With summer just around the corner, it looks like stock markets won’t be the only ones seeing red. Weeks of volatility and sell-offs have been difficult for all but the most seasoned self-directed investors to stomach.
For DIY investors, the news isn’t all bad though. The pullback in stock markets typically means that online brokerages will need to work harder to encourage online investors to open an online trading account, and that means potentially bigger or more attractive incentives.
By far, the biggest development last month was the launch of commission-free trading on stocks and ETFs at CIBC Investor’s Edge. This is huge news for younger investors, as well as for competing online brokerages across the board. As the first of the big five bank-owned online brokerages to offer full commission-free trading, it seems like CIBC’s peers will have to consider adjusting their commission rates or young investor offerings.
Fortunately for RBC Direct Investing, their 100 commission-free trade offer is both large enough and long enough in duration to weather this price move by CIBC Investor’s Edge. Perhaps it was fortuitous timing that RBC chose to extend their offer at the beginning of last month, and with this move from CIBC Investor’s Edge, they may consider extending it even further.
Against that backdrop, the launch last month by Qtrade Direct Investing of a 50 commission-free trade offer does provide something to online investors looking for a deal when opening an online account, but clearly, the stakes have been raised.
The reality for Canadian online brokerages is that there are only a few months left to make plans for the next RRSP season, and with all the action happening in markets right now, for better or worse, online investors are checking their accounts and wondering if they’re getting great value. It’s one thing to sell a stock into a storm and another to incur a commission charge on a loss.
Wealthsimple Trade’s “free stock” promotion expired on May 31st. This popular promotion has been a windfall for the zero-commission broker, mirroring the performance of US online brokerage, Robinhood, who has a similar (but actually a free stock) program in place.
Another important expired deal was from National Bank Direct Brokerage. Their recent promotional discount on margin rates seemed especially well-timed given the discussion on rising interest rates that is dominating the news cycle right now. It was the first “discount” on margin interest rates we’ve seen in some time, so given the current interest rate environment and volatility in markets, it could make this offer especially attractive to very active or sophisticated investors.
Nothing new to report on this month as far as deal extensions are concerned. The RBC Direct Investing commission-free trade offer is worth watching as it was extended into this month.
No new deals activity to report at the start of the month.
*Updated May 17* No Jedi mind tricks here; there is literally not much to see in the deals and promotions category for May. Deals have gone dark for the moment with most offers that were launched for RRSP season formally closing out or receding into “YMMV” territory, where they’re offered on a case-by-case basis to select individuals.
While the pullback in deals and promotions is not uncommon at the start of May, what is unusual this time is that stock markets are tanking, interest rates are rising, and many first-time investors that made up a huge portion of the momentum in online account openings are going to be returning back to the office, and, thus, not able to pay attention to market fluctuations the same way they did at the beginning of the pandemic.
Adding to the mix of challenges, more options for DIY investors to choose from are coming to market (including more commission-free online brokerages) and a prevailing narrative among online brokerage rankings that the industry seems to have stagnated in terms of innovation.
In short, Canadian online brokerages are going to be facing exceptionally challenging terrain when it comes to new client acquisition and growth.
If only there was a way that they could attract the attention of online investors without having to lower their fees to zero or compromise their service experience. *Ahem* deals.
As we approach summer, there is only one Canadian online brokerage (so far) that is getting in front of the “rising interest rates” environment by leaning into an interest-themed promotion: National Bank Direct Brokerage (NBDB). If there’s one online broker that other Canadian brokerages probably don’t want to have grabbing more spotlight right now, it is NBDB – a bank-owned online brokerage offering zero-commission trading.
If only there was a way that online brokerages could also play defense without having to resort to an all-out price war. *Ahem* deals.
With the uncertainty around markets likely steering older online investors away from jumping into the market and competing priorities for younger investors interfering with getting started in the market despite declining prices, this is likely to set the stage for Canadian online brokerages to consider using more promotional activity (or bigger offers) to attract attention while simultaneously offering up some measure of defense against new entrants and ambitious existing players.
Although the deals activity is dark at the moment, there’s definitely a disturbance in the Force that could provide some very compelling deals in the near future. Stay tuned.
Two important offers formally expired at the end of April.
The first was Qtrade Direct Investing’s cash back promotion. This Qtrade promo was historic in several respects, as it marked one of the rare times that an online brokerage actually revised an existing promotional offer upwards during RRSP season. Another important first was that this tiered promotion was one in which Qtrade matched or led some of the highest offers that were available, making Qtrade’s offer one of the most competitive across the board (not something we typically see).
Also sunset (for now?), the RBC Direct Investing 100 commission-free trade promo. This was one of the most ambitious commission-free trade offers yet from RBC Direct Investing, as it gave clients up to two years to use 100 commission-free trades.
*Updated May 6 – Like a good comeback plot from the Star Wars franchise, it looks like there’s a new episode to celebrate for the RBC Direct Investing commission-free trade promotion. The same 100 commission-free trade offer is now available until the end of June (albeit with an updated promo code). As reported earlier, RBC Direct Investing’s commission-free promotion provides clients with 100 commission-free trades which can be used for up to two years.*
No deal extensions to report on just yet.
*And just like that, it looks like deals action is heating up faster than Ontario weather. Hope you have AC for this deals update. Two big online brokerage names, CIBC Investor’s Edge and Qtrade Direct Investing have dropped new commission-free trading offers – and at least one of these is a game changer.
Commission-free trading just took a big step forward with CIBC announcing they’re going to offer commission-free trading for younger investors (aged 18-24) – a move from a bank-owned brokerage that will undoubtedly challenge other Canadian online brokerages to act decisively on commission-free trading (of some kind). The offer is linked to having a CIBC Smart Account (for banking) and it offers free trading for Canadian and US stock and ETF trades. To boot, they’ve also waived annual account fees for registered accounts. Oh, to be young in 2022.
For those over the age of 24 (and those younger than that too), there’s another promotion to be excited about. Qtrade Direct Investing has launched a new commission-free trading promotion that offers 50 commission-free trades which are good for up to a year. This offer is live until the end of August.*
No new online brokerage promotions to start the month; however, we’re monitoring chatter on possible commission-free trade offers that are in the works. Check back soon or follow along on Twitter for more updates when they happen.
What can beginner investors expect from your firm? As a new investor with Qtrade Direct Investing, you’ll quickly feel empowered to pursue your investing goals while you gain experience. Qtrade is an award-winning online investing service with robust mobile trading capabilities and unrivaled client service. Reviews from The Globe and Mail, MoneySense, and Surviscor have consistently ranked Qtrade among the best, including 23 first-place awards for Best Online Brokerage over the past 16 years, and eight first-place awards for customer service experience over the past six years.
As a Qtrader, you have access to a wealth of resources and innovative tools to help you invest with confidence. For example, Portfolio Simulator™ lets you test investment scenarios in a simulator mode, so you can explore ideas and fine-tune your investment strategy. Portfolio Score™ provides a second opinion on your portfolio, grading it on five key dimensions, including performance, diversification, and risk exposure.
If you’re looking to build an ETF portfolio, you’ll have access to over 100 commission-free ETFs, which are free to buy and sell. You can also get help building your own ETF portfolio with Portfolio Creator™. After answering a short series of questions, it generates a sample portfolio, customized to your investing preferences, that will help you maximize risk-adjusted returns.
And along your investor journey you can always get answers to your questions through our FAQs and self-help tools, including “Guide Me” tutorials, which help you quickly learn how to use different features of the platform.
What can active investors expect from your firm? Qtrade Direct Investing offers the Investor Plus program, an enhanced service for active traders or investors with larger portfolios. Investor Plus features include discounted trading fees, no fees on US dollar registered accounts, and reduced margin borrowing rates. As an active trader, you’ll benefit from a reliable, stable trading platform, mobile trading capabilities, and expert client support. In addition, Qtrade will soon roll out expanded trading capabilities, which include advanced order types, like contingent orders and multi-leg options.
What online investing trends do you expect to matter to self-directed investors? Omni-channel experiences. Do-it-yourself investors want to be empowered with well- designed online brokerage experiences on all versions of the trading platform, and for the platform to be accessible on different devices.
What does user experience mean at your firm? At Qtrade Direct Investing, we’re genuinely obsessed with enhancing Qtraders’ experience and building investor confidence – it’s at the heart of everything we do. We’re committed to continuous innovation to improve the investor experience.
What sets your firm apart from your peers? It’s the relentless determination to empower you with the best investor experience, so you can build and manage your portfolio with confidence. Our mantra is: “We’re a confidence-building machine.” We strive to deliver more value in a comprehensive service than any other choice.
In The Globe and Mail’s 2021 online brokerage review, personal finance columnist Rob Carrick said: “Any broker can fill an order to buy stocks, exchange-traded funds, mutual funds, bonds and more. Qtrade helps you build a well-constructed portfolio and then monitor it to ensure it continues to work for you. Qtrade,” he continued, “may be the king of steady year-by-year improvement.”
And in the 2021 ranking of online brokers by MoneySense, Glenn LaCoste of Surviscor said, “Qtrade Direct Investing is a UX leader given its breadth of data, which is both easy to locate and to use.”
Reviews like these are gratifying because it means we’re succeeding in building a service that provides investors with value and the confidence to pursue their goals.
Please note: Online brokerage services are offered through Qtrade Direct Investing, a division of Credential Qtrade Securities Inc. Qtrade and Qtrade Direct Investing are trade names and trademarks of Aviso Wealth.
Change is certainly life’s only constant. And even though, historically, change has been relatively slow to take effect among Canadian online brokerages, when it does show up, the effects tend to endure. As we steer into the season of change, it seems like both the pace and breadth of change are starting to accelerate, with some remarkable developments.
In this (we’ll call it “toddler time-distorted”) edition of the Roundup, we look at an unusual pattern emerging in the deals and promotions activity at Canadian online brokerages and what it could signal for promotions going forward. Next, we highlight a new look that one online brokerage is sporting for spring, and whether it is dressed in what the cool kids are into these days. Finally, we’ll wrap up with some timely topics self-directed investors are chatting about online.
Usually around the start of each month we go through the latest deals and promotions to see what new offers have shown up and whether there are any interesting developments in the ongoing race to garner attention (and assets) from self-directed investors. This month, however, there was a signal of continued unusual activity among the Canadian online brokers that suggests there are some interesting changes coming to the way in which online brokerages create and launch promotions.
Of course, “change” is a relative term, so, before diving into what seems to be evolving with online brokerage deals and promotions, it’s useful to get a sense of what is “typical.”
Although many online investors now know that Canadian online brokerages offer deals and promotions, especially during RRSP season, that hasn’t always been the case. There was a time many years ago that most Canadian online brokerages were reluctant to use promotions and incentives to attract in new self-directed investors. Interestingly, as commission prices began to drop in a meaningful way, roughly around 2014, so too, it seemed did the resistance to trying out using offers to encourage new users to try out a brokerage.
At that time, one of the most active Canadian online brokerages when it came to special offers or promotions was Questrade – who aside from much lower commission prices than their peers – was a constant name to watch because they ran so many promotional offers. The kinds of promotions they ran ranged from various commission-free trade offers to promotions featuring a free iPad.
It was not long after other online brokerages lowered their commission prices, that one of the first big shifts in the deals and promotions activity took place: Questrade stopped offering so many promotions.
Instead of offering so many different promotions, Questrade decided to consolidate their offers and focus their promotional offers on their affiliate program and referral bonuses (and later launching TV ads). Many of the same promotions, such as their five free trades or first month free, are still available today. Regardless of the season – including RRSP season – Questrade’s strategy was still the same when it came to promotions. Namely, stick to their core offers.
It’s difficult to characterize just how significant of a shift that was at the time; however, by the time Questrade did ramp down, other online brokerages, notably BMO InvestorLine, had picked up the practice of regular promotions outside of RRSP season. In fact, since that time, BMO InvestorLine has effectively carried the torch for launching “new promotions” just about every season.
So, if there was one online brokerage in Canada that we did not expect to see a break in promotional cadence, it was BMO InvestorLine. And yet, this month that is exactly what’s taken place.
To be fair, BMO InvestorLine hitting pause on deals is not without precedent. That said, the last time they did so was near the start of the pandemic, when BMO InvestorLine’s unprecedented investor interest overwhelmed systems.
This time, however, there isn’t a rush of investors flooding the systems of BMO InvestorLine with new applicants, which begs the question, what would cause BMO InvestorLine to pause offering an already live tiered cash back promotion at a time when major rivals still have open offers?
It’s difficult to know exactly why, however, it seems that shuttering an active deal is likely the result of something abrupt instead of something planned, especially given the timing being so close to the launch of their latest cash back promotion.
Perhaps the economics of a tiered cash back offer simply don’t work for BMO InvestorLine, or perhaps the costs of running a campaign to acquire new clients exceeded the benefit those clients would bring. The latter point is one of the drivers behind online brokerages typically choosing to launch promotions during RRSP season instead of during the whole year. When online investors are “in market” for a new online brokerage or seeking to park new assets in an account, as is the case during RRSP season, online brokerages want to be as visible as possible.
That said, instead of stopping promotions outside of RRSP season, one of the strategies BMO InvestorLine has employed in the past was to raise the deposit threshold at which an individual investor could qualify for a promotion. Thus, instead of requiring a minimum deposit of $15,000, BMO InvestorLine could raise the minimum deposit to $50,000 so that only those individuals who bring the kind of value BMO is seeking qualify for incentives.
So, though speculative, if costs of a program suddenly get put under the microscope to the point that they lead to a decision to cut loose a promotion in midstream, then a good candidate reason why would be a “cost cutting” program. And for that to take place at BMO InvestorLine, a bank-owned brokerage, that is very interesting timing indeed. If, after all of the years of running this program, something fundamentally has changed (or is about to) for promotions-led acquisition, it does beg the question as to what BMO is encountering now that makes the math for promotions untenable at this time.
Though the online promotion of the deal is now gone, self-directed investors interested in the cash back promotion at BMO InvestorLine may be able to access the offer via customer service touch points (e.g. in branch) on a case by case basis. When a client is of sufficiently high value (what that value is, we don’t yet know), then they might be offered a cash back incentive.
The latest move by BMO InvestorLine to shutter an active offer is a step change for an online brokerage that has almost consistently leaned into “always on” promotions and bears a resemblance to the structural shift in promotional strategy that Questrade undertook many years ago. Unlike that decision, however, BMO InvestorLine does not have the same magnitude of affiliate channels nor social media community support that Questrade had when it decided to shift its promotions strategy.
Instead of being a leader among Canadian bank-owned online brokerages when it comes to promotional activity, it seems BMO InvestorLine is more content to run with the pack. With no other big bank-owned online brokerages currently offering cash back promotions right now, all attention for self-directed investors looking for a cash back deal on a new trading account is being directed to Qtrade Direct Investing.
The bigger consequence to bowing out of the post RRSP season promotions race may not be felt for some time but will almost certainly resurface again next RRSP season. One of the biggest benefits of an always on campaign is to continuously attract attention of investors and to be among the list of names those investors consider when the need for a solution arises. In this case, BMO stepping back simply opens the door to another lesser known or not historically active name to fill that void.
An alternate view is that online brokers may also be more willing to be agile when it comes to promotional activity. A case in point is the current cash back promotion from Qtrade Direct Investing.
Qtrade did something highly unusual at the beginning of this year by revising upward the amount they were willing to offer to new clients. They did not “set it and forget it” with the deal that launched last year but rather saw that their offer was not nearly as competitive as their peers and adjusted accordingly.
The fact that BMO InvestorLine was the only big bank-owned online brokerage in market with a cash back promotion perhaps made them realize they were overspending to acquire new clients. That they were willing to do so mid-campaign is maybe a sign of different kind of structural change: online brokerages are becoming nimbler.
This year alone we’ve seen Qtrade Direct Investing change deal amounts, BMO InvestorLine effectively shut down an already live deal, and RBC Direct Investing move around the expiry date on an unprecedented commission-free trade offer. If there was ever a case for expecting the unexpected, Canadian online brokerages seem to have made it their theme for 2022.
CI Direct Trading Sporting a New Look
Spring seems like the opportune moment for new beginnings. This month, CI Direct Trading, the brand formerly known as Virtual Brokers, officially rolled out their new public-facing website. Gone is the familiar combination of red, black and white, and instead, the new website reflects the last stage in the integration of Virtual Brokers with the CI Financial common look and feel.
While a “new” website isn’t necessarily a big step change, building a new online brokerage website in an ultra-competitive environment does present an opportunity to intentionally lean into the brand identity. Secondarily, for seasoned observers, it offers a glimpse into where the priorities are for a particular provider.
In the case of the new CI Direct Trading website, there are a number of interesting observations to comment on; however, the biggest theme that jumps out is integration.
Unlike Virtual Brokers, which was effectively a standalone online brokerage, CI Direct Trading’s new site was intended to fold the online brokerage into the CI Financial ecosystem. And, at first blush, it appears they’ve done so – perhaps too well.
In fact, in the drive to create a common look and feel between brands, the point at which CI Direct Trading starts and where CI Direct Investing stops is very blurry.
Navigating between the CI Direct Investing and CI Direct Trading is so seamless that as a user, you wouldn’t know where you are unless you look at the logo on the page, and even then, you’d have to really pay attention to the small text under the word “direct” in the logo. Recall that one of the principles of user-centred design is to answer a simple question: am I in the right place? On the new CI Direct Trading website, the answer for DIY investors in particular is unclear.
On a more nuanced note, the decision to use the names “CI Direct Investing” and “CI Direct Trading” is confusing because almost no other online brokerage in Canada uses the term “Direct Trading” in their names. Three big names in the “Direct Investing” space jump out, for example:
Qtrade Direct Investing
RBC Direct Investing
TD Direct Investing
Virtual Brokers used to be a direct competitor to these particular providers; however, CI Direct Investing (rather than Direct Trading) seems like it would be the place where a user would look to find a service similar to Qtrade Direct Investing, TD Direct Investing or RBC Direct Investing. Except, they would be incorrect. CI Direct Investing is more akin to a roboadvisor solution, not a DIY one.
Although it seems like semantics, in reality, the “DIY investor” industry has been undergoing its own identity crisis for the past decade. Ten years ago, the entire space was almost uniformly calling themselves “discount brokerages,” then it shifted to “online brokerages,” and now they are positioning themselves as “direct investing” solutions providers.
Why this matters so much is because when it comes to being found online, something that is exceptionally important in a hypercompetitive environment, individual investors are going to search based on what they know and think is the term they need to use in order to access the category of service providers. When the category shifts, so too does the audience searching for it.
Another interesting theme is that the new website leans heavily into the “less is more” look. There are fewer options and less text as well as clear headings so that there is less information to have to parse through on the front page. From a visual perspective, there is also a heavy presence of mobile screens, a decision that undoubtedly is intended to relate to a generation of “mobile first” traders.
In a tinge of irony, the screenshots of the CI Direct Trading iPhone app show the symbol of a well-known Canadian bank (TD) instead of using the opportunity to have the publicly-traded CI Financial ticker (CIX) on there.
Even in the app store, the Virtual Brokers legacy association is still visible too, a reminder that all brand touch points need to be considered in the rebrand process. Of greater consequence, however, is that the legacy star ratings for the app experience are likely to impact user impressions on the brand. With a 2.5 star rating on the Apple App Store for CI Direct Trading, there is much work to be done to improve the perception of the mobile app as being an enjoyable way to engage with the service, especially with the mobile-first crowd.
When Virtual Brokers was acquired by CI Financial in 2017, it was unclear what direction the popular online brokerage would go in. Fast forward to today, it is now clearer that the successor to VB, CI Direct Trading is offering many of the same features and pricing as Virtual Brokers but is wrapping itself into the CI Financial ecosystem.
It has been a relatively quiet four years since the integration was first announced but now it seems the real work will begin for CI Direct Trading to be able to tell its story to online investors (traders?) and establish its niche in a very crowded field.
If the new design is a signal they’re looking to court a younger generation of investors, simplifying the website is a step in the right direction. Clearly, though, there is much work to be done in the seasons ahead to evoke the same kind of emotion, curiosity, and enthusiasm that their direct competitors have already managed to successfully achieve.
From the Forums
Moving day is always a chore. When it comes to moving mutual funds, however, it’s a problem that needs more than pizza to solve. One reddit user reaches out to the community of investors in this post for some guidance on how to navigate transferring away from Manulife and into a popular online broker.
Under the Influencer
A big theme among online brokerages heading into this year has been investor education. An interesting discussion emerged in this reddit post about seeking out “education” on investing and trading from a relatively well-known Canadian personal finance influencer.
Into the Close
That’s a wrap on another edition of the Roundup. If news among the online brokerage space is anything like the weather in April, it’s going to be a mixed bag of activity throughout the month. For the loyal readers that have managed to make it this far, we’re also going to be sharing more updates in the weeks ahead on the new special SparxTrading Pro and other tools we’ve been working on, so be sure to tune in for sunnier news coming around the corner. Until then, keep your powder and yourselves dry, you never know what might come up as an interesting buy.
For the past two years, adapting to drastic changes has been part of a “new normal.” So, perhaps it shouldn’t be a total surprise at this point that something unusual (dare we say unprecedented?) is taking place with online brokerage deals and promotions in the month of April.
Although in more “normal” times we would expect to see a drop off in the number and size of promotions for online investors after the RRSP contribution deadline (at the beginning of March), last month we noted that there actually offers being extended – or so we thought.
April, however, brought with it not just rain, but reining in of promotion deadlines or of offers altogether.
Starting first with what was supposed to happen. Scotia iTRADE’s big RSP-season push closed out with their cash back / commission-free trade promotion wrapping up at the beginning of April, as intended. As of the time of publication, there has been no new offer to replace the outgoing one; however, Scotia iTRADE still offers a welcome bonus of 10 commission-free equity trades in the first year (and 5 commission-free trades each year) to holders of a Scotiabank Ultimate banking package. Curiously, this is not advertised in the promotions section of the Scotia iTRADE website, but rather only on the banking side.
On the other side of the deals ledger, March saw the launch of a new deal from National Bank Direct Brokerage that was unlike any other offer that is currently available. National Bank Direct Brokerage is offering a discount on margin interest rates for four months, a clever way to attract active traders with larger balances into the firm.
So, while things seemed to even out, there were a couple of noteworthy moves by bank-owned online brokerages RBC Direct Investing and BMO InvestorLine that suggest some important changes across the summer.
The first important update is that RBC Direct Investing officially extended their 100 commission-free trade offer for another month, with the new expiry date set for the end of April. While that would normally be a positive, last month we noted a published deal page by RBC Direct Investing that showed that same promotion expiring in November, not April.
Finally, the biggest question mark to arise during the deals and promotions scan starting the month is the disappearance of the BMO InvestorLine cash back offer. This is an important development on a number of levels because it marks a significant departure from the historical activity of BMO InvestorLine in terms of having an “always on” offer for self-directed investors interested in opening an online trading account.
At the time of publication, the cash back offer, which launched only in the beginning of March and was scheduled to expire at the end of May, is no longer visible on the BMO InvestorLine page. That said, the offer may be available to certain clients in branch which means the offer is a “YMMV” (your mileage may vary) situation.
With the elimination of the public BMO InvestorLine cash back offer and Scotia iTRADE’s cash back promotion officially concluded, Qtrade Direct Investing is the lone online brokerage with a mass market cash back promotion. Historically speaking, it’s unusual territory for Qtrade to be the last deal standing. However, earlier this year Qtrade also signaled a shift in posture towards promotional offers by upping the dollar amounts available for their cash back deal despite the deal already being live.
Clearly this year has become the year of quick pivots when it comes to deals and promotions. Given the backdrop of competition for new clients as well as the pressure to lower cost of services, online brokerages are exploring different ways to drive new business without engaging in an arms race for customers longer than needed. That said, it seems online brokerages are starting to get more agile and responsive to market conditions, so it will be interesting to see how things unfold from May to September. If there’s a pullback from bigger players, it might just be the window of opportunity for smaller brokerages to gain a foothold ahead of next year’s RRSP season.
Scotia iTRADE’s combined cash back or commission-free trade promotion officially ended on April 1st. This offer gave customers the choice between cash back or commission-free trades, and deposit tiers ranged from $5,000 to $1M+.
Also expired (sort of) – the BMO InvestorLine cash back promotion. Though technically it may be accessible by contacting customer service or in branch it is no longer being advertised. This was a hasty exit for the deal which launched in March and was scheduled to expire at the end of May. No word yet on whether there will be a replacement.
RBC Direct Investing is back in this category, clarifying an earlier reported extension. So technically this extension is more of a revision, but, nonetheless, the official word is RBC Direct Investing’s RRSP season promotion has been extended for one more month and now expires at the end of April. This promotion offers 100 commission-free trades which clients can use over two years.
There are no new deals to report at the start of the month. Last month we saw the addition of a new offer by National Bank Direct Brokerage join the deals pool. That new promotion lasts until the end of May.
Spring has sprung, and with it a renewed focus on growth and optimism for what’s ahead. Interestingly, online brokerages have also embraced a new season now that the RRSP season is over, and this one focuses on active investors.
In this abbreviated edition of the Roundup, we focus on deals and promotions offered by zero-commission online brokerages. Dive into the details of the newest promotions to emerge and what they signal for existing and potentially incoming online brokerages to consider. To wrap things up, we focus on investor commentary related to retirement accounts and slow-moving platforms.
New Deals in Town: Zero Commission Brokerages Continue Using Promotions to Drive Interest
Hot on the heels of the 2022 RRSP season, the timing of a launch of a new offer is also indicative of a new target audience: active traders. Trading on margin is not something that people thinking about retirement or RRSPs typically consider first, so the timing of this offer to go live after the RRSP season rush makes sense.
National Bank Direct Brokerage is not alone in that reasoning either. Wealthsimple Trade also launched their own limited-time offer aimed at the non-registered account crowd. Although their offer of a “free stock” cash back equivalent is ongoing, the boost to the amount for referrals to 3x the normal amount is clearly intended to generate some buzz.
Offering a promotion to attract new clients is a tricky proposition for a “zero-commission” brokerage.
After all, part of what should keep costs low is the controlled spending on acquiring new assets and customers. That said, when looking at the current group of “zero-commission” online brokerages in Canada, not only is the number of firms small (currently three) but two of the three firms are not well-known across Canada
Uncertainty Begets Volatility
When it comes to choosing an online brokerage, one of the biggest hurdles facing this specific group of zero-commission brokerages will be the uncertainty associated with them.
Unlike the entrenched Big Five bank-owned brokerages or names, such as Questrade and Qtrade that have been around for many years across Canada, the current group of zero-commission brokerages faces an uphill journey to become known and, more importantly, trusted.
A recent quote from Mike Foy, Senior Director of the Wealth Management Practice for North America at J.D. Power sums up the issue:
“Investors are increasingly bombarded by information from numerous sources including social media. We see the single biggest driver of online investor satisfaction with their broker is trust.”
Now that the surge in new retail investors coming to the market has somewhat abated, the challenge to Canadian online brokerages will be to create online investing tools and experiences that cater to this new group of investors and yet-to-be investors. And this is where promotions can offer a tactical advantage.
The latest promotion to launch from National Bank Direct Brokerage focuses on margin interest rates and serves as a good example where zero-commission brokerages can look to in order to attract attention while at the same time keeping costs contained. Although cash back or commission-free trades are welcomed, they’re not the only place that self-directed investors incur fees.
This past RRSP season demonstrated that online brokerages are spending aggressively on cash back promotions to attract new clients. For zero-commission online brokerages, pure cash back promotions are unlikely to be pursued because the costs may be prohibitively high. And as National Bank Direct Brokerage showed, there are now other costs that are up for negotiation.
Active is Attractive
National Bank Direct Brokerage’s focus on margin rates is a clear overture to active investors. The hope, it seems, is that in addition to the zero-commission trading commissions, there are other reasons to consider NBDB for a trial run or even as a separate or additional account.
Unless the direct competitor to NBDB, Desjardins Online Brokerage, follows suit with a similar offer, this latest deal will give National Bank Direct Brokerage an interesting combination of features worthy of a closer look by active self-directed investors.
With interest rates increasingly coming into focus for the next two years, getting a substantial break on higher interest rates for even a short time could be the catalyst that gets online investors talking about National Bank Direct Brokerage once again. And if there’s one sure fire way to achieve greater consideration in the online brokerage segment, it’s through the honest and unfiltered positive commentary of investors.
By lowering their commission prices to zero, National Bank Direct Brokerage has already ignited a conversation among online investors as to why they should pay attention to NBDB. This latest move seeks to steer the conversation once again in favour of this bank-owned brokerage. The key question, however, is who investors will stop talking about now that National Bank Direct Brokerage’s newest promotion is live.
From the Forums
There’s probably a reason that changing financial service providers is deliberately harder than it needs to be. This post from Reddit is fascinating because it highlights the challenges associated from moving accounts from one provider to another, but even more so, because it is a question about moving pension accounts – something that signals there are more than Millennials and Gen Z readers tuning into Reddit for information and guidance.
Not So Fast and Furious
“Time is money” takes on a whole other layer of meaning when it comes to trading online. In this Reddit thread, there is a chorus of complaints from active investors who find one online brokerage’s platform to be moving too slowly for their liking.
Into the Close
That’s a wrap on another Roundup. Although it was a bit of a light week (a March break?) heading into start of spring, “green shoots” are starting to appear in terms of investor education activities. We’re looking forward to the nicer weather and a chance to get out and about more, and we’re not alone. So, it will be interesting to see how the reopening starting to take place will impact the ability of online brokerages to capture and hold attention over the next few months. In the meantime, enjoy the signs of spring!
Let’s call a spade a spade: things are in a terrible state. While we continue to watch from afar and hope that peace comes quickly to Ukraine, markets and investors closer to home are trying to digest world events having local consequences. And right now, we could all use something uplifting.
Fortunately, there are a few bright spots in this edition of the Weekly Roundup. To begin, we review the latest online brokerage deals and promotions, with a detailed look at how developments during the RRSP season portend what DIY investors can expect through the rest of the year. From there, we dive into a master class in continued growth by Interactive Brokers, whose latest metrics reveal that they’ve successfully navigated the new normal. Finally, tune into chatter from the investor forums to see what self-directed investors were focused on (other than oil prices).
Deals and Promotions: Rise of the Hybrids
While the holiday season is typically the time of year for gifts, it seems this year it was the RRSP season that gave self-directed investors the gift that keeps on giving: online brokerage deal extensions.
Things around the Canadian online brokerage industry are a bit unusual these days (see next story for more). Prior to the pandemic, there was a trend of online brokerages offering incentives and promotions that would typically start in November and last until the RRSP contribution deadline at the beginning of March the following year.
While last year was characterized by a tsunami of new investors clamoring to open online brokerage accounts, this year traffic is comparably quieter and thankfully more measured. And, despite crowd sizes returning to more manageable levels for online brokerages, the deals and promotions offered around RRSP season reflect a massive step change in the promotional landscape, driven in large part by increased competition and a whole new set of investors that are looking at trading online.
Before diving into the analysis of March’s deals and promotions reveal about the current competitive landscape, let’s begin with a recap of who’s in and who’s out.
What is interesting, however, is that on a year-over-year basis, the profile of the offer from CIBC Investor’s Edge was about the same, whereas for TD Direct Investing the minimum deposit requirement dropped 90%, from $15,000 to $1,500. Across multiple deposit tiers, TD Direct Investing also offered the highest (or was tied for highest) cash back amounts.
As small as this sample size is, it is illustrative of how Canadian online brokerages appeared to approach RRSP season this year.
On the one hand, there are firms that chose to stick to the traditional script, and on the other, firms that took a dramatically different route. Based on the numbers, it is clear that TD Direct Investing employed a different playbook, whereas CIBC Investor’s Edge stuck to their familiar game plan.
That said, as the RRSP season went on, we witnessed three exceptional developments that suggest the current competitive landscape among Canadian online brokerages has shifted in a direction we believe is bullish for self-directed investors looking for a promotion when opening an online trading account.
A series of fortunate events
The first big shift in tactic came from Qtrade Direct Investing. At the outset of the RRSP season, Qtrade launched a cash back offer that looked like past offers. That is, they weren’t trying to be “first” when it came to cash back amounts.
That all changed in late January when Qtrade Direct Investing revised their cash back offering upwards and lowered the threshold to qualify for the promotions as well. They lowered their minimum deposit requirement from $15,000 to $5,000 and raised their minimum deposit bonus from $50 to $100. On a year over year basis, the revised Qtrade promotion was 80% lower for the minimum deposit threshold (from $25,000 down to $5,000) and two times higher in terms of minimum bonus. And it didn’t stop there.
Qtrade Direct Investing also raised their cash back amounts across numerous deposit tiers, matching the top bonus amounts in almost all of them. The only range where Qtrade Direct Investing was not tied for the highest cash back amount was in the $25,000 to $50,000 tier.
And this brings us to the second big development during the RRSP season, which is promotion extensions.
Historically, the expiry date of most online brokerage promotions would coincide with the end of the RRSP contribution season. This year, however, we saw expiry dates stretch out well beyond that point into March and April. And, as the RRSP season drew to a close, we started to notice deal extensions further into the calendar year.
For example, Qtrade’s cash back promotion now expires at the end of May (moved from an original expiry at the end of March). The RBC Direct Investing promotion, a fascinating development in its own right because of the number of commission-free trades (100) and term over which they can be used (two years), was originally scheduled to expire at the end of April and is now set to expire at the end of October. Joining this list of extensions is BMO InvestorLine, which has now extended its RRSP season cash back promotional offer into the end of May. Scotia iTrade has not extended their current offer (yet?), however, that is set to expire at the beginning of April.
Finally, another telling development during RRSP season this year was the launch of Easy Trade by TD. This new trading platform (which is separate from TD Direct Investing) offers 50 commission-free trades per year to its users. There is no doubt that when one of the largest banks in Canada launches a product that promises 50 commission-free trades per year, that self-directed investors (and other online brokerages) are going to pay attention. And, just in case they weren’t paying attention, TD heavily advertised the launch of Easy Trade during the Super Bowl and is continuing to advertise on social media as well.
Collectively, these developments are bullish for self-directed investors looking for better value (on commission pricing) and suggest that deals and promotions are going to fare more strategically into the approaches of online brokerages in the near term. In particular, those online brokerages that don’t want to drop their standard commission prices can, instead, launch a competitive commission-free trading promotion (as was the case with RBC Direct Investing). The events over this RRSP season also may serve as a harbinger of commission-free trading finally gaining widespread adoption in Canada.
Prior to the launch of full zero-commission trading at National Bank Direct Brokerage, this bank-owned brokerage offered 100 commission-free trades which were good for one year. Eventually, that promotion was superseded by the new pricing scheme. But in taking a measured approach towards zero-commission trading, it stands to reason that they could have reviewed the data associated with that promotion to decide about the impact of going to zero.
As TD showed with Easy Trade, zero-commission trading doesn’t necessarily mean full access to the suite of tools and capabilities that their TD Direct Investing online brokerage platform has.
It’s certainly a salient metaphor these days, but the “hybrid” option (aka unbundling) introduced by TD of paying for some trades or features and not for others could be how other online brokerages who currently charge for commissions approach the new world of zero-commission trading.
If other online brokerages follow suit, then just like at the pump, DIY investors looking for premium will be prepared to pay up. For everyone else, however, getting started with investing appears to be getting a lot cheaper.
Interactive Brokers: Numbers Reveal a Winning Formula
As we near the two-year anniversary of the official declaration of a global pandemic by the World Health Organization (March 11, 2020), the true impact of this once in a generation (hopefully) event is starting to become clearer. Although COVID is by no means behind us, almost anyone in the online brokerage industry can attest to how exceptionally different things are now than in the “before times.”
One area that probably doesn’t get much attention, however, is benchmarking. Specifically, how do you compare what’s taken place over the past two years to anything?
As it relates to online brokerages, be they Canadian or US, data from the past two years is showing that the changes to the industry have been profound. In many ways, not only is there a “new normal,” but new approaches are required and many of these are largely going to be written on the fly.
Earlier this month, as per usual, Interactive Brokers released their monthly performance metrics (for February 2022). Contextualizing these numbers, however, is particularly challenging because of how dramatically different the performance figures were in January and February of this year compared to last year. Though it may not be news that 2020 and 2021 were busy times – even by historic standards – what is particularly noteworthy is what you can see when net new account growth is plotted out back to 2019.
Because a picture is worth a thousand words, take a look at this graph of data of net new accounts at Interactive Brokers from 2019 to 2022.
Among the many things that jump out, it is striking to see the step change in interest in trading online that coincides with the start of the pandemic. Even more imposing is the surge in net new accounts in the first three months of 2021. Against that backdrop, the latest account growth figures reported by Interactive Brokers could be good, excellent, or terrible. Thankfully, context matters, and as such even though just under 39 thousand net new accounts represents a month over month decline in February of almost 22%, this still puts the strength of new account growth several times above where things were pre-pandemic.
Surges in interest aside, the longer-term picture points to a sustained interest – at least for Interactive Brokers – in trading online as indicated by net new account opens.
Prior to the pandemic, the average number of net new accounts in a month in 2019 was about 7.6 thousand. Excluding the period between January and March of 2021, the average between March 2020 and February 2022, the average number of net new accounts at Interactive Brokers has climbed to just shy of 38 thousand per month, a whopping 5x increase.
Focusing in on a more recent timeframe, it appears that the launch of cryptocurrency trading at Interactive Brokers in the late summer of last year helped to provide renewed enthusiasm for new account growth. Net new accounts opened in November 2021 (almost 55 thousand) reached the highest level seen since the end of the meme-stock craze in March.
Interactive Brokers’ continued account growth serves as a remarkable example of what is clearly a winning combination for active investors/traders.
Granted, some of the growth in their numbers is from acquisition. However, most new accounts have come through organic growth. Even more fascinating is that a material portion of their new clients have come to Interactive Brokers because of recommendations and referrals from existing clients.
Perhaps most remarkable of all, though, is that this data shows that growth can happen at an online brokerage that has a core business that charges commissions per trade, and against a backdrop where commission-free trading is the norm at many peer firms.
When comparing account growth figures across Interactive Brokers, Schwab, and Robinhood for 2021, it was revealing to see how poorly Robinhood fared against its peer firms in the back half of year – especially in the category of account openings. In contrast, Robinhood, which blew the doors off account growth in early 2021, saw a precipitous drop in account growth once meme-stock momentum faded.
As mentioned above, the truly exceptional nature of what happened in 2021 to the world of online investing makes comparing subsequent time periods against those first few months somewhat futile. The open question for online brokerages is whether the new entrants into the world of online investing are here to stay or simply a temporary phenomenon.
What the longer-term account data provided by Interactive Brokers suggests, however, there is more permanence to new users and continued interest in sophisticated platforms. Robinhood’s latest performance data has shown that especially when it comes to trading stocks, the new cohort of investors and traders were not nearly as interested in that asset class as they were in options or cryptocurrency trading.
Interactive Brokers has clearly figured out a winning formula to attracting new clients. Their platform and user experience, however, appeal to a narrower segment of users than something like Schwab or even Robinhood. What is undeniable, is that by creating a best-in-class product, maintaining a reputation for low-cost pricing and catering to the most influential user group in active trading, Interactive Brokers has shown that new clients will come.
Perhaps less obvious, Interactive Brokers has been playing a long game strategy.
Though they could not have foreseen a global pandemic tilting interest in their favour, their platform was nonetheless equipped to scale and did so when needed. They stuck to their strategy of focusing on their core segment (active traders) while recognizing the need to innovate (cryptocurrency, ESG investing, commission-free trading) to adapt to changing investor demands.
While it is difficult to extrapolate directly onto the Canadian online brokerage market, the key themes emerging from the latest Interactive Brokerage results, as well as the longer-term picture on account opening data across the big publicly traded online brokerages in the US, reaffirms that simply going commission-free doesn’t guarantee new account growth, nor does it guarantee loyalty.
That said, the pricing at Canadian online brokerages, for the most part, is very disconnected from the value offered.
Unless incumbent online brokerages are prepared to dramatically shift their development focus on delighting influential segments of self-directed investors, they should be prepared to significantly lower their commission pricing (or offer substantial sign-up bonuses).
When the new crop of online brokerages launches in Canada, COVID will be a fading memory and the conversation for most investors will be focused squarely on pricing and ease of use. As Interactive Brokers has shown, staying relevant is the best way to ensure you remain in the conversation, no matter where events in the world turn.
From the Forums
When trusting an online brokerage with something as valuable as a nest egg, it’s important to know exactly what kind of assurances there are in place in case of a default. In this post from the investor forum on RedFlagDeals.com, one investor compares coverage available at two popular online brokerages and how vastly different the terms are.
Point of View
One of the latest features to emerge from Wealthsimple is a small but convenient improvement – a singular view of Wealthsimple Invest and Wealthsimple Trade accounts in one place. In this post revealing the new feature, users weigh in on the new view.
Into the Close
That’s a wrap on this edition of the Roundup. It was a bit delayed in going live, but perhaps we can chalk this one up to a chip shortage, the potato kind not the silicon kind (thanks Frito Lay). Besides, it seemed like there was more than enough to digest this week with market volatility keeping investors on edge. Here’s hoping for calmer waters and heads prevailing.
Unusual times are upon us. In the world of online brokerages, the beginning of March has historically been a turning point where RSP promotional offers expire, and the industry collectively takes a breath after their busiest stretch in the year. But this year, things are a bit different.
What unusual things that we’ve witness take place are an increase in cash back amounts from Qtrade Direct Investing coupled with extensions, again from Qtrade as well as RBC Direct Investing. And perhaps it is a sign of exactly how intense competition has become, but the RBC Direct Investing and Qtrade Direct Investing promos are at historic high levels. Another, for good measure, are longer deadlines for offers.
So, while we don’t have any new offers (yet) to report on, the extensions of offers from big names, like RBC Direct Investing and Qtrade Direct Investing, and longer durations of offers from Scotia iTRADE, would (or should) compel brokerages without an active promotion to consider launching an offer for the spring or through the summer.
In part, incumbent online brokerages – and especially bank-owned online brokerages – now need to factor into their promotional mix a world in which zero-commission trading from firms like National Bank Direct Brokerage (as well as Desjardins Online Brokerage) are gaining ground, and TD Easy Trade now exists. The new self-directed investor service from TD offers 50 commission-free trades per year to clients, and our recent in-depth analysis of TD Easy Trade shows why it is of immediate concern to competing brokerages.
Again, typically this would be a quieter time for all but a handful of perpetually active online brokers, but there’s a clear signal that in many ways these are not usual times, especially in the realm of self-directed investing. One possible reason: younger investors.
This new and materially relevant group of investors has started to drive all manner of change among online brokerages in Canada, which could mean that there are a few more interesting touchpoints in the calendar year where we see promotional campaigns surface.
For the time being, we’ll keep an eye out for new deals and promotions, but if you don’t see one on our list of online brokerage deals, let us know!
CIBC Investor’s Edge cash back promotion officially wrapped up on March 1st, as did the ultra-competitive cash back offer from TD Direct Investing. For reference, check out February’s deals and promotions post for a comparison of cash back promotions from the 2022 RRSP season.
Extended Online Brokerage Deals
RBC Direct Investing made a huge move this RRSP season by offering 100 commission-free trades which are good for up to two years. Originally slated to expire at the end of March, this RBC Direct Investing free trade promotion has now been extended to the end of November.
Another important extension was from Qtrade Direct Investing. In addition to revising the cash back bonus amounts upwards (and applying rewards retroactively to people who signed up under the original bonus), they also extended this offer until the end of April.
This year more than most, February is a month that embodies competition. From the Super Bowl to the Winter Olympics to the final stretch of RRSP season, there’s no shortage of high drama, stats, scores, and podium finishes. And while there might not be any formal winner declared to RRSP season, the reality is that Canadian online brokerages are battling hard to lock in new clients and assets ahead of the RRSP contribution deadline.
In this reboot to the Weekly Roundup, we took our cues from the biggest sporting events in the world to bring an exceptional edition filled with high degrees of difficulty to compare one of the most influential touchpoints of DIY investors making decisions on which online brokerage to choose: Canadian online brokerage rankings. Grab some snacks (maybe a coffee too), this is going to be a good one – but if you don’t have time, check out the key takeaways below.
It is increasingly more difficult to distinguish between Canadian online brokerages, let alone to find out which online brokerage is best
Different online brokerage rankings (Globe and Mail and Surviscor) ended up with very similar opinions about Canadian online brokerages this year, despite measuring them differently
When comparing online brokerage rankings, consistency between rankings provides greater confidence, whereas, inconsistency is a warning that experiences may be variable (aka YMMV)
Most online brokerages in Canada are generally OK to meet the needs of most self-directed investors; however, ranking as a best online brokerage means hitting important feature metrics, not just having the lowest commission pricing
Which Online Brokerage is Best? Comparing Online Brokerage Rankings to Find Out
The 2022 RRSP season is on the cusp of wrapping up, and, as in previous years, there has been a predictable surge among self-directed investors to find a new Canadian online brokerage. Unlike in past years, however, this year it seems that competition between Canadian brokerages is even more heated than ever before. And despite that competition (or perhaps a result of it), it is becoming increasingly more challenging to distinguish Canadian online brokerages from one another.
While commission price has historically been a key distinguishing feature for value-conscious self-directed investors to base their decisions on, zero-commission pricing has now gained a foothold among Canadian online brokerages.
The fact that there is more than Wealthsimple Trade – which was the sole zero-commission option for several years – to choose from since the start of this year’s RRSP season also heavily impacted an important touchpoint for the online brokerage industry and consumers alike: Canadian online brokerage rankings.
Online Brokerage Rankings Launch Ahead of RRSP Season
Earlier this month, the 2022 edition of the Globe and Mail’s online brokerage rankings was released, just in time for the peak of the wave of investor interest in online brokerage account opening. Now in its 23rd year, Rob Carrick’s long-running review is hands down one of the most influential online brokerage reviews with Canadian self-directed investors. And in late December 2021, the other big name in online brokerage rankings, Surviscor, released their 2021 online brokerage experience rankings, a comprehensive ranking of online brokerages in Canada based on detailed criteria about the online investing experience.
While it comes as no surprise that in the lead up to the 2022 RRSP contribution deadline two very important Canadian online brokerage reviews have been released, it was surprising to see the degree to which both rankings ended up agreeing with each other.
At Sparx Trading, we don’t rank online brokerages, but we do have a long history reviewing online brokerage reviews. We’ve continuously held the perspective that “the best” online brokerage for Canadian investors is one that suits their particular needs as a self-directed investor.
That said, for self-directed investors who turn to third party reviews for guidance and perspective on which online brokerages are leaders or laggards (or to find out “which online brokerage is best?”), our recommended approach would be to see what different brokerage rankings have to say.
The challenge, however, is that each of these reviews take very different approaches to defining and measuring which online brokerages in Canada are the best, and so it is important to understand what each of these online brokerage reviews measure and how they measure it. But comparing online brokerage rankings is not easy.
From a consumer perspective, there is quite a bit of analysis and more homework/guesswork than most are willing to do, which is why we’ve tried to simplify this in our online brokerage review pages by providing ranking data from different sources alongside information about the brokerages themselves below.
An important trend that we’ve observed with online brokerage rankings in Canada is that the difference between online brokerage ranking scores has been shrinking.
For the past two decades, online brokerage reviews from third party sites and sources have played an important role in helping Canadian self-directed investors understand how to choose an online brokerage, as well as provide recommendations on which Canadian online brokerage is best. That said, the spread between the top and bottom ranked firms has been closing across different reviews, a signal that it is becoming increasingly more difficult to distinguish between online brokerage firms.
While the appeal of these online brokerage rankings is that they offer a quick point of reference for investors to be able to determine which online brokerage(s) are the segment leaders and which are the laggards, there hasn’t been an easy way to compare Canadian online brokerage rankings – until now.
To address this analysis gap and to highlight the trend towards homogenization among online brokerages (i.e. that it is harder to tell online brokerages apart from one another) we wanted to put the latest online brokerage rankings from the Globe and Mail and Surviscor into a format where they could be compared side by side. By doing this, a much clearer picture emerges of where there is consensus from subject matter experts on which Canadian online brokerages are leaders and which are lagging their peers.
Specifically, the most important thing (we think) to pay attention to when comparing online brokerage rankings is where there is agreement and the extent of that agreement, because it demonstrates increased confidence in the experience that self-directed investors can expect from a particular Canadian online brokerage.
How We Compared Canadian Online Brokerage Rankings
Before diving into a comparison of the two different online brokerage rankings, it is important to provide some context as to how these numbers were generated.
The scoring criteria for the 2022 Globe and Mail online brokerage rankings uses letter grades in combination with +/- components. (For those who wish to take an in-depth look at how the grading system changed over time, you can check out one of our original articles explaining how the Globe and Mail online brokerage rankings evolved from 2002 to 2012.) As in the past, there are multiple criteria that Canadian online brokerages are evaluated on with a final letter grade assigned based on a combination of scoring and impression of the online brokerage (from the perspective of the “average” online investor).
In contrast, Surviscor reports a numerical percentage for their Canadian online brokerage experience rankings. The methodology for their analysis takes a criteria-based approach and measures features that online brokerages do (or do not) have. This year’s online brokerage experience review audited Canadian online brokerages during October and November 2021 and analyzed over 400 criteria in six categories and 27 subcategories.
To enable a fair comparison, we decided to convert the letter grade ranking system used by the most recent Globe and Mail online brokerage rankings, into a numerical system that is used by Surviscor.
Interactive Brokers Canada was analyzed as part of the Globe and Mail’s 2022 online brokerage rankings, whereas Surviscor’s brokerage ranking did not include them. Conversely, Wealthsimple Trade was rated by both firms; however, they were only scored in the Surviscor rankings. In the Globe and Mail online brokerage rankings, Wealthsimple Trade was given an “I” for “incomplete.” As such, both Interactive Brokers and Wealthsimple Trade are not directly comparable in the two different rankings.
The table below contains the raw rankings from both online brokerage reviews. As mentioned above, the online brokerage rankings from the Globe and Mail are reported in the form of letter grades, whereas the rankings of online brokerage experience from Surviscor are reported in percentages:
Also, for ease of comparison, we’ve calculated the average score between the two sets of online brokerage rankings, as well as the difference between the scores (in percentage points) to highlight the degree of agreement (or disagreement) between the two different rankings’ results.
What We Found When Comparing Canadian Online Brokerage Rankings
Again, in the interest of a fair comparison, it is important to reiterate that we are comparing two different Canadian online brokerage rankings that measure different aspects of trading online via a Canadian online brokerage.
The Globe and Mail’s online brokerage rankings take the perspective of what the “average” Canadian self-directed investor would typically need or want. By comparison, Surviscor’s rankings measure the “online brokerage experience,” which reflects what their perception of a leading online brokerage experience could look like.
One of the first things that jumps out from the results of this year’s rankings is that averages from the Globe and Mail (75%) are lower than those from Surviscor (81%). Moreover (and for the stats nerds), the standard deviation – or measure of variance of the average – for each set of scores show much more consistency for the Globe and Mail’s online brokerage ranking than for Surviscor’s (7.31% vs 8.88%). It is important to note that the scores for Wealthsimple Trade on Surviscor’s rating (20%) were not included because they were so far below everyone else’s that it would have significantly skewed the analysis.
What these averages and standard deviations point to is that the perception of the overall online brokerage offering for Canadian self-directed investors is generally not bad.
Aside from a couple of outliers – in particular Wealthsimple Trade – an online investor could pick just about any Canadian online brokerage and be OK. Thus, choosing a Canadian online brokerage in 2022 for most individual investors is not a decision to fret over – especially if their needs are fairly straightforward or basic.
Importantly, a low number on these rankings doesn’t necessarily imply a “bad” or poor online brokerage, but rather one that doesn’t meet a full spectrum of user needs based on what else is out there. As such, not all investors will end up wanting or needing all features that are available elsewhere, which might be just fine for those investors.
Another interesting observation right off the bat is that the average score for Canadian online brokerages is lower in the Globe and Mail ranking than it is in the Surviscor ranking. One interpretation is that Rob Carrick is a tougher grader than Surviscor, something that is somewhat of a surprise given the qualitative data and commentary on the online brokerages coming from each ranking. While it is clear what Surviscor’s position is on firms like Wealthsimple Trade, other than that, according to Surviscor’s scores, most Canadian online brokerage firms appear to be faring well (in a relative sense) when it comes to features.
One of the unique features of analyzing the Canadian online brokerage rankings this way is that it is possible to combine the scores into an average score between the two different rankings. In doing so, not only does this enable readers to more easily compare Canadian online brokerages based on the average alone, but it also highlights where these rankings agree and the extent to which they do.
To be fair and consistent for the analysis on combined scores, Interactive Brokers (which was analyzed only in the Globe and Mail) and Wealthsimple Trade (which was not graded in the Globe and Mail and was a severe outlier in the Surviscor analysis) were not included.
The table below shows the combined average scores from each Canadian online brokerage, as well as the difference (in percentage points) between the two rankings. Firms that had the same average score but lower difference between rankings were rated higher in this analysis, thus it is possible to have a lower average score but place higher because there is greater confidence associated with a particular average.
The scores for the combined rankings ranged from a high of 90% (Qtrade Direct Investing) to a low of 62% (HSBC InvestDirect) with the overall average of the group coming in at 78% and a standard deviation of 7.7%.
With these numbers in mind, the results of the best ranked online brokerages (as well as the worst) take on greater meaning.
In particular, based on the average values and the range of scores alone, Qtrade’s performance is very close to being significantly better than the other firms ranked, falling just three percentage points shy of being two standard deviations better than the average. Conversely, HSBC InvestDirect’s ranking does (barely) cross the threshold into being significantly lower than its peers.
As for the rest of the field, which is essentially every other online brokerage, the experience is generally OK. This could explain the observation that many Canadian self-directed investors don’t feel compelled to switch online brokerages, even in the face of low or zero commission alternatives. Even if costs may be somewhat higher, things are not so materially bad to induce a change. It’s only likely after a negative service interaction (or feature shortcoming) or some significant convenience boost (e.g. consolidating other financial services or very cool feature) that would form the catalyst to change brokerages.
Areas of Agreement
What became clear in comparing these online brokerage rankings is that there were clearly some instances where both sets of reviews arrived at similar conclusions about the performance of a particular online brokerage.
The range of agreement was between 4 and 16.5; however, the latter score (the result of the difference in scoring for Scotia iTRADE) was certainly an outlier. Excluding that from the analysis, the average difference between the Globe and Mail rankings and Surviscor ratings was about 7.15 percentage points with a standard deviation of 2.24.
When including a “confidence” measure, which is really a consistency between rankings measure, the most consistent conclusions were about BMO InvestorLine (average combined score of 80%) and CIBC Investor’s Edge (average combined score of 73%). Rankings for both of these firms were within four percentage points of each other, suggesting that both Surviscor and the Globe and Mail analyses arrived at a similar conclusion about what self-directed investors can expect. In this case, when comparing BMO InvestorLine versus CIBC Investor’s Edge, according to the rankings, BMO InvestorLine would provider higher probability of a better outcome for investors.
Where the confidence measure really impacts the average scoring and ultimate ranking of online brokerages is when the difference between online brokerage rankings is considered high. In this case difference scores of 8 or higher were considered to be an indicator of a “YMMV” (your mileage may vary) for investors in terms of what their own experiences with an online brokerage may be. Several firms fell into this cluster including (in descending order of disagreement):
The most extreme example of disagreement between online brokerage rankings was for Scotia iTRADE, which had a 16.5 percentage point difference. The Globe and Mail’s online brokerage rankings rated Scotia iTRADE at 74.5%, a score that put it in the middle of the pack in terms of grading; however, in the Surviscor rating, Scotia iTRADE earned a 91% rating. According to Rob Carrick’s commentary, the website interface came across as dated but in the Surviscor ranking, the overall online experience was close to exceptional. In short, this is a good example of a firm where consumer experience is likely somewhere between good or excellent, depending on the user.
Other interesting names on the YMMV list were the two online brokerages with zero commission trading: National Bank Direct Brokerage and Desjardins Online Brokerage.
Despite being a “tougher” judge overall, it was the Globe and Mail ranking for National Bank Direct Brokerage (78%) which was higher than Surviscor (69%). The situation was almost the opposite at Desjardins Online Brokerage, which scored higher on the Surviscor ranking (76%) compared to the Globe and Mail (68%). And despite not being captured in the comparison analysis shown above, Wealthsimple Trade is also a zero commission brokerage that did not score well on the online brokerage rankings.
The shift to this low-cost structure for consumers would almost certainly be considered a win, but as these online brokerage rankings clearly show, pricing is just one of many factors that online brokerages need to get right in order to score well on these brokerage rankings. In fact, it appears that when it comes to Canadian online brokerage rankings, each of these aggregate ratings favour the online brokerage offering features and “frills” rather than the most essential online trading experience. Most “average” investors don’t make a significant amount of online trades in a year, so the “value” of zero commission trading might be minimal compared to other features (such as portfolio tracking) that would be of interest.
Online brokerage reviews and rankings have and will continue to play an important role for self-directed investors who are interested in opening an online brokerage account. For Canadian online brokerages, rankings – especially those from the Globe and Mail and Surviscor (as well as from JD Power) – are a particular point of pride, and demonstrate to investors that these online brokerages can meet certain standards of quality that, in turn, should give investors confidence in doing business with them.
While historically there might have been substantial differences between firms, in 2022 it is clear that most Canadian online brokerages are doing an adequate job of providing self-directed investors with the essential functions of being able to trade and track their portfolios online. The customer service wait times, which became a dominant topic of discussion in 2021, were also part of the conversation this year, but what that data also showed is a) improvements have been achieved in most places year over year, and b) customer service channels are, like pricing, only part of what earns good grades in an online brokerage ranking.
Our conversion of the letter grades used in the Globe and Mail’s online brokerage rankings into percentages is not a perfect one-to-one mapping. For that reason, the percentages that we’ve used are at best, a reasonable approximation of what it takes to conduct an apples-to-apples comparison of the different online brokerage rankings that are highly influential during the current RSP season and throughout the rest of 2022. Despite the limitations, the ability to compare different online brokerage rankings does show that firms like Qtrade Direct Investing and TD Direct Investing have earned their way to the top of the list of firms who are providing broadly appealing features and value to Canadian self-directed investors. The fact that there are both strong averages as well as reasonable agreement can give self-directed investors some degree of confidence when trying to decide on a “good” choice for an online brokerage.
That said, the online brokerage rankings are a line of best fit for the “average” or typical investor. And despite some firms scoring lower, it is important to recognize that a “lower” score doesn’t translate necessarily into a firm that doesn’t please its customers. Different features matter to different investors, and as such, firms that didn’t receive much spotlight in these rankings and analysis, in particular Interactive Brokers and Wealthsimple Trade, have passionate users who genuinely enjoy using these brokerages.
Thus, if there is one big cautionary note in relying on the rankings and ratings generated by both the Globe and Mail and Surviscor, is that these ratings reflect the perspectives of the respective entities that developed the rankings. The rankings do not, unfortunately, factor in customer satisfaction or sentiment, which is a highly prized but very difficult factor to get reliable data on.
Nonetheless, much like the Olympics, the competition between Canadian online brokerages is so intense that the difference between a podium finish and being out of the spotlight is small. The gap between the best online brokerage and the rest is closing. Canadian online brokerages who are agile enough to continuously improve, especially in what kind of features they can bring to market, should continue to do well in the rankings. If there’s one important lesson from the world of sport that holds true for Canadian online brokerages, however, it’s to try and eliminate unforced errors, especially once RRSP season is done. The data now exists in an easier format for Canadian online investors to compare online brokerages, but whether or not they’re driven to look it up after RRSP season is a function of how well each online brokerage can perform.
Into the Close
It’s great “two” be back in the thick of things just in time for sprint to the RRSP finish line at the end of February.
There’s lots that’s happened since our pause so we’re looking forward to digging out from the vacation responder emails, as well as reviewing the latest developments taking place with Canadian self-directed investors and online brokerages.
Of course, anyone who’s also had a newborn knows that sleep is a precious commodity, as is family time. So we thank you for your patience as we get back online and promise that there are even more dad joke puns about to make their way into the Roundup from here on out.
Fingers crossed, it’s going to be a nail-biter of a week in more ways than one.
For most Canadian DIY investors, however, retiring in your early forties after a storied career in the NFL isn’t the typical route to old age. Instead, we’re tasked with figuring out how to choose an online brokerage so that we can manage our own wealth online.
Fortunately, competition among Canadian online brokerages in 2022 is higher than it’s ever been. For self-directed investors, this means more value, either with better pricing or more features (or both!) starting to show up.
One of the interesting places we’ve seen this competition turn into tangible benefits for self-directed investors has been with online brokerage deals and promotions. While there are no new deals to report at the beginning of February per se, there was plenty of action in January to set up a really exciting sprint to the finish of RRSP season at the end of the month.
Case in point: Qtrade’s latest promotion. While it is not unheard of, an online broker adjusting the reward of an already live promotion is exceptionally rare. Qtrade’s decision to revise their offer so substantially (in some cases more than double the previous cash back amounts) and to apply these changes retroactively to anyone who had signed up under the original terms is likely unprecedented.
To see just how drastic the changes are, it is worth putting these changes into perspective with some tables.
The upper table shows the cash back promotions from Canadian online brokerages heading into late January (just prior to the revised Qtrade promotion). In that table it is clear that Qtrade Direct Investing did not stand out with a leading offer across any of the deposit tiers attached to current brokerage promotions.
In contrast, the revised offer table shows that Qtrade Direct Investing is now tied for the top cash back promotion amount at nearly all of the deposit tiers (except for deposits of $25,000 to $49,999), and has the distinct lead of offering $5,000 cash back for deposits of $2M+, an amount more than double any other cash back offer and certainly worthy of the headlines it is sure to grab.
In short, Qtrade Direct Investing’s latest cash back promotion amounts are historically higher than they’ve ever been for Qtrade (at least in recent memory) and they are now competing shoulder to shoulder with the biggest online brokerages in the market.
To help put things into further perspective for readers, looking at the year-over-year change between deals launched in 2020 compared to those launched in 2021 (including the revised Qtrade deal here in 2021 for convenience), it’s clear that minimum deposit requirements have cratered (including at Qtrade with this latest revision) and minimum bonus amounts have surged at three of the five firms compared here, with Scotia iTRADE increasing their bonus amount fourfold at their minimum deposit tier.
The takeaway for Canadian self-directed investors is that this month (February) offers one of the best opportunities to land a significant cash back promotion from an online brokerage for opening a new online trading account.
With zero-commission trading now more likely to become the new normal in the near future (thanks to TD Direct Investing rolling out a zero-commission trading option in January), this might be one of the last times Canadian online brokerages turn to sizeable cash back promotions to win new customers.
The Qtrade Direct Investing promotion revision technically falls into this category because it offers up new cash back bonus amounts. (Kudos to Qtrade for applying the bonus retroactively to people who signed up for the offer already.)
Deposit requirements for the Qtrade promotion now range from a low of $5,000 (for which there is now a $100 bonus) to $2M+ (which nets a $5,000 bonus). Timing of the promotion is still the same, with expiry dates and holding periods remaining identical to the terms when the deal was first launched. Click for more information on the latest Qtrade promo.