Tag: iTRADE

iTRADE

Posted on by

Discount Brokerage Weekly Roundup – December 6, 2021

And just like that, there are less than 19 days until Christmas (fewer if you aren’t reading this on Monday). This past week and year have seen more twists and turns than a pack of Twizzlers, but either by design or some kind of pleasant surprise, stock markets appear to be pricing in better times ahead – at least for some.

In this edition of the Roundup, it seems that gifts for self-directed investors are arriving in time for the holidays (no chip shortage here!). Read on for more insight into some big online brokerage deals and possibly bigger savings coming for self-directed investors into this cycle of RSP season. Next, we preview the upcoming edition of the Sparx Trading exclusive, Look Back / Look Ahead. Be sure to check out the teaser for interesting perspectives on what we’ve seen from brokerages participating this year. As always, we’ve included some banter from the forums to capture the sentiment from the past week.

Deal-cember: Big Savings for Self-Directed Investors this RSP Season

The number of deals and promotions that tend to show up around this time of year are driven by the interest in the TFSA and RSP contribution deadlines.

There’s fairly reliable data (see below) that shows that Canadians start asking more questions and inquiring about these investment vehicles at about the same time each year; however, it’s clear that the volume of searches on a relative basis favours RRSPs vs TFSAs. Not surprisingly then, the savvy Canadian online brokerages tend to time their promotions for opening new accounts or adding more funds to existing accounts around the same time as well.

What is interesting to compare with the current list of promotions is the expiry dates. Given that the RSP contribution deadline to qualify for the 2021 tax year is March 1, 2022, there are several online brokerage promotions currently running that are timed to expire at around that date. Notably, cash back promotions from TD Direct Investing, CIBC Investor’s Edge and Qtrade Direct Investing – all of which launched in November – are set to expire in the new year. In contrast, the cash back promotion from BMO InvestorLine is set to expire at the end of December, and the commission-free trade deal from HSBC InvestDirect is also set to expire at the end of 2021.

Why these dates matter is because if we look to last year, both BMO InvestorLine and HSBC InvestDirect ran cash back promotions heading into the RSP contribution deadline. Further, RBC Direct Investing and Scotia iTRADE were also on the list of online brokerages offering cash back (or combined cash back and commission-free trade) promotions.

So, as busy as the deals and promotions section is, there is certainly potential for more activity as we progress through December and into January if last year is any indicator.

At this stage of the year, however, it appears that the big bank-owned brokerages are the most aggressive in competing for new business. In particular, TD Direct Investing appears to be on the hunt for new accounts with the largest cash back amounts for deposits ranging from $1,500 to $49,999. This isn’t typical territory for a bank-owned brokerage to look to take a lead in; however, these are clearly not typical times.

Currently, TD Direct Investing’s offer outcompetes Questrade’s referral promotion (which is the only way to get a cash back bonus) at the sub $10K mark. And, in comparing the online brokerage promotions available at this time last year there are some even more startling developments. As seen in the chart below, TD Direct Investing dropped the minimum deposit threshold to qualify for a cash back promotion by 90%. Similarly, BMO InvestorLine and Qtrade Direct Investing also dropped the minimum requirement to qualify by 50% and 40%, respectively. So, while the cash back amounts have stayed relatively the same – or proportionately lower in the case of BMO InvestorLine – the deposit amounts required to qualify for those bonuses (i.e. the hurdle to qualify) has significantly decreased at three of the four online brokerages currently offering cash back promotions.

While no online brokerage aspires to have to spend heavily to acquire new clients, the reality is that when the largest online brokerage in Canada makes such an aggressive move, other peer firms are almost required to follow suit.

Aside from the published deals, it appears there are also very aggressive commission-price lowering efforts happening behind the scenes. While we typically don’t report on rumours, we’ve seen and heard reports of commission prices being lowered at CIBC Investor’s Edge and TD Direct Investing with rates going down to $2.95 to $4.95 per trade. Usually, this kind of price adjustment would be negotiated for very active traders. Now, it appears to be spreading to higher value accounts, which suggests it is a matter of time before a bigger public announcement takes place for commission drops.

All told, it appears that the online brokerage industry in Canada is at a tipping point heading into the next RSP season.

Deals and promotions activity is once again active; however, the fact that promotional offers are being led by the largest player in the space (right now) indicates that they are starting to play offense rather than simply position themselves according to their popularity. TD Direct Investing didn’t have to drop their cash back offer qualification rate for the same offer rate they were giving out last year; however, the fact that they did indicates they felt the need to.

One of the biggest catalysts, we suspect, is commission-free trading available at National Bank Direct Brokerage. Further, the cash bonus from Wealthsimple Trade and Questrade’s continued rise in popularity are additional factors that sway investors with sub-$15K amounts to deposit. With three quarters of the current cash back promotions now having offers for investors with $15,000 and half of the cash back promotions offering promos for investors with $10,000, we might be witnessing a trend by the larger or more established players to revisit their offerings in this segment of the market.

Additional threats to the incumbent online brokerages include newcomers, such as Mogo Trade, Tastytrade, Tradezero, and Free Trade to name a few, all of whom are promising to bring with them commission-free stock trading. At least two of those firms have stated that they will be looking to launch in 2022, if not sooner.

The takeaway is that there are likely to be some interesting offers coming to market for self-directed investors, especially between now and the first few days of January 2022. We expect there to be lots of investment by online brokerages to try and advertise these offers so it may not come as a surprise to see more than Questrade commercials show up from now until the end of February. This, perhaps more than in years’ past, December is really the most wonderful time of the year – especially if you’re looking to open an online brokerage account (or are considering switching online brokerages).

Getting Ready to Look Back, Can’t Wait to Look Ahead

The end of the year is just around the corner, and with it comes a slew of enjoyable traditions. It’s been a tremendous year for the self-directed investing space here in Canada, and with so much having taken place, it’s hard to keep track of everything that’s happened. Or at least it would be much harder were it not for the upcoming issue of the Look Back / Look Ahead magazine.

We’re thrilled to be launching this upcoming issue which features submissions from some of the leading online brokerages in Canada. This issue is currently in production; however, it provides some very rich insights into how the past year played out for Canadian online brokerages and highlights how big shifts in the industry, such as the flood of new investors or the launch of commission-free trading, have impacted firms in different ways.

One of the biggest draws of the magazine is to see what self-directed investors can expect from different Canadian online brokerages in the year ahead. And, there are some very interesting announcements we think are going to continue to shape the industry – especially as more competition enters into the market. From hints on pricing to innovative new ways for investors to get greater value out of their relationship with an online brokerage, some big changes are set to make landfall in early 2022.

Of course, it’s hard for anyone (as we know) to stay on top of developments and feature launches. That said, it’s also a challenge for the online brokerage industry in Canada as a whole to communicate what they’re up to. While press releases remain a mainstay for big feature announcements, we believe that a series of small announcements tend to accrue more value over time with DIY investors. Activity is certainly a marker of progress, however, so too is transparency in communication.

As we noted in a Roundup last month, we’ve seen communications strategy at Canadian online brokerages shift, especially on platforms like social media. Several once-active online brokerages, it seems, have run out of things to talk about or have opted to not say much in places that investors would frequent.

Thus, it is a bit of a paradox as 2021 draws to a close. Despite having more options for finding out information about online brokerages, it is increasingly more challenging for self-directed investors to find well curated and in-depth content about those brokerages.

The Look Back / Look Ahead is therefore a unique opportunity to get direct information from Canada’s online brokerages that would not necessarily be as easy to find anywhere else. It also helps to serve as an indicator of the online brokerages we can expect to hear and see more about heading into 2022.

From the Forums

Paid to Wait, Eh

Patience in the stock market can pay dividends, literally. For one Canadian self-directed investor, the recent news of dividend hikes at major Canadian financial institutions was confused when those hikes hadn’t yet been updated in a popular Canadian ETF, XIU. See what fellow investors had to say in this post about the pace of dividend updates and the virtue of patience.

Waiting on the Edge

The old adage of time equaling money is something that eventually comes home to roost for online investors who have to spend a lot of time waiting on customer service lines. Although it was a big issue early on in the pandemic, wait times appeared to recede to more “normal” levels. So, it was interesting to see this post on reddit from one self-directed investor who experienced an unusually long wait time and had lots of time to write a review and contemplate alternates.

Into the Close

If 2021 wanted to keep things interesting for everyone on its way out the door, it is certainly doing a good job of that. With just a few weeks to go, self-directed investors are getting into planning mode, with tax-loss selling, harvesting of gains, and culling of losses all on the docket heading into the home stretch of the year. Of course, when stocks are done for the week, there’s always crypto dipping to keep things interesting over the weekend.

Posted on by

Discount Brokerage Weekly Roundup – November 15, 2021

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

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

Betting on Better: Interactive Brokers Launches new Sustainable Investing App

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Quick Online Brokerage Updates

Bandits in Sherwood Forest: Robinhood Security Breach

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

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

Appy Days

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

Looking Forward to Looking Back

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

From the Forums

Need for Speed

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

Departures and Rivals

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

Into the Close

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

Posted on by

Discount Brokerage Weekly Roundup – November 8, 2021

The end of 2021 is just a few weeks away. Incredible. It definitely feels like we’re on an express train through the calendar, and it is only going to speed up now that the official start to RSP season appears to be here. Thankfully, those of us fortunate to live in a spot with daylight savings have one extra hour to enjoy it!

In this edition of the Roundup, we review the latest promotions from Canadian online brokerages, including some big offers from bank-owned brokerages to try and sway interest their way in what is the most competitive landscape yet. Next, we call out an interesting trend forming among most online brokerages who appear to be pulling back from digital engagement on Twitter despite the record high numbers of investors flocking to online trading. Finally, we wrap up with the ever-entertaining banter from the investor forums.

Online Brokerage Promotions: Playing Cash Up

The RSP deals and promotions activity at Canada’s online brokerages is already off to a strong start this month. And, given who is now in the pool, it shouldn’t be too much longer before we see others follow suit.

Now a week into November, three of the big five bank-owned brokerages have published their seasonal promotions, and they all seem to have one important feature in common: cash.

The latest deals from BMO InvestorLine, CIBC Investor’s Edge and TD Direct Investing are all cash back offers, and as with past years, they are once again tiered promotions where the more you deposit, the more (at least in absolute terms) you stand to receive.

What is very different this year, however, is that it seems like TD Direct Investing (the largest online brokerage in Canada) has shown up with an historic offer for lower deposit amounts. TD Direct Investing’s newest promotion offers an eye-popping $100 for a minimum deposit of $1,500 and an extra $100 on top of any tier for individuals who set up regular deposits. In fact, it appears that among the cash back promotions of the (current) three bank-owned brokerages, TD Direct Investing has the best promotion bonus on deposits up to $25,000 and is tied for top deal up to deposits of $50,000.

By comparison, CIBC Investor’s Edge has staked out its sweet spot in the cash back promotion tier in the  $100,000 to $250,000 range. In that window, CIBC Investor’s Edge is offering up $500 which is more than either competitor by a lot. After deposits of $250,000, however, all three bank-owned brokerages are offering up identical rewards for comparable deposit tiers. Cash back amounts max out at $2,000 for deposits of $1M or more, which is similar to last year in terms of amount and associated tier.

For its part, BMO InvestorLine appears to have played their cards close to their chest in terms of the offer expiry date. The promotions from CIBC Investor’s Edge and TD Direct Investing that launched at the beginning of November run until the beginning of March 2022. The expiry date for BMO InvestorLine’s current offer, however, is the end of December 2021, which leaves enough time for them to decide how (or if) to respond with a slightly different promotion heading into the RSP contribution deadline.

Despite it still being early on in RSP season, the offer by TD Direct Investing is indicative of the competitive landscape this year. With zero-commission trading now a reality at a bank-owned competitor (i.e. National Bank Direct Brokerage), it looks like TD Direct Investing is going to challenge their peers hard at the sub $50,000 deposit level. This is especially interesting because it pits TDDI against brokerages like Wealthsimple Trade and Questrade by offering a more generous bonus than either of these brokerages provide at these deposit levels.

Unlike other online brokerages in Canada, it is hard to ignore or dismiss TD Direct Investing. For online investors looking to start out, TDDI might be a difficult choice because of inactivity fees for balances under $15,000. That said, it looks as if users who are willing to commit to a monthly pre-authorized contribution plan of at least $100 per month, they also stand to benefit from an additional $100 bonus and be able to waive the inactivity fee for a sub-$15,000 balance.

The early and aggressive launch of cash back offers from both TD Direct Investing and CIBC Investor’s Edge are a clear signal that the value equation has changed for self-directed investing. Now that there are at least three zero-commission trading options in Canada, one of which is becoming an increasingly better-known bank-owned brokerage, deals and promotions need to follow suit.

The reality is that it is a matter of when – not if – bank-owned online brokerages in Canada start to drop their commission fees, and as such, this could be one of the most opportunistic windows for online investors looking for a bonus offer on the way into a new account to secure one before pricing ends up shifting lower and promotional offers with them.  

Flying the Nest: Online Brokerages Migrating Away from Twitter

When it comes to quirky stories, Elon Musk seems like as good a reason as any to tune into Twitter. For some Canadian online brokerages, however, Twitter just doesn’t seem to hold the appeal that it used to, and we’ve spotted an interesting communications trend that reflects some of the challenges Canadian online brokerages are having engaging investors online.

Last month, we spotted the rather abrupt disappearance of Scotia iTRADE’s Twitter channel. And upon further inquiry, it seems that this channel had been folded into the customer support Twitter handle for the parent of the online broker: Scotiabank.

Normally, the disappearance of a social media channel would seem innocuous; however, Scotia iTRADE is not the only Canadian online brokerage over the past year to pull a sudden about-face on social media (much to the confusion of many users). As recently as last month, Virtual Brokers also folded up their Twitter handle because of their rebranding as CI Direct Trading, and earlier this year, Wealthsimple Trade also did something similar, opting to use the parent Wealthsimple handle instead.

A quick scan over other Canadian online brokerages who had Twitter accounts also shows that there hasn’t really been a whole lot going on there either. The last published tweet from the TD Direct Investing Twitter account, for example, was from February 2021. With that paucity of activity on social media despite having lots to talk about in other areas, it could be a signal that TD Direct Investing might take a similar approach to Scotia iTrade and wrap up its Twitter presence in favour of other channels being actively used by TD for either customer support or content creation.

As it stands, Questrade and Qtrade Direct Investing appear to be the only Canadian online brokerages using their Twitter handles for both broadcasting of messages as well as customer support responses. With many of their peer firms appearing to abandon pursuing a direct presence on Twitter, it could signal an opportunity for either of these firms to pull ahead with audiences who spend time on the social network.

Given the strategic importance of Twitter to the kinds of individuals that would pay attention to market-moving eccentric billionaires (like very active traders), it seems curious that online brokerages with tools and services catered to active traders aren’t doing more on Twitter. A quick look at the Twitter accounts of TradeZero or Interactive Brokers confirms that there is content being created for active traders there.

The most recent lightning rod tweet from Elon Musk got over 3.5 million people to cast a vote. Granted, he occupies rarefied air for a businessperson to be among celebrities whose primary job it is to entertain, so for brands such as online brokerages (especially Canadian ones), it is tough to compare. That said, if there is any lesson to be gleaned, perhaps it helps to realize that in order to succeed being on Twitter, it’s to make content that’s engaging and entertaining.

From the Forums

Hold the Music

Wait times on customer service lines are back – at least as a topic of discussion. Several weeks ago, we noted the hold music at TD Direct Investing had been replaced with banter. This past week, it seems like the wait time combined with the choice of non-musical accompaniment ruffled a few feathers. Here’s more of what redditors had to say about wait times and musical choices on customer service lines.

Character Flaw

Practice accounts are intended to give users a sense of what the trading experience is supposed to be like – much like a test drive. Unfortunately, one user on reddit discovered that their last name didn’t meet the minimum length requirements to sign up. Find out what others had to say in this post here.

Into the Close

That’s it for another week of curious developments in the online brokerage world. We’re hurtling towards the end of the year and for any die-hard readers of the Roundup, the good news to report on here is that we’ve got a very exciting Look Back / Look Ahead edition planned for this year. Stay tuned!

On another note, this upcoming week is Remembrance Day, and we wanted to take the opportunity to thank the brave individuals who have served and sacrificed in our armed forces, as well as those who continue to stand at the ready. Thank you.

Posted on by

Discount Brokerage Weekly Roundup – October 18, 2021

If there’s one thing that stock markets can do quite well, it’s to price in expectations. Judging by the rally in stock markets, including in the share prices of some online brokerages, there’s optimism and some insight as to what the market thinks is going to be necessary to succeed in the coming months.

In this edition of the Roundup, we peek across the fence at the latest developments in the US online brokerage market, with a particular view on different strategies for growing in a highly competitive market. From there, we relay updates from one Canadian fintech firm looking to add zero-commission trading into its suite of services by the end of this year. Finally, we cap off the news with some fascinating feedback from self-directed investors in the forums.

Charting New Territory: US Online Brokerages Trade Their Way Higher

Stock markets aren’t the only ones pushing new highs. Share prices for a couple of online brokerages in the US are also on the move upward in a scenario that appears to be more than a simple case of a “rising tide lifting all ships.”

Earlier this month, Interactive Brokers reported their regularly scheduled performance metrics, and this past week, online brokerage giant Schwab also reported their latest quarterly earnings. Included in both reports are numbers around new account growth rates that we’ve been tracking closely to gauge what the retail online trading sentiment is like south of the border.

The latest data continues to show an interesting divergence in new account growth at these two big names. Interactive Brokers continues to grow net new accounts while the pace of new account growth at Schwab has continued to contract. Interestingly, the share price trend over the past year points to the opposite – at least until very recently.

Historically, and in “normal conditions,” the growth rate of new accounts at Interactive Brokers has managed to stay positive. The exception, however, was the meme-stock mania which significantly distorted stats. After account openings reached a peak frenzy in January and February, the enthusiasm for new account opening has been waning.

As can be seen in the Interactive Brokers account growth data chart above, after bottoming out in May, Interactive Brokers has shown new account growth in the past four consecutive months. It looks like things are “back to normal” insofar as account growth is concerned.

On the other hand, account openings at Schwab show that after the peak of account openings earlier this year, the month over month decline persists. It is worth noting, however, that the magnitude of difference in the number of accounts opened between Schwab and Interactive Brokers is enormous.

Schwab has opened about 10 to 20 times the number of accounts that Interactive Brokers has over the past 9 months, which is no small feat. The combination of Ameritrade and Schwab within the online trading space has created a formidable giant against which only agility and service experience can truly outcompete.

Considering the context of the two firms, however, Interactive Brokers’ growth is exceptional in that they still charge for commissions per trade (in their IBKR Pro, they do offer a commission-free version IBKR Lite) which is clearly not a deterrent for some.

The online brokerage space is incredibly competitive, especially in the US and increasingly around the globe. Earlier this month, zero-commission trading firm Tradezero filed to go public (via SPAC) and just this past week, UK-based Freetrade announced it had reached one million users. Both of these zero-commission trading brokerages have Canada on their roadmaps (and likely the US as well).

Growth in interest in trading online certainly helped propel zero-commission trading into the spotlight. However, for an online brokerage to be sustainable, the model has been shown time and again, that other financial services must be a part of what the online brokerage offers. Scale is also important.

Despite the differences between Canadian and US online investing markets, the dynamic of being able to survive and thrive as an online brokerage are remarkably similar. At the end of the day, online brokerages need to make money – and profit – to sustain themselves and aside from the active trader segment, there has to be more than just trading stocks or ETFs.

As National Bank Direct Brokerage and TD Direct Investing have both pointed out, it’s those “other” relationships and financial products that offer opportunities to deepen the value self-directed clients bring to their respective firms.

Interactive Brokers and Schwab demonstrate two different approaches to monetizing the online brokerage space. In the case of Interactive Brokers, it is still able to charge for commissions because of superior technology and user experience for active traders. Conversely, Schwab is able to survive because they have the immense scale to be able to generate higher earnings with interest rates. In either case, agility or scale, the room for new entrants is tough, so creative differentiation and investment in product will be key to survival for newcomers.

The stock prices for Schwab and Interactive Brokers are signaling a brighter future than Robinhood’s. That future seems to suggest that to truly succeed, an online brokerage must be fast or big. Simply being the least expensive option isn’t enough.

MogoTrade Coming Soon(er)

One of the hallmarks of a great Thanksgiving is having some leftovers to dig into after the holiday is over. Cue some developments earlier this month that we didn’t get a chance to report on.

This past week there was an interesting update on the commission-free trading front that will naturally add more kindling to the smoldering conversation about when “that” pricing model will gain wider adoption here in Canada.

Mogo Financial, a Canadian fintech firm, provided another update on the status of their commission-free trading service, MogoTrade, announcing that they had selected CI Investment Services to provide “operational and back office services, including clearing and settlement, custody of client funds and securities, and trade execution.”

The biggest update in the press release, however, was a forecast that the launch date would be coming later this year, putting MogoTrade and the zero-commission option in the conversation for investors during peak season for online investors poking around for new online brokerage providers.

By working with an established services provider like CI Investment Services, MogoTrade is able to hit the ground running in technology, operations, and compliance required to run an online brokerage in Canada. This, in theory, should enable MogoTrade to focus on bringing on new clients and working on user experience. It is currently unclear what account types and features will be a part of the launch. And, importantly, based on the infrastructure costs associated with online trading (including all of the back office function), how MogoTrade will make money will be an important question many investors will surely be asking.

As referenced above, the connection of online trading to other financial products seems to be key to Mogo’s strategy to enter into the world of self-directed investing, with a particular focus on beginner investors.

Mogo has a number of additional lending products as well as cryptocurrency trading connections that could enable it to use self-directed trading as a mechanism to cross-promote other services, a direction laid out in their recent investor presentation. This increasingly familiar playbook of cryptocurrency trading showing up beside traditional online investing in stocks and ETFs might become a sign of things to come at other online brokerages in Canada.

From the Forums

Readying to Move

When it comes to transferring away from an online brokerage, sometimes the exit can be complicated. In this reddit post, one user wants to minimize the financial hit incurred from switching brokerage away from Questrade. Find out what fellow investors provided in terms of perspective.

A Portfolio Built for Two

DIY investing isn’t just about managing one’s own investments, for many couples and families, additional account management comes into play. In this post, it was interesting to see how many self-directed investors are also taking on the management of their significant others’ portfolios.

Into the Close

That’s it for another edition of the Roundup. It was a short week; however, as we round past the halfway point in October, signals from all over point to an incredibly busy stretch to the end of December. On deck for the week ahead is yet another earnings wave, and with several new online brokerage stories forming, there’ll be lots to digest. Fortunately, if Thanksgiving is any indicator, there’s always a creative way to find more room for something enticing.

Posted on by

Discount Brokerage Weekly Roundup – October 11, 2021

If there’s one thing that Thanksgiving is famous for, it’s making a little extra room for treats. And, fortunately, it seems like online brokerages on both sides of the border were dishing out a healthy portion of good news heading into the Canadian long weekend.

In this edition of the Roundup, we kick things off with some bite-sized updates on new pricing and new naming from a couple of popular online brokerages. Next, we dial into the main course – a deep dive on the latest big feature from Robinhood: phone customer service. And finally, you’ll want to save room for dessert, which consists of some sweet chatter from the online investor forums.

Appetizing Canadian Online Brokerage Updates

BMO adviceDirect Lowers Fees to Attract New Clients

In the ramp up to RSP season, we expect to see a flood of new features and pricing announcements come through from Canadian online brokerages. This past week, BMO InvestorLine announced some interesting enhancements to their adviceDirect service that made it more accessible and enticing to investors with lower portfolio balances looking to trial out this service.

The biggest change is the reduction in the required minimum to open an adviceDirect account, from $50,000 down to $10,000. Of course, in an era of zero-commission trading, there were also some free trades (15, to be exact) thrown in for good measure for accounts with deposits of between $10,000 and $50,000.

One of the biggest challenges for consumers, especially those looking at the cost of “advice” on their portfolio, is paying fees. The minimum annual fee for adviceDirect has also been lowered from $750 to 0.75% on billable assets, with a maximum annual advisory fee of $3,750. For the entry point investor (i.e. someone with $10,000) the annual cost for the service would be $75.

While many online investors are aware of BMO InvestorLine, there are many who don’t know about adviceDirect, and given how long adviceDirect has been around, there are many online investors in DIY circles who’ve simply viewed this option as pricey. So, the move to lower the balance requirement as well as the fee structure is a great opportunity to introduce the new cohort of investors to this product. The challenge, however, will be in changing the narrative and conversation around adviceDirect, which is something that has been heavily shaped by the many years of discussion about it. As such, we expect that going into the RSP season, there will not only be greater advertising of adviceDirect, but more effort into repositioning this solution with the kinds of investors who would value having additional support and advice when making investing decisions.

Another interesting angle to this offering is that adviceDirect standard commissions per trade are $7.75 whereas BMO InvestorLine commission rates are $9.95. The disparity between the two presumably is a result of additional revenues from clients paying an annual fee for services. This, of course, naturally raises a couple of questions around how much BMO InvestorLine would be willing to lower their commission rates to in order to secure minimum activity thresholds.

Peer firms, such as RBC Direct Investing or TD Direct Investing offer discounted commission rates for active traders, but BMO InvestorLine does not. Instead, BMO InvestorLine offers up access to additional features (such as their advanced trading platform) for clients who trade more actively. If BMO InvestorLine were to lower their commissions to zero to match other brokerages, like National Bank Direct Brokerage, then it also could impact the pricing structure for adviceDirect.

Digging deeper into the pricing at this entry point tier, if a new client is being charged $75 for the service and 15 trades, that works out to $5 per trade – far lower than the current $9.95 for the self-directed investing service and the $7.75 for the adviceDirect standard commission.

For now, it’s clear that based on the pricing and the free trades for the new tier created for adviceDirect that BMO InvestorLine is very interested in attracting in new clients to give this service a try. As RSP season heats up, this latest move from BMO InvestorLine signals that there is likely more to come in terms of either features, pricing, or promotions to entice the self-directed investor segment. And, if BMO InvestorLine is any indicator, the other bank-owned online brokerages won’t be too far behind with something big.

Virtual Brokers Now CI Direct Trading

It may have taken some time, but the Virtual Brokers brand has finally seen its sunset. After Virtual Brokers was acquired by CI Financial in 2017, it was unclear as to how the Virtual Brokers brand would co-exist among the other brands managed by CI Financial. Then, in early 2020, there was some clarification that the many brands owned by CI Financial, while strong in their own right, were not building the CI brand directly, and as a result, they were all brought under the umbrella of the “CI Financial” name.

As of the publication of this edition of the Roundup, Virtual Brokers is now CI Direct Trading. It was unclear once CI Direct Investing was created whether Virtual Brokers would fall under that brand or another, especially given how crowded the “direct investing” name has become.

Qtrade, RBC, and TD all have “Direct Investing” in their name, so the “Direct Trading” brand does help them stand out but with the “direct” in the name, they also must contend with CG Direct – something that will almost certainly cause confusion, especially if CG Direct decides to ramp up their marketing to make more investors aware of their offering.

One of the biggest challenges facing CI Direct Trading, however, will be managing the transition from such a well-known name. For example, although the website has changed names, the current site structure and design are still the same. Also, the mobile app links still point to the existing Virtual Brokers mobile app page and naming.

The roll out of a new brand, especially as big of a change as a name, reveals the complexity of an online brokerage in terms of moving parts. Qtrade Direct Investing did an effective job managing their rebrand earlier this year, and when they went live, they also initiated a new marketing campaign to carry the new brand forward with the energy and momentum required to build excitement with their existing stakeholders.

If there are any clues as to where things go for CI Direct Trading, there might be some in the CI Direct Investing user experience. The shift from WealthBar to CI Direct Investing set a high bar for user experience and design for the CI Financial family. So, if the transformation for Virtual Brokers is anything like the look and feel for CI Direct Investing, it seems like Canadian self-directed investors are in for a pleasant surprise.

Robinhood Launches 24/7 Phone Support

One of the biggest stories out of the US online brokerage space this past week was from Robinhood, who announced on their blog that they have rolled out 24/7 phone support. The mixed reaction (or lack thereof) to the news is a unique reflection of where this feature fits into their business and the continued overhang of negative sentiment towards Robinhood from very vocal users online.

Historically, phone service was never really a priority at Robinhood – it was simply too expensive a feature that a zero-commission online brokerage couldn’t effectively support. Instead, for much of its existence, Robinhood fielded customer enquiries digitally, through email and chat and eventually with some limited phone support. In contrast, many peers of Robinhood, such as Schwab, Ameritrade and Interactive Brokers, have robust phone customer service infrastructure, including coverage 24 hours a day for the business week, if not for the whole week.

So, why is rolling out 24/7 phone customer service such a big deal at Robinhood?

For starters, launching a point of contact that is available all day, every day is a signal that Robinhood is trying to improve the customer experience. Events over the past 18 months, in particular the crush of volume of new accounts and the meme stock rush, uncovered issues with how customers of Robinhood dealt with things like outages, trading restrictions, account hacks/breaches, and more. Ultimately, these high stakes situations required many customers to reach out to the Robinhood customer support team.

Thus, 24/7 phone service – while a standard feature amongst other large online brokerages – provides a measure of comfort to clients who want or need to get in touch with a human to help sort through an issue.

A bigger reason why the phone service access matters, however, is because Robinhood also supports cryptocurrency trading – a market that never closes. While there was very little chatter among online investors on the stock trading side about this feature at Robinhood, the crypto community was abuzz with this innovation. There simply is no analogue for customer service at that level from crypto exchanges.

Scaling up to meet the needs of their 22+ million customers won’t be easy – or smooth. Their initial approach to providing phone support will require clients to use the app to request contact from a Robinhood agent. According to an article published in TechCrunch, there are no “guaranteed” wait times, however, the targeted call back time is within half an hour. To meet that commitment, Robinhood will employ in-house customer service reps, as well as contracted outsourced agents. Clients can therefore expect some heavy triaging of calls to ensure that resources be allocated efficiently. Of course, one of the quirks of dealing with individuals in finance is that interactions can’t seem “too rushed” otherwise the experience becomes less enjoyable. As a result, Robinhood customer service will be subject to the same forces that tend to impact their peers when the markets get extremely volatile: longer wait times on the phone.  

As important as this as a development for Robinhood, they are not the only US online brokerage to be shoring up their customer service and customer experience. Interactive Brokers, another brand for which customer support has been a lower priority, had mentioned earlier this year that they are working on something exciting for their customer support experience.

Here in Canada, 24/7 customer service at an online brokerage is a very rare feature. In fact, there is no online brokerage that offers this, but there are two that come close: HSBC InvestDirect and Interactive Brokers. The rest of the online brokerages phone service channels typically operate around business hours on Eastern Time, which is a frustrating thing for clients in Western Canada.

HSBC InvestDirect’s phone customer service hours are 24 hours a day from Monday through Thursday, and from 12am to 8pm ET on Friday. Agents resume phone coverage again on Sunday evening starting at 6pm ET. Interactive Brokers has phone service coverage 24hrs a day, five days a week. Interactive Broker’s phone customer service hours are 24 hours a day, Monday through Friday. For Interactive Brokers, however, the Canadian service operation runs from 8am to 8:30pm ET and outside of these hours calls are answered by an international affiliate of Interactive Brokers.

Perhaps unsurprisingly, Canadian online brokerages have some work to do to provide a cutting-edge phone customer service experience. To begin with, coverage for Canadian online brokerages is largely limited to business hours, with several big named brokerages only offering coverage during business hours in the Eastern time zone. Then, there are simple features, like call back (instead of waiting on hold) to letting clients know where they are in a call queue with an estimated wait time, which are still not in place at many online brokerages.

What the latest move by Robinhood demonstrates, however, is that eventually customer service and customer experience do matter and that even at a commission-free online brokerage, clients still expect to be able to connect to a human being to solve complicated or urgent issues. It is also instructive to note that any online brokerage that currently deals with a “market that never closes” like cryptocurrency (such as Wealthsimple Trade) or international trading is going to have to support customers with a phone channel at extended hours.

The silver lining for Canadian online brokerages and self-directed investors is that phone support is an area that has been an important focal point for improvement after the mega-delays experienced during the pandemic surge last year. Firms such as BMO InvestorLine and Questrade have been very public about their investments in increasing call centre resources to keep wait times low. Impressively, BMO InvestorLine also publishes wait time numbers on their customer login pages so clients can see how long wait times are.

Despite Robinhood’s launch of the new 24/7 phone support system, cynicism among clients and observers remains high.

The outages and trading restrictions are still fresh in the minds of many online investors who have weighed in on the Robinhood announcement, so getting it right on phone support will be key. The real test will come during times of market volatility, which have benefited them in the past, but going forward, will expose what they haven’t yet thought about as far as customer service.

From the Forums

Zeroing in on Commissions at Questrade

Heavy is the head that wears the crown. For the Canadian online brokerage that long held the title of the lowest-cost online Canadian brokerage, recent developments around zero-commission trading have raised questions from clients as to when Questrade will follow suit. Threads like this one on reddit are reflective of a growing chorus of investors looking for more value in a highly competitive market.

Not So Simple After All

Cryptocurrency trading – the direct way – seems to continue to present opportunity and controversy at one Canadian online brokerage. Wealthsimple Trade, which initially launched under the mantra of supporting “getting rich slowly” announced a recent development regarding cryptocurrency transfers that got online investors buzzing in this reddit post. The pivot for Wealthsimple towards cryptocurrency did not go unnoticed, and was the focus of this article in the Globe and Mail which also had a lot of people weighing in.

Into the Close

That’s a wrap on this holiday edition of the Roundup. There’s a lot that we didn’t get to this week (but that’s what leftovers are for right?), including a shout-out to World Investor Week. For Canadian self-directed investors, it might be a short week ahead but there’s no shortage of new developments on the radar (including a few generated by us!). However, between Squid Game, football, new movies starting to trickle out, and the unemployment rate dropping to pre-pandemic levels, it’s going to be quite the battle for attention regardless of what screen you’re watching from.

Posted on by

Discount Brokerage Weekly Roundup – September 27, 2021

Now that the Canadian federal election is (finally) behind us, there’s little to distract us from the fact that the RSP season ramp up is just around the corner. If there is one thing that is synonymous with elections, however, it’s constant polling – something that has interestingly become a focal point in the online brokerage space as well.

In this edition of the Roundup, we review the launch of a new investor sentiment index developed by one of Canada’s largest online brokerages and explore where the upside of sentiment tracking may lie. Next, we take a look at some important updates on the zero-commission trading file, including a big name entering the US and an update to what’s unfolding here in Canada. Finally, there’s lots of new-feature buzz in the forums – from crypto to new mobile apps.

Tracking the Pulse of Investors: TD Direct Investing Index

Regular readers of SparxTrading.com know that we’re bullish about bulls and bears – and measuring self-directed investor sentiment. So, we were delighted to see one of Canada’s largest online brokerages, TD Direct Investing, announce this past week, the official launch of a new tool that measures investor sentiment.

The TD Direct Investing Index is a compilation of metrics that reflect the optimism (bullish) or pessimism (bearish) of self-directed investors based on trading behaviour from the prior month. The four key areas that comprise the index measure whether investors were:

  • Buying or selling more
  • Buying (or selling) more on a rising market
  • Buying more at the top of a market
  • Retreating to less risky investments

Like all indices, however, the details on the underlying methodology matter.

The specific definitions of these parameters are detailed on the TD Direct Investing Index help page as is information on the frequency of publication of this data (monthly) and information that is on the index web page.

There is lots of interesting data for self-directed investors to poke around, most notably historical data on the overall sentiment score. Historic data exploration comes in two views: the past 13 months or the previous two years. What is especially appealing to the data enthusiasts is the filter function which enables users to analyze age, regional, trading style, and sector data in fairly granular fashion. Data can be filtered across stocks being bought, sold, or held.

Ultimately, how useful this index is will come down to what individuals can do with this information. For example, will DIY investors make decisions about investing based on what they’re seeing other investors do, especially given the lag time? Will it help them (reliably) identify a good time to buy or sell? Potentially identify names of interest to invest in? Or is it just “nice to know” information that will add to the noise of numbers and stats to sift through?

Regardless of the usefulness this tool ends up having for self-directed investors, for TD Direct Investing, the creation of a sentiment index provides a rich source of content to be able to talk about.

The TD Direct Investing Index web page contains a lot of data and is coupled with a video segment that reviews that data as well. While this tool takes things to a new level of depth and complexity, TD Direct Investing is not alone in reporting the activity of their user base for a source of content.

Among Canadian online brokerages, Wealthsimple Trade, Questrade and RBC Direct Investing, for example, all have reported on what investors on their respective platforms have traded. None, however, have taken it to level that TD Direct Investing has. And, in the US, there are several examples of online brokerages taking a similar approach to reporting. TD Ameritrade has its Investor Movement Index and E*TRADE regularly reports data on investor sentiment as well.  

Robinhood was infamously the source of investor trading data. That data was available via API and sites, such as Robintrack, reported on the trading activity of Robinhood investors, which, in turn, enabled other investors to trade alongside (or against) that activity (before Robinhood shut down their API in August 2020).

The amount of work put into the TD Direct Investing Index is sizeable, which also means that it is likely going to take considerable effort to maintain. So, while other online brokerages might be able to put something like the index or another sentiment-like indicator together, sustaining it will require considerable resources.

For now, it seems like return on investment for the TD Direct Investing Index will be in marketing value. The fact that the index data is available on the public facing website (versus being made available only to existing clients) offers a reason to keep coming back to that site for anyone interested in the data it contains.

Ironically, the complexity and detail that make the index useful for analysis might also be its biggest limitation.

There is a clear trend in design among online brokerages and fintech firms towards simplicity and reducing information. The TD Direct Investing Index, however, has so much data that only investors who are highly invested (pun intended) in learning about DIY investor sentiment would really keep coming back to this tool on a regular basis. Despite the strong pun game and occasional Drake lyric references in the write-ups (shout out to the compliance folks for letting the mullet references through), there’s a lot of information to process, which might lead some readers to say…I can’t even. (Not us though.)

Zero-Commission Revolut-ion Continues

With zero-commission trading now table stakes among the largest online brokerages in the US, and despite the chatter about clamping down on payment for order flow by the SEC, there are still fintech companies taking a shot at entering the online investing space.

This past week, another big fintech name, Revolut, signalled their intent to offer commission-free stock trading in the US. Last month, PayPal was in the spotlight after they too were reportedly making progress towards launching a stock trading platform, and while it wasn’t specified as to whether or not they too would be a commission-free trading platform, it is almost a given at this point considering rival Square’s Cash App provides commission-free trading.

Despite the extensive regulatory hurdles to entering the Canadian online brokerage market, it seems that Freetrade, the UK-based zero-commission online brokerage we first reported on in August, is continuing to add to its search for Canadian talent to help expand here.

Earlier this month, Mogo Inc, who announced earlier this year that they, too, would be entering the commission-free online trading space, completed the acquisition of Fortification Capital, which is being renamed to MogoTrade Inc. According to the press release, Mogo’s founder and CEO, David Feller stated “The acquisition of Fortification represents an important milestone towards the launch of our new commission-free stock trading platform, providing necessary components on the regulatory and technology side to complement our existing capabilities.”

After the launch of commission-free trading by National Bank Direct Brokerage, there has been a lot of discussion among Canadian self-directed investors, as well as online brokers, as to what will happen next. While we’re generally reluctant to report on rumours, there is chatter of a large bank-owned online brokerage prepared to roll out commission-free buying of stocks and ETFs, which if true, would almost certainly trigger others to match. Rumours are also swirling about a “digital” bank in Canada also.

Internationally, it appears that zero-commission trading is continuing to gain traction, so it’s now a matter of when, and perhaps how, not if Canadian online brokerages follow suit. The trend emerging is that fintech firms view stock trading as one of series of financial services that they can offer, which sounds like a familiar value proposition to the traditional message pitched by big bank-owned brokerages.

That said, even in the case of Revolut stepping into commission-free stock trading in the US required a significant runway (almost a year) of discussion with regulators before getting the green light to proceed. For firms looking to enter Canada, that runway could be substantially longer and barring any big name jumping into the Canadian space (like a certain well-known US financial institution), the existing online brokerage providers have a bit of time to position themselves accordingly.

From the Forums

App Quest

Fall leaves aren’t the only things changing colours this season. Big changes are coming soon at Questrade, as mentioned in this post on reddit. Find out the reactions from self-directed investors to recent news of a new mobile trading app and changes to the web interface.

Tales from the Crypto

It appears the crypto trading experiment at Wealthsimple Trade is gaining traction. In this post on reddit, investors weigh in on the pros and cons of being able to deposit more crypto into their Wealthsimple trading accounts.

Into the Close

With the end of September now almost here, it is important to recognize a couple of important upcoming events. First, the National Day for Truth and Reconciliation offers a chance for all Canadians to learn about, reflect, and engage in dialogue about the harrowing chapter in our history related to residential schools. September 30th 2021 will also mark the second “Make the World Better Day” at Sparx, where our team will be taking on the challenge of using our time and talents to positively impact the world around us. Anyone curious about the day can follow the Sparx Publishing Group on Instagram for updates.  

Posted on by

Discount Brokerage Weekly Roundup – September 7, 2021

If you find it hard to believe that it’s already September, you’re not alone. With so much taking place this year, especially in the online brokerage industry, the months have flown by, and we now find ourselves on the cusp of what is usually the “busy season.” Another reason that time flies: it’s because we’re having fun.

After a marathon edition of the Weekly Roundup last week, we now return to a more digestible edition of online brokerage industry coverage. First, we launch into the deals and promotions updates to start the month and look at the increased importance that promotions are poised to play in a commission-free world. Next, we recap some other important developments, including the 10-year anniversary (that’s X in Roman numerals!) of the launch of SparxTrading.com. Finally, we close out with commentary from the online investor forums.

Deals and Promotions Update

There are lots of different reasons people look forward to the start of a new month, but here at Sparx Trading, it’s a convenient time to review Canadian online brokerage deals and promotions.

In case you missed it, the big news this past month – perhaps this decade – is that National Bank Direct Brokerage eliminated commission fees for trading stocks and ETFs in August. This is still a very recent development, so while we have yet to witness any immediate reactions in pricing or promotional changes from Canada’s online brokers, we believe it will be a matter of time until we see other online brokers start to lower their pricing as well.

Given the lack of immediate reduction in pricing of commissions, online brokerage promotions and incentives are poised to take on an even more important role for Canadian online brokerages to secure existing accounts and even attract new ones.

Despite the immediate relevance that zero-commission trading provides to National Bank Direct Brokerage, one of the big challenges it faces is the “friction” that online investors who would rather not move. Another challenge is the fact that as an online brokerage, National Bank Direct Brokerage is relatively unknown compared to bigger bank-owned brokers or those that have been aggressively advertising, such as Questrade or Wealthsimple Trade.

Thus, Canadian online brokerages who aren’t yet ready to drop their commission prices to zero have a brief window of opportunity to show up big during the next few months. As such, we forecast that September through November will represent a very volatile period for Canadian online brokerages.

In this month’s deals and promotions, there’s a lot to report on already. Starting with the special Sparx Trading exclusive promotion from Questrade. The now famous Sparx88 promo code for Questrade accounts is having its sunset at the end of September, after having a run of just over four years.

It has delivered exceptional value for online investors opening an account with Questrade as one of the best commission-free offers at that online brokerage and played an important role in the promotions space after Questrade largely pulled back from offering multiple promotional offers.  

There some important changes taking place behind the scenes at Questrade, so we were informed it would no longer be possible to run this offer. For anyone who signs up using the promo code before the expiry date of September 30, they have until the end of December of this year to use up their commission credit.

On the expiry front, there were a pair of deals that officially concluded at the end of August – one from Scotia iTRADE as well as one from BMO InvestorLine. In keeping with historical trends, however, BMO InvestorLine replaced their outgoing cash back offer with a new cash back incentive. Interestingly, BMO InvestorLine’s newest promotion runs until the beginning of November, which is about the point of time in which we expect to see a surge in launches of online brokerage promotions.

Also worth noting, the minimum deposit requirement for the InvestorLine offer has been raised from $15,000 to $25,000. Currently, BMO InvestorLine is the only Canadian bank-owned online brokerage advertising a cash back promotion. Intriguingly, the only other Canadian online brokerage offering a cash back is Wealthsimple Trade, whose “free stock” sign up bonus offers self-directed investors some cash when opening a new account. Questrade and Scotia iTRADE have cash bonuses available through referral codes.

Another interesting development that we first spotted being advertised online in August was a commission-free trading offer from RBC Direct Investing.

Unlike some of its previous commission-free trading offers, RBC Direct Investing’s promotion was both larger and longer in duration. This new offer, which runs until the end of September, is for 50 commission-free trades that are good for two years. Previously, RBC Direct Investing’s free trade offer was typically 25 trades for one year, so this new promotion effectively doubles that.

The move to increase the size and duration of the commission-free trade offer is likely to be something other Canadian online brokerages consider when planning similar commission promotions. As mentioned above, by providing a longer time horizon for investors to use commission-free trades, there is less immediate pressure to switch brokerages and less pressure to lower commission levels outright, especially for passive investors or those who are not yet ready to make the leap to a lesser-known brokerage.

While the beginning of the month started with a shockwave of news, the end of the month provides a natural jumping off point for several online brokerages. Qtrade Direct Investing and RBC Direct Investing both have campaigns that are scheduled to expire at the end of the month, so it will be interesting to see what, if any, offers show up to replace them.

The ramp up to the start of RSP season is also just around the corner, which, based on everything that has transpired these past few weeks, suggests prime time for some big incentives to start showing up. Larger online brokerages may just roll the dice and come to market with similar offers as they had last year, but smaller or less popular online brokers are at a pivotal moment where they will have to be launching exceptional new features or introduce offers that are going either buy time or clients (or both).

With the move by National Bank Direct Brokerage catching many industry observers (including us!) by surprise, these next few weeks and months will bring a host of pleasant surprises for Canadian self-directed investors. And we haven’t even mentioned the new online brokerages slated to enter the online trading scene soon. It seems entirely fitting that “fall” is the season in which we’ll now start to see commission costs for online investors meaningfully drop. Stay tuned.

Online Brokerage Quick Takes

After the marathon read that was last week’s Roundup, we wanted to give readers a bit of a break with some quick highlights of other news stories around the online brokerage space that didn’t get as much press or coverage.

Wealthsimple Trade Increases Fractional Shares & Instant Deposits

The launch of fractional shares at Wealthsimple Trade earlier this year was a very big deal. Despite the rollout only featuring a handful of Canadian and US stocks, a few weeks ago, a lot more were added to the list of stocks eligible for fractional trading. At the time of publication, that list has now grown almost ten-fold to 150 stocks. The vast majority (115) of those stocks are US-listed securities, which, given their popularity, availability, and profitability to Wealthsimple Trade, makes sense.

However, the list of Canadian stocks (35) has some additional names which are very familiar to Canadian investors. Interestingly, on the list of US securities, there are also a number of ETFs.

This much wider selection is going to be of much greater appeal to investors, however, unsurprisingly, the demand for more Canadian securities is likely a priority for self-directed investors (rather than traders) in Canada.

Complementing the launch of more securities eligible for fractional shares is the increase in the amounts that can be funded instantly to Wealthsimple Trade from $1,000 to $5,000. The monthly subscription to enhance features on Wealthsimple Trade is currently $3 which also provides real time snap quotes from Canadian exchanges as well as Nasdaq.

Fast deposits of larger sums of money are an area that non-bank-owned online brokerages have struggled with in the past, so it is no surprise to see “account funding” be a feature that Questrade, as well as Wealthsimple Trade, are working to improve.

The summer has been a busy one for Wealthsimple Trade with no signs of a slowdown in terms of new feature releases. It appears that they are pushing very hard to have some very big features in place for RSP season, and with news coming out almost weekly on Wealthsimple Trade, it is hard to imagine other online brokerages being able to rest easy knowing that current pain points of Wealthsimple Trade customers are going to be that way for too much longer.

SparxTrading.com Turns 10!

Also eclipsed by the big news from National Bank Direct Brokerage: SparxTrading.com’s official birthday!! It’s hard to fathom that we officially went live 10 years ago in September with a mission to help untangle the journey of self-directed investing and that we’ve been around for this long.

It has been quite the journey to where we are today. From a conversation among friends expressing frustration at the state of online investing to becoming one of the most important voices in the Canadian online brokerage industry, I certainly didn’t picture this world 10 years ago.

In so many ways, the world for online investors a decade ago was dramatically different than the one now. There was no inkling that commission-free trading was “a thing” and we were just coming out of the Great Financial Crisis, so sentiment on markets was understandably skeptical. Nevertheless, it was clear at that point that the world of online investing was prohibitively inaccessible to so many, and it was time to change that.

I would like to think that in some small way, we’ve helped improve the experience of online investors over the past decade, whether it’s been through making it easier to research online brokerages in Canada, improve access to deals and promotions, or advocating directly to leaders across the industry as to what online investors are interested in.

As anyone who knows the Canadian online brokerage landscape will tell you, change often happens slowly, so patience has been a defining trait since day one.

The first “official” post on the original Sparx Trading site is still available – it was a reference to an investment blog called Juggling Dynamite, which is still going strong today. And, in a twist of fate that can only be one of those signs the universe tends to toss our way every now and then, a recent post on that blog happens to be a harbinger of where the parent to Sparx Trading, Sparx Publishing Group, is heading towards to help make the world better.

The Sparx team has now grown to 18, many more if you include new family members, pets, and one heck of a spider plant.

We’re so excited to see what the next 10 years has in store, and with the latest shift in the online brokerage industry in Canada, there seems to be as much of a need today for clarity for self-directed investors as there was when we first started. True to the mission of Sparx Publishing Group, we’re content to make the world better one post at a time.

Like most of the online brokerage industry, we too are actively working on new features and can’t wait to have them launch soon enough.

Thanks to everyone who has helped us get to this point, especially you curious and supportive readers who enjoy the world of online investing as much as we do!

From the Forums

Kind of a Big Deal?

At the start of the month, it seems fitting to be talking about making a move from one online brokerage to another. In this post, one online investor wanted to know what the consequences were of transferring assets into a TFSA from a non-registered account. Check out what fellow online investors had to say about making the shift.

Sliced vs Diced

Smaller portions are all the rage right now when it comes to buying stocks online. With some very popular stocks like Amazon out of reach for many new investors, online brokerages and investment firms have gotten creative, in particular using fractional shares and ETFs to lower the bar to get a literal piece of the action. Find out what one reddit thread had to say about fractional shares versus ETFs on the NEO exchange.

Into the Close

That’s a wrap on the long weekend edition of the Roundup. There’s a lot in play – including the return of NFL football – so there’s something extra for fantasy football portfolio managers to stay on top of. We’re thrilled to be stepping into our 10th year with so much change taking place. September is often associated with the “back to school” theme, however, as we’ve come to appreciate (this year more than ever), every day brings something new to learn.

Posted on by

Discount Brokerage Deals & Promotions – September 2021

September is officially upon us, and with fall just around the corner, change seems to be the appropriate theme to capture what’s taking place in the online brokerage industry in Canada.

Of course, the big news this month is that National Bank Direct Brokerage launched commission-free trading at the end of August, signaling the start of a new chapter for the industry in which bank-owned brokerages are prepared to compete with the nimble upstarts in terms of pricing.

On the deals and promotions front, this is a particularly busy month, now likely made even busier by National Bank Direct Brokerage’s latest pricing move. All of this is great news for Canadian self-directed investors, who will likely benefit from more compelling promotions and pricing in the coming weeks and months.

The launch of the new commission-free trading structure at National Bank Direct Brokerage wasn’t the only story that is relevant to the deals section this month, however. For example, we saw cash back offers still lead the way at BMO InvestorLine; Qtrade Direct Investing still has their cash back offering, and we (finally) spotted the official terms of an RBC Direct Investing deal that appears to be advertised on search engines.

Another big piece of news in the deals section: the best Questrade promo offer code on the market, Sparx88, is being retired at the end of September.

The end of August also bid farewell to offers from Scotia iTRADE for their education bootcamp, and the 100 commission-free trade offer from National Bank Direct Brokerage is, for all intents and purposes, taking an early retirement.

Given everything that’s in motion this month, we’ll be keeping an eye out for more offers and if you spot any you think would be of value to other online investors, let us know.

Expired Deals

There are a couple offers that have officially expired at the end of August. The commission-free trade offer from Scotia iTRADE linked to their investor education initiative concluded, as well as BMO InvestorLine’s summer cash back offer (a new one has replaced it).

Extended Deals

No extended deals to report at this time.

New Deals

The most exciting new deal to report on this month is from RBC Direct Investing. We had first spotted this in August, however, locating it online was a challenge since it appears to be tied to different Google searches – something that is a fascinating tactical choice. This new deal represents an important shift for RBC Direct Investing, as the number of free trades being offered (50) is higher than any recent commission-free offer they’ve put forward, and the time horizon to use the trades is two years. Like several other offers, this deal is scheduled to expire at the end of August. Check out the online brokerage deals index for more details.

BMO InvestorLine launched a slightly modified cash back offer upping the minimum deposit requirement from $15,000 to $25,000. The cash back amounts range from $50 to $2,000 so it is one of the few offers currently available to provide larger cash back rewards for large deposit amounts. This offer expires at the beginning of November, which is likely the window of time in which we expect to see more online brokerages launch RSP-linked campaigns.

Posted on by

Discount Brokerage Weekly Roundup – August 30, 2021

Truth be told, it was supposed to be a vacation edition of the Weekly Roundup. However, National Bank Direct Brokerage’s big news this week managed to make a lot of folks in the online brokerage industry in Canada put any plans for taking time off on hold (including mine).

It’s fitting that this special edition of the Roundup focuses on just one big story: the move to zero commission trading by National Bank Direct Brokerage. We’ll return with more stories next week (there were actually other things that happened too!) as well as more investor forum chatter.

Caveat: We were going to keep this initial coverage of the price movement short (well at least as short as we could). After poring over 1,000 user comments, as well as different news reports, articles, and forum posts, there’s lots to say here, but in the interest of keeping things manageable, we’ll focus on some of the initial developments and implications. Not to worry though, there’s lots more to unpack, so stay tuned.

National Bank Direct Brokerage Eliminates Trading Commissions

In case you missed it on the news, social media, and in the investor forums, National Bank Direct Brokerage made history this past week by dropping standard commissions for equity and ETF trading to zero. That’s right, the first big bank-owned online brokerage in Canada chose the “nuclear” option on pricing by eliminating trading commissions.

While it is still early days, saying this is a game changer would be an understatement.

Change, however, is unlikely to come as swift as it did in the US during their zero-commission wave in 2019, but the latest move by National Bank Direct Brokerage is sure to put pressure on all Canadian online brokers to seriously consider taking drastic measures to respond.

A History of Making Pricing Moves

Commission price drops have been a part of the trends at National Bank Direct Brokerage over the past several years, and even earlier this year. And yet, in looking at the roll-out of the new commission reality, one gets the sense that this decision was both a long time coming and pushed forward quickly to come to market this year.

For a bit of a history lesson, the zero-commission trading conversation at National Bank Direct Brokerage has been happening for longer than most online investors would think. In a bit of a personal anecdote, I recollect having a meeting with a senior executive at National Bank Direct Brokerage (NBDB) back in the spring of 2017 in which commission-free trading at Robinhood came up. At that time, it wasn’t seen as something that would gain traction with the industry, however, later that summer, NBDB launched zero-commission ETF trading on all Canadian and US ETFs. Prior to that, there were only short stints at NBDB where commission-free trading of ETFs were offered as a promotion, probably as a means to analyze the impact and popularity of this feature.

In October 2019, they dropped the pricing from $9.95 to $6.95 for National Bank clients, offered young investors (aged 18 to 30) commission rates at $4.95, and gave active investors an even lower rate of $0.95 per trade for 100+ trades per quarter. Earlier this year, in March, we also reported on a commission fee drop from National Bank Direct Brokerage in which the regular commission fee was lowered to $6.95 per trade for everyone. Incidentally, October 2019 was also the point in time when US online brokerages also embraced zero-commission online trading more broadly.

If there is a pattern emerging, it is that National Bank Direct Brokerage has been quietly gathering data on the zero-commission thesis over the past few years. It is a bold move to be “the first” one to make the move to zero, however, they clearly had a lot of information on which to place this bet.

While the timing is a bit of a mystery, the reality is that it was going to be a matter of when, rather than if, online brokerages moved to zero-commission in Canada. And, as a brand that wanted to expand its footprint across Canada, as well as its position in the hierarchy of online brokerages in Canada, going to zero commissions provided much more upside to NBDB relative to the downside.

Being the first one to do it, gave NBDB the spotlight and enabled them to set the pace of change. Case in point, everyone in the online investing community weighed in on the move.

Having covered this space for almost a decade, there are few moments in the Canadian online brokerage industry that have garnered as much interest from news outlets, social media, and investor forums alike. In fact, the news also made it to several bank earnings calls which happened to fall in the same week as the announcement. It’s safe to say that has never happened before here in Canada.

Not Everything is Free

Despite eliminating the commission charges for stocks and ETFs, National Bank Direct Brokerage did not entirely eliminate commission fees on trading options or inactivity fees.

In terms of options commission, the fixed commission cost component to the options trading commission trade has been eliminated, however, there is still a minimum charge of $6.95 per options trade and pricing per contract remains at $1.25.

That said, it is worth reviewing the revenue segmentation for Robinhood’s earnings which we covered last week, where it clearly shows that when it comes to commission-free trading, the product mix tends to favour options trading over purely stock trading. Options trading is also a lot more profitable for online brokerages than stock trading is, so there is some economic utility to keeping charges for that product intact. Although NBDB does not have all the bells and whistles or order types available on options trading that other brokerages support, the reality is that for simple strategies the functionality is there.

There are also still account maintenance fees. The annual fee of $100 for balances that are less than $20,000 still applies, as does the conditions in place to have them waived. Users can have the inactivity fee waived if they make five stock, ETF, or options trades in a year (between June 1 and May 31 of each calendar year). One source of confusion online initially was when the term “commissionable” was left in one of the conditions (it has since been updated).

Getting used to the realities of zero commission trading also means changes to the old way of doing things. One casualty is promotional offers. The 100 commission-free trade deal is no longer relevant (it was set to expire at the end of September anyway), and while it can’t be ruled out altogether, there is a low probability that cash back offers at NBDB are showing up anytime soon given the surge in interest from self-directed investors curious and relieved at this new option.

What Does This Mean for Self-Directed Investors?

Speaking of self-directed investors, the launch of a full commission-free trading experience with no limits or special conditions on US stocks or specific trading requirements is huge. The chatter online exploded as the news broke early last week, offering a rare glimpse at the various attitudes of many different types of investors all at once.

It is of little surprise to see how much interest there was online, especially in forums on reddit and RedFlagDeals.com that a bank-owned brokerage is offering zero-commission trading. What was surprising, even seasoned veterans, like Glenn LaCoste of Surviscor, was that a bank-owned brokerage that led with this change rather than a smaller competitor.

In fact, it is almost hard to put into words just how explosive the reaction was from retail investors to the news. While it is difficult to summarize all of the fascinating points raised by self-directed investors online, it is incredible to see that even with zero commissions, there are other features that Canadian investors value, something that could turn out to be an Achilles’ heel for broader adoption of commission-free trading at other online brokerages.

Nonetheless, in the weeks ahead, NBDB will likely be tested with a crush of new account opens. From transfers to new accounts outright, the wave of interest is more like a tsunami that will only continue to gather strength as news ripples through investor forums. It is especially attractive to younger investors (under 30) who are not subject to the minimum account balance requirements, and, thus, have almost no downside of opening an account to try out NBDB.

For very active investors and traders, the economics of this make far too much sense to pass up as well.

Granted, options traders and those using margin will still put Interactive Brokers high on their list, however, no other online brokerage in Canada is offering the competitive offer that National Bank Direct Brokerage currently is. Again, this is a major coup for NBDB across almost all segments of investors, including those fed up with paying lots of commissions for what they consider to be an “average” digital experience.

The two most fascinating angles (it is hard to narrow this down to only two), however, have been online investor reactions and the real-time test of how important mobile apps are to investors.

With well over one thousand investor comments and counting, the conversation around NBDB’s price drop contains many themes. High up on that list is the reaction that many online investors had were they contacted their existing online brokerage to ask whether those brokerages had any plans whatsoever to offer similar pricing.

That so many online investors did this was interesting for two reasons.

First, it revealed the different answers from online brokerages around this issue, ranging from “we’re thinking about it” to “nope” (paraphrasing a bit here). In some instances, online brokerages that offer lower commission prices were willing to lower the commission rates generally reserved for active traders to non-active users. In other words, online investors at certain online brokerages are apparently able to request a discount and get one.

The second reason it was so fascinating is because it revealed a nuance about the Canadian online investor which is that here (perhaps unlike in the US), investors are willing to ask questions first then make a move, rather than move quickly based on price alone. Underpinning the “ask first” approach is likely the hassle of having to move accounts, which online investors are apparently willing to endure depending on what they hear back. It was really interesting to see online investors publicly offer up “ultimatum” dates to their online broker to get zero commission trading announced by a certain date otherwise they would move altogether.

Another big point of interest is whether or not a mobile app matters more than low cost to the online investing experience. National Bank Direct Brokerage has web-based trading interface that works on mobile but does not have a dedicated mobile trading app, something that younger investors have – up until this point – been insistent is the marker of a great online investing experience.

It also important to note that the most active (and vocal and influential) online investors use their desktops or laptops when trading online. Users need or want multiple monitors when trading, especially for charting and scanning lots of news. Phones don’t do that nearly as well, so the traders that influence opinions for investors online are going to be driven by the web or desktop experience rather than the mobile one.

As the old adage says, money talks. And while NBDB is not in the same league as Wealthsimple Trade for mobile trading app user experience, the reality is that the mobile experience for NBDB (especially for the price) is “good enough.”

Again, for the sake of brevity, there is a lot to the investor reaction we aren’t reporting here, but suffice to say that all bank-owned online brokerages have likely seen a flood of questions from their clients asking about matching, as well as online brokerages in general receiving account transfer requests from clients looking to move their business to National Bank Direct Brokerage. Online investors are no longer caught between having to choose either low prices or bank-owned brokerage convenience; they can now have both.

What Does This Mean for the Canadian Online Brokerage Industry?

We’ve said it a few times, but it is worth underscoring that the commission price drop by NBDB is a game changer. Who it impacts and how immediately, however, is something we’ll be watching with intense interest.

The first online broker that lots of users have mentioned as being impacted by this decision from National Bank Direct Brokerage is Wealthsimple Trade.

Wealthsimple Trade

Though Wealthsimple Trade has tried to build its brand as the zero-commission online brokerage, the reality for their model is that trading in the US comes with some punishing forex transaction fees. This latest move by NBDB has earned accolades for being able to offer the full list of securities on the major US exchanges as well as the Canadian ones rather than have them subject to restrictions set by the broker. Already, however, sentiment among self-directed investors has put NBDB ahead of Wealthsimple Trade in a number of cost-sensitive categories.

Big Bank-owned Online Brokerages

If there’s any group that could defy gravity on commission pricing just a bit longer in Canada, it is the big five bank-owned online brokerages.

Arguably, the two biggest players, TD Direct Investing and RBC Direct Investing are in the best position to not have to go zero commissions right away given their strong set of features and platforms. Responses from frontline reps, as well as from senior TD and RBC executives on earnings calls, seem to support this view.

Remarks from Teri Currie, TD’s Group Head of Canadian Personal Banking, reveal a rough estimate of what the cost might be if TD went the route of full commission-free trading, as well as what the current sentiment is on them moving price.

It is worth pointing out that the last time that the Canadian online brokerage industry saw a major repricing was in 2014, however, Scotia iTRADE managed to hold onto its 19.99+ and higher commission structure until 2019, which is a long five years for many investors.

After just launching commission-free ETFs, BMO InvestorLine might also take a wait and see approach to the commission drop rather than be the next to dive into the pool, or it might, like National Bank Direct Brokerage did, elect to start dropping prices gradually or with a really compelling promotion to buy some time heading into RSP season.

Of the big five bank-owned brokerages, CIBC Investor’s Edge, already a low-cost option, could arguably have to concede to a lower price point per trade first because it does not have the same depth of features or platforms that are currently being offered by its competitors.

Questrade

Speaking of low-cost leaders, Questrade has emerged as a popular option for value-conscious online investors, so the latest move by National Bank Direct Brokerage to eliminate trading commissions is definitely a blow to the title for Questrade.

There are scenarios in which Questrade might be able to delay dropping commission pricing, however, in all likelihood, despite having a compelling brand, Questrade has sought to be a low-cost option and doing nothing doesn’t seem like an option nor does trying to reposition itself as a technology or platform leader. It has invested substantial resources in marketing themselves as a low-cost provider – if not THE lowest cost provider – so for fee-conscious online investors, they will likely be looking to Questrade to move quickly otherwise it will be investors who will do the moving.

Everyone Else

With the exception of Interactive Brokers, all other online brokerages in Canada will have to seriously reevaluate their pricing heading into the fall and 2022. There aren’t that many other online brokerages in this category, but the strength of brand, convenience, or features just isn’t there the same way it is for other online brokers.

What’s Next?

Where things go from here is somewhat safe to say; when, however, is a different story. The story is still unfolding but anyone who’s made it this far can attest to, there’s lots to unpack here.

The likely scenario we see playing out for now is that online investors will be adding National Bank Direct Brokerage to their short list of online brokerages to consider. There is quite the uphill battle NBDB faces in terms of building awareness of its platform, so it would be safe to assume there’s some big marketing pushes coming in the next few months. Even with the huge surge in online investor interest, National Bank Direct Brokerage is just not well known enough to have online investors immediately jump ship from their existing providers.

The early adopters of NBDB will serve as important points of influence to the curious, however, the good news for NBDB is that there is likely a high enough surge in new account openings that some portion of those individuals will be writing about their experiences.

As for the rest of the online brokerage industry, given where we are in the calendar year, the existing marketing plans that have been devised heading into the end of the year are going to have to be rewritten. While several online brokerages have probably got a “playbook” on how to respond to a zero-commission offering, the next few weeks and months will reveal how extensive that playbook is.

Although it has come as a surprise that National Bank Direct Brokerage was the first big bank-owned online broker to reduce equity and ETF trading commissions to zero, the reality is they’re well-rehearsed in making pricing moves while continuing to improve their service offering. By going first, they have certainly earned the attention they are now getting, however, they are also fighting the pull off some powerful forces among consumer behaviour to stay with their existing online brokerage firm.

Despite the forecast for other brokerages to adopt zero-commission pricing, one thing is clear: the longer other brokerages wait to go to zero, the more impatient online investors will get. Unlike the world before last week, Canadians have now woken up to a new option for trading online and no longer have to wait to take advantage of it.

Into the Close

Thanks for tuning in all the way! There’s still more to this story so be sure to tune into what is likely going to be a wild ride through the end of the year and into next. For now, try and recharge as quickly as you can; it seems the forecast is for activity at Canadian online brokerages to surge, thanks to the move by NBDB.

Posted on by

Discount Brokerage Weekly Roundup – August 2, 2021

While Canada being on fire at the Olympics is a definite plus, Canada is literally on fire (at least in this neck of the woods in BC) this long weekend. Despite the hazy skies, ambitions at Canadian (and American) online brokers are pushing faster and higher.

In this long (and smoky) weekend edition of the Roundup, we jump into the latest updates from the deals and promotions section, highlighting a new offer from a popular online brokerage. Next, we do a quick sweep of some interesting developments, including new stocks available for trading at Wealthsimple and the brave new world for Robinhood now that they’ve IPO’d. Finally, there is some fascinating fodder in the forums to cap your summer reading list off.

Deals Activity Update – August

It’s the start of a new month, and as such, time to check in on the latest deals and promotions from Canadian online brokerages. This summer (and year) has been filled with surprises, and this month, there’s a positive surprise in the form of a new offer from Qtrade Direct Investing to kick things off in August.

Before diving into the details of the promotions active this month, it’s important to highlight that August is the start of the final quarter of the fiscal year at many Canadian online brokerages. Why that matters is because this final stretch of the year offers brokerages a chance to bring their full year numbers up. While trading volume isn’t something that brokerages can directly impact, attracting assets and new accounts are. And, one of the fastest ways to do that is with promotional activity.

Looking first at the newest offer in play, Qtrade Direct Investing has an interesting promo aimed at the FOMO crowd: 50 commission-free trades. One of the reasons this promotion is interesting is because it lives up to its FOMO name, with the deal only lasting until the end of September. Another FOMO angle is that only the first 100 people to sign up for this account are eligible to receive it.

While limited time offers are not unusual, short term (one to two month) offers are fairly rare and combining these offers with a limited quantity feature is virtually unheard of at other brokerages. This is not the first time Qtrade Direct Investing has tried the limited quantity approach, but the titling of this offer as a “FOMO” promotion is targeting this deal to millennial investors who would have likely also seen this labelled applied to GameStop and AMC trading earlier this year. The fact that the deposit requirement is a minimum of $10,000 also significantly lowers the hurdle for younger investors to be able to take advantage of it.

Promotions generally take time and effort on the part of online brokerages to configure and manage, so there have to be additional benefits to the exercise that go beyond just the new accounts. One of those additional advantages would likely be understanding what kind of demand for online brokerage accounts currently exist.

Earlier this year there was an unmistakable tsunami of interest in opening new accounts; however, as the year has progressed, there has been a definite pullback in the number of new accounts opened. The launch of a new promotion at a typically quiet time in the calendar year might be a way to gauge whether DIY investors – especially younger ones – are still keen on trading.

Two other online brokerages on the deals radar this month are BMO InvestorLine and Scotia iTRADE.  Both of these bank-owned brokerages have promotions that are currently scheduled to conclude at the end of August. In the case of BMO InvestorLine, there is a strong likelihood that a new offer will appear to replace the outgoing promotion; however, for Scotia iTRADE, it is not entirely clear whether there will be another special offer coming.

The good news for DIY investors is that the quiet period for promotional activity is almost over. In all likelihood, the combination of the end of the fiscal year and a surge in new feature releases means that online brokerages are going to be more inclined to either test some creative offers or launch some campaigns that will last into the mid-fall when the ramp up to RRSP season kicks off.

Online Brokerage Quick Updates

Wealthsimple Trade Enables Hundreds of Canadian Securities Exchange Listed Stocks

When it comes to online brokerages in Canada, Wealthsimple Trade represents an interesting case. On the one hand, there is a clear value proposition with zero-fee trading commissions for Canadian-listed securities, on the other, there is a limited availability of those shares for trading because stocks have to meet certain price and volume criteria.

This past week, Wealthsimple Trade took a significant step forward in increasing access to a big chunk of a Canadian-listed stocks by enabling access to just over 200 stocks listed on the Canadian Securities Exchange (CSE). The CSE is home to Canada’s largest contingent of publicly-traded cannabis companies and also has stocks in blockchain and esports, all areas in which the core audience of Wealthsimple Trade are interested in trading.

For the CSE and Wealthsimple, this is clearly a win-win. Wealthsimple Trade has achieved a unique position in the online trading landscape in Canada, having reaching a critical mass of importance that enables it to challenge larger and older online brokerages despite not having all of the features of those other brokerages. By closing that gap between themselves and the existing competition, Wealthsimple Trade is well-positioned to benefit from any big movements in the cannabis space that could reignite investor interest in the industry (e.g. any movement on legalization in the US). On the CSE side, more access to retail investors also means more possible trading to take place on their market, ultimately translating into greater potential revenue.

Memes in the HOOD

If there’s one name in the US online brokerage market that’s been in the news practically all year, it’s been Robinhood. Earlier in the year, it was a rollercoaster ride of emotion from hero to villain, as Robinhood found itself in the middle of a public firestorm from DIY investors who wanted to ride on the “meme stock” train only to find themselves shut out of trading those stocks by Robinhood.

The fallout from the meme stock controversy has still not subsided, and despite what would ordinarily been considered a blowout year of performance, there is a clear overhang on the Robinhood story that clearly had an impact on what should have been an exceptionally big deal of Robinhood going public via IPO.

The Robinhood IPO and the journey to this incredible milestone will almost certainly be the focus of business case studies, more so as a question of what went wrong. The fact that the stock was priced at the lower end of its range and that it still fell on opening day (and for a few sessions afterwards) point to clear pessimism on the part of the investing public. Until the market can accurately discount the risks for activities such as payment for order flow (and where regulators may elect to clamp down) as well as some of the liabilities, there will be a constant uncertainty to what Robinhood should be worth. The bigger challenge, however, is how Robinhood will fare as a public company in order to grow its revenue to make it an attractive investment over the long term. They have a massive account base (22 million at last count) so there is room to monetize that, and it’s not just any account holder, it’s the prized millennial segment that so many online brokerages and wealth managers are only now ramping up to try and win over. Robinhood has a six-year head start on this group. The question, ultimately, is how Robinhood intends to grow its earnings.

One interesting feature about Robinhood is that because of its line of business, it can be a better proxy for ordinary online investors than Interactive Brokers can. In the case of Interactive Brokers, their target is more active investors, including day traders, so there is some limitation as to what can be interpreted when Interactive Brokers releases its trading figures. Another interesting feature we can expect as well is that in order to grow earnings in what might be a declining level of interest in markets (compared to 2020 and early 2021), Robinhood will have to innovate and that could open up a slew of new features and components that Canadian online brokerages can look to for inspiration as they too wrestle with how to attract and win market share with millennial investors.

There is much more on the new chapter in the Robinhood story, so be prepared for this name to become cemented into the psyche of retail investors and wealth management everywhere.

From the Forums

Fractional Shade

Some stories you find in the spotlight, others you find in the shade. And in the case of this forum post on reddit, there was clearly a lot of shade being thrown by Interactive Brokers Canada at the whole Canadian fractional share trading story.

The shots fired by Interactive Brokers Canada management at Wealthsimple Trade and the latest innovative launch of Canadian Depository Receipts at Neo Exchange are unlike anything we’ve seen from the normally spotlight-shy brokerage. Ironically, despite having access to fractional shares for years, Interactive Brokers Canada has not heavily marketed this feature and as a result, Wealthsimple Trade and now the new CDR feature have stolen the innovation thunder away from Interactive Brokers. See what sparks were flying among online investors here.

Help with Homework

DIY investing requires doing some degree of homework, especially when picking an online brokerage to start trading with. In this post from RedFlagDeals.com, it is fascinating to see the degree to which some online investors would prefer to seek out answers to questions from fellow DIY investors rather than addressing questions directly to online brokerages or digging around on a website for answers. While at first glance it may seem like trying to take the easy route out, long customer service wait times and website navigation are some of the unseen reasons why sometimes even simple questions get raised in forums instead of addressed by online brokers themselves.

Into the Close

That’s a wrap on this short-week edition of the Roundup. Here’s hoping you’re managing to stay safe and squeezing in relaxation before what is shaping up to be a very busy September.