should, this should not come as a shock, but based on certain types of traders, we have special arrangements based on their needs and their offerings, and what value they need. And so, when we look at our trading commissions are taxed well, the reality is, depending on which segment you’re looking at, it could be less than that.

So I think it’s important to keep that in mind. So we feel very comfortable with our position, the offerings we have integrated with retail, the products that we offer, the services, if you look at thinkorswim platform, there’s nothing like that in the options trading business. And if a client needs that, that’s where they’re going to go.

And finally, I mean, there’s a lot of sort of, write-ups on this, but the overall commissions in this business represents about 1% of total revenues at TD. So we’ve got to keep this in perspective as to what it does to the bank, than to think that oh, my God, this is a major, major, I’m not undermining anything, every part of our business, I love every part of our business and the business model around it. But our job is to adapt to the environment we find ourselves in rather than hoping, wishing and praying that we go back to the good old days, that does not happen. And we have shown consistently that we will adapt, and we will adapt faster than others and I have no doubt that we will do so.

And another point I’d make, we just introduced TD GoalAssist, that’s a new offering there that competes very well, if a client is just requiring vanilla type of trading and services and then not the other value-added services that I just talked about. So important point is event that has occurred don’t want to underestimate as to what it means, but we feel very comfortable with the business model we have and the value proposition we provide to our customers.

There’s clearly lots to unpack from that statement, however, there are three specific data points of interest.

First, 80% of TD Direct Investing clients are also clients of other TD products and services. If this is true for TD, then it is likely comparable at other big-bank-owned online brokerages as well. The notion that Canadian self-directed investors would prefer to have the convenience of keeping all of their financial affairs at one firm is evident in that data point. The move by National Bank Direct Brokerage, therefore, is likely a play to acquire new customers that will then also want to simplify the management of their financial affairs by housing other financial relationships under the same digital roof.

The second point of interest is that revenues from commissions at TD represent about 1% of total revenue. For a finer point, as referenced in their last earnings call, the amount would be 50% of the broker dealer fees and commissions which last year brought in $860 million dollars and year to date have generated $849 million dollars. The “hit” that TD would incur, therefore, would be something that could be absorbed by the bank as a whole. For reference, TD generated $42 billion dollars in revenue in 2020 and almost $32 billion dollars year to date.

Third, and perhaps most instructive to those holding out for the big banks to make a move similar to National Bank Direct Brokerage and potentially Desjardins Online Brokerage, is that TD feels confident enough in their value proposition, in particular with their options trading platform and other elements, that they don’t need to rush to lower their commissions to zero. On this front, they’re happy to let others go first, which likely mirrors what at least one or two of the big bank online brokerages are thinking as well.

While TD is clearly stating they are ready to adapt (read: respond) if a sizeable competitor or peer firm moved to reduce their commissions substantially, self-directed investors hoping for a quick response to National Bank Direct Brokerage shouldn’t hold their breath. Movements by Desjardins Online Brokerage and potentially other smaller online brokerages seem to be inevitable in order to preserve market share. TD Direct Investing doesn’t really have to worry about that.

The rate-limiting factor, it seems, is how aggressively National Bank Direct Brokerage is prepared to advertise against competing brokerages while those online brokers maintain high commission rates. With more discussion and conversation on zero-commission trading to be almost a given, National Bank Direct Brokerage will likely be heavily referenced in that discussion, earning them a big discount on the media exposure.

That said, picking a fight with all of the other Canadian online brokerages this far ahead of the RSP season still gives competitor firms a chance to respond. And they will.

Had National Bank Direct Brokerage dropped this news in October or November, other Canadian online brokerages would have been hard-pressed to pivot their campaigns and advertising buys quickly enough.

With a few extra weeks of lead time and a healthy fiscal year performance across the board, there just might be enough capital and circumstance to warrant some pretty interesting fireworks this year. And it seems the best place for that might just be the deals and promotions section. Here’s hoping.  

From the Forums

Interactive Brokers Crypto Trading Launch

After a lot of hype around cryptocurrency trading being available at Interactive Brokers around September of this year, the actual launch of this feature was abnormally quiet. No coverage (yet) on major media but in this reddit post, online investors took notice (and we did too). More to come on this story but check out the early reactions.  

Crunching the Numbers on Motley Fool

As a very visible source of information about different investing opportunities, Motley Fool is a recognizable name among online investors. In this interesting post on reddit, one individual shared their analysis of whether the forecasts from Motley Fool lived up to the reality when it came to portfolio performance.

Into the Close

Apparently, there is lots to say (and still more to come) when it comes to zero-commission trading. There are other fascinating stories unfolding across the online brokerage space, so we look forward to highlighting those as well. At a certain point we can probably defer the reporting to a DJ Khaled meme. Until then, however, there’s lots going on between the launch of football (NFL) and the final stretch of the Canadian federal election (where people toss political footballs and, occasionally, pebbles). Whatever you’re focusing on this week, we hope you find some reasons to stay positive!

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Discount Brokerage Weekly Roundup – June 14, 2021

Taking a Moment

There’s a lot that goes into the production of a Weekly Roundup that many readers don’t see. Looking back on the week that was is as much a habit as knowing which letters to capitalize in an online brokerage’s name. Despite the hundreds of times having done this, occasionally something happens in a week that forces a pause from business as usual.

This past week there was a terrible tragedy that took place in London, Ontario. Four members of a family were murdered simply for looking and being different than what someone decided was appropriately Canadian. They were murdered because they were Muslim.

Like many Canadians, it is hard to find words to capture how thoroughly awful and traumatic this event was. And so, we are left with yet another heavy but necessary exercise: to not turn away from the terrible news but this time to watch and engage.

The news cycle will move on before the people will. A young boy will be left to figure out the rest of his life without his parents and sister beside him. Muslims and other religious and ethnic communities across Canada will forever be slightly less trusting that everything will be OK.

Before getting back to business as usual, I wanted to call attention to Islamophobia and the responsibility all of us bear to call out prejudice when and where we see it.

Please take a moment and either watch or read about this family.

All of us have a part to play in looking out for each other.

A Tale of Two Tables: 2021 MoneySense Online Brokerage Rankings Released

It’s hard to believe, but the DIY investor datapalooza (or datastravaganza?) that is characterizing 2021 continues to chug along well into June.

Earlier this month, a popular Canadian investment publication, MoneySense magazine, published their 2021 Canadian online brokerage rankings, essentially capping off the last of the major discount broker rankings for the summer.

Even though the fall feels far away, online brokerages are undoubtedly at work planning for their ramp up at the end of the year. These latest Canadian online brokerage rankings will ultimately prove to be a big part of what will help online investors shape their perceptions and decisions around which online broker they choose to go with, and ultimately impact how online brokerages market and talk about themselves for the rest of the year.

Why is this Online Brokerage Ranking Important?

Now in its ninth year, the MoneySense rankings have become a go-to resource for many DIY investors curious about the online brokerage marketplace in Canada. As the landscape evolves for online brokerages and self-directed investing, so too do these rankings.

Helping MoneySense stay on top of those changes is Surviscor, a financial services research firm that evaluates Canadian online brokerages across a number of different parameters.

Frequent readers of the Weekly Roundup will already be familiar with the research and in particular, the online brokerage rankings, produced by Surviscor. For a timely throwback, be sure to check out our Look Back/Look Ahead series featuring Glenn LaCoste, President and CEO of Surviscor, and the author of this year’s MoneySense online brokerage rankings.

With yet another online brokerage ranking appearing this year, it’s a lot for online investors to digest. The MoneySense rankings in particular offer an interesting way to see the importance of defining what’s “best” when it comes to online brokerages. Also, in digging through the data, we uncovered an interesting relationship between a major driver of investor decision making, cost of services, and the performance on measures of investor experience – like service.

There’s lots to dig into, so grab some caffeine and get ready to scroll.

Methodology

Online brokerage rankings and evaluations help to make sense of the often-confusing question: “which online brokerage is best?”

With several Canadian online brokerage rankings available for online investors to consult, it is important to come back to a familiar concept – that each online brokerage ranking measures the idea of what’s best in a different way.

The MoneySense online brokerage rankings are often cited as a resource to evaluate almost all of Canada’s online brokerages. Like most of the other comprehensive rankings, information is published annually, and as a result, the data takes a snapshot of the past year or so in the world of DIY investing at Canadian online brokerages.

It is important to note that the data for the MoneySense online brokerage rankings comes from financial services research firm Surviscor. Specifically, according to the methodology, the MoneySense rankings are based on a combination of the following Surviscor reviews:

1. Online experience

2. Mobile experience

3. Cost of services experience

4. Service experiences

Points were assigned to each online brokerage according to a points-based system in which each brokerage received a score based on its ranking within the seven sections of the review:

1st = 5 points

2nd = 4 points

3rd = 3 points

4th = 2 points

5th = 1 point

The overall score was the sum of the awarded sections and reported as points.

In addition to reporting on the points earned by each brokerage as part of this review, the MoneySense rankings also reported the “Best online brokers” by category. The breakdown is as follows:

  • Best online broker for fees
  • Best online broker for customer service
  • Best online broker for ETF investing
  • Best online broker for stock investing
  • Best online broker for financial literacy
  • Best online broker for market data
  • Best online broker for customer onboarding
  • Best online broker for mobile experience

Within each of these categories, the top two firms were reported.

Strengths & Limitations

One of the strengths of the review is that there is lots of data reported for investors to consider, and it has been published in a way that identifies the top two firms in each of the stated categories. This saves a lot of time for investors or readers who simply want or need a quick answer from a reputable source.

A big plus this year is that there is a companion publication on the Surviscor blog which dives into detail on the scores and provides more context on the process.

In terms of limitations, presenting this volume of information can be a challenge. For example, the methodology stated:

“Each firm was assigned a score based on its ranking within the seven sections of review (5 points for first; 4 for second; 3 for third; 2 for fourth; and 1 for fifth), and the overall score was the sum of the awarded sections.”

Given that there are eight reported categories (noted above), it was not immediately clear which seven sections of the review were being referred to, and as a result, validating the math or seeing how scores varied across sections would have added important context to rankings.

For example, one of the immediate questions that jumps to mind with the points system is what the maximum possible score would be?  Without that information, it is hard for the reader to get a sense of just how good a particular brokerage is. And, when the scores are close, or tied, the value of points and how they get calculated becomes even more important to contextualize results.

Results

The results for the 2021 MoneySense online brokerage rankings are shown in the following table.

FirmMoneySense PointsMoneySense Rank
Questrade361
National Bank Direct Brokerage312
TD Direct Investing253
Qtrade Direct Investing224
BMO InvestorLine95
Scotia iTRADE66
RBC Direct Investing57
Desjardins Online Brokerage48
Wealthsimple Trade48
Virtual Brokers48
Canaccord Genuity Direct48
CIBC Investor’s Edge212
HSBC InvestDirect113
Laurentian Bank Discount Brokerage014

Questrade took the top spot in this year’s rankings with a total of 36 points, followed closely by National Bank Direct Brokerage (31 points), and TD Direct Investing in third place (with 25 points). Again, without a maximum score, it is difficult to know exactly how well any one brokerage could have done.

The methodology states that there are seven “sections” and a five-point maximum which would imply a maximum score of 35. However, Questrade has clearly exceeded that score, hence some confusion.

Data outside of the top five brokerages was not published in the MoneySense rankings, however, it was available on the Surviscor site, which helped identify additional context on how the entire field of online brokerages performed this year.

One of the first noteworthy items is just how sharp the drop off is from fourth to fifth place in these rankings. Qtrade Direct Investing placed fourth with 22 points. However, BMO InvestorLine, with just nine points, managed to make it into the top five.

Even though on a relative basis, a top five finish may not sound so bad, in the case of this year’s ranking, the distance between fourth and fifth is materially different.

Another interesting observation about the data is the number of firms who tied for eighth place. CG Direct, Desjardins Online Brokerage, Virtual Brokers, and Wealthsimple Trade are very, very different firms, and yet each tied for eighth place with four points.

Somewhat stunning are the positions of CIBC Investor’s Edge and HSBC InvestDirect, who placed 12th and 13th respectively. In the case of the former, being a “Big Five” bank-owned brokerage should in theory enable it to have the resources to score better, but with a score of two points, it implies that Investor’s Edge was rarely a top five brokerage in any of the evaluated categories. Similarly, HSBC InvestDirect scored one point, and it too barely placed in a top five finish in any of the categories measured.

Surviscor’s “behind the scenes” look at the MoneySense rankings also provided some additional context and important takeaways when it came to this year’s analysis. The following five statements were made in reference to the data and the items that online investors (and online brokerages) should pay attention to.

  • Beware the marketing when it comes to fees
  • Firms never get a second chance to make a first impression
  • Financial literacy is weak
  • Mobile experience is still not where it needs to be
  • $0 commission is not always worth it

With so much data to crunch, it can be a challenge for DIY investors and industry analysts alike to form a “big picture” of what’s going on in the online brokerage space.

Surviscor’s multiple studies to measure online brokerages got us curious, so we compiled the ranking data from each of the four online brokerage analyses cited in the MoneySense rankings, and crunched the numbers to see what the correlation would be between the combined rankings of each evaluation and the MoneySense ranking data.

Methodology, Part Deux

First a(nother) note on methodology. The rankings in each of the four different Surviscor evaluations used in the MoneySense ranking were averaged out and reported along with a standard deviation. The computed rank is one that we generated based on the average rank across each of the evaluations.

 To try and get as close to an apples-to-apples comparison of how different online brokerages ranked against each other in each of the four evaluations, it was necessary to make some minor adjustments to the data.

In the Service Experiences, Interactive Brokers was actually evaluated, so for the sake of consistency across comparisons, they were excluded from the data and the ranks of other brokerages adjusted upwards by one. Wealthsimple Trade was assigned the lowest value for not having been able to be measured. For the actual service experience scores, check the link here.

Adjustments were also made in the Online Experience and Mobile Experience rankings. Laurentian Bank Discount Brokerage and CG Direct were assigned the lowest rank since they did not offer anything that could be evaluated using those tools.

Results

One of the first things to stand out is that the top four brokerages in the 2021 MoneySense online brokerage rankings are the same four online brokerages when computing scores across the four Surviscor evaluations, however, the order in which they appear is different.

In the computed rank, the measure that we calculated, Qtrade Direct Investing came in first, followed by National Bank Direct Brokerage, Questrade, and TD Direct Investing, respectively. What also stood out in the top three is that the average rank between Qtrade Direct Investing, National Bank Direct Brokerage, and Questrade is very close, ranging between 4.0 and 4.8. Having the standard deviation handy (shout out to the stats profs who drove home the point about standard deviations) as a measure of consistency, however, adds a bit more nuance to the top three online brokerages.

Specifically, Qtrade Direct Investing has a relatively low standard deviation (2.3) indicating their ranking is relatively consistent from one evaluation to the next. By comparison, Questrade has the highest standard deviation of the group (5.7), which points to the remarkably poor ranking they received in the Cost of Services evaluation (they ranked 13th). Having the context of all the data helps to illustrate where exactly the top three online brokerages excel relative to each other, and to see how consistently (or inconsistently) online brokerages are scoring.

Consistency cuts both ways, however.

RBC Direct Investing had the lowest standard deviation (1.2) of all of the rankings, implying a fairly consistent score across different evaluation studies. Their average rank was sixth, and the computed rank put them in fifth place overall.

By comparison, Virtual Brokers also had a very low standard deviation score (relatively speaking) at 2.1, but their average rank of 9.8 landed them with a computed rank of 13th overall. This implies that Virtual Brokers has consistently performed poorly on the four Surviscor evaluations for 2021.

It was also intriguing to note that after about eighth place in the MoneySense ranking, the divergence between these scores and the computed rank became more pronounced. In particular, CIBC Investor’s Edge ranked 12th in the MoneySense ranking but ninth in the computed ranking, only slightly behind Scotia iTRADE and Desjardins Online Brokerage.

Takeaways

Being able to step back and take a big picture view of the data provides a unique window into how the different evaluations generated by Surviscor come together, and how they compare to the MoneySense rankings.

When placed side by side, the combined Surviscor studies used in the MoneySense ranking show that firms that are strong on experiential factors, such as online, mobile, and service, tended to do better overall in the rankings.

Interestingly, with the exception of National Bank Direct Brokerage, firms that tended to do well on pricing had a negative correlation to performance on the MoneySense or combined Surviscor rankings. This points out that perhaps there is an inverse relationship between the cost of services and the experience of online investing.

Thus, having the additional data presented in a big picture format does help illustrate what exactly online investors would have to trade off. For example, in choosing between Questrade and National Bank Direct Brokerage, investors can see that the tradeoff might be one of “cost of services” versus “online experience.”

Clearly there is lots of data to explore, which can be both a pro and a con for online investors looking for a quick answer to “which online brokerage is best?”

The reality is that rankings help to compress a lot of the analysis into an easy to digest number. However, as illustrated above, how one defines “best” – even when using the same underlying data – can impact how specific brokerages are perceived and reported on by media, online brokerages themselves, and other DIY investors.

What is evident in looking at the big picture of this data is that the field of Canadian online brokerages is crowded, and with even more new entrants poised to add to the numbers, keeping on top of the evolving space is an ongoing challenge. For those that want to avoid the spreadsheets and comparisons, rankings offer a quick shortcut. But like everything else when it comes to investing online, it pays to do your homework.

Into the Close

That’s a wrap on this week’s Roundup. It’s been a difficult week but here’s hoping we can look for, find, and create the good in the week ahead.

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Discount Brokerage Weekly Roundup – May 31, 2021

It’s Memorial Day weekend in the US, which means that markets there are closed. Here in Canada, however, despite it being a short week last week, the volume of newsworthy developments was quite hefty. There’s lots to catch up on.

In this edition of the Roundup, we look at a big Canadian online brokerage making a splash by jumping into commission-free ETFs. From there, we continue to plumb the depths of more DIY investor data with an important online brokerage rankings release. As always, we cap things off with a snapshot of investor chatter from the DIY investing forums.

BMO InvestorLine Launches Commission-Free ETF Trading

Every now and then a tipping point development takes place in the Canadian online brokerage space. This past week, we might have just witnessed another important milestone in the price reduction for DIY investors.

News started to spread among DIY investors that BMO InvestorLine has launched commission-free ETF trading for a list of 80 ETFs.

This is clearly a big deal given the prominence of BMO InvestorLine in the Canadian online brokerage landscape. And, while they are not the biggest or most popular online brokerage, they do command a respectable amount of attention in online brokerage rankings, and they are part of the “Big Five” bank-owned online brokerages.

Commission-free ETFs at Canadian online brokerages are neither novel nor are they new to Big Five banks either.

Scotia iTRADE, for example, has a list of 49 (as of the date of publication). However, they launched this feature back in 2011 – almost ten years ago – and were followed by Qtrade (with a list of 100 commission-free ETFs) and Virtual Brokers in 2012.

National Bank Direct Brokerage also offers commission-free ETF buying and selling on all ETFs (Canadian and US) so long as minimum purchase amounts are met (minimum 100 units). And, for good measure, Questrade and Virtual Brokers offer commission-free buying of ETFs. Not to mention Wealthsimple Trade, where all Canadian ETFs can be traded commission-free.

Thus, BMO InvestorLine is not the first to jump into the pool by any means, but their offer is already making a splash among DIY investors, who are reacting with the same enthusiasm they did almost a decade ago when these free offerings first hit the market. The difference between now and ten years ago, however, is that commission pricing and consumer preferences and expectations have changed dramatically. Online brokerages in 2021 have to work a lot harder to impress investors today than they did in 2011.

What is interesting about the latest launch by BMO InvestorLine are the “strings” attached to trading these commission-free ETFs. While the list of eligible ETFs is respectable at 80, there is a restriction that investors must hold the ETF for at least one business day from the date of purchase, which is bound to create some friction with some active users. Upon deeper reflection, however, it seems like the math still works out in BMO’s favour.

By implementing the “speed bump” on the timing between purchase and selling, the day traders are going to be excluded (for now). This implies the feature is targeting “investors” (or swing traders), and will almost certainly challenge National Bank Direct Brokerage’s approach of the required minimum buy

Directly challenging Qtrade Direct Investing and Scotia iTRADE will come down to other features and conveniences that BMO InvestorLine can offer clients. As such, it seems like a faceoff between Scotia iTRADE and BMO InvestorLine – but in a great move at the puck drop, BMO InvestorLine has posted a public statement about wait times on its website. This is a direct shot at Scotia iTRADE, which has suffered extended wait times on its phone lines for years, reaching almost unimaginable durations during the past year.

BMO InvestorLine is a large enough competitor to the steady state operations of both TD Direct Investing and RBC Direct Investing, that this latest move to include commission-free ETFs will not go unnoticed. It will also not go unnoticed by the Wealthsimple Trade crowd who find the lack of additional features or slow money transfer annoying at times.

Interestingly, at the time of publication, we had yet to see a big, splashy announcement, but that is almost certainly forthcoming. What BMO InvestorLine’s latest foray likely signals, however, is that one of the standard features an online brokerage needs to come to the table with in 2021 and beyond is ultra-low cost ETF trading.

While wishing for industry-wide dominos to fall might have been premature in 2011, even with a prominent bank-owned online broker getting into the mix, the famous last words of “it’s this different this time” ring true.

Most of the Canadian online brokerage field has managed to do just fine up until now without having to concede ground on commission-free ETFs, let alone commission-free trading. That said, treading water when it comes to pricing or innovation in features no longer feels like an option when the investor tide has clearly turned towards lower-priced alternatives.

Latest Canadian Online Rankings Point to Underwhelming Experiences for DIY Investors

If April showers bring May flowers, it seems like those showers also have brought with them a deluge of data on the DIY investing space in Canada, the US, and even around the world.

The latest landmark data release to launch (publicly) occurred last week, when J.D. Power released the 2021 edition of their Self-Directed Investor Satisfaction Study for Canadian online brokerages.

Now in its 13th year, this study measures “investor satisfaction” among Canadian DIY investors who are clients at a number of popular online brokerages. This year, as in the past few years, eight of 14 or so Canadian online brokerages were included in the analysis, providing a reasonably good approximation of the state of investor satisfaction among Canadian investors.

Of course, regular readers of the Roundup know what’s about to come next when talking about another data report on DIY investors or online investing: we have to dive into the methodology to understand what is being measured and better contextualize the findings.

Like many other online brokerage rankings we’ve covered recently, this year’s J.D. Power investor satisfaction study contains a rich source of insight about DIY investors. And, while the reporting format is fairly standard to its historical structure, what caught our eye this year were the important changes that were made to how investor satisfaction was defined.

Methodology and definition changes aside, it was fascinating to unpack the data on this year’s win, but also to contextualize this year’s results against the historical data from this survey. This has helped to really clarify who has been working hard to consistently improve, who has struggled in 2020/2021, and what the DIY investor can expect when it comes to online brokerages in Canada (hint: it’s not great).

What are the rankings about – what do they measure?

Before diving into the results, it’s extra important to spend some time reviewing the methodology and what’s changed about what this study measured in its latest edition.

According to the press release announcing the findings, there were 2,011 Canadian investors surveyed from December 2020 to February 2021 about their perspectives on various components of the online investing experience.

As mentioned in previous coverage of this study, the definition of “investor satisfaction” is made up of multiple components, and this year the factors that comprise that definition changed. The table below shows the seven components that “investor satisfaction” was measured against in 2020 and in 2021.

Change in Definition of Investor Satisfaction: 2020 vs 2021
20202021
Firm interaction (1)Trust (1)
Account information (2)Digital channels (2)
Commissions and fees (3)Ability to manage wealth how & when I want (3)
Product and service offerings (4)Products and services (4)
Information resources (5)Value for fees (5)
Investment performance (6)People (6)
Problem resolution (7)Problem resolution (7)

While there are a couple of components, such as products and services and problem resolution, that appear in the same level of priority in both frameworks, the rest of the changes point to a significant difference in the drivers of investor satisfaction.

At the top of the list for 2021, “Trust” is now the most important driver, followed by “Digital channels” and the “Ability to manage wealth how & where I want.” In 2021, pricing – as measured in “Value for fees” – falls to fifth from third place.

One of the important limitations of the published rankings is that they did not provide detailed definitions of what these terms refer to specifically. And, with a term like “trust” there could be many different interpretations of what that refers to. Nonetheless, there are some reasonable assumptions that can be made around most of what these categories refer to. The most important point to take note of is that the construct of “investor satisfaction” – or even which online brokerage is “best” – is highly dependent on how that is being measured.

DIY investors place different weights on the importance of each of these factors, so although this survey provides a systematic approach to comparing investor attitudes and beliefs about the online brokerage experience, individual investors are likely to have differing opinions on how well or poorly these results match their own experiences.

What are the findings from this year’s results?

With some important qualifiers out of the way, the results from this year’s study paint a portrait of an industry that has struggled to keep pace with the level of demand from DIY investors. Whether it was on the customer service front, where wait times and getting through to a human was nearly Sisyphean, or it was on platform stability on the most volatile of trading days (or some not-so-volatile days either), how online brokerages weathered the storm became evident through the data gathered in this study.  

Perhaps the most telling finding in this regard is that 24% of investors reported having at least one problem with their firm in the past 12 months, up from 14% in 2020 and more than double the rate in the US (11%). For active investors, this is a big problem when it comes to assessments around reliability. For less active investors, however, if the most “exciting” days to be in the market are fraught with outages, delays, or interruptions to service, there is almost no second chance to make a first impression.

And, according to additional findings in the data, those hiccups matter. 20% of investors who experienced a problem stated they are considering switching, which is more than three times the rate of those without issues who would consider switching online brokerages.

According to Michael Foy, Senior Director and Head of Wealth Intelligence at J.D. Power:

“Especially for newer clients, those who have not yet developed strong loyalty with these firms, who are more likely to leave if they have a bad experience. Investors today have more choices and firms need to raise the bar on the experience they deliver.”

Of course, beyond the contextual information, the focal point of the rankings is the list of how each online brokerage scored.  

National Bank Direct Brokerage654
Questrade645
RBC Direct Investing615
BMO InvestorLine607
Desjardins Online Brokerage599
TD Direct Investing591
CIBC Investor’s Edge585
Scotia iTRADE576

The table above shows the numerical scores achieved by Canadian online brokerages that were reported on for this study. The scoring for the online brokerage ranking by J.D. Power is out of 1,000, so it was interesting to note that this year the scores were lower on average than they have been historically (more on that in a moment).

The average score across the eight online brokerages that were reported on was 602. On an absolute basis, it is tricky to compare year over year results now that the evaluation criteria has dramatically shifted. However, on a relative basis, it is possible to derive additional insight.

One of the first things that is important to point out is the spread between first and last place. In this case, the distance between the top and bottom of the ranking is 78 points. By comparison, last year’s ranking saw a difference of only 33 points between top and bottom. It is therefore fair to say that volatility in this year’s rankings reflect some meaningful differences in the way online brokerage operations are impacting investor satisfaction.

The difference between first place ranked National Bank Direct Brokerage and second place Questrade was only nine points, but the difference between second and third place (RBC Direct Investing) was a whopping 30 points. What this implies is the top two firms substantially outperformed the remainder of their peers on the measures contained in this ranking.

Curiously, the difference between placements from third place onwards is a fairly consistent six to nine point drop. This linear decrease is probably an artifact of certain kinds of measures, but it implies that the bottom six online brokers could make significant strides on this index with a minimal amount of effort invested in customer satisfaction.

What is not a coincidence, however, is that five of the bottom six online brokerages in this ranking are the Big Five bank-owned Canadian online brokerages. The differentiating factors between these brokerages are minimal, so it stands to reason that investor satisfaction levels with these bank-owned online brokerages is probably pretty close too.

In contrast, the data from the latest online brokerage survey imply that the firms at the top have found the right mix of service and pricing with DIY investors in 2020, which has created a big gap between these firms and the rest.

National Bank Direct Brokerage and Questrade were able to do something very different and appealing for their clients, compared to the rest of the industry in 2020.

How do this year’s results stack up over time?

It’s at this point that historical data is incredibly helpful to provide additional context around online brokerage performance on the J.D. Power Investor Satisfaction rankings.

Analyzing the results from 2017 to 2021, one of the first things that immediately jumps out is that the average investor satisfaction scores with Canadian online brokerages, regardless of how they’re measured, have been decreasing.

Scores from J.D. Power Canadian Self-Directed Investor Study 2017 to 2021 (heatmaps applied to each year).

The stretch from 2020 to 2021 is an anomalous one in terms of customer composition for online brokerages because so many new investors have joined the client pool.

As the J.D. Power study pointed out, many of these new clients haven’t had the benefit of seeing what the experience was prior to this year. With the number of service and performance issues many online brokerages suffered from, the risk of new clients who joined an online brokerage leaving shortly after joining is likely higher than it’s been in the past.  

For DIY investors who have been around since 2016 (which is what the 2017 data would have captured) or earlier, J.D. Power’s satisfaction scores imply being a DIY investor has probably felt like an investment with diminishing returns at most of the brokerages analyzed. Even if pricing has become more competitive, the value proposition has not improved overall, at least in the firms whose data was published as part of this ranking.

Since not all online brokerages were reported on, it is hard to say what the DIY investor experience has been like at Qtrade Direct Investing or Interactive Brokers or even Wealthsimple Trade, names that are often associated with significant enthusiasm in either rankings or DIY investor community discussions.

Another remarkably consistent pattern that stands out with these rankings is not so much who’s at the top, but rather who has remained at or near the bottom.

In three of the past four years, Scotia iTRADE has ranked as the online brokerage with the least satisfied clients, with TD Direct Investing not too far behind. Historical data also shows that CIBC Investor’s Edge has gone from being among the top online brokerages as recently as 2019 to second last in 2021.

Looking back over the past five years, Questrade stands out as an online brokerage that has continuously strengthened its satisfaction scores, and although it dropped from top spot last year to second place this year, it continues to move in a positive direction for DIY investors, even under the new evaluation criteria. On a relative basis, RBC Direct Investing has gone from a consistently average score to one that is better than average.

Historical investor satisfaction data also helps to quickly spot online brokerages who had an especially rough year in terms of maintaining investor satisfaction.

Desjardins Online Brokerage, for example, went from a market leading (or high scoring) position from 2017 through 2020 to being below average in 2021. Another unusual score was BMO InvestorLine’s. Like Desjardins, BMO InvestorLine consistently placed at or near the top from 2017 through 2020, however for the 2021 results, BMO InvestorLine just barely beat the average.

As mentioned above, the changes in the methodology used to define investor satisfaction make comparing absolute scores from one year to the next hard to do, but the relative position of each of these Canadian online brokerages to one another makes it clear who the leaders and laggards are. Perhaps most compelling is that the bottom of the pool did not really change in 2020 and 2021 despite the shift in how things are being measured.

Takeaways

There are a number of very interesting takeaways from the latest online brokerage rankings by J.D. Power.

As other data points have indicated, most Canadian online brokerages were not ready for the crush of new business in the form of DIY investors wanting to sign up for new accounts, or for the flood of investor trading volume that came with it. What the J.D. Power satisfaction study helped put into sharper focus was the impact to firms via the voice of their customers.

The new methodology by the investor satisfaction study puts Trust at the top of the criteria that they now evaluate online brokerages with. In a world where pricing among online brokerages is increasingly under pressure, DIY investors are still going to expect that an online brokerage platform be reliable, and when pricing is high, so too are expectations around the ability to perform when needed.

National Bank Direct Brokerage appears to have figured out some key ingredients. Low commissions, and entirely free commission buying and selling are important on the pricing front, and whatever they happen to be doing on the service front is working as well.

The latest evaluation by Surviscor highlights the pricing advantage that National Bank Direct Brokerage offers relative to other brokerages, and National Bank Direct Brokerage is starting to gain traction in discussions on social media channels. With this additional accolade, the “trust” profile and the interest in National Bank Direct Brokerage is sure to grow.

According to the J.D. Power Investor Satisfaction Study, Canadian online investing satisfaction scores are nothing to write home about. The troubling trend the historical data has uncovered is that there is a palpable gap in innovation and enthusiasm to do better for clients. Compared to the US, most Canadian online brokerages are trailing in areas that are critical to building loyalty and client delight.

The opportunity to any Canadian online brokerage who reviews this data is that an extraordinary service or innovative experience can earn and win a lot of praise. As the saying goes, there is far less traffic on the extra mile, so firms doing more in either service or innovation are going to stand out (in a good way).

From the Forums

Riding the Commission-Free Waive

It’s hard to keep a deal this good a secret for long. Eagle-eyed DIY investors spotted a new commission-free ETF feature at BMO InvestorLine before any official announcement. Here are a few links of interest worth browsing:

BMO InvestorLine Now Offering Commission Free ETFs (reddit)

Zero Commission ETFs (Financial Wisdom Forum)

Commission Free ETFs at BMO Investorline (Red Flag Deals)

Commission-Free at Last

Is the grass (and account statement) really greener on the other side of the $10 commission per trade? One forum user sparked a lively discussion of DIY investors on the topic of switching away from paying higher fees for trading online. Read more about what users had to say here.

Into the Close

With US markets closed, there’s only one story that matters to many Canadian DIY investors – will the Leafs beat themselves? Ironically the last time the Toronto Maple Leafs were in the Stanley Cup playoffs was the same year Friends signed off, which was 2004. In 2021, it’s going to be debatable who had the bigger comeback.

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Discount Brokerage Weekly Roundup – May 17, 2021

With the weather starting to warm up, flowers aren’t the only thing springing up at every turn. This month, it seems like DIY investing data continues to bloom, offering some very colourful perspectives on the current online trading landscape.

In this edition of the Roundup, we dig into yet another treasure trove of online brokerage and DIY investor data and find out why measuring the similarities between online brokers is challenging. Also, we’ve got reactions by DIY investors to interesting survey results and more in the forum chatter.

Reviewing Online Brokerage Pricing: Latest Rankings Challenge Perceptions of Low-Cost Online Trading

Another week, another big online investing data report to talk about.

This past week, fees at Canadian online brokerages were under the microscope, as Canadian financial services research firm Surviscor published a significant analysis of the fee structures at 15 Canadian online brokers and found some surprising – and at times controversial – results.

If there’s been any recurring theme to the coverage of the reports we’ve analyzed over the past few weeks, it’s that context matters. In particular, while it is tempting to focus on the headline results, it is often crucial to understand the methodology underpinning a study to properly understand the outcomes.

In the case of this latest analysis by Surviscor, this is especially true, because question at the heart of this study is “Who is Canada’s lowest cost online brokerage?” As any long-time reader of the Weekly Roundup will know, however, the answer is usually “it depends.”

So, before diving into the results, we’ll start by looking at the methodology and process information provided about this study which will better enable readers to understand how the results were ultimately arrived at.

Method Matters

One of the most interesting features of the Surviscor online brokerage fee analysis is sheer number of different factors that it considers. Like anything, however, the devil is in the details.

At a high level, the following six cost categories were measured:

  1. Equity trades
  2. Options trading commissions
  3. ETF commissions
  4. Data costs
  5. Account interest rates
  6. General account fees
Stock commissions

When it comes to equity trades, over 12,600 simulated equity orders were analyzed. Specifically, 6,300 buy and sell orders for Canadian and US equities, respectively, were measured. The prices and volumes of securities varied and ECN fees were applied where applicable.

Options commissions

Treated as a sub-category, options commissions on a total of 340 option orders, split into 170 Canadian and US buy and sell orders (of various price and contract levels), were measured.

ETF commissions

Over 350 ETF orders consisting of over 175 Canadian and US buy and sell orders were analyzed, each order consisting of 700 shares per order.

Data costs

Market data fees were examined in this category, and consist of the fees charged by firms to provide real-time quotes, streaming quotes, trading dashboards, and “enhanced” research and tools.

Account interest

This category measured debit and credit interest for both non-registered and registered accounts in Canadian and US accounts.

General account fees

Fees included and measured in this category refer to inactivity fees, non-registered and registered account annual fees, charges to transfer assets, confirmation fees, closure fees, and account investigation fees.

Another important methodological point to understand is that profiles of traders/investors were broken into the following five categories based on the number of trades made per month:

  1. 0-4 trades
  2. 5-9 trades
  3. 10-33 trades
  4. 34-49 trades
  5. 50+ trades

Results & Analysis

The table below shows the rankings of all the Canadian online brokerages measured as part of this study.

RankOnline BrokerageScore
1National Bank Direct Brokerage93%
2*Wealthsimple Trade86%
3Desjardins Online Brokerage83%
4HSBC InvestDirect77%
5CIBC Investor’s Edge76%
6Qtrade Investor (now Qtrade Direct Investing)61%
T-7RBC Direct Investing54%
T-7Scotia iTRADE54%
T-7Laurentian Bank Discount Brokerage54%
T-10TD Direct Investing53%
T-10BMO InvestorLine53%
12Virtual Brokers50%
13Questrade45%
14Canaccord Genuity Direct42%
15Interactive Brokers22%

The online brokerage that took the top spot in this edition of the online broker cost ranking was as much of a surprise as two of the bottom three rankings.

Starting from the top of the podium, National Bank Direct Brokerage came out on top in this study with the highest score of 93%.

Although it was not entirely clear based on the methodology what the percentage refers to exactly, on a relative basis it is clear that this bank-owned online brokerage managed to outrank its competitors because of lower standard commission pricing (which impacts equities and commissions trading), as well as the fact that it offers commission-free ETF buying and selling when at least 100 ETF units are either bought or sold.

Taking second place with 86% was a name that many newer investors and much of the popular press on online investing has characterized as the lowest cost online brokerage: Wealthsimple Trade. There was a heavily telegraphed caveat to the results of this study (the elephant-sized asterisk) when it came to Wealthsimple Trade, which, for several reasons to be covered below, makes them a very controversial pick for second place overall in this ranking.

In third place was Desjardins Online Brokerage – the direct rival to National Bank Direct Brokerage – who scored 83%. Desjardins Online Brokerage was the winner of this ranking last year, and depending on whether or not to include Wealthsimple Trade’s limitations, this online broker might have ended up in second place overall.

Aside from Wealthsimple Trade, what is noteworthy about two of the top three online brokerages in the fees ranking is that they are both heavily focused on the Quebec market. Not that many Canadian online investors outside of that province are likely to know about these two providers.

The fact that both of these brands compete aggressively with one another means that there is pricing available for active traders at each of these firms that is unheard of at other online brokerages across Canada. Desjardins Online Brokerage, for example, charges $0.75 per trade if more than 30 trades per month are made. By comparison, National Bank Direct Brokerage charges $0.95 per trade for clients who make 100 trades per quarter.

Looking at the top five ranked firms in this latest study, it shows that having a low standard commission price significantly improves the ranking position. Again, excluding Wealthsimple Trade, four of the top five online brokerages in this latest ranking have a standard commission rate that ranges from $6.88 to $6.95 per trade. Also worth noting is that the only big-five bank-owned online brokerage to appear in the top five is CIBC Investor’s Edge, however, both National Bank Direct Brokerage and HSBC InvestDirect (which placed fourth overall) are bank-owned online brokerages.

Thus, one of the biggest findings that this study helps put into focus is that value-conscious online investors can find competitive pricing and convenience with banking products, all in one online brokerage.

Another interesting set of results emerged with the three online brokerages tied for seventh place and two that tied for tenth. The scores for online brokerages that ranked seventh were 54%, while the scores for tenth place were 53% – a razor thin margin. While it seems strange to be focusing on this middle-of-the-pack group, four of Canada’s biggest five banks have an online brokerage that appeared in either seventh or tenth place when it came to fees. Perhaps the most shocking or surprising finding is that relative unknown Laurentian Bank Discount Brokerage was tied with RBC Direct Investing and Scotia iTRADE, and it managed to do better from a cost perspective than TD Direct Investing and BMO InvestorLine.

That so many of the biggest bank-owned online brokerages in Canada performed so closely to one another is a signal that when it comes to fees, these brokerages are virtually indistinguishable. This result likely reinforces the perception that there is no real difference when it comes to commission or trading price for big-bank-owned online brokerages. The differentiators will come in features or service elements.

While the bottom ranked online brokerages typically don’t get much attention in online brokerage reviews, this time seems different. Specifically, three big names often associated with low cost of trading online managed to make up three of the bottom four spots. Virtual Brokers, Questrade and Interactive Brokers, ranked 12, 13 and 15, respectively.

One feature that each of these three online brokerages have in common when it comes to pricing is that they have a variable component to how they charge for trading stocks. Virtual Brokers and Questrade, for example, charge $0.01 per share with a minimum trade cost and maximum trade cost. Similarly, Interactive Brokers charges $0.01 per share with the maximum charge being 0.5% of the trade value.  

Arguably, aside from the variable pricing, there are also ECN fees which factor into the total commission cost for trading with Virtual Brokers, Questrade, and Interactive Brokers. So depending on the type of order placed (e.g. limit order versus market order), the cost of executing a trade can be far higher than just the commission price.

Method Determines Measures

Why it was so important to start this exploration of the Surviscor report by highlighting the methodology is because the way in which certain components were measured influenced the overall ranking outcome.

One example that stands out is with respect to ETFs. Recall that according to the ETF component of the cost evaluation, 700 “shares,” or units, was used as the standard buy or sell amount. It is difficult to say what the “average” or even the weighted average number of ETF units would be during a typical transaction. However, for many investors, that could represent a significant dollar purchase.

Consider, for example, the cost for purchasing 700 units of one of the most popular ETFs among Canadian online investors – VBAL. The last price for this ETF was $29.15 so an order to buy 700 units would cost $20,405 before commissions.

This transaction would be commission-free at National Bank Direct Brokerage, Wealthsimple Trade, Questrade, and Virtual Brokers. If, however, the number of units purchased was lower, say 50 units, then the commissions for the transaction (buy and sell) would see Wealthsimple Trade come out on top with zero commissions, followed by Virtual Brokers and Questrade, while the transaction at National Bank Direct Brokerage would cost $13.90 ($6.95 for each of the buy and the sell).

That picture changes dramatically, however, if the transaction was for a US-listed ETF. For an ETF like VTI, which had a closing price (at the time of publication) of $215.54 US, 700 units before commission would cost $150,878 US. The commission prices for National Bank Direct Brokerage, Questrade. and Virtual Brokers would be zero. However, at Wealthsimple Trade the foreign exchange fee would be 1.5% times the corporate foreign exchange rate (which at the time of publication was $1.21070). In this example, that means the rate of $1.2289 would apply, which means that instead of costing $182,668 CAD, the forex conversion cost would work out to $185,408 CAD, and would mean a difference in cost of $2,740.

It is for that dramatic difference in potential cost to consumers that, as part of this cost analysis, Wealthsimple Trade comes with a very substantial asterisk. Certainly, there are some situations, such as trading Canadian securities, where Wealthsimple Trade could come out ahead in terms of cost relative to other Canadian discount brokerages. However, any substantial transactions taking place for US-listed securities would be significantly more expensive.

Given that Wealthsimple Trade also has restrictions on the securities and markets that DIY investors can trade on, whereas many other online brokerages do not, it becomes harder to rank Wealthsimple Trade on an apples-to-apples basis.

It is unclear how Wealthsimple Trade was graded for the US-listed securities that would have been traded (700 shares/units of US ETFs and which US stocks) as part of the testing framework, as well as how Wealthsimple Trade was graded for options trading and margin lending (which are not currently offered by Wealthsimple Trade).

Without knowing which securities were used in the test and which order types, it is harder to pinpoint why Wealthsimple Trade ranked as highly as it did, despite limitations for currency conversion and trading certain securities that other online brokerages would have no issues with. Similarly, this could potentially have an impact on other online brokerages such as Questrade or Virtual Brokers, where buying ETFs is commission-free, or for Qtrade Direct Investing and Scotia iTRADE, where there are certain ETFs which are completely commission-free to trade.

Takeaway

With so much data being analyzed, it is no small feat to be able to organize and score all of Canada’s online brokerages even on something as quantifiable as cost.

Surviscor’s latest evaluation of online brokerage costs reveal the challenge of trying to deconstruct a lot of intentional differentiation effort on the part of Canadian online brokerages. If it is not easy for the professionals to do it, it is certainly a lot harder for DIY investors to run these kinds of deep analysis exercises to find the cheapest (or best value) online brokerage.

There are other variables, such as age of the investor, or what ticker symbols or the amounts of stock/securities being transacted, that can influence what kinds of costs a DIY investor pays for commissions or account fees.

One of the most interesting consequences of Surviscor’s latest analysis, however, is that the low pricing structures of online brokerages such as National Bank Direct Brokerage, Desjardins Online Brokerage, and HSBC InvestDirect are going to pique the curiosity of more and more investors.

Despite having a major focus on the Quebec market of DIY investors, based on the exposure this latest evaluation is getting online, National Bank Direct Brokerage will benefit from the attention. By implication, the bigger bank-owned online brokerages and traditionally viewed “low cost” providers will have to adjust course to compete even more aggressively with brokerages who are able to provide the convenience and confidence of a bank with a price point that, as yet, cannot be beaten by most online brokerages.

From the Forums

Price of Fame

Continuing on the theme of low cost online brokerages, reddit was abuzz discussing the findings of the latest Surviscor report. Check out posts here and here for users commenting on National Bank Direct Brokerage’s latest win and what DIY investors think about commission pricing at Canada’s online brokerages.

Flipping the Switch

Moving between RRSP providers can be nerve wracking. In this post, one redditor looks for community guidance in choosing between two very popular online brokerages.

Into the Close

That’s a wrap on another data-filled episode of the Roundup. Admittedly it was hard not to drop a doge reference into the whole article so what better way to channel “long” energy than by signing off on a meme-filled ending ahead of the long weekend! Be safe!