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National Bank Direct Brokerage

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Discount Brokerage Weekly Roundup – January 6, 2022

Happy New Year and welcome to 2022! The start of a new calendar year is typically the time of year when we all struggle with writing the correct year for a few weeks and then eventually get the hang of (or accept) being in a new place. Ironically, time distortion is a hallmark of a pandemic, and aside from not knowing what day of the week it is (every day is sweatpants day!), it seems that timing was topsy-turvy at online brokerages in Canada and the US. But this is the definition of the new normal, and like markets tend to do, we’re embracing the ability to adapt with the times.

Change is a big theme in this mega-edition of the Roundup. First, we dive into the biggest review of Canadian online brokerages: the Look Back / Look Ahead for 2021/2022. This in-depth look at the latest issue picks out some important themes that impacted Canadian online brokerages and self-directed investors in 2021 and what’s in store for 2022. Next, we recap the year with memes & themes in an epic rundown of the big (and small) stories of 2021. So, in case you missed the past year or simply just need a quick(ish) primer on what happened with Canadian online brokerages in 2021, be sure to read through this ultimate roundup of Roundups. Finally, be sure to get to the end for an important announcement on the schedule changes to the Roundup coming this January.

Online Brokerages Review 2021 & Offer Exclusive Preview of 2022

When given the opportunity and spotlight to speak directly to online investors, what did Canadian online brokerages have to say about an exceptional year and how to build on top of that?

Well, we found out just that in the latest edition of the Look Back / Look Ahead series in which Canadian online brokerage leaders shared their perspectives on the past year, as well as what they have planned for the year ahead.

This year’s edition featured submissions from BMO InvestorLine, Desjardins Online Brokerage, HSBC InvestDirect, National Bank Direct Brokerage, Qtrade Direct Investing and RBC Direct Investing, with senior leaders from each of these firms, sharing unique and intriguing perspectives into how various factors over the past year have influenced the priorities and direction of their respective firms going forward.

On a thematic level, it was clear that one of the biggest challenges and opportunities for the online brokerage industry in Canada was the meteoric rise of retail investor interest in trading stocks online. The stats provided were incredible. Desjardins Online Brokerage, for example, shared that 30% of their user base is between the ages of 18 and 30, and BMO InvestorLine reported nearly 50% of their new clients are under 35. And they’re likely not alone. The huge demographic shift in clients means that online brokerages are working to deliver features and experiences that align more closely with this group – including investor education resources.

Having covered the online brokerage industry in Canada for the past decade, an important theme of this issue we’ve witnessed is effort into investor education gradually recede. When Sparx Trading first launched, at least half a dozen or more online brokerages would regularly hold investor education seminars, webinars, or education-focused events. Gradually, however, as markets moved steadily higher and volatility subsided, interest in education waned, and whether it was supply or demand driven, “investor education” resources began to disappear.

Fast forward to today and it seems we are experiencing a renaissance of investor education based on the feedback from online brokerages, as well as in several of the trends we’ve been tracking throughout the industry. National Bank Direct Brokerage, for example, highlighted the fact they offer Options Play for free to their clients. This digital tool enables clients to simulate and learn about options trading strategies – something that is of growing interest to younger investors, especially coming out of the meme-stock craze of early 2021. At RBC Direct Investing, education is also on the roadmap for 2022 as is building out additional content for investors via the Inspired Investor magazine. And, at the industry giant TD Direct Investing, it is clear that investor-focused content will play an important role given their sizeable investment in building an entire content team that is likely going to be producing content at an unmatched volume.

Of course, the big story for 2021 in the Canadian online brokerage industry was the launch of commission-free trading by National Bank Direct Brokerage in August. Undeniably a surprise for many, the fact that a bank-owned online brokerage with a national footprint would be the first to offer full commission-free trading changed the competitive landscape for larger and smaller players alike. Not long after NBDB lowered their fees, Desjardins Online Brokerage followed suit. With both of these Quebec-based institutions taking trading commissions to zero, clearly commission-free trading is on the minds of self-directed investors and online brokerages alike. When polled about the issue, Canadian online brokerages revealed that they are clearly aware of it and would be looking to enhance value for investors with new features and offers rather than lower prices for trading commissions – at least at this point.

As we round the turn into 2022, however, zero-commission trading looms large. Just ahead of the end of 2021, Mogo Trade announced it had received the official green light to launch its commission-free trading app, and in our special section on commission-free online brokerages, we listed a total of four (including Mogo Trade) that we are currently tracking that are likely to come online either in 2022 or 2023. So, the reality for Canadian online brokerages is that zero-commission trading is coming, as is more competition.

Given the pace of innovation and change that are on the horizon, the Look Back / Look Ahead series provides visibility on which Canadian online brokerages are actively innovating, which firms are working on important infrastructure components, such as client experience, and which firms are clearly capable of doing both.

For self-directed investors, moving from online brokerage to online brokerage is (at least for now) a slow and painful exercise. Consumers would much rather stay where they are; however, without confidence in their online brokerage’s ability to innovate or be competitive on cost or value, alternatives are increasingly present.

Perhaps one of the most compelling stories in 2022 beyond commission-free trading will be a new feature telegraphed in the Look Back / Look Ahead from National Bank Direct Brokerage: paid securities lending.

In addition to offering zero-commission trading, the fact that clients could be compensated for lending their securities out to those seeking to short them lays a strategic foundation for NBDB to not only hang on to clients in a way that other brokerages are not (at least not yet), but it also is a draw for active traders who are looking to source shares for shorting. It’s a feature that currently exists only at Interactive Brokers, which is a signal or validation that active investors are either direct or indirect benefactors of this program. In short (pun intended), our call on National Bank Direct Brokerage in early 2021 appears to continue to play out: they are increasingly going to be an online brokerage to watch as they expand their presence across Canada. Until another major online brokerage in Canada drops their commission pricing to zero or close to it, National Bank Direct Brokerage is going to continue to be a top contender among self-directed investors looking to for a value-oriented online trading experience. Unlike other providers, however, NBDB isn’t waiting around for that to happen – they are clearly positioning themselves well with Options Play and the paid securities lending feature to be an attractive destination for active investors, as well as passive ones, and they’re working towards launching a mobile app which would only deepen the appeal with younger investors.

With 2021 now officially in the books, the Look Back / Look Ahead series is a great opportunity to get a unique perspective from industry insiders on the world of self-directed investing. As it falls on the tenth official year of the launch of SparxTrading.com, it also represents a significant milestone to have been covering the activity in this space to the depth and consistency that we have. Over the course of the decade, it’s been amazing to connect with industry analysts, online brokerage leaders, and self-directed investors to chat all things online investing. Most fulfilling, however, has been getting to be able to level the playing field for DIY investors and help, even in some small measure, make self-directed investing easier and more accessible.

True to the spirit of the Look Back / Look Ahead series, we also took the opportunity to announce the launch of Sparx Trading Pro. While it is still in development, we’re excited to be building something special for the community of users that regularly turn to SparxTrading.com for in-depth insight and analysis of the online brokerage industry. We love analytics and numbers, so a big part of what we hope to introduce is more data on what self-directed investors are interested in, and as a result, help serve as a catalyst to drive innovation.

Finally, on behalf of the entire Sparx Publishing Group organization and SparxTrading.com team, thank you to our loyal readers, visitors, and supporters. We’re amazed that 10 years has flown by, and we’re bullish on where the next chapter in self-directed investing goes from here. Thanks for tuning in!

Themes and Memes: Online Brokerage Highlights from Q2 2021 onwards

April: In with the New

From Qtrade’s new look and new name (Qtrade Direct Investing) to the preview of long sought-after features from Questrade and Wealthsimple Trade, April showered self-directed investors with the promise of new things to come.

The launch of the new brand direction for Qtrade Direct Investing was a huge milestone for this popular Canadian online brokerage. Executing a rebrand is no small feat; however, Qtrade managed to strike the right balance between a connection to what people know it for (i.e. its first name) and what it wants people to know it for. With a bold, new look and energy, it felt like Qtrade was ready to embrace the new landscape of online investing and bring something emotion into what has typically been a conservative brand.

Also looking to stir up some excitement, Questrade telegraphed the launch of a new mobile app – something that they hoped would help them compete more effectively against a design-savvy, mobile-first competitor: Wealthsimple Trade. It wouldn’t actually launch until November (see below) but the hype train on the new mobile app officially pulled out of the station in April.

And speaking of Wealthsimple Trade, new feature releases were a regular occurrence throughout the year, but one big announcement from the zero-commission brokerage was the news that they would be launching US dollar trading accounts. Long the Achilles heel for this very popular brokerage, the final form of the US dollar trading offering from Wealthsimple Trade ended up launching in December (see below).  

May: Statistics and Outliers

Strange, almost by definition, is not normal. For the (fellow) statistics nerds out there, data is a great way to get a handle on what is considered normal and what’s an outlier. This month happened to be filled with DIY investor data from all over the world.

One of the big developments was the online brokerage ranking by Surviscor, which put online brokerage fees into the spotlight. Remarkably, even before going to zero commissions, National Bank Direct Brokerage took the crown of lowest cost provider which is no small feat in a fiercely price sensitive industry.

Another watershed pricing moment came later in the month from popular bank-owned online brokerage BMO InvestorLine. In a calculated move, BMO InvestorLine launched 80 commission-free ETFs, and while they are not the only Canadian online brokerage to offer completely commission-free ETF buying and selling, the move gave both active and passive investors a compelling reason to choose this online brokerage over others (especially bank-owned brokerage competitors).

June: More New Features

Summer is typically the time for big blockbuster movies. Although the silver screens weren’t as busy this past year, DIY investor screens were filled with blockbuster reveals in the summer.

Perhaps the biggest one for Canadian self-directed investors (up until that point) was the launch of fractional share trading by Wealthsimple Trade. This highly-prized feature is something that US online investors were able to have access to from a variety of online brokerages, but for mainstream investors in Canada, Wealthsimple Trade was able to make a huge splash by bringing this trading to the masses in Canada.

The huge news from Wealthsimple Trade essentially overshadowed a lot of other new and newsworthy feature releases that month, including the launch of faster deposit times for Questrade, new advanced trading tools for clients of RBC Direct Investing, and the launch of the Interactive Brokers credit card in Canada.  

July: No Strings Attached

The Robinhood IPO and the opportunity to “buy buy buy” into the game-changing commission-free online brokerage was undeniably one of the biggest stories in the space this past year. By venturing into the public markets, it was possible to look under the financial “hood” to see how this commission-free brokerage managed to grow so rapidly, and, more importantly, how they made their money despite keeping commissions at zero. As it turned out, the prospectus for Robinhood’s IPO made for some fascinating reading.

No stranger to life as a publicly traded online brokerage, however, Interactive Brokers managed to pull off a deft mic drop moment of their own when they waved bye-bye-bye to inactivity fees for their clients worldwide. This included Canadian online investors, so it was a huge win for DIY investors everywhere who, prior to the removal of inactivity fees, were reluctant to have more than their most active accounts with Interactive Brokers. By lowering the friction to stay a customer of Interactive Brokers, this savvy online brokerage turned the math of customer churn on its head and managed to find a way to get customers to stay, even if they needed to step back from active trading for a while.

August: Coming This Fall

Twenty twenty-one was many things, but typical it was not. For that reason, we probably should have known better than to think it would be business as usual – or more appropriately – quiet business as usual. August happened to be an historic month for Canadian online investors because that was the month National Bank Direct Brokerage chose to launch commission-free trading.

Not only did National Bank Direct Brokerage take their commission fees for trading stocks to zero, they simultaneously took the vacation plans for other online brokerage leaders to zero as well.

And, while there wasn’t a story bigger than that, there was one that came close. We spotted and reported on the potential launch of yet another commission-free online broker, FreeTrade, here in Canada. In addition to Mogo Trade, FreeTrade represented yet another online brokerage interested in launching direct trading services in Canada with no commission.

Between the news of National Bank Direct Brokerage and the potential launch of another commission-free online brokerage in Canada, a clear trend is forming, and now it seems only a matter of time before existing big-bank online brokerages follow suit with significant commission rate drops.

September: Adding Up

We had to do a double take when it came to turning double digits. September marked 10 years since SparxTrading.com launched with a mission to level the playing field for online investors and “discount brokerages” as they were then known.

It has been a spectacular journey, and despite a very different landscape for online investors today, it was clear that a resource like Sparx Trading is needed as much now as it was when we first started. We also recognized that to prepare for a very dynamic future in the online brokerage space, we had to make some big changes – starting with a full redesign on the website, and in September, we also added the ability for online investors to research what other people are saying about online brokerages on Twitter and reddit, two areas which saw huge gains in participation by retail investors.  

We weren’t the only ones launching a retail investor sentiment tool, however. As it turned out, TD Direct Investing  launched the TD Direct Investing Index to measure Canadian investor sentiment in the stock market. With several Canadian online brokerages regularly reporting what their clients have been trading, this new feature from TDDI takes things to a whole new level by providing data on demographics and location, as well as sectors.

Of course, when it comes to online investors in 2021, stocks weren’t the only asset class of interest to them. In a stunning pivot (and/or a capitulation to giving people what they want), Interactive Brokers announced they would be enabling cryptocurrency trading to their clients. The big story here is that founder and very public face of Interactive Brokers, Thomas Peterffy, has been an outspoken critic of cryptocurrency for years, and so to see him personally acknowledge the material relevance of cryptocurrency as well as make the feature available to Interactive Brokers clients underscores the trading adage of “not fighting the tape.” Demand for cryptocurrency trading was simply too high despite the potential regulatory peril it could represent. Interactive Brokers was by no means the only big name in the US to adopt or support cryptocurrency trading, but it does signal that there is a sufficiently high level of interest among new and experienced investors in trading this digital asset class.

October: And Another One

And speaking of listening to customers, the launch of the QuestMobile app by Questrade generated a tonne (yes, it felt like the metric kind) of responses from clients and observers who weighed in (pun intended) on the new feature. There are only a handful of examples of feature launches from online brokerages over the past decade that generated so much response online, and the QuestMobile launch ranks high on the list of lightning rod discussion points.

Questrade’s unique success online with DIY investors ultimately became its undoing in this case because so many of its clients were not shy about providing their (negative) feedback on social media and investor forums. Regardless of the merits of the app, the roll-out of a new interface is a highly instructive case study change management, especially in an era of increasingly tech and design savvy clientele.

It seemed fitting in a month often known for trick or treating that a huge treat for self-directed investors was the announcement that (yet) another commission-free online brokerage was looking to formally launch in Canada in 2022. TradeZero, a name familiar to very active traders, indicated their plans to expand globally with Canada being an important jumping off point in that roadmap. Excluding the perennial “are we there yet?” questions about tastyworks coming to Canada, the announcement by TradeZero brought the total number of new online brokerages (new commission-free online brokerages) looking to launch in Canada in 2022(ish) to three. In the decade prior to 2021, the number of commission-free online brokerages that were publicly looking to launch in Canada was exactly Wealthsimple Trade long (we announced this back in 2018).

Finally, October was also the month where Virtual Brokers officially rebranded to CI Direct Trading. It had been just over four years since CI Financial acquired Virtual Brokers in 2017; however, the highly recognizable low-cost online brokerage had clearly been paring back on news and announcements post-acquisition. In an interesting (cryptic?) move in September, Virtual Brokers announced its name would be changing; however, it didn’t specify what it would be changing to. Nonetheless, 2021 brought some answers as to what’s going to happen next with Virtual Brokers / CI Direct Trading, and as we saw through the year, rebranding is big project but does set the stage for some transformative moves.

November: Let the Games Begin

In a month that has now become synonymous with bargain hunting, November didn’t disappoint for DIY investors either. There was a dizzying amount of news to report on but the biggest story for self-directed investors in Canada was the unofficial (but now kinda official) launch of RSP season. While the contribution deadline comes at the beginning of March 2022, the deals and promotions for online trading accounts have now started to appear at the beginning of November, and 2021 was no exception. Some big players in the Canadian online brokerage space came out swinging early, among them, CIBC Investor’s Edge and TD Direct Investing, both of which provided a preview to the highly competitive promotional offers available this season.

Another big theme for this year was in the non-bank-owned online brokerage group launching features to help self-directed investors get started and funded as quickly as possible. Qtrade Direct Investing announced the launch of rapid account opening knocking down the time required to open an online trading account at Qtrade from days to minutes. While getting an account opened quickly is a huge step forward, another big hurdle to clear is account funding. Competitor online brokerages such as Questrade and Wealthsimple Trade worked feverishly in 2021 to address instant account funding (albeit with limited amounts).

On the topic of opening accounts quickly, Robinhood, the poster child for rapid growth in online brokerage accounts, in 2020 and 2021 reported earnings, and for anyone keeping score on their stock price recently, the outlook was not great. Being winter, the phrase “getting ahead of your skis” characterizes the Robinhood story, and the now publicly traded stock has seen a massive sell off in large part because of the stall in momentum from retail investor trading. Specifically, the pull back in options and cryptotrading have clearly hurt the top and bottom lines for this zero-commission brokerage. Beyond the trading in those products, it also appears that after the meme-stock debacle, the “for the people” branding took a significant hit, something that might be keeping newer clients away from considering Robinhood as their online brokerage of choice.

And, speaking of choosing, Interactive Brokers once again reflected that the power of capitalism is ultimately in listening and providing to the market what the market wants. Ironically (or perhaps appropriately), ESG-driven trading is something that Interactive Brokers offers to its clients with the launch of their IMPACT app. Commission-free trading that enables you to make the world better through your investment decisions pretty much nails it for the demographic this app is clearly targeting.

December: Free Fallin’

Even with ice and snow on the ground, it seems like stock markets (and a couple of online brokerages) were doing all the slipping and sliding heading into the end of the year. Yet again, 2021 proved that time distortion and normalcy are not a thing because feature launches and big announcements continued to roll in despite it traditionally being a month when activity among online brokerages gears down for the holiday season.

But the giving season did giveth, or at least asketh to taketh, in the case of Wealthsimple Trade which launched a new subscription-based service. The commission-free brokerage finally addressed (sort of) one of their clients’ biggest pain points, the high cost of trading US-listed stocks by launching access to US currency trading accounts. The devil, however, was in the details, and despite the sizzle on rolling out the feature, there were many important unanswered questions about how converting between currencies would work with the subscription model.

Questrade managed to slide in some interesting new features ahead of the end of the year as well, launching a wonderfully named “RoundUP” service to help make investing digital spare change easier as well as a “cash back” shopping feature in which the worlds of online shopping and online investing collide.

Also, just casually sliding some big news in before the end of the year, Mogo Trade received approval for it to launch its zero-commission online trading platform and opened up the waiting list to be notified of the official go live date.

Finally, we shipped the annual Look Back / Look Ahead series for 2021/2022 in December (see above), and with it we wrapped up what has clearly been an eventful year with insights from Canadian online brokerage leaders. As busy as the year was in 2021, all signs point to even more activity in 2022, with new features continuing to launch, new pricing drops likely to come from existing online brokerages (who haven’t already lowered their prices), some interesting new players on the field, and, naturally, the unknown.

Into the Close

If you’ve made it to this point reading top to bottom, congratulations! Not only are you all caught up on the biggest developments in the online brokerage space for the year, but you’re also well prepared for what’s about to come next in 2022. The start of a new year is often a time for reflection and resolutions, but this new year brings even greater cause for reflection as well as celebration.

After 10 years of publishing the Weekly Roundup from pretty much everywhere life has taken me, there are only a handful of instances where publication has been paused, and they’ve been to tend to the greatest investment anyone can have: family. For that reason, the Weekly Roundup will be going on pause until mid-February.

In the interim, we will continue to be publishing deals and promotions updates, as well as monitoring and sharing interesting content to our Twitter channel and newsletter, so be sure to subscribe to those if you haven’t already done so. Also, we will continue to monitor the online brokerage space for big developments, and like all of life’s great surprises, perhaps don’t be surprised if we drop some interesting posts between now and the return of Roundup.

Until then, Happy New Year, and wishing good health, prosperity, and joy to you and your loved ones for 2022! Here’s hoping we get back to a time where can all fist bump in person again soon.

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Look Back / Look Ahead: A Review of Canadian Online Brokerages in 2021 & Preview of 2022

If there’s one thing that all self-directed investors have in common, it’s that they pay attention to trends. This year, we officially crossed the 10-year mark at Sparx Trading, and if there’s one thing that we can speak to after a decade’s worth of data and analysis, it’s being able to spot trends in the Canadian online brokerage industry. 

Taking stock (pun intended) of the past year and a half, it’s fair to say that we’re living through events unlike anything we’ve ever witnessed before. And yet, one of the most striking features of the Canadian online brokerage industry, even in the face of such dramatic events, is the ability of the Canadian market to sustain firms that move at paradoxically different speeds when it comes to innovation. That world, however, is about to change. 

In this fifth iteration of the Look Back / Look Ahead magazine, it’s abundantly clear that the Canadian self-directed investing industry sits at the cusp of a major transformation. 

From the launch of commission-free trading by National Bank Direct Brokerage, to a structural shift in demographics of investors who entered the online trading world, 2021 was a year that online brokerage executives told us challenged them to establish a new normal when it comes to delivering outstanding experiences for Canadian self-directed investors. 

Drastic change was also prevalent at SparxTrading.com this year. Our choice to completely overhaul our website and lean into refining our brand identity appears to be in line with where leaders in the industry are as well. And we, too, have some incredibly ambitious projects slated for the next year that we can’t wait to share more about, especially the launch of Sparx Trading Pro.

After 10 years of consistently producing content on the Canadian online brokerage landscape, it’s remarkable to reflect on the breadth of audience that we serve. 

Analysts, journalists, executives, enthusiasts, and investors turn to Sparx Trading for in-depth insights and newsworthy developments, as well as puns, gifs, and fun artwork. In today’s parlance, we’ve helped to democratize online investing by providing industry-grade content and insights to all. Today, investors have more technology, platforms, products, providers, and pricing options than they have ever had before, which means our place in the DIY investor ecosystem is even more important today than it was a decade ago when we first launched. 

On behalf of the exceptionally talented Sparx team, I would like to thank our loyal readers, supporters, and, especially, the online brokerage community for 10 years of wonderful memories, and for keeping things interesting. 

Where the next 10 years takes us all, we’re not sure. But we’re excited all the same, especially if where we’re going next won’t need roads. See you in the future!

Click below to learn more about what each individual online brokerage had to say about 2021 and what’s coming up in 2022:

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Discount Brokerage Weekly Roundup – December 20, 2021

Vixen might be a reindeer name, but Vix’n is just what the active traders wanted to see Blitzen and Dash-in around their screens as volatility, like lockdowns, makes a comeback. Screens and markets might be redder than Rudolph’s nose heading into the end of the year, but like all things market related, there are opportunities for good news if you Comet to finding them.

In this I-can’t-believe-we’re-so-close-to-the-end-of-this-hot-mess-of-a-year edition of the Roundup, we spotted new features being launched by one popular online brokerage just in time for the holiday shopping season, and what they could signal for this brokerage, as well as DIY investors. Next, more savings just got deal-ivered as two (big!) new online brokerage promos crossed our radar this week. Finally, a bonus story about a story – we preview the launch of the Look Back / Look Ahead magazine with an overview of what to expect, including some special features we think will drastically shape the industry in 2022.

Cashing In: Questrade Launches Cash Rewards and Roundup Features

At Sparx, we know a thing or two about roundups. So, you can imagine our joy when we noticed a Canadian online brokerage launch a new product line with “roundup” in the name!

Questrade, one of Canada’s most popular online brokerages, quietly rolled out a pair of new “savings” features for existing clients this past week in what looks like an interesting tactic to encourage low-friction asset gathering, while providing clients with additional value for being a Questrade customer.

The first, the RoundUP automatic savings program, is similar to many well-established services that help encourage saving and investing by rounding up dollar amounts on purchases which then get contributed into investments. Think of it like finding the spare change in your actual couch and automatically adding it to your couch potato strategy.

The second is the new Cashback Rewards program. This new feature appears to offer Questrade clients a way to spend their way to savings via cash back rewards from a variety of retailers. Similar to ebates/Rakuten, purchases made at different online merchants will provide shoppers with a cash back bonus for those purchases. The cash back amount can then be deposited directly into a Questrade account automatically.

In either case, these are timely programs to have arrive just before the holidays and when online shopping season hits a crescendo. More strategically, these new features also help Questrade stand out amongst an increasingly commoditized and crowded field of online brokerage service providers.

Despite an initial mixed reaction from investors and skepticism on the part of clients seeking out lower commission rates, this idea from Questrade is quite savvy even if it is not original. Questrade can lean on the successes from similar programs, such as Acorns in the US and Moka (recently acquired by Mogo Financial) in Canada, all of which are built on a premise of small amounts adding up to material gains. Undoubtedly, it is going to play well with the personal finance discussion groups and influencers who recognize that sometimes being disciplined about saving is hard; anything that makes building the habit of saving and investing easier is likely to win support.

One of the early critiques of the Cashback Rewards program is that Questrade has pulled together a list of merchants offering deals that most online investors don’t find compelling. There are a handful of recognizable names and a heavy concentration of shopping mall gift card-linked offers, so the successful uptake of this program will be correlated to the kinds of offers that Questrade can negotiate in. By comparison, rewards programs offered by Canadian financial service providers, such as RBC Rewards, or even like Rakuten, illustrate just how sophisticated these reward programs are.

As we noted in our coverage of Questrade in the soon-to-be-released Look Back / Look Ahead feature magazine, this year Questrade elected not to provide a submission highlighting what they’ve been working on. Nonetheless, there has clearly been activity and new features being brought forward, so it is curious that even with this new program that the rollout has been quiet out of the gate.

It’s clear that Questrade continues to innovate; however, what also is clear is that they are expanding beyond just the online brokerage space – a trend that other online brokerages in the US have demonstrated is necessary to retain clients from having to access other financial service providers for things like credit cards or bill payments. Their acquisition of Community Trust in 2019 helps to explain why Questrade Financial Group is hiring for roles related to digital banking, and even in roles related to their online brokerage site, they are looking to drive growth in the banking side of their business, the clearest signal yet of where they intend to move into next.

Against the backdrop of broader ambitions in the traditional banking and financial services realm, the latest product launch of RoundUP and Cashback Rewards programs seem aligned with a bigger picture to create ongoing relationships with online investors beyond just the world of investing. Tying real world purchases to the online investing accounts through credit cards and bank accounts gives Questrade important insights into spending patterns of their customers, better enabling Questrade to provide support and content (among other things – like mortgages) to clients in a more meaningful way.

And, if moving into the traditional banking offering is part of Questrade’s roadmap, it also stands to reason that the economics of offering commission-free (or lower commission fee) investing options would change. After all, National Bank Direct Brokerage and Desjardins Online Brokerage managed to take a “big picture” approach to what their online investing clients could represent in terms of business opportunities for other lines of business, and if the math made sense to them, it could certainly do so for Questrade.

Deal-ightful News: RBC Direct Investing Promo and Scotia iTRADE Offer Launch

It might have taken some time, but like the thrill of last-minute shopping, promotions from RBC Direct Investing and Scotia iTRADE joined the pool of online brokerage offers this past week.

In terms of the latest promotions, however, there are some noteworthy differences from the trend of cash back offers that have been dominant through the launch of RSP season promos. The biggest difference: the reappearance of commission-free trades.

The latest promotion from RBC Direct Investing is a huge 100 commission-free trade offer, with those trades being good for up to two years. This is by far the biggest commission-free trade deal we’ve seen since a similarly sized one offered by National Bank Direct Brokerage (before they went fully commission free), and both the quantity of those free trades as well as the duration of time that clients could use them make it incredibly competitive. To boot, there is no minimum deposit required to qualify for this promotion, which immediately positions this offer at the top of the list for any online investor seeking out deep value for active trading or doing some major portfolio reorganization. It is impossible to say where exactly things will end up in two years’ time; however, the fact that RBC Direct Investing is willing to extend such a long runway for commission-free trades is perhaps a sign of an experiment playing out in real time. Either way, this is an exceptional offer that other online brokerages (who still charge commissions and even those who don’t) are going to be compared against, especially given RBC Direct Investing’s feature set (in particular real-time data).

While at first blush it may seem like Scotia iTRADE is content to rely on their regular playbook of promotion structure, their latest tiered promotion of cash back or commission-free trades shows that they’ve been doing their homework (and reading the Roundup!) when it comes to strategic deposit amounts.

It helps to view the latest cash back promotion from Scotia iTRADE against its bank-owned brokerage peers to see the deposit levels at which Scotia iTRADE is competing the most aggressively for deposits.

The first tier that jumps out is the minimum deposit level. Scotia iTRADE is the only one of the online brokerages to have minimum of $5,000 for a deposit, and the associated cash back amount of $100 is tied with the only other bank-owned brokerage with a cash back bonus at that deposit tier (TD Direct Investing). In fact, Scotia iTRADE keeps pace with TD Direct Investing’s cash back offer through deposit tiers up to $100,000, after which point Scotia iTRADE’s cash back bonus leaps to $500, matching the leader at that tier, CIBC Investor’s Edge. What delivers bonus value to anyone signing up for the Scotia iTRADE cash back promotion, however, is that those individuals also receive a temporary commission rate of $4.99 per trade (flat!!) – effectively, a 50% discount on the standard commission rate – until the end of July 2022.

As we referenced in prior Roundups, Scotia iTRADE has been quietly going through a “rebuilding” mode, as evidenced by their front-end website refresh and winding down of their Twitter channel. This latest offer reveals some signs of activity, however, and that they are willing to keep pace with peer firms when it comes to trying to attract new clients.

Unfortunately, there is a lot of ground to make up by Scotia iTRADE when it comes to client experience.

A quick look at their Google reviews showcases concerns that have been voiced very publicly online, and as such, as competitive as their offering may be, it may hold greater appeal with existing clients rather than new clients who are learning about this brokerage for the first time.  

The latest launch of new promotions at this point in the calendar year is a great indicator of the high degree of competition between online brokerages. The biggest rush of interest to self-directed investing is likely behind us, however there is greater awareness of trading online (especially among younger investors) and it’s clear that the effect that National Bank Direct Brokerage’s move to zero commission rates has had across the board. While most online brokerages aren’t lowering standard commissions to zero (yet), the commission-free trades are getting more numerous, cash back incentives higher and commission rates dropping (even temporarily). Combined, those factors clearly paint a picture of a world in which pricing for self-directed investing will continue to decline.

Preview: Look Back / Look Ahead Magazine

The end of a calendar year is a fitting time to reflect on the events of the past twelve months, while also casting a gaze forward as to what to look forward to. We’re not alone in that activity, as numerous political and business leaders are taking the time to comment on what they thought the most important developments were for the past year.

This week coming up, the latest issue of Look Back / Look Ahead magazine is set to publish, and included in it are some very insightful perspectives by a cross section of senior leaders of Canada’s online brokerages. In this issue, we asked all participants a series of questions about what investors can expect from their firms, what interesting trends they noted, and in particular, what they see coming in the year ahead.

All Canadian online brokerages that we cover on SparxTrading.com were invited to participate, free of charge, and were given the opportunity to speak directly and freely to Canadian self-directed investors about the challenges and triumphs of 2021.

Naturally, the industry being as competitive as it is, many online brokerages were not going to reveal all of the things they’re working on; however, it was refreshing to see that among all the participants, there were some candid discussions of new features slated to arrive in the new year.

The online brokerages that provided submissions to this year’s issue include:

We also provided coverage of the rest of the field based on what we saw as important and noteworthy developments during the year, and where things could go for those firms in 2022.

Among the big trends that we noted for 2021, multiple online brokerages called attention to the shift in demographics of their client base to a decidedly younger group. Stats vary, but in the order of 20% to 40% of new clients joining online brokerages in Canada this past year were under the age of 35. This has tremendous implications for what online brokerages are focusing on, and we can already see what several brokerages are committing to as a result. One tangible feature that is in focus is investor-oriented content to support new investors.

We also asked about client experience, and how each firm interprets that component of their service offering. While we doubt anyone would talk down their service experience, there were clear and tangible activities shared by online brokerages as to what they intend to do in the area of providing strong service to online investors.

On the topic of zero-commission trading, there were some intriguing answers – especially from the firms that have not yet lowered their commission rates to zero. It’s clearly something that has been discussed, and in fact, will continue to be evaluated as the market continues to evolve.

There were several notable new features coming soon that were discussed by online brokerages in this issue. One, we believe, will be significant (dare we say huge) and will serve as a catalyst for self-directed investors to seriously consider brokerages based on this one big feature. Other features being telegraphed will undoubtedly address certain pain points with mobile and digital experiences that will hopefully contribute to self-directed investors remaining where they are.

Beyond the online brokerages already operating in Canada, we also took a look at the companies that have all provided some indication of interest in launching new online brokerages in Canada in the near future. Names such as Mogotrade, Tradezero, FreeTrade, and, infamously, Tastyworks, are set to make history if they all are able to come to market in such a short amount of time. Realistically, we understand the regulatory process is neither easy nor fast when it comes to launching a new brokerage in Canada; however, none of those firms mentioned are standing still on the issue of going live in Canada as soon as is feasible to do so.

Finally, this issue happens to coincide with the 10th anniversary of SparxTrading.com’s launch. It’s hard to fathom that a decade has gone by, and through that time, we’ve been covering the ups, downs, and sideways of the online brokerage industry in Canada, as well as in the US. We provide some fun behind the scenes snippets of the journey to this point, and in stepping back to look at the bigger picture of the state of the industry, as well as the needs of online investors, we see our role and mission as more important than ever to deliver on. It’s abundantly clear (to us) that we’ve also grown a sizable community of online brokerage industry stakeholders, followers, and online brokerage enthusiasts, and we’re really excited to reveal what we’ve got planned next for this community in 2022.

Be sure to sign up to our newsletter for recaps and updates (including the first look at the magazine) and follow along on our social media accounts for highlights from the Look Back / Look Ahead.  

Thanks to all the firms that submitted and participated in this year’s magazine, as well as to the readers and supporters of Sparx Trading that have helped us make it to year 10, conveniently X in Roman numerals. Here’s to the next X.

Into the Close

At the time of publication, markets are poised for a bumpy start to a shortened holiday week. And, as financial services firms also sound the alarm to retreat and work from home through the winter to ride out the Omicron blizzard, we’re mindful that this is going to be a turbulent week. Volatility is going to be high, so despite travel bans and lockdowns starting to take effect, anyone who is a student of recent history is going to get a chance to witness a rerun of market turmoil and trading activity spikes. For traders, that’s about as bittersweet as it gets at this time of year but all we can do is buckle up, be kind, and hold on. We’ll be publishing the next edition of the Roundup a little later than usual courtesy of the holidays, but between now and then, thank you for joining us this year, and from all of us at Sparx, we wish you and your loved ones a safe and restful holiday season!

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Discount Brokerage Weekly Roundup – December 13, 2021

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

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

Wealthsimple Trade Launches SaaSy New Subscription

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

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

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

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

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

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

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

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

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

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

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

2021 Online Brokerage Rewind: Part 1

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

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

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

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

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

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

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

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

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

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

From the Forums

Fees Squeeze

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

On Better Terms

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

Into the Close

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

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Discount Brokerage 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.

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Discount Brokerage Deals & Promotions – December 2021

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

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

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

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

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

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

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

Expired Online Brokerage Deals

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

Extended Online Brokerage Deals

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

New Online Brokerage Deals

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

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

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

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Discount Brokerage Weekly Roundup – November 15, 2021

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

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

Betting on Better: Interactive Brokers Launches new Sustainable Investing App

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Quick Online Brokerage Updates

Bandits in Sherwood Forest: Robinhood Security Breach

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

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

Appy Days

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

Looking Forward to Looking Back

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

From the Forums

Need for Speed

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

Departures and Rivals

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

Into the Close

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

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Discount Brokerage 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.

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Discount Brokerage Deals & Promotions – November 1, 2021

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

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

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

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

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

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

Expired Online Brokerage Deals

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

Extended Online Brokerage Deals

No deal extensions to report at this time.

New Online Brokerage Deals

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

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Discount Brokerage Weekly Roundup – October 25, 2021

Halloween is just around the corner, and it’s not just ghouls and goblins that are causing a fright around online brokerage circles. Apparently, the specter of zero-commission trading is a bit of a phantom menace on both sides of the border.

In this edition of the Roundup, we reveal (yet) another new commission-free online brokerage setting its sights on coming to Canada and what that could mean to existing online brokerages’ plans to keep commission rates where they are. Next, we review one US online brokerage’s move to put account funding in the fast lane and dive into what it could mean for active traders here in Canada who want to get going as fast as possible. Finally, we cap off this week’s news with some fascinating commentary from self-directed investors in the investing forums.

TradeZero Coming to Canada

Last week we mentioned the news that TradeZero announced they would be going public. A fun fact about going public is that there is usually a pitch deck for investors to buy into your company, and in the case of TradeZero, there were several interesting nuggets of information about their intent as an online brokerage.

Buried in the TradeZero investor presentation deck was the revelation that TradeZero intends to launch in Canada sometime in 2022. Although they had officially registered in Canada as far back as June of this year, the investor presentation put a timeline and target on what the opportunity for them in the Canadian market could look like. It appears that TradeZero is using its launch in Canada as part of a series of launches in different countries and regions over the next few years.

Perhaps the most interesting angle in terms of their expansion is that TradeZero is positioning itself to compete directly against Interactive Brokers for the ultra-active retail trader. Of all the segments of investors, the active trader is highly prized but comes with the highest expectations for quality of experience, platform stability, capability for complex trading, and competitive pricing.

Although it is unclear as to what they will launch in Canada, it’s a safe assumption that the products will be aligned to active traders, and according to their investor presentation, options, and cryptocurrency trading, are likely candidates alongside equities to be a part of the go-to-market offering. The timeframe to achieve the scale they’re looking for, namely some percentage of the 160,000 accounts, is also unclear. For comparison, account opens cited by other media sources peg Questrade as opening 200,000 accounts per year, and while there very well may be a large number of accounts in the total addressable market in Canada, hitting their target number won’t come easy.

It begs the question, who would TradeZero’s competitors be in Canada?

At the top of the list would be Interactive Brokers; however, based on their target demographic and the active trader profile, there are several other firms whose lunch TradeZero would try to eat. These would include CG Direct (the legacy business from Jitneytrade), Wealthsimple Trade (because of crypto and US equities), and it’s fair that Questrade and TD Direct Investing would be in the mix too because of their active trader offering, especially on the options side.

Then, there is the branding issue. While active traders might be more inclined to trial or check out a new technology or brokerage, being a new online brokerage in the Canadian market is generally met with some suspicion, regardless of the offer. A great case in point is the fact that despite having low standard commissions and offering a lot of the perks of being bank-owned, both HSBC InvestDirect and National Bank Direct Brokerage have yet to see the kind of traction from price sensitive online investors that would have been expected. Even with zero commission trading now available from National Bank Direct Brokerage, it is surprising to read how many investors are willing to stay with their existing brokerage in hopes that commission rates will drop at their broker.

In order to ramp up to the addressable market that TradeZero is targeting for Canada, there will almost certainly be a significant investment in marketing and advertising to let people know who they are and what they do best – perhaps better than the alternatives. And, to make matters more challenging, they will also be doing this alongside at least two if not three other new entrants into the Canadian online trading landscape – the most directly challenging one being Tastyworks.

Of course, Interactive Brokers is also no slouch and is unlikely to simply allow a new entrant to directly compete for high value clients. The product mix, especially with regards to account types such as RRSPs and TFSAs, are crucial to the “convenience factor” even for ultra-active traders. The benefits of TFSAs and RRSPs for wealth creation are simply too high to not try to take full advantage of, hence clients who wish to “trade fast” with TradeZero will have to maintain another relationship with another online brokerage to do the “slow stuff,” thus opening the door to being courted away.

To TradeZero’s credit, despite the hurdles, they are clearly ambitious in their desire to expand their brand globally and into the highly regulated areas of securities trading. The fundamental business case is certainly there; however, so is the competition. There are pain points among users of Interactive Brokers, such as a steep learning curve of the trading platform and lackluster customer service, so TradeZero does have a foothold if they can improve the client experience of active retail traders.

The consequences for the Canadian online brokerage landscape may not be felt right away, especially given the segment that TradeZero will be pursuing. That said, with a name like TradeZero and an offering of commission-free trades, there is almost certainly going to be increased pressure on incumbent online brokerages to drop their commission prices. It is already happening a few times per week in investor forums and discussions and will likely only ramp up as each new commission-free brokerage comes on stream.

Canadian investors and traders alike might just find the pace of change at their own online brokerage slow enough that they’d be willing to at least try TradeZero, and at that point, it’s a slippery slope as to whether they switch brokerages. Those are the odds that perhaps TradeZero is banking on.

Interactive Brokers Puts Payments on Rails

Payments were an interesting thread of discussion at Interactive Brokers this past week. In the first instance, there were some intriguing remarks made by founder and Chairman of Interactive Brokers, Thomas Peterffy, regarding payment for order flow (PFOF), the (now) controversial practice that enables zero-commission online brokerages like Robinhood to sell the orders their clients place to buy and sell stocks to a third party.

An industry veteran, it is always fascinating to hear Peterffy’s take on the mechanics of online trading, and in an interview last week with Yahoo! Finance, it was his position that despite the increased scrutiny from the US financial regulators, the reality is that the practice of selling orders would likely still persist although under a different pathway. In short, even if PFOF was clamped down on, online brokerages would find another way to monetize the trade execution.

Another interesting talking point about Interactive Brokers this past week was an announcement that they are launching a real-time payment solution that will enable clients to make instant deposits to their accounts. The rollout of this feature in the US is starting with clients who have accounts with Chase; however, given the desire for fast money traders to be able to move money around just as fast, this is a huge step forward.

Getting funds from point A to point B is remarkably longer than it should be in 2021, especially among online brokerages who aren’t bank-owned. The ability for individuals to open an account and essentially fund the account instantly removes a major friction point from being able to quickly jump into hot trading opportunities.

In the case of real-time funding of accounts, among Canadian online brokerages that are not bank-owned, this has been a significant stumbling block to individuals who are looking to get started as quickly as possible. Earlier this year, we reported on Questrade launching instant deposits (up to $3,500) and Wealthsimple (Trade) too, with the latter raising deposit limits significantly since they first launched and tying the ability to send more (up to $1,000) to their premium service. For Interactive Brokers in Canada, the funding time listed on their website states up to four business days for funds to be available, depending on the funding method chosen.  

As the launch of the real time payments option in the US is still in the early stages of a roll out, there is likely some time before Canadian self-directed investors can benefit. That said, it is a sign of a trend already in place whereby the faster an online investor can fund their account, the more likely they are to choose that brokerage to get up and running with. It’s not enough to have instant or fast account approvals if the ability to trade opportunities – especially fast-moving ones – is limited. Clearly, other online brokerages in Canada have figured this out, so it is now a bit of a race for others, including Interactive Brokers, to ramp this feature up quickly or risk being derailed by whatever the next big wave of new trading opportunities brings.

From the Forums

Trade Interrupted

If there’s one thing that all seasoned DIY investors know, it’s that online trading is not without its risks. One active investor learned the hard way about the risk of a platform not working as intended, and shared their experience in this post on reddit. Find out what fellow online investors had to say about what happened as well as the aftermath.

Hold On, For One More Day

Being told to wait is rarely music to any investor’s ears. In this post on reddit, one self-directed investor pointed out that the new hold music (or lack thereof) at TD Direct Investing was an unusual experience. Find out what fellow online investors had to say about this small but interesting detail of the customer service experience.\