Tag: Discount Brokerage Rankings

Posted on by — Leave a comment

J.D. Power & Associates Canadian Discount Brokerage Rankings 2013 – Part 1

For Canada’s discount brokerages, fall not only means a busier season with investors, but for many of them it is also the time of year they either dread or cheer. The stretch of time between September and January is typically when a number of Canadian discount brokerage rankings get published – something that could be known as “rankings season.”

Just before the end of September, one of the biggest of the ranking companies, J.D. Power & Associates, officially announced their 2013 Canadian Discount Brokerage Rankings.  This year’s winner, National Bank Direct Brokerage, finally managed to grab first place by narrowly edging out the reigning winner for the past four years, Disnat who came in second and BMO InvestorLine who placed third.

In the first of a two-part series on the 2013 J.D. Power & Associates discount brokerage rankings, I’ll take an in-depth look at this year’s award winner, how they managed to land in first and what the ripple effect of their win might mean for self-directed investors as well as the Canadian discount brokerage industry as a whole.  The second part in the series will drill down into the numbers from this year to see what they reveal about the sentiment of investor satisfaction with discount brokerages and how it has shifted relative to prior years.

For those of you interested in learning more about the awards are produced, check out the special series on the JD Power & Associates Canadian discount brokerage rankings.

How “The Best” Was Won

Getting to number 1 has been a story of persistence for National Bank Direct Brokerage (NBDB).  Over the past 5 years, NBDB has consistently scored among the top three Canadian discount brokerages in terms of investor satisfaction yet first place was always elusive.  This year, however, NBDB scored 757 (out of 1000) and narrowly managed to edge out the reigning winner Disnat (who scored 750) by 7 points.  While the margin is small, a victory is still a victory.

For NBDB the win is a sign that they continue to hit the right notes with their clients in terms of providing an experience clients feel is satisfying – the metric the ‘investor satisfaction’ survey is designed to measure.  As is explained in the special series on the discount brokerage rankings, what goes into measuring “investor satisfaction” might help account for why NBDB was able edge out Disnat this year.  Fortunately, the President of National Bank Direct Brokerage, Nancy Paquet, helped to provide some background into what might have contributed to her firm’s win this year.  As a bonus, she also shared her views on the Canadian discount brokerage industry and provided a glimpse into how this industry continues to meet the challenges of innovation demanded by clients and competitors.

Pages: 1 2 3
Posted on by — Leave a comment

Special Series: Dalbar Canada’s Direct Brokerage Service Award – Part 2

In part 1 of this series, we took a brief look at how self-directed investors typically access information about discount brokerage customer service and introduced Dalbar Canada’s research in this area.  Specifically, Dalbar’s Direct Brokerage Sales Effectiveness (DBSE) program measures the performance of client service teams at discount brokerages.

In this part of our series, we take a closer look at the evaluation itself to see how Dalbar measures quality customer service, how the evaluations are conducted and what the implications are for self-directed investors when comparing customer service at discount brokerages.

Knowing what counts

Given the number of evaluations being conducted to try and find ‘the best’ Canadian discount brokerage, it is increasingly important that self-directed investors be clear on exactly how a measurement of a discount brokerage is structured.  To avoid falling victim to clever marketing, whenever Canadian investors see a discount brokerage ranking, the following three questions are worth keeping in mind:

  1. What is being measured (ranked)?
  2. How was it measured?
  3. Does the measure actually measure what it says it does?

In the case of Dalbar Canada’s Direct Brokerage Service Award, what is being measured is “quality” of the customer experience when interacting with a particular discount brokerage’s customer service agents.  Of course, how “quality” is defined can be highly subjective so readers should keep this in mind when considering the explanations below.

Pages: 1 2 3 4
Posted on by — Leave a comment

Getting to the bottom of who’s on top of Canada’s discount brokerage market

In search of Canada’s best discount brokerage

Getting to the bottom of who’s on top in the Canadian discount brokerage market is a lot trickier than it seems.  After all, one would assume that winning the crown of “best discount brokerage” is fairly difficult to do and also when a discount brokerage gets that award, it means they’re actually “the best”.  In our ongoing search to find an answer to the popular question “who is Canada’s best discount broker?”, we found a curious answer – it depends on what is being measured.

Over the past year, 7 of the 14 Canadian discount brokerages have been given titles such as:

  • Canada’s #1 Direct Investing Brokerage
  • Best Canadian Online Broker
  • Canada’s Top Online Discount Brokerage
  • Best Discount Brokerage
  • #1 Online Brokerage for Client Service in Canada
  • Highest in Investor Satisfaction
  • Top Bank-Owned Online Brokerage

With so many high achievers to choose from, it seems hard to believe that Canadians would have any kind of struggle finding a great discount brokerage.  According to these stats, almost 50% of the Canadian discount brokerage providers are “the best” at something, if not the best outright. It stands to reason that if the discount brokerages are doing such a great job, then clients would also be satisfied with the service they are getting.  The data, however, paints a different picture.

Best Discount Brokerages in Canada

To find out more, click the link for Page 2 below.

Pages: 1 2 3
Posted on by — Leave a comment

Special Series: Review of Globe and Mail’s Discount Brokerage Rankings – Part II

In part one of this series, we looked at the background of the Globe and Mail discount brokerage rankings as well as how they’re structured and who they’re targeted towards. In this next part, we take a detailed look at what the discount brokerage rankings are actually measuring and some interesting observations we made about the Canadian discount brokerage industry over time.  Lastly, we provide some important tips to keep in mind when using rankings as part of your product research.

What Do the Discount Brokerage Rankings Measure?

When looking at any ranking or rating, one of the most important questions to be clear on is what the ranking or rating is actually measuring.  In our review of the J.D. Power Investor Satisfaction Survey, we saw that “investor satisfaction” was being measured by six components: interaction, trading charges and fees, account information, account offerings, information resources and problem resolution. By comparison, the Globe and Mail discount brokerage rankings are measuring what Rob Carrick thinks is the “best discount brokerage” for “mainstream” investors.

As we saw in part one, when looking across the last eleven rankings, it appears that the categories that go into defining “the best” discount brokerage are not static. The most stable characteristics of what it means to be “the best” seem to cluster around costs, trading and tools. According to Carrick, the categories that he chooses vary in large part because they are based on a combination of data from reader surveys and his perceptions of what mainstream investors are curious about or would find worthwhile.

Strengths of the Discount Brokerage Rankings

A strength of this approach is that the discount brokerage rankings are somewhat reflective of the mood or sentiment of mainstream Canadian investors.  If investors are curious about certain features, such as commission free ETFs or user experience of a discount brokerage, the rankings have incorporated these kinds of innovations into their structure.  Having looked at a decade of results, it is fair to say that the rankings reflect the pulse of what mainstream investors are exposed to from the discount brokerage industry and hence curious about.

Limitations of the Discount Brokerage Rankings

While Rob Carrick’s opinion is certainly informed by monitoring Canadian discount brokerages for over 14 years, his opinion may not necessarily be shared by other investors, something that readers should keep in mind when doing their research.  The degree to which his opinion can be generalized rests on how accurately the needs of “mainstream investors”, a term that is loosely defined, are captured in the questions he uses to survey discount brokerages and in the process he uses to evaluate their products and services.

A second limitation of the rankings is historical comparability.  Because the criteria have changed as often as they have, it is difficult to compare historical performance of Canadian discount brokerages in a meaningful way.  It may be possible to compare results on costs, trading and tools because of their relative stability as categories however the total scores from year to year are largely incomparable.

Pages: 1 2 3
Posted on by — Leave a comment

Special Series: Review of Globe and Mail’s Discount Brokerage Rankings – Part I

Introduction

As part of our continued look at Canadian discount brokerage rankings, we review the longest running comparison and ranking of Canadian discount brokerages: The Globe and Mail’s annual ranking of online brokers, which had its start back in 1999. In part one of this series, we go through how we conducted the review, who the rankings are aimed at, the discount brokerages covered in the rankings and how the rankings are structured.

Our Methods

The scope of this review covers the 11 Globe and Mail discount brokerage rankings published from 2002 to 2012.  Even though the rankings started in 1999, we felt the window we used to be sufficient to explore the recent history of discount brokerages within Canada, and more importantly to illustrate the nature of how the rankings have changed over time.  The data was retrieved by searching for each years’ results via Google, The Globe and Mail website as well as from several websites that contained archived copies of articles. In addition to researching online, we also had the chance to speak to Rob Carrick of The Globe and Mail directly about his experiences in putting together the reviews.

Once gathered, the data was compiled into tables for sorting and analysis. Initially we thought it would be possible to compare scores and how they changed from year to year, however given that the ranking criteria changed so frequently, such a comparison would offer limited value.  Instead, we have included a figure (see next page) that details the criteria for each year and how the criteria have changed over time.  Although it is also of limited reliability, we nonetheless took the historical average rank of each discount brokerage currently referenced in the 2012 rankings which can be seen in the table to be included in part two of this series.

Pages: 1 2 3 4
Posted on by — Leave a comment

Special Series: JD Power & Associates Discount Brokerage Rankings Explained – Part 3

In this final section of our special series on the J.D. Power & Associates Discount Broker Investor Satisfaction Survey, we look at the survey from the perspectives of its creators as well as the company that has placed first in investor satisfaction for the past four years.  Dr. Lubo Li, Senior Director and Industry Practice Leader for Canada at J.D. Power and Associates and Laurent Blanchard, Vice President and Manager of Online Brokerage at Disnat – shared their perspectives with us on the value of the investor satisfaction survey, and what it means for both consumers as well as the discount brokerage industry.

As we’ve learned from the previous sections in this series (click here for part 1 or here for part 2), the Investor Satisfaction Survey measures the experiences of consumers with different discount brokerages in Canada.  According to Dr. Li, however, the value of the survey goes beyond simply looking at experiences.   The real strength of the survey, he explained, is its ability to measure the “voice of the customer” and uncover “perceived customer value.” In short, the survey results reflect what consumers believe are important components to having a discount brokerage account.

Reliability matters

As any quick Google search will reveal, reliable and impartial measures of consumer opinions on Canadian discount brokerages are hard to come by. Thus, for consumers of financial products, the opportunity to access reliable feedback from their peers is invaluable.  Since a survey is only as useful as it is accurate,  consumers must be skeptical when coming across ‘polls’, surveys or other rankings by asking how they were devised and measured. As we’ve seen over the past year, several discount brokerages have been considered “the best” depending on who’s doing the ranking. Defining and measuring “investor satisfaction” accurately and transparently was therefore critical to the overall reliability of the investor satisfaction survey. For example, Dr. Li was able to explain that the reason the rankings (covered in section 1) were ordered in the way they were was because that was the priority most investors placed on those items.  To review, the six categories of investor satisfaction are:

  1. Interaction
  2. Trading Charges and Fees
  3. Account Information
  4. Account Offerings
  5. Information Resources
  6. Problem Resolution

Interestingly, when asked why something as seemingly important as “Problem Resolution” was placed last on the scale, Dr. Li answered that while the importance of receiving help when it is needed is high, the frequency with which that occurs relative to other situations is actually quite low.  The example he gave was using the insurance industry where although the essence of why insurance is useful is precisely because one may need it in an emergency, the frequency of those occurrences is actually quite rare. Similarly, for discount broker customers,the more immediate concerns of being able to get a hold of someone or how much a transaction costs score higher on the list of priorities hence they  are given greater importance for scoring.

Pages: 1 2
Posted on by — Leave a comment

Special Series: J.D. Power & Associates – Discount Brokerage Rankings Data Visualized

How to use the Visual Discount Brokerage Rankings Table

We’ve collected the results from the J.D. Power and Associates Investor Satisfaction survey from 2012 (Table 1) as well as historical results from 2009-2012 (Table 2).  To help visualize how the different discount brokerages have performed on the surveys relative to other discount brokerages, we’ve created small graphs called “sparxlines”.  Each graph shows a series of dots that represent the order in which a company ranked according to the survey results and ordered from left to right (with 1st being on the far left).  A red dot on each graph corresponds to the company referenced in the same row.  The average for the industry is presented on the graph for a point of reference to identify which companies are at, above or below average.  Lastly the scores are provided for a numerical reference point.   To find out more about a particular discount brokerage, simply click on the logo of the company to be taken to the brokerage profile.

 

Table 1: J.D. Power and Associates 2012 Investor Satisfaction Results

Sparxline Company Investor Satisfaction Survey Score Rating
768 5/5
720 4/5
719 4/5
707 3/5
690 3/5
687 3/5
686 3/5
686 3/5
678 3/5
656 2/5

Source: J.D. Power and Associates 2012 Discount Brokerage Investor Satisfaction Study

Pages: 1 2
Posted on by — Leave a comment

Special Series: J.D. Power & Associates – Discount Brokerage Rankings Explained Part 2

JD-Power-Data-Ranking - Discount Brokerage Rankings

If you missed the first part of our J.D. Power & Associates Discount Brokerage Rankings series, read it here.

The two main objectives of this section are to provide readers with:

  1. A look at the overall discount brokerage marketplace to see what, if any trends in investor satisfaction there are that matter to consumers
  2. A detailed look at the company results in the survey to see how each company has performed over time so that consumers get an idea of the responsiveness of a particular discount brokerage to the needs of investors

When choosing a discount brokerage, you can either “go it alone” and find out for yourself what a discount brokerage is like or you can turn to the opinions of other self-directed investors to help you decide. Even though both approaches exist, surveys of Canadian investors have shown that many of them like to do research, turning to friends or family for recommendations, as well as third party reviews and research, before making a choice to go with a particular discount broker. While external opinions are valuable sources of information to help avoid potentially costly or unpleasant experiences they can also help to find a service provider that can hopefully keep you a satisfied customer.

Looking at what thousands of other self-directed investors have said about their experiences can certainly shed light on what you’re likely to encounter with a particular discount brokerage and at the very least help to provide some context around informal discussions with friends or family. There are some questions, however, you may want to consider when looking to these sources. Questions such as:

  • How well does the source I’m looking at consider and describe my needs?
  • If they are a friend, family member or opinion in a forum, how long has this person been a client with the company and
  • What, if any, issues have they encountered with the service/experience along the way?

Also, because numbers and statistics often get presented to support marketing and sales, we thought it prudent to state several “qualifiers” readers need to consider about such numbers up front instead of at the end. First, it’s worth stating that the range of data this section references covers four years of results of the investor satisfaction survey. This four year time period is a small time frame, especially since the interval that the survey is conducted on is annual. Second, the number of companies in the ‘pool’ is fairly small so we must be cautious about inferring too much about the performance numbers and possible trends of the industry as a whole. Instead, looking at a particular company’s change in performance over time is probably more reliable an approach than comparing companies to one another. Lastly, not every year had the same number of discount brokerages covered. In 2009 and 2010 for example, the number of discount brokerages covered by this survey was 6 and 8 respectively. Smaller or newer discount brokerages, therefore, are less likely to appear on the survey and so the inferences made about “the industry” actually apply to the discount brokerages covered in this list.

Investor satisfaction with the overall discount brokerage industry in Canada

Over the four years the investor satisfaction survey has been conducted, more than eleven and a half thousand individuals have been consulted about discount brokerage services in Canada.

Canadian Discount Brokerage Industry - Investor Satisfaction Scores 2009-2012
Figure 1: Canadian Discount Brokerage Investor Satisfaction Scores from 2009-2012

When looking at the four year picture, the average industry satisfaction scores have fluctuated year over year, bouncing between a low of 679 in 2011 and a high of 707 in 2010. The four year average score for the industry is 696 (out of 1000) with an average standard deviation of 27.5 points. When graphed, it is clear that as a group no clear industry-wide trends in the satisfaction of Canadian discount brokerage investors are visible.

Pages: 1 2 3
Posted on by — Leave a comment

Special Series: J.D. Power & Associates – Discount Brokerage Rankings Explained Part 1

JD-Power-Section 1 - Discount Brokerage Rankings

Introduction

In the first part of our special series on discount brokerage rankings and reviews, we take a look at one of the most popular consumer research organizations, J.D. Power and Associates, and their annual survey of self-directed investors’ impressions of Canadian discount brokerages known as the Investor Satisfaction survey.  The results from this survey form the basis for the highly coveted J.D. Power and Associates award for the Canadian discount brokerage industry. As such, both consumers and the discount brokers pay close attention to the results of these surveys.

For consumers trying to choose between the many options in the discount brokerage market, using reviews and data from actual customers is a popular strategy to help make a decision.  With several ratings systems now being provided to self-directed investors, there seems to be some confusing and potentially conflicting messages being communicated about different discount brokerages. Not all reviews are created equally, however, nor do they measure identical features, which is why sometimes the results can seem confusing.

To help demystify the ratings and to give Canadian self-directed investors a better understanding of J.D. Power’s rankings, we’ve taken a look at the following four questions:

  1. Who is J.D. Power and Associates?
  2. What does the Investor Satisfaction survey measure?
  3. How is Investor Satisfaction measured?
  4. What does this survey and its ratings mean for consumers?

1.      Who is J.D. Power and Associates?

J.D. Power and Associates is a professional consumer research firm.  They are among the most widely recognized names in marketing research and have a solid reputation for conducting thorough research on the experiences of consumers with brands or products.  Although they are well-known for their work in the auto sector, J.D. Power and Associates (J.D. Power) also conducts surveys across a number of different sectors, including the banking and financial services sectors.  Of particular interest to Canadians looking for a discount brokerage, J.D. Power has been conducting surveys of investor satisfaction with Canadian discount brokerages since 2009. Over that period of time, they have surveyed over 11,500 clients of Canadian discount brokerages asking them about various components of their experience with discount brokerage account providers.  J.D. Power makes their money by selling the detailed results and analysis of their research to major brands so that these brands can better understand the needs and experiences of their customers and, in theory, work to improve those experiences.

Pages: 1 2 3 4
Posted on by — Leave a comment

Special Series: A comparison of the Canadian Discount Brokerage Comparisons

As part of a special series on the comparison of Canadian discount brokerages, we’re taking a look at some of the major providers of this information so that self-directed investors and those interested in researching Canadian discount brokerages can gain a better understanding of the types of research that is done, what the results of that research mean and some of the important perspectives of those involved with the research as well as those who are featured in it.

The first part of this series starts by looking more closely at one of the major sources of consumer experiences with discount brokerages, the J.D. Power and Associates Investor Satisfaction survey.  We begin by looking at the survey itself and what it measures, then we’ll look at the historical results and lastly we’ll provide important perspectives from both J.D. Power and Associates as well as from Disnat, the discount brokerage that has managed to place first in the survey for the past four years.