Tag: Interactive Brokers

Interactive Brokers

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Discount Brokerage Weekly Roundup – April 15, 2016

While one basketball legend is retiring another one is seeing his star rise. Whether it’s professional basketball or the world of DIY investing, performance is what counts. For the race that is the Canadian discount brokerages landscape, however, coasting along is not an option.

In this week’s roundup, we take a look at continued signs of life with one online brokerage who is getting prepped to move deeper into the investor education space. Next we take a look at the latest results from online brokerage in the US to see what trends are emerging across the brokerage industry as a whole. From there we’ll preview the upcoming investor education events in the week ahead and close out the round up with comments from DIY investors on Twitter and around the investor forums.

Making the Grade

This first few months of 2016 have been busy for Virtual Brokers. After their recent commission price adjustments, Virtual Brokers has tried to distance itself somewhat from the “ultra low cost” discount brokerage image and in place of the label try to introduce features and services that offer up more value for the dollars being spent on commissions. A recent article in the Globe and Mail featured a quote from Virtual Brokers CEO Bardya Ziaian in which he stated “I want to go beyond the notion that Virtual Brokers is a cheap way of trading, we want to add value.”

In line with this move to offer greater value, Virtual Brokers appears to be ramping up efforts to provide additional market research information and education to DIY investors. Their latest move was noted this week as they announced a webinar in partnership with Morningstar to discuss the Morningstar economic moat feature. In addition to the webinar, there are also plans in the near term to offer more value-added research and analysis of markets to clients. While details are still to come, it’s clear that Virtual Brokers is actively moving towards a ‘value’ focused offering.

As one of the relatively newer entrants into the DIY investing space, however, Virtual Brokers still has to outcompete the massive amounts of advertising and marketing resources being spent by their peers. The boost in exposure by being crowned the top online brokerage in the Globe and Mail has certainly made a material difference to Virtual Brokers. And, in order to keep atop the standings, there has to be a clear focus on delivering innovative and useful features. In other words, for Canadian online brokerages, the best way not to be noticed is to stand still.

Let’s Get Digital

Earnings and quarterly reports from US online brokerages are kicking off once again. What’s particularly interesting about this round of reports is that Charles Schwab, the largest online brokerage in the US, has just crossed the one year mark since they launched their robo advisor service (or as they call it the ‘digital advice’ segment), and, according to the numbers, there are about 6.6 billion reasons to celebrate.

On a year over year basis, Schwab had very healthy gains in net revenues (+16% to $1.8B), net income (up 36% to $412M) and modest account growth (+3%). Part of the reason for those gains came from their robo-advisor segment which attracted $6.6B in assets in just over a year’s time.

Despite being an online brokerage, Schwab makes the majority of its revenue from interest revenue, asset management and administration fees whereas trading revenue made up 13% of net revenues for the quarter. And, while the volatility over February and March may have provided a 12% quarter over quarter increase in trading revenues, the notion of what it takes to succeed in the online brokerage space clearly points to having something more than trading revenues to keep you going.

The reason these numbers matter is because they clearly demonstrate that there is a market for the ‘managed wealth’ that appears to be outpacing the DIY trading segment. Further, it also shows how sensitive the earnings at online brokerages are to interest rate moves and why low rates are a challenge to the business model.

For Canadian online brokerages, there has clearly been an interest in following suit with Schwab’s model of deploying robo-advisors; Questrade and more recently BMO began offering these ‘digital advice’ products as a way to capture market share from the not-so-do-it-yourself crowd. Virtual Brokers also appears to be positioning themselves within this space as they were recent sponsors of the Morningstar robo-advisor conference.

While the scale of the US wealth management market is considerably larger than Canada’s, it is interesting nonetheless to see how online brokerages are going to have to adapt their offering and business for a robo-world. Earnings for E*trade and Interactive Brokers are also on deck for the upcoming week so the picture of where investors are (or aren’t going) will be even clearer heading into the end of April.

Event Horizon

Patio weather has arrived, and it’s a refreshing week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts, those interested in international investing, and ETFs. Technical analysis, trading strategies, and a fundamental landscape overview round out this week’s selection.

April 18

NBDB – Technical Analysis with Mr. Gaetan Royer of Cobalt Investments – [Fr]

April 19

Scotia iTRADE – Dogs of the Dow – Easy as 1, 2, 3 with Pro Market Advisors

April 20

TD Direct Investing – Introduction to Investing in Options

NBDB – International Investing – [Fr]

April 21

Scotia iTRADE – Options Trading Using Technical Analysis with Montreal Exchange

TD Direct Investing – Introduction to Investing in Options

Desjardins Online Brokerage (Disnat) – Macro Masters Foundations Course

Virtual Brokers – Understanding Morningstar’s Economic Moat

Discount Brokerage Tweets of the Week

Spring is here. And while it brings flowers, and showers it also seems to bring bugs – at least for some. Mentioned this week are: BMO Investorline, Questrade, Scotia iTrade TD Direct Investing and Virtual Brokers.

 

From the Forums

Clouds Forming

For many investors keeping a handle on all of the official slips and forms and calculations can be, well, taxing. In this thread from reddit’s Personal Finance Canada section, however, the stress level for some of Questrade’s clients (and for many Questrade staff) spiked as it appears T3 forms for some clients were being sent to others. Whoops. The link is worth a read to see the reactions of investors as well as how Questrade stepped up to address the situation.

Green or Red?

It seems many investors looking for an online brokerage account tend to narrow the field down to a couple of choices and from there the hair splitting begins. In this post from Redflagdeals.com’s investing forum, the community weighs in on TD Direct Investing vs CIBC Investors Edge vs Questrade.

Into the Close

That’s a wrap for this week. With earnings season in full swing and a rally that nobody seems to trust, the next week will be fun one for traders. In the meantime, enjoy the spring weather and the human highlight reel that is Kobe Bryant (arguably a great DIY’er) in his last game.

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Discount Brokerage Weekly Roundup – April 1, 2016

Welcome to April. While there may be pranks and gags to kick off the start of a new month and a new quarter, it seems like some Canadian discount brokerages are taking the chance to start anew a little too seriously.

In this week’s roundup we take a look at the latest deals action that shows some interesting changes to the makeup of the brokerage landscape. From there, we’ll take a look at a major online brokerage that sees nothing but upside as they bet big on technology. Technology also seems to be the focal point for many DIY investors on Twitter in this week’s tweets summary albeit for those brokerages that are still struggling with bugs. We close out the roundup with more interesting chatter about commission pricing from the investor forums.

Out with the Old

It looks like Canadian discount brokerages have taken spring cleaning seriously this year, especially when it comes to their deals and promotions.

Heading into a new month, the number of commission-free trade and cash back offers from Canada’s online brokerages saw a sharp decline, with a significant number of offers expiring at the end of March. While many of these deals were deployed specifically to capitalize on the seasonal interest in RSP accounts, only a handful of brokerages have standing offers that ran alongside RSP season and into what is now ‘income tax refund’ season.

That said, there are still 19 offers that we’ve noted, which still provides many DIY investors interested in an online trading or investing account some kind of incentive to try one brokerage over another. Of course, the big unknown for many brokerages is whether DIY investors are turning to more passive or automated strategies (such as Robo-advisors) or interest in markets is waning in favour of other more popular investment types.

While the firm numbers of account openings and assets brought into each firm will give the best idea of what’s going on, there is something that is definitely different about the start of Q2 2016 – especially in the deals and promotions space.

Specifically, what stands out as interesting is that one of the most active brokerages (historically) in offering commission-free and cash-back offers, Questrade, is not significantly present in this category at the launch of a new month and new quarter.

In addition, Virtual Brokers’ move to offer an as yet unrivaled commission-free trading offer means that the winds of change appear to be blowing in the discount brokerage deals space. In fact, the new promotions page on Virtual Brokers’ website also signals they’re likely to be more active in offering promotions which will pose a challenge to all other players on the field.

While 19 or so offers is still substantial, it is unlikely that the deals and promotions field will remain this thin for much longer. Whether brokerages are going to mix up their promotional offers to more partner or product offers (VR headsets anyone?) or rely on the tried and true commission-free trade offer, one thing is clear – there is all of a sudden a lot more room for brokerages to make a splash by offering up a bold offer to DIY investors.

View from the Top

Not one to shy away from the spotlight, the CEO and founder of Interactive Brokers Thomas Peterffy, was featured in an interesting interview from The Wall Street Transcript in late March.

The interview itself offers a great overview of Interactive Brokers’ focus on technology and automating as much of their process as possible in order to achieve efficiency and also cost advantages over their peers.

Three points from this interview stand out: the role of robo-advisors, mobile trading and technological preparedness.

With regards to robo-advisors, it’s clear that Interactive Brokers sees this as a significant enough trend to get in on. In particular, their acquisition of Covestor as well as their investor marketplace are both moves that diversify Interactive Brokers away from just the DIY investor client. In fact, many of the tools mentioned by Peterffy resemble the automatic or more passive investor strategies that don’t fit their typical ‘active trader’ client base signaling a clear interest in going after the ‘managed wealth’ space.

Another area in which Interactive Brokers is signaling they’re going to push into is mobile trading. This is particularly challenging to get right for active traders, many of whom are still trading on a desktop (with multiple monitors). That said, there is definitely a balance between form, function and features when going from one screen size and device to another.

The success and resonance of the Robinhood app with mobile users signals that thinking ‘mobile first’ tends to favour functionality over features. Interactive Brokers’ platforms, however, are appealing because they are so robust. Fortunately, smartphones now are powerful enough to handle heavy applications, however usability will ultimately determine whether a trader feels comfortable enough stepping away from their desk and letting their phone be their lifeline to the market action.

Finally, the most ominous (for competitor brokerages) comment came at the end of the interview where Peterffy was asked about the landscape of the online brokerage industry in the next five years to which he responded “Five  years  from  now  the  industry  will  have  fewer and technologically more advanced participants…” The pace of technological change and the associated costs of keeping up with that technology means that Canadian online brokerages who aren’t able to fund this technological arms race will likely be made obsolete.

Discount Brokerage Tweets of the Week

Even though the weather was improving outside, storm clouds were brewing on Twitter. From platform outages, to delayed tax slips and frustrations with reporting, Twitter users didn’t hold back when it came to the shortcomings of Canadian brokerages. Mentioned this week were Questrade, RBC Direct Investing, Scotia iTrade, TD Direct Investing and Virtual Brokers.

From the Forums

A valuable lesson

Whether you focus on price or value is the job of marketing departments and sales staff being able to tell one story or the other. In this post from Reddit, there is definitely some debate over whether recent fee changes at Virtual Brokers represent an increase in price or an increase in value.

Sound Bites

An article on discount brokerage commission fees from the Globe and Mail’s Rob Carrick this past week stirred up a lot of strong opinions about the current perception of price and value across the Canadian brokerage landscape.

Into the Close

That does it for another week. Here’s a great little roundup of April fool’s day ideas that are surprisingly not all that far-fetched. Enjoy the sunshine if you’re lucky enough to have some this weekend!

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Discount Brokerage Weekly Roundup – March 18, 2016

If you were like most folks this week, getting adjusted to the one hour less made things feel a little bit foggy. Of course, if you’re following what’s happening with the US elections, candidates are taking all kinds of swings at one another as the contest for presidency heats up. Here in Canada, discount brokerages, while keeping it polite, are nonetheless starting to raise the stakes with one another in a big way this week.

In this week’s roundup we start by first looking at one brokerage’s continued pursuit of mobile trading with the launch of their latest smartwatch trading app. Next we take a look at a small brokerage that seems poised to make a big splash in the deals and promotions pool with a newly launched offer. The event horizon makes a comeback this week and we round out with the latest comments from DIY investors on Twitter and forums.

Watching the Markets

This week Scotia iTrade unveiled their latest upgrade to their mobile trading experience: an Apple watch based app. Their latest addition to the mobile trading suite, which includes smartphone and iPad versions, enables Apple watch users to take a pulse of what’s going on in the markets as well as within their own portfolio.

While the Scotia iTrade Apple Watch app does not let users actually trade from the watch, it does enable users to get updates on balances, monitor watchlists and keep an eye on market activity. Given the dependency of the Apple Watch on the iPhone, however, the full set of trading features available on the iPhone app offers users much more functionality should they need it.

In celebration of their new release, Scotia iTRADE also held a mobile day at their investor centre in downtown Toronto.

Canadian online discount brokerage Scotia iTrade tweeting about their new Apple Watch trading app.

When considering the mobile trading landscape, Scotia iTrade is certainly not alone in their pursuit of the smartphone and now smartwatch space.

Most Canadian discount brokerages have some kind of dedicated app or specific mobile site to accommodate smartphone users. In terms of smartwatches, however, there are three online brokerages that have Apple Watch apps specifically built for DIY investors, and two bank-owned brokerages who’ve bundled some of their online investing functionality into their overall banking app.

The three Canadian online brokerages with Apple watch trading apps are:

  • Interactive Brokers
  • Qtrade Investor and
  • Scotia iTrade

What is interesting about the online trading experience on mobile is that the smartwatch is typically limited to providing alerts and updates. In that sense, its role is mainly to monitor what’s going on.

With the Apple Watch in particular, because it is tethered to the iPhone, how an online brokerage’s iPhone-based trading app functions is something individuals interested in these products should also consider.

In the table below, it is particularly noteworthy that almost all Canadian online brokerages, whether they are bank-owned or are independent, have ranked poorly in terms of user reviews. The best rated online brokerage iPhone trading app, based on client reviews from the Apple App Store, turns out to be Qtrade Investor with 4.5 out of 5 stars (based on only 23 reviews). At the other end of the spectrum, Questrade’s IQ app garnered only a 1.5 out of 5 stars and it was based on the highest number of ratings (463) received by any online brokerages’ mobile app.

Online Brokerage Overall Star Rating* # of Ratings Support for Apple Watch
BMO InvestorLine 2 63 No
CIBC Investor’s Edge 2.5 133 No
Interactive Brokers 2.5 179 Yes
Questrade iQ 1.5 463 No
Qtrade Investor 4.5 23 Yes
Scotia iTrade 3 105 Yes
Virtual Brokers 2.5 10 No
Notes * based on all versions

What stands out in looking at these user ratings is actually how unfavourable consumer ratings are of the mobile experience provided by Canadian online brokerages.

In sharp contrast to the muted ratings received by most Canadian discount brokerages, was the rating of robo-advisor, WealthSimple’s mobile app, which received a glowing 4.5 star rating (based on 51 ratings).

As financial services firms cross the threshold from just being about services to really incorporating technology (ie. Fintech) as part of the service experience, the gap between the incumbent online brokerages and the new entrants into the wealth management space is starting to widen.

For added proof, one need not look further than US online brokerage Robinhood, whose mobile-first design approach has earned them incredibly positive design and user-experience recognition and a 4.5 star rating across 10,107 ratings.

So, while being able to get updates on the market might be nice, there is still a heavy reliance on the smartphone app trading experience and as such, there is clearly lots of work that many Canadian online brokerages need to do in order to win the hearts, minds and design accolades of the newer players in the space.

Virtual Brokers Goes All In on Trading Deal

For savvy traders, patience and timing are a virtue. In this case of deal watchers, this past week Virtual Brokers has launched a monster offer that has, surprisingly, not yet garnered much attention. We suspect that might change quite soon.

Earlier this week Virtual Brokers launched a promotion that offers 3 months free of their $150 USD/mo Edge Trader Pro trading platform which is part of their commission-free trading plan. The minimum deposit to qualify for this offer is $5,000.

What is remarkable about this offer is that it is actually one of the most aggressive free trade offers seen to date.

By signing up for this offer, it appears that an individual would be able to trade commission-free for 3 months with a deposit of $5,000. This seems to be the case since Edge Trader Pro is a required to qualify for the commission-free trading plan, however since the platform fee of $150 USD/mo would be waived, individuals could then trade commission-free (equities only and ECN fees/admin fees/handling fees still apply) for the period of the promotion. At least that’s what the terms and conditions of this offer seem to suggest.

Historically, the only brokerage that has consistently offered 3 months of commission-free trading has been Questrade however for to qualify for 3 months of commission-free trading, an individual would have to pony up a deposit of at least $100,000. Another interesting observation on Virtual Brokers’ latest deal is that there is no deadline stated in the terms and conditions despite it being marketed as a limited time offer.

A little more math, however, puts this offer into further context as to why it is such a big deal.

With 3 months of fees waived, the annual spend for being on the commission-free trading plan with a reasonably standard application-based trading platform totals $1350 USD which breaks down to $112.50 per month (for 12 months). For traders of US equities this works out to about 11 trades per month at the standard commission of $9.95 + any ECN fees or special handling fees – a threshold that many active traders can easily hit.

So, many folks might be wondering what the catch is. For starters, to stay on this program, whether on purpose or by accident will still cost $150 USD/mo once the free trial period expires. What this means is that individuals should carefully consider whether this is the right fit for their trading needs. Another important detail in the terms and conditions is that the $150 USD/mo applies to the Edge Trader Pro platform only, the data plan for which might not really be enough for most very active traders. Finally, Virtual Brokers reserves the right to change the offer at any time during the process, so users need to ensure they monitor the terms of the offer for any modifications that may arise.

With all of the above in mind, how this plays out for other Canadian discount brokerages will be very interesting. Virtual Brokers’ latest offer feels like someone going ‘all in’ at the poker table. One thing is certain, however, and that is that Virtual Brokers’ latest deal will finally uncover how serious other Canadian brokerages are about acquiring the most coveted tier of client: the active trader.

Event Horizon

Spring is in the air, and it’s an exciting week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts and those interested in risk management. Technical analysis and registered accounts round out this week’s selection.

March 22

NBDB – Stop Orders: A Winning Solution Worth Knowing – [Fr]

Scotia iTRADE – Introduction to Candlestick Charts with Pro Market Advisors

March 23

TD Direct Investing – Building Wealth Through Registered Accounts

TD Direct Investing – Introduction to Investing in Options

March 24

Scotia iTRADE – Introduction to Index Options with Montreal Exchange

Tweets of the Week

This week’s tweets show once again that clients are increasingly turning to Twitter as a customer service touch point for brokerages big and small. Mentioned this week were BMO InvestorLine, Questrade, RBC Direct Investing, Scotia iTRADE and TD Direct Investing.

From the Forums

Eminent Domain

Well, this is not one you see everyday. In this post from Reddit’s personal finance Canada section, one disgruntled Virtual Brokers user decided to leave after receiving a warning regarding the domain name being used to access streaming quotes (from Quotemedia). Worth a read as more than one individual came across the same issue.

Plan B

Having an employer group RSP plan is a great perk, however savvy investors know that sometimes there are ways to stretch their investment dollar further. In this post from the Reddit personal finance Canada section, one investor wanted to know if it was possible to get the best of both worlds by taking advantage of Questrade’s commission-free ETF buying. Find out what other people had to say about their own experiences trying to do the same.

Into the Close

With spring just around the corner, and St. Paddy’s that just passed, green seems to be the theme heading into the weekend – especially if you managed to be the lucky winner of an increasingly large lotto jackpot. Of course if you’re still betting against Canadian Vancouver real estate, with the recent interest rate announcements in the US, you might be inclined to see red for a while longer. Regardless, have a great weekend and strap in for a wild start to the spring next week!

via GIPHY

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Discount Brokerage Weekly Roundup – March 11, 2016

As week two of March comes to an end, there was one clear story that seemed to dominate the news cycle for Canadians – the visit of Prime Minister Justin Trudeau with US President Barack Obama. Of the many angles on the coverage of this visit, one of the most interesting was the theme of friendship between Canada and our neighbor to the South. The notion of friendship is something that Canadian discount brokerages also know a thing or two about, especially when it comes to trying to somehow rewarding clients for bringing their friends over to the same brokerage.

To kick off this week’s roundup, we take a look at the trading activity from a major US online brokerage who continues to gain market share with the most lucrative segment of online investors – active traders. Next, we provide a glimpse into an in-depth story on refer-a-friend promotions that we referenced in last week’s roundup. From there we’ll cover the conversations investors were having with Canadian online brokerages and with each other on Twitter and in the Canadian investing forums.

Interactive Brokers Trading Metrics

The machine that is Interactive Brokers continues to fire on all cylinders. Trading metrics from the month of February were released earlier this month and numbers across key company metrics continue to point to Interactive Brokers doing something right.

While trading volumes (measured as daily average revenue trades) were lower than last month by 8%, on a year over year basis, trading volumes of 767 thousand DARTs was a whopping 21% higher than the same period last year, reinforcing the fact that traders love volatility and traders tend to love Interactive Brokers. To that end, Interactive Brokers continued its monthly client growth chart with a 1% bump over January and 340 thousand clients now under their belt – with each client making an impressive 527 trades (on average) per year and an average commission per cleared client order of $3.78.

Another interesting observation of the Interactive Brokers Canada website is the requirement that individuals actually be an active trader to be their client. More specifically, the announcement on the Interactive Brokers Canada website section for RSPs and TFSAs, states that they require the following from customers:

“You must have executed at least 100 trades for any product type or 100 simulated trades in our real-time demo”

Source: Screenshot from Interactive Brokers Canada Website

This qualification is especially interesting within a registered account, since many individuals look at the RSP account as a ‘long-term’ play and a place to let dividend investing work its magic (since it is exempt from the US withholding tax on dividends from US listed stocks). It could also be equally contentious for individuals considering actively trading in their TFSA, since there have been some stories of the CRA scrutinizing individuals who’ve managed to substantially grow their TFSA by trading.

Nonetheless, it is also a very interesting approach to qualify who it is they want as a client. Clearly Interactive Brokers’ stats show they appeal to and are built around a strong base of active traders. The move to either require a history of a relatively arbitrary 100 trade threshold or to have an individual not only sign onto their demo but also place 100 trades with it means that they’re actively funneling prospective clients into their system in a much more meaningful way than just giving a simple demo platform access away.

In short, it looks like Interactive Brokers is continuing to build their strategy and product around the active trader experience, and with this latest qualification to join them, they’re not only building their brand as one that traders have to aspire to (century club anyone?) but at the same time, they’re very cleverly qualifying who they want as a client and who they are ok with turning away.

That’s What Friends are For

This week we saw a great story about friends getting together on an international stage. Of course while much of the goodwill is also about great public relations, there is no discounting the fact that the recommendations and referrals that come from one leader to another will impact the decisions each leader makes.

On a much smaller scale, the value of referrals to financial services is a pivotal way in which online brokerages can lower their cost of acquiring new clients and also likely get better clients as a result.

As part of our continued look into the deals and promotions landscape, this week we launched the first in a two-part series that analyzes the current refer-a-friend promotions available from four popular Canadian discount brokerages.

Specifically, the first part of this series take a detailed look at what the incentives are like for those who refer a friend or family member as well as the incentives for those actually opening and funding the account. When comparing the different offers side by side, it is not only interesting to see just how different the offer amounts are, but what was especially interesting to discover was how each online brokerage is actually valuing clients who have more money/assets. Click here to read part one of the series & stay tuned for part two next week.

Extra Mileage

While PM Trudeau was busy making front page news, SparxTrading also got a great little plug from Canadian personal finance writer Rob Carrick in the Globe and Mail. Specifically SparxTrading.com made the list of his top web links, especially for those on the hunt for a new brokerage. For any Air Miles enthusiasts the article is a good read especially in light of that program’s recent announcement to retire miles. Judging by the comments and shares from that article, the announcement has made some serious waves for passionate collectors.

Tweets of the Week

From outages to outrage, this week DIY investors voiced their concerns that technical glitches continue plague Canadian discount brokerages this week. Mentioned in this scan were BMO InvestorLine, Questrade, RBC Direct Investing, Scotia iTrade, TD Direct Investing & Virtual Brokers.

From the Forums

Which way to robo?

As readers may have already guessed, we love to compare things. In this post, from RedFlagDeals.com, one investor asks about some feedback on some of the more popular robo-advisor platforms currently available. Worth a read for those interested in seeing what folks are thinking about.

Questrade vs Virtual Brokers

It’s been a while since we’ve mentioned this ongoing debate between two of the long standing deep discount online brokerages, but this latest post on Reddit provide a good look at why people online have tended to stick up for Questrade more so than Virtual Brokers. Interestingly, Questrade’s community team rep also weighs in on the conversation.

Into the Close

Nothing takes the edge off losing an hour like the prospect of the opening bell coming an hour sooner. For those lucky enough to get some great weather this weekend, make the most of the extra sunshine! For those who need to fill their post-House-of-Cards binge Whitehouse cravings, here is some fun footage of President Obama and PM Justin Trudeau trading jabs at the state dinner. Have a great weekend!

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What are Friends For? A Review of Online Brokerage Refer-a-Friend Promotions

One of the interesting paradoxes of DIY investing is that for many investors, the journey to doing it yourself actually starts by consulting a lot of other people. Knowing this, several online brokerages have created incentive programs aimed at giving existing clients a ‘win/win’ approach to refer their friends and family.

Unfortunately for many investors, when it comes to the current refer-a-friend promotions, it seems like there isn’t as much ‘giving’ as there is ‘taking’.

In the first of this two part series, we report some fairly surprising results from an in-depth look at the current referral promotions offered by Canadian discount brokerages and how the industry may need to rethink its current approach if it wants get DIY investors – and their friends – talking about what their brokerage offers.

A Referral By Any Other Name

Whether they’re called refer-a-friend or simply just a referral program, there are a handful of discount brokerages in Canada that offer up incentives for existing clients to refer a new client their way.

While there are technically five Canadian discount brokerages offering referral bonus programs, one of those five (Interactive Brokers Canada) has a program that only rewards the referring party and not the new client so they have not been included as part of this analysis.

In this post, we’ll focus on the following four discount brokerages:

  1. BMO InvestorLine
  2. Questrade
  3. Scotia iTRADE
  4. Virtual Brokers

Of this list, Virtual Brokers, BMO InvestorLine and Scotia iTrade are running offers with deadlines. That said, the latter two online brokerages have historically extended these programs so even though there is no guarantee they will continue to do so, we’ve included them since they’re running the programs at the time of publishing.

Currently referral programs offer either cash rewards or credits for free trades to the person making the referral (the ‘referrer’) as well as to the person being referred (the ‘referee’). This post will focus on those referrals that actually offer cash back rather than those that offer commission credits since commission pricing is somewhat variable across the different brokerages.

This is a Friend of Mine

Vouching for a financial institution is easy when a client feels good about their experience with the firm. Of course, things are made easier if there is some additional ‘encouragement’ offered by the financial institution to say thanks for the business.

While the system seems simple enough as a concept and may seem like a good idea, the devil is, as usual, in the details. This might help to explain why, although referrals are the lowest cost and most potent way to earn new clients, most Canadian online brokerages don’t have one.

So what do individuals who might want to refer a friend or family member to an online brokerage have to consider before doing so?

The table below summarizes some of the important points DIY investors should consider when it comes to the current referral offerings. In particular, one of the most important things to do is to read the terms and conditions associated with a specific offer because, as we found out, there is a lot of variability when it comes to eligibility and requirements. Nonetheless, here are some of the interesting similarities and differences across the four brokerages we reviewed.

BMO InvestorLine Questrade Scotia iTRADE Virtual Brokers
Minimum Deposit to Qualify $50,000 $1,000 $10,000 $5,000
Referral Amount Range (Referrer) $50 $25 – $75 $50 – $100 $25 – $75
Bonus Amount Range (Referee) $50 $25 – $250 $50 – $100 $25 – $50
Offer Terms & Conditions Word Count 1112 797 1780 958
Time it takes to get benefit 45 days 97 days 60 days 77 days*
Max Number of Referrals Not Specified Not Specified 100 Not Specified
Current Deadline June 30, 2016 Not Specified March 31, 2016 May 31, 2016
Notes *minimum based on deadline. Referral bonus to be deposited by Aug. 15/16

Mo Money, Mo Choices

One of the first things that DIY investors need to know is just what they qualify for in terms of incentives. Of the four brokerages compared, Questrade has the lowest deposit threshold to qualify for a referral bonus at $1,000 whereas BMO InvestorLine has the highest at $50,000. Virtual Brokers and Scotia iTrade require a minimum of $5,000 or $10,000 respectively.

In terms of referral amounts (i.e. the amounts being paid to existing clients who refer a new client), individuals can receive between $25 and $100 per referred account depending on the discount brokerage and the deposit amount.

In this category, Scotia iTrade offers the highest amount ($100 cash back) for a new client – the caveat being that new client has to deposit at least $100,000. Interestingly, Scotia iTrade also offers clients and referees the option for a cash back reward or for commission-free trades. For ease of comparison to other brokerages, however, this article focuses on the cash-back rewards (and since brokerages may value a trade commission differently).

Questrade and Virtual Brokers have a similar structure to their referral amounts with individual clients eligible to receive cash back bonuses of $25 for each account they refer as well as a bonus of $50 added to every third referral. This structure clearly is intended to reward/incentivize clients to encourage a greater number of referrals.

BMO InvestorLine has taken a literal 50:50 approach in offering only one reward amount ($50) to both referrer and referee.

Quantity isn’t Quality

When it comes to online brokerages, it would seem that for new clients, quantity is quality – or at least it should be when it comes to asset deposits. Looking at the referee bonus offers, however, paints a paradoxical picture where the more a new client brings with them, the less they actually get.

An important distinction to make between bonuses is the difference between absolute dollar amounts and relative amounts.

Among the four brokerages compared, Questrade is clearly offering the most on an absolute basis for new clients. That is to say Questrade offers as much as $250 for deposits of $100,000+ whereas at that same deposit level Scotia iTrade offers $100 cash and BMO InvestorLine and Virtual Brokers each offer $50.

Refer-a-Friend Bonus Amounts Offered by Canadian Online Brokerages

But absolute dollar amounts don’t quite tell the full story. The relative picture is more revealing.

As shown in the following table, on a relative basis the amount offered to new clients from referral cash back offers ranges from a high of 2.5% for Questrade (at the $1,000 deposit level) all the way down to 0.05% at BMO InvestorLine and Virtual Brokers. It should be noted that the 6 deposit levels shown here were used for ease of comparison across each of the discount brokerages.

In a nutshell, what this table shows is that bringing more assets to a discount brokerage via a referral is not a great strategy – at least as a standalone at certain brokerages. If there is a silver lining, some brokerages, such as BMO InvestorLine and Scotia iTrade, actually allow the refer-a-friend bonus to be combined with an existing offer (i.e. the deals are stackable) which certainly adds a much more competitive element for a new client.

Friend Zone

Still, the trend towards offering less to clients who bring more seems somewhat paradoxical, especially since clients who have lots of assets are more likely to have friends or family that also have lots of assets. And, while this may be somewhat speculative, it stands to reason that an individual looking to move $100,000 is going to have to consider the endorsement of a discount brokerage (independent or bank-owned) more carefully than someone moving $1,000 so the reward/incentive should also be proportionate to the value of the new client.

Clearly, the range of offers shows that certain brokerages are willing to be more aggressive with incentives than other. Questrade, for example, appears to be offering five times more for a relatively high value client ($100,000+ deposit) than either Virtual Brokers or BMO InvestorLine. In addition, Questrade appears to be aggressively pricing their referee incentives than most other brokerages at all the deposit levels we measured. Conversely, Scotia iTrade appears to be offering higher incentives to those doing the referring, especially at the $50,000+ deposit levels.

In part two of this series, we’ll dive further into details of the various programs including some of the red tape involved as well as the very interesting findings from the terms and conditions of each discount brokerage’s programs. If you’re at all interested in the referral programs, that’s one you’ll want to also read.

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Discount Brokerage Weekly Roundup – February 12, 2016

This week there was some serious talk about gravity. From the astrophysicists cheering the official confirmation of Einstein’s predicted gravitational waves to the basketball fans in ‘the six’ hoping to observe the NBA’s best and brightest defy gravity at the upcoming All-Star game, this has been an exciting week. Unfortunately for most investors, watching the markets succumb to the pull of gravity has been a tough lesson in the physics of how markets react to uncertainty. For Canadian discount brokerages, there also appear to be distant forces at work which could cause commission prices to feel the gravitational pull on pricing.

While the news around the Canadian discount brokerage industry this past week did not prove or disprove any of Einstein’s theories, there appear to be interesting forces at work for the discount brokerage industry on the horizon. In this edition of the roundup, we take a look at the growing trend of commission-free trading and how it might be poised to take the world by storm. Next, we take a look what DIY investors were talking about both on Twitter and in the investor forums. Finally, we close out the roundup with a look at the upcoming investor education events.

From Zero to Hero

Somewhat akin to the running of the 4-minute mile or the existence of ‘gravitational waves’ the idea that online discount brokerages could offer “zero commission” stock trading seemed impossible until somebody went ahead and showed it could be done.

With firms like Robinhood, in the US, not only has commission-free trading gone from unthinkable to reality, much like the 4-minute mile, there are now multiple firms offering up zero commission trading and potentially many more looking at the model with some notion that they too can do the same.

Earlier this month, a piece in the Investors Chronicle, profiled the rise of the ‘uber discount broker’ in Europe, with the firm iDealing becoming the first online brokerage in Europe to offer commission-free trading as of December 2015. While limited in scope to a handful of smaller markets, it looks like zero commission trading has officially spread to and landed in Europe.

Interestingly, even though ‘commission-free trading’ is being met with mixed reactions in the US, it seems that Europe could be shaping up to be a bit of a battleground for commission-free trading.

We recently noted a hiring post on Robinhood’s career website signaling they too are eagerly looking to bring their commission-free trading model into Europe and perhaps the UK, which would put them in direct competition with iDealing. While there appears to be a number of regulatory challenges for both iDealing and Robinhood to overcome before being cleared to launch in the UK, it seems like a matter of time before either one or both are cleared to enter and massively disrupt the DIY investor market in Europe.

screenshot of Robinhood job posting

So what does all of this mean for Canadian discount brokerages?

One of the common threads amongst these new “uber discount brokerages” is the use of technology to drive down the operational costs of being a brokerage. They are often small in size and agile in the use of technology to do the heavy lifting. Interestingly, these firms are increasingly being viewed as tech or ‘fintech’ companies first and financial services companies second. In fact, looking at the continued success of Interactive Brokers and the extent to which technology has helped keep operational costs low, there is clearly a case to be made for focusing on IT development.

For the larger bank-owned online brokerages, this poses a significant challenge as they not only have to deploy a competitive trading experience, but they also have to ensure they live up to client expectations of a seamless experience between the banking and the investing touchpoints. A failure in one element of the business is enough to send many Canadians looking to a provider who can get these pieces to work.

With many of Canada’s largest discount brokerages still struggling to create user friendly, intuitive and convenient online experiences, it would be a significant disruption to the Canadian online brokerage landscape should a firm, such as Robinhood, decide to launch within Canada.

Yes, there would be barriers to overcome and trust to be built. What firms like Wealthsimple and other robo-advisors, as well as the relatively young Virtual Brokers have shown is that sometimes it doesn’t take that much time for a lower cost alternative to get noticed.

Another reason for the disruptive nature of zero-commission trading is that not only would ‘commission-free trading’ brokerages have a head start on operating within a no-commission framework, but they are also able to leverage their technological agility and talent pool to have a significant “technology edge” over their counterparts.

While it seems inconceivable that yet another discount brokerage could enter and succeed in the already crowded Canadian DIY investor market, the fact that the wave of zero-commission trading is already starting to spread globally means that it is likely a matter of time before the idea takes root here in Canada. And, just like the four-minute mile barrier being broken, it is now possible for investors and providers alike to envision a world in which zero-commission trading is possible.

Event Horizon

Love is in the air, and it’s an enticing week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts, those who are interested in trading strategies and new to investing. ETFs, technical analysis and risk management round out this week’s selection.

February 16

NBDB – Introduction to Call Options – [Fr]

TD Direct Investing – Understanding Margin & Short Selling

RBC Direct Investing – The ETF Selection Process: Navigating the ETF Landscape – RBC Global Asset Management

Scotia iTRADE – Building a Better Portfolio Using ETFs: How to Build a Low-Cost and Efficient Portfolio using ETFs with Horizons ETFs

TD Direct Investing – Introduction to Canadian ETFs and ETF Options

NBDB – Tools and Technical Analysis with Michel Carignan – [Fr]

February 17

TD Direct Investing – Options as an Income Strategy

NBDB – Stop Orders: A Winning Solution Worth Knowing – [Fr]

February 18

TD Direct Investing – Technical Analysis – Candlestick Charting

NBDB – Introduction to Put Options – [Fr]

RBC Direct Investing – The ETF Selection Process: Navigating the ETF Landscape – RBC Global Asset Management

Discount Brokerage Tweets of the Week

There were cheers and jeers this week on Twitter. On a positive note, it looks like changes to user interfaces are paying off at a couple of brokerages while outages during trading hours took their toll on others. Mentioned this week were BMO InvestorLine, CIBC Investor's Edge, Credential Direct, Questrade, Scotia iTrade and TD Direct Investing.

From the Forums

Tailored Switch

In this post from the Personal Finance Canada thread on reddit, one user requested the community’s input on transferring from Tangerine to Questrade and whether or not this was the ‘smart move’ to make. Worth a read for those interested in the passive investing/CCP strategies.

Seeking Clari-fee-cation

In this post from the RedFlagDeals.com investing forum, one user has a question about stepping into the world of investing within a TFSA at Questrade. There’s some good information for those considering Questrade and the explanation of how ECN fees are incurred

Into the Close

That’s a wrap on this lighter-than-usual roundup. As a reminder to all the traders out there, the Canadian stock markets will be closed on Monday in observance of Family Day in Ontario. Markets will reopen for trading again on Tuesday. In addition to Family Day, it’s also Valentine’s Day and the NBA All-Star game this weekend so whatever your reason to celebrate, you’ve got a great setup to make this weekend a slam dunk!

 

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Discount Brokerage Weekly Roundup – February 5, 2016

It seems like Fox Mulder and Goldman Sachs share at least one more thing in common: they both want to believe. When the poster child for capitalism questions out loud whether or not capitalism actually is working as it should, there is definitely something paranormal happening. Canadian and US discount brokerages alike also want to believe that the recent downturn in stocks won’t spook investors.

In this week’s roundup we take a look at two sides of the race for dominance in online trading. Starting first with the most recent discount brokerage deals and promotions to emerge in the race to the RSP contribution deadline. From there, we take a look at the recent performance of the US online brokerages to gauge whether investors are trading more or less as a result of the recent market volatility. Next we’ll review the upcoming investor education events and then take a look at what DIY investors were talking about on Twitter and in the investor forums.

New Month, New Deals

A big story at Canadian discount brokerages this year continues to be the fierce competition to provide incentives and promotions to DIY investors.

In the initial week of February, Virtual Brokers stepped into an already crowded deals and promotions arena bringing the number of advertised promotions to 18 with an offer that pitted it clearly against Questrade’s recent success with the Apple watch (i.e. Apple store gift card) promo.

Although Virtual Brokers’ promotion is not exactly the same, it has many popular elements as their cross-town rival.

First, it has a tiered deposit structure so that the more a client deposits, the greater the reward. In this case, the reward is commission-free trades ranging from 25 (minimum deposit required: $15,000) through to 200 (minimum deposit required: $250,000).

Under their new “classic” commission pricing structure of $9.99 per trade (flat) this equates roughly to just under $250 to and $1998 in value (depending on the deposit).

In addition to the tiered offer, Virtual Brokers has also paired the tiered offer with an entry to a contest to win a $500 Apple gift card (which can be used towards an Apple watch for example). Previously, Questrade was the only Canadian discount brokerage leveraging the Apple watch as part of its promotional mix.

What is interesting about Virtual Brokers’ latest promotion is that it sets the deposit bar far higher than Questrade does in order to qualify for a modest incentive (VB’s deal requires $15,000 minimum whereas Questrade has 6 offers requiring $5,000 or less). That means the barrier to qualify for a promotion is much higher than with Virtual Brokers than with Questrade.

Another interesting observation is that with Virtual Brokers now in the deals arena there are only 4 online brokerages without some kind of publicized deal for DIY investors: CIBC Investor’s Edge, Interactive Brokers, Qtrade Investor and RBC Direct Investing.

Distribution of current discount brokerage deals & promotions (as of February 5, 2016)

That said, Interactive Brokers does offer a referral bonus (that benefits the referrer not so much the referee) and Qtrade Investor is running an RSP contest, however unlike in previous years, CIBC Investor’s Edge and RBC Direct Investing have yet to step forward with any major offers.

As the month progresses, competition should continue to heat up. As most of these offers show, however, many of the deadlines for these promotions fall after the RSP contribution deadline of February 29th which means that while there are some limited-time offers, there’s still plenty of selection for those that are looking to see what else pops up.

A Volatile Combination

Volatility may bring opportunity, but many DIY investors in the US pulled back on their trading in the most recent quarter. With the exception of one brokerage, most of the publicly traded US online brokerages saw less activity in the face of global equity volatility and crude oil in freefall.

One of the key indicators of that trading activity, known as “daily average revenue trades” (DARTs), saw quarter over quarter (QoQ) and year over year (YoY) declines across the board. DARTs specifically measure the total number of trades over trading days in a given period.

According to recent earnings releases from key players in the DIY brokerage space, including TD Ameritrade, Charles Schwab, and E*trade, retail traders were marginally less involved in recent swings. Out of all the discount brokerages researched, E*Trade showed the worst performance DART wise (displayed below) and on the new accounts front. New accounts for E*Trade tumbled 34% YoY, the firm is leading in alternative measures of client engagement however.

A key trend in two of the biggest discount brokerages was the client utilization of mobile apps for trading.

E*Trade indicated 14% of their 2015 DART volume was done on a mobile device. Similarly, TD Ameritrade set an internal record of 18% DART volume from mobile. Mobile trading will be a key variable for all online brokers going forward, as it represents a new age of engagement and functionality.

Ideally, the optimal combination for an online brokerage would be increasing DART volume while seeing increasing client account equity. This would indicate clients are engaged with the firm’s services and keen on putting capital to work. Fortunately, this was the case for Interactive Brokers, where customer equity was up 19% YoY with 4% DART growth vs 2014.

Interactive Brokers was also the clear winner new assets wise, while E*trade, TD Ameritrade and Charles Schwab found it harder to grow assets. Interactive Brokers Group stood out as their clients embraced their cutting edge technology and ramped up their activity (and equity) in the face of volatility. Of course, Interactive Brokers is certainly smaller than their peers so percentage growth can mask the difference that scale and size have on the ability to show positive growth.

Nonetheless, the trading habits at these particular firms show that the active traders are drawn to the volatility whereas many of the less or moderately active investors tend to step back and let the dust settle. For many DIY investors currently watching the Canadian markets, as well as several Canadian online brokerages there seems to be a growing hope that the dust settles sooner rather than later.

Event Horizon

What better way to beat the cold this month than to huddle up for an investor education seminar or webinar. Coming up this week are sessions on Technical Analysis, Registered Accounts, ETFs, Options and avoiding common trader pitfalls – and that’s all before Wednesday!

February 9th

NBDB – Introduction to Technical Analysis – Oscillators – [Fr]

TD Direct Investing – Building Wealth Through Registered Accounts

Scotia iTRADE – Top Mistakes Made by Investors with Pro Market Advisors

Desjardins Online Brokerage (Disnat) – Meet the 18-30 Broker@ge Team at 360d

February 10th

TD Direct Investing – Building Wealth Through Registered Accounts

Desjardins Online Brokerage (Disnat) – Discover the Benefits of the TFSA

NBDB – Equities and ETFs – [Fr]

RBC Direct Investing – The ETF Selection Process: Navigating the ETF Landscape – RBC Global Asset Management

February 11th

Scotia iTRADE – Options Trading: Myths versus Reality with Montreal Exchange

TD Direct Investing – Advanced Options

Discount Brokerage Tweets of the Week

DIY investors on Twitter paused to take a breath after a wild start to this year’s trading activity. Mentioned this week are CIBC Investor’s Edge, Credential Direct, Questrade, Scotia iTRADE and TD Direct Investing.

From the Forums

Asset A Location?

One of Canada’s largest online brokerages, TD Direct Investing, was the focus of this post on the Reddit personal finance Canada section. In particular, one user was curious to know why there was so much ‘in person’ activity required for an online investment.

Year Right

In this post from Canadian Money Forum, Interactive Brokers’ RSP contribution feature was a cause for confusion because it required individuals to select the tax year for the contribution to apply to. Read on to find out more about how this issue was finally resolved.

Into the Close

That does if for this edition of the roundup. Whether you’re gearing up for the “big game” this weekend or simply looking to take advantage of the ‘bad break’ in the markets – have a super weekend! For all the readers in BC, happy Family Day long weekend!

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Discount Brokerage Weekly Roundup – January 8, 2016

source: giphy

The start of the 2016 trading year has been more than a bit loonie. Circuit breakers tripping and then being pulled in China, RBC raising mortgage rates in Canada and the price of oil continuing to plunge have made for quite an opening act to 2016. For Canadian discount brokerages, planning for their busiest season in 2016 just seems to have gotten much more interesting as they are now tasked with enticing DIY investors into opening online trading accounts.

In this week’s roundup, we take a look at the best bet Canadian discount brokerages have to woo investors in our recap of the new promotions that appeared in week one. Next we take a look at one brokerage’s strategy to appeal to the younger generation of investors and potentially encroach on turf well defended by low-cost brokerages. From there we’ll recap the upcoming investor education events and the activity of DIY investors on Twitter. Lastly we’ll close out with some interesting conversations on the Canadian investor forums.

Discount brokerage deals tick up

The discount brokerage deals and promotions activity showed signs of coming back to life this past week. Heading into January, the number of advertised promotional offers fell to 11 however unlike the major stock market indices, there was a modest uptick with a total of three additional offers joining the list.

The promotional offers were a mix of extensions and revivals of deals we had seen earlier in 2015. It was interesting to note, however, that most of these offers had expiry dates that fell just after the RRSP contribution deadline of February 29th.

Both BMO InvestorLine and Questrade tossed in a pair of offers this past week. For BMO InvestorLine, it was a case of repackaging offers that had officially expired at the beginning of January.

The first offer, which is their refer-a-friend promotion, actually changed quite substantially. BMO InvestorLine is now offering to give $50 cash back to both a referrer and referee if the referee deposits at least $50,000. Previously BMO InvestorLine was offering up to $300 cash back to individuals for referring new clients and $100 to new clients that opened accounts with at least $250,000.

BMO InvestorLine’s other offer to launch this month provided individuals with either $200 (on deposits of at least $100,000) or $600 (of at least $250,000) cash back plus 100 commission-free equity trades (commissions to be rebated later in the year). This offer is substantially larger than the commission-free trade offer that expired early January. In the case of that promotion, individuals were being offered 20 commission-free trades which were good for a year and $200 cash back for deposits of at least $100,000.

The battle for the $100,000+ deposit threshold seems to be a two-horse race at this point between Questrade, who is offering up a $500 Apple gift card and BMO InvestorLine with their $200 cash back + 100 trade promo.

At the other end of the deposit spectrum, Questrade put forward two nearly identical commission-free trading offers. The offers consist of either one, two or three months of commission-free trading depending on the deposit levels. Interestingly, the major difference between the offers is the lowest deposit tier of one offer is $1,000 and the other is $2,000. These two offers give Questrade the clear lead in terms of the number of promotions (7) being offered by a brokerage to self-directed investors with 6 of those offers having a minimum deposit of either $1,000 or $2,000.

Another interesting observation in the deals arena is that Scotia iTrade has yet to replace its major offer that expired at the end of December. They did step back into the deals race by extending their refer-a-friend offer but it remains to be seen if they are launching something bigger and bolder heading into the RRSP deadline.

Be sure to check the deals and promotions section regularly through January and February as there are likely to be more announcements of offers in the coming weeks.

Fountain of youth

One of the major buzzwords around the financial services and wealth management space in 2014 and 2015 was ‘millenials’. Specifically, many Canadian online brokerages were trying to figure out ways to make their products and platforms more appealing to the ‘up and coming’ generation of investors.

This past week, it was interesting to note that Desjardins Online Brokerage is now offering a program specifically geared towards individuals between the ages of 18 to 30 years of age.

At first blush, the new program known as ‘Broker@ge 18 – 30’ seems to tick the most relevant boxes for younger investors. Specifically, there are no inactivity fees and no asset minimums to maintain free registered accounts. To sweeten the deal, Desjardins Online Brokerage is also including $50 in commission credits. This program applies specifically to Disnat Classic which is generally geared towards less active investors. On an interesting note, Desjardins also managed to snap a picture of a very “millennial” group of individuals huddled in the Desjardins investor centre.

Looking across the Canadian discount brokerage space, there are only a handful (currently) of incentive programs offered to ‘young’ investors. Virtual Brokers, for example, has their Kickstarter program aimed at students and recent post-secondary graduates; Interactive Brokers has a lower minimum deposit requirement ($3,000 vs $10,000) for individuals 25 years old and younger; and Questrade offers to waive account inactivity fees for clients 25 years and under . While BMO InvestorLine did have a youth-oriented offer for a good portion of last year, there is a lack of bank-owned Canadian discount brokerage that offer up a youth-focused program along with similar incentives.

As was the case at the outset of 2015, Desjardins Online Brokerage is launching 2016 with a new program and it is likely that this move into the younger investor segment will not go unnoticed by their cross-town rivals National Bank Direct Brokerage, but also by the independent brokerages Questrade and Virtual Brokers who actively market to the younger investor segments.

Tweets of the week

With all the activity in markets this past week, there was definitely an uptick in chatter on Twitter. Interestingly many of the tweets provided user feedback to the latest platform rollouts from TD Direct Investing and also Questrade.

Event Horizon

It’s a New Year, and a busy week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to yield hounds, those who are interested in trading strategies, and new to investing. Primers on options, technical analysis, and tax free savings accounts (TFSAs) round out this week’s selection.

January 11

Scotia iTRADE – Generating Income Using iShares ETFs

January 13

TD Direct Investing – The Power of Tax-Free Savings Accounts

Scotia iTRADE – After Your First 10 Trades with Sarah Potter

January 14

Scotia iTRADE – The Ten Most Frequent Mistakes Traders or Investors Make with AJ Monte

NBDB – Introduction to Technical Analysis: Trends – [Fr]

TD Direct Investing – The Power of Tax-Free Savings Accounts

TD Direct Investing – Introduction to Investing in Options

TD Direct Investing – The Power of Tax-Free Savings Accounts

From the Forums

Best brokerage for TFSA?

With TFSA’s on the minds of many DIY investors, this post from RedFlagDeals.com investor thread asks if there is a brokerage that may be better than others when it comes to TFSAs. While we’re a little hesitant to crown a single brokerage as the best brokerage for TFSAs, there are some interesting points made by the posts in the thread.

Questrade vs. Tangerine

While not an apples to apples (or oranges to oranges) comparison, the slow and steady DIY investor crowd tends to ask about the value of going with one or the other of these low-cost providers. In this post from the reddit PersonalFinanceCanada thread, there are some interesting perspectives offered to a recently debt-free DIY investor.

Into the Close

That’s a wrap for the first week of 2016. For those watching the NFL playoffs, it might just be a more volatile weekend than the week that just finished. Nonetheless, it should be a great way to think about something other than rattled markets for a few days. See you next week!

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Discount Brokerage Weekly Roundup – January 1, 2016

Happy New Year! Welcome to the first edition of the discount brokerage roundup for 2016. It’s hard to believe that we’re turning the page into another year already but when time flies this fast it must mean that we’re having fun.

With a number of market closures, a gearing down of activity with Canadian DIY investors over the final week of 2015,and probably because everyone is out watching Star Wars, it was an opportune time to look back at all of what’s happened with Canadian discount brokerages in the short span of just one year and muse about what it all means for 2016.

To make it a little easier to navigate all of what happened, we picked the stories that stood out each month and put them together into one super roundup of roundups for 2015.

While it is nowhere near as fun as a hot tub time machine, tardis or a delorian, here is a trip into the most interesting and standout stories from around the Canadian discount brokerage industry for 2015.

January 2015: Questrade Punches Heavier

Questrade stepped into the Canadian ETF provider arena signalling a big move for the small independent brokerage. Questrade would go on to make 2015 a year in which they diversified their business away from just an online brokerage to become a wealth management company offering robo-advisor, ETFs and other managed wealth services. Tack on platform updates and a tonne of promotions month in and month out and Questrade’s start in January was just the tip of iceberg.

February 2015: The Website Update Frenzy Begins

Desjardins Online Brokerage’s launch of their new website unlocked an avalanche of website refreshes from Canadian discount brokerages in 2015. The move from their old website to a more modern, user-focused design signalled a clear shift to the “less is more” model from Canadian brokerages. Five other brokerages would also go on to redesign their websites, and, even though Desjardins’ website did not receive high praise in the Globe and Mail online brokerage rankings, the design and user experience considerations that went into the Desjardins Online Brokerage site were thoughtful and trendsetting for 2015.

March 2015: #SocialMediaMatters

Although it had been a long time coming, one of the most interesting stories of the online brokerage world in Canada was watching TD Direct Investing change the social media game for discount brokerages on Twitter. Unlike every other Canadian discount brokerage (and even many financial services firms) on Twitter, TD Direct Investing undertook the bold move to allow multiple representatives the freedom to tweet instead of having just one solitary voice. Considering the number of people to coordinate, this was a huge risk to take on TD’s part however the gamble appeared to pay off in spades. The pivotal moment when things started to really take off, however, started with their webinar in March. With over 300 live attendees (a headline grabbing number on its own) and thousands more registered, TD Direct Investing’s team could now communicate directly and transparently with DIY investors and with each other all in real time. TD Direct Investing would later go on to have its own Twitter account however no other brokerage, except for maybe Questrade (who has had a 4 year head start over TD on Twitter) has had the kind of impact on social media that TD Direct Investing had in 2015.

April 2015: Keeping it in the Family

For a discount brokerage that built its brand on not charging DIY investors account or inactivity fees, the road to Questrade becoming one that does charge inactivity fees has been a bumpy one. This past April, Questrade made yet another bold move to enable clients the ability to avoid  paying inactivity fee by enabling family members to pool resources and have inactivity fees waived.

While offers to clients in the same household are nothing new, what was interesting about this move was that it offered Questrade yet another feather in its cap of being able to compete with brokerages big and small when it came to client acquisition. Empowering family members with more than just referral bonuses means that the value to customer goes beyond a one time deposit or commission credit. Later through the year, Questrade would also raise its fees, but when the firm goes about making itself more personable online, it’s something that the former ‘no fee’ brokerage can pull off without the kind of backlash it has faced in the past. Well played Questrade, well played.

May 2015: We Sherwood Like Lower Commissions

It’s interesting that one of the biggest developments in the online brokerage space in 2015 came from a non-Canadian brokerage. The firm Robinhood, which many Canadian investors may not have even heard of, offers commission free trading to its clients. Yes, you read that right.

In May 2015, Robinhood announced they’d be going global to bring commission-free trading to countries outside of the US with a first stop to Australia.

Whether or not Canada is a place that Robinhood would consider coming to anytime soon is anyone’s guess however the next wave in commission price drops would almost certainly be triggered by news of Robinhood moving into Canada or of another firm here deciding that commission-free trading is possible.

June 2015: Kicking Assets, Taking Names

Yet again, it was another US-based brokerage that grabbed the spotlight for the most interesting development for the first summer month. In particular, Interactive Brokers (which has a Canadian subsidiary) released stats showing just how well they’ve been crushing it when it comes to asset and account growth. Interactive Brokers is almost a goto name amongst active traders – something that is the envy of online brokerages everywhere.

Their secret? Being better at technology and automation apparently. Regionally, however, Interactive Brokers continued to get frozen out of the brokerage rankings throughout the year so despite being a firm that now caters to less active investors and those seeking registered accounts, their “trader” reputation seems to be working against them. Numbers don’t lie and it seems like they’re anything but concerned about not being ranked by a Canadian ranking as they nailed top spot in Barrons’ 2015 online brokerage ranking.

July 2015: Big Screen Not Enough for the Small Screen

In a bid to spark some interest on social media, the folks at Scotia iTRADE decided to try getting investors into their new investor centre to take selfies. Looking back, it’s safe to say that the contest response was a little underwhelming.

It was, however, interesting to see that the lure of the promise of a free movie ticket wasn’t enough to generate the kind of buzz that a free giveaway normally would on social media. As the only brokerage that has not lowered its standard commission prices to compete with every other Canadian brokerage, Scotia iTRADE is clearly incentivizing clients with larger balances to pay attention. It was not entirely surprising, therefore, to see that the promise of a single movie ticket just couldn’t convince DIY investors to make the trek to the downtown Toronto investor centre during the Pan-Am game HOV restrictions.

August 2015: Solving Problems 140 Characters at a Time

One of the realities of the 2015 world is that when consumers have a problem with a company, social media can be a powerful medium to escalate the issue to a global audience. Until this year, many Canadian discount brokerages who were on Twitter were spared the very long back and forth exchanges that can arise between vocal clients and client service reps. In August, however, a rather interesting conversation took place between Scotia iTRADE and one of their apparent clients. While it started seemingly innocuously, the issue eventually gave way to a weeks long affair. The conversation ended up stretching over a couple of months and involved just one individual and multiple brokerages encouraging Scotia iTRADE’s unhappy client to give a different brokerage a try. It was clearly a standout moment as it signaled just how different the ‘customer service’ model has become and how brokerages have now rethink their approach to resolution. (skip to slide 16 in the tweets of the week for the first tweet in this conversation).

September 2015: The Nail in the High Commission Coffin

It’s hard to define an exact moment when the days of high trading commissions became numbered. When RBC Direct Investing lowered their standard pricing to 9.95 per trade in early 2014, it set off a shockwave that culminated in September of 2015 with HSBC InvestDirect finally conceding to lower their standard commission price to under $10 per trade. While RBC Direct Investing enjoyed the spotlight for ‘going first’ (even though the smaller independent brokerages were already charging less than $10/trade), the spotlight for being last now belongs exclusively to Scotia iTrade. Whether or not the two points are related is hard to say, however September was also the month in which the JD Power discount brokerage rankings were published. The data from those ratings clearly illustrate how tight the race is between Canadian discount brokerages and underscores the challenge facing Scotia iTrade to justify the higher price per trade for certain client segments.

October 2015: Raising the Bar on Investor Education

Providing DIY investors with educational resources and tools is something that only a handful of Canadian online brokerages have fully committed to. Among the Canadian brokerages who do provide investor education, however, TD Direct Investing is a juggernaut of seminars, webinars and content. One of the most interesting developments in 2015 for Canadian brokerages was the shift of TD Direct Investing away from doing lots of in person seminars to focusing on delivering educational content online (usually via webinars). What was particularly game-changing for the brokerage-provided education space, was the event TD Direct Investing held with Tastytrade founder and famous options trader Tom Sosnoff. Nothing quite like this event has been put together (in recent memory) for DIY investors and it illustrates just how much harder it will be for Canadian brokerages to deliver quality, entertaining investor education content now that TD Direct Investing is leveraging a powerful platform (ThinkOrSwim) and a very polished production in Tastytrade.

November 2015: Here Come the Droids

Robo-advisors continued to make big strides with investors in 2015. One of the standout stories from the Canadian brokerage world was the news that BMO may be stepping into the robo-advisor arena in the near future. Already Virtual Brokers and Questrade have either affiliations with or their own in house robo-advisory, however a major bank supporting the robo-advisor model could touch off a whole other layer of competition amongst brokerages. While the adoption and understanding of robo-advisors by Canadian investors is still relatively small, the fact that robo-advisors have gained so much traction within such a short amount of time means that this story is only bound to pick up speed going forward into 2016.

December 2015: A Very Good Year

With the 2015 edition of the Globe and Mail discount brokerage rankings published in December this year, it was interesting to see how all the major online brokerages fared over all the rankings. The focus of Rob Carrick’s review clearly shifted away from price and into the realm of user experience – in particular the websites of Canada’s discount brokerages. SparxTrading collected the results of the big three analyses that typically take place and saw that of all the brokerages, BMO InvestorLine appeared to have a banner year.  Also of interest was the strong showing this year by Questrade and TD Direct Investing. Equally interesting was the consensus view that emerged on HSBC InvestDirect has a lot of ground to make up to compete with other online discount brokerages.

Looking back across the past year of news makers for the weekly roundups, there are certainly names that continuously come up and names who barely get mentioned. In that, there may be a method to the weekly roundup madness after all: Brokerages who are busy doing interesting things, will get typically get covered or mentioned in the weekly roundup. For Canadian discount brokerages heading into 2016, this year is one in which being interesting is going to be more important than ever before and we can’t wait to see what’s going to happen next.

Into the Close

That’s a wrap on the special roundup of roundups for 2015. Our regularly scheduled tweets and events will be back next week. From everyone here at SparxTrading.com, we wish you and your families a happy and prosperous New Year. And, for the traders and DIY investors out there a very profitable year too!

Happy New Year (source: Giphy)

 

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Discount Brokerage Weekly Roundup – December 11, 2015

“We’re often led to believe migration is a drain on the country’s resources but Steve Jobs was the son of a Syrian migrant. Apple is the world’s most profitable company, it pays over $7billion a year in taxes–and it only exists because they allowed in a young man from Homs.” – Banksy source: Twitter

Like it or not, the one great lesson that markets continuously teaches its students is that prices reflect some vision of the future and not the present. Of course what makes markets so exciting is the fact that there are so many companies thinking up new ideas and products to bring that future into reality.

For the heads of Canadian discount brokerages, the future of DIY investing is always on their minds. The speed at which they’re able to respond to it or even shape it, however, is what has started to separate those who are known as ‘innovative’ from those deemed to be stagnant.

In this week’s edition of the roundup, we take an in-depth look at one brokerage who has figured out that it will take more than just technology to be able to be a leader in the DIY investor world of tomorrow. Next, we’ll look at the reaction to last week’s Globe and Mail online brokerage rankings from across social media and also take a look at what investors were reacting to this past week on Twitter. Finally, we’ll preview the upcoming investor education events for the week ahead and round out with chatter from the investor forums.

Using the Force

While it may not be quite as big as the release of the new Star Wars movie, the battle for intergalactic supremacy in the discount brokerage world is poised to heat up yet again this weekend. Rolling out this weekend are two major platform updates from Questrade that are sure to bring cheer from DIY investors and rattle the nerves of bank-owned and independent brokerages alike.

Rolling out this weekend will be a highly anticipated set of upgrade to the suite of Questrade trading platforms. Their active trader platform, IQ Edge will see some long sought-after features finally go live and a new web-based trading platform join their bench.

Starting first with the update to IQ Edge, the upcoming refresh will be the third major upgrade to the platform this year taking the release number to 4.2. The major feature to be added is the ability to use conditional orders when placing trades – a feature that many active traders rely on to plan their entry and/or exit points. In fact, Questrade is not the first brokerage in 2015 to roll this feature out nor are they alone in being able to offer this as part of a trading platform. Recall that earlier this year Desjardins Online Brokerage also launched conditional trading into their trading platforms and brokerage platforms, such as the Active Trader and US trading (aka ThinkOrSwim) platforms at TD Direct Investing and Interactive Brokers’ Trader WorkStation have had conditional orders for quite some time.

With each release of Questrade’s IQ Edge, it is clear that they are moving closer to having a trading platform that is as good as if not better than many of the third party platforms currently being offered by other brokerages. And, while there appears to still be features and functionality that users are looking to have built in, Questrade is clearly listening and executing on getting trader-friendly features integrated on a regular basis. This is certainly one area in which they have outshone their larger bank-owned brokerage competitors who seem to be much slower at releasing upgrades to trading platforms.

For less active traders, Questrade is also releasing a browser based platform that is slated to replace (eventually) IQ Essential.

One of the key features being trumpeted for the new online platform is the watchlist. While a watchlist is not a technological marvel, the small changes, such as adding sparklines for a visualization of price trending, is a nice and modern touch. Enabling snap quote refresh of the watchlist is also a much more convenient way to source quotes from the watchlist that aren’t part of a real-time update feed.

Another feature being highlighted is the ability to trade seamlessly across devices. The reality of 2015 and now 2016 is that individual investors would like access to information about their investments as well as the ability to buy or sell them, across any device.

Of course, while all this innovation is exciting, it also creates a challenge for DIY investors and clients. Questrade now has more platforms, they offer more services, and a wider variety of packages than they ever have before. And, while more is usually better, for most consumers, it’s also a challenge to understand exactly what Questrade has to offer.

With all of these choices and changes, as well as the many areas of investing and wealth management that Questrade is now in, their product offering is no longer so simple to understand. Even though Questrade has maintained a very human voice, and has anchored its presence on social media, the reality is that Questrade is now doing more things than it ever has done before.

This tweet, taken from this week for example, shows that there are still folks out there who remember (and think) that Questrade is the no-fee broker when they shed this status several years ago.

For DIY investors, the lesson is that they can expect Canadian brokerages to have to innovate much more quickly in order to compete effectively with one another. While in theory this competition will drive better pricing and products, it will also create a whole new learning curve to stay on top of the changes within their own brokerages.

Without great support and communication to accompany these changes, the intended ‘improvements’ may backfire into user frustration. Fortunately for brokerages such as Questrade and Desjardins Online Brokerage, their individual releases of new features (such as the conditional orders) have been well supported with videos and content describing how these work.

Ironically, it seems that in order to truly succeed at innovation going forward, tech savvy won’t be the magic ingredient. Rather, a very human quality, emotional intelligence, will be needed to help customers navigate the brave new world of online investing.

Tweets of the Week

In addition to the regular overview of the Canadian discount brokerage voices on Twitter, we’ve also collected the reactions to the most recent discount brokerage rankings from the Globe and Mail’s Rob Carrick from Twitter and Facebook.

Here are some of the reactions to the 2015 Globe and Mail online brokerage rankings from across social media:

Here are some comments from Facebook:

Event Horizon

Counting down to the holidays, it’s a festive week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to those who are new to investing, curious about trading strategies, and options enthusiasts. ETFs, technical analysis, and registered accounts round out this week’s selection.

December 15

Scotia iTRADE – Introduction to ETF Strategies with Pro Market Advisors

TD Direct Investing – Introduction to Investing in Options

December 16

TD Direct Investing – Building Wealth Through Registered Accounts

Scotia iTRADE – Placing Your First 10 Trades with Sarah Potter

December 17

Scotia iTRADE – Head & Shoulder Patterns with AJ Monte

December 18

Scotia iTRADE – Active, Passive or Both Strategies with Purpose Investments

 

From the Forums

Limiting Factors

This past week, the Liberals made good on the pledge to lower the TFSA contribution amounts from $10,000 back down to $5,500. In this post from the RedFlagDeals.com investing forum, the discussion from DIY investors highlights some of the initial reactions and perspectives from the price-savvy crowd.

Smorgasbord

In this post from Reddit’s Personal Finance Canada section, a user is looking for a few answers related to moving funds from Sunlife to Questrade as well as other financial planning questions for a newly started position. Worth a read for those curious about employer contributions.

Into the Close

This week has seen so many different versions of the future, from dystopian to fantastic. Heading into the weekend, here’s a glimpse into the distant future as well as a post that signals a chance to finally dream about a better future.