There’s no doubt about it, summer is here. While the prescription for most folks is to take it easy, online brokerages have been doing anything but resting up so far this year.
In this month-end edition of the Roundup, we focus on the launch of a new trading dashboard by a big bank-owned online brokerage who is hoping to make strides with the active DIY investing crowd. More new features abound as we highlight announcements at popular online brokerages and some associated chatter from the DIY investor forums.
RBC Direct Investing Launches New Trading Tools
As any seasoned online investor knows, being adaptable and capable of change is a prerequisite to finding new and interesting opportunities to invest in. That said, when it comes to the platform and interface used to pursue those opportunities, changing things around can often be a stressful affair – especially for those individuals who like to have things “just so” or who are familiar enough with the way things have been for some time. Inertia, it seems, is the enemy of momentum.
This past week, one of Canada’s largest and most recognizable bank-owned online brokerages, RBC Direct Investing, officially announced the launch of yet another new feature this year: a new trading dashboard.
At its core, the trading dashboard is intended to provided active investors with a nimble environment in which to manage and execute trades of stocks and ETFs. Actively trading stocks is more time and opportunity-sensitive than passively trading stocks, and as a result, the features required to make and act upon decisions quickly need to be able to support that.
As popular as RBC Direct Investing may be with investors, one of the areas in which several of their bank-owned peers, such as TD Direct Investing and Scotia iTRADE, have managed to outcompete RBC Direct Investing has been in the active trader segment, specifically because of the trading platform experience.
The existing (and now “Old”) RBC Direct Investing trading dashboard provided some of the essential features of a trading-focused user experience, such as the ability to efficiently place trades, and monitor watchlists and level 2 activities.
In the newest incarnation of the active trading experience, RBC Direct Investing has maintained the purpose of the trading dashboard, which is to provide a streamlined trading experience, but has completely redesigned how users can manage information related to tracking and trading stocks and ETFs.
Of the many changes to the user experience that the new trading dashboard introduced, one of the most striking is that the new dashboard enables significant customization of how information gets organized.
By using floating windows, known as widgets, inside of a “workspace,” a user can organize account information, watchlists, charts, quotes, and more in virtually any layout that best suits them. And with five workspaces that can be easily navigated through, there is enough opportunity to track a respectable amount of information quickly and efficiently.
Another huge improvement to the trading experience is the charting on the new trading dashboard. Although it takes a little getting used to, once over the learning curve, there are multiple chart indicators that users can do research with. And, for active traders, it is nice to be able to look for different kinds of technical setups as well as to create notes on the charts themselves. Being able to annotate things like entry and exit points along with reasons on the chart is a big time-saver.
Ironically, one of the biggest strengths of the new approach to design and rendering of trading-oriented information is that with so many moving parts, finding where things are is going to take some getting used to. While watchlists are at the core of the transition from the old system to the new, not all the information about a security that was available in the old version is available in the new (yet).
On that last point, it is clear that RBC Direct Investing is actively collecting feedback on their new trading platform experience, and will (likely) be continuously working to enhance the offering for DIY investors, so this new platform will still evolve from its current state. The nice thing about the configuration of the design is that it is very modular, so changes and improvements can be made without negatively impacting all clients and new enhancements.
In turning to design and modern interfaces, the new dashboard feels more at home in 2021 than does its predecessor. That said, the new interface also has new jargon for DIY investors to have to learn in order to navigate this platform. For example, labels such as “Hub” and “X-ray” do not clearly convey what those things do, which then requires users to learn and remember this information. If there’s an area in which the dashboard will have to be mindful, it’s focusing on being intuitive while at the same time providing something unique to the brand.
Recognizing that active investors and traders have different, and likely more complex, needs and requirements than novice investors, the new trading dashboard is a step in the right direction for RBC to provide these valuable segments of users with enhanced functionality. By enabling a highly customizable interface, the platform experience can be configured by the user and thus change along with their changing needs and preferences. If there’s one thing that can be counted on, it’s that the world of DIY investing is going to continue to change. The challenge for all Canadian online brokerages is whether or not they can keep up.
More Online Brokerage Features Keep Coming
RBC Direct Investing wasn’t the only Canadian online broker making big feature announcements this past week. Three other online brokerages had new features to showcase, which is a clear signal that the self-directed investing space is going to be incredibly busy heading into the end of the year.
All of the new features will undoubtedly need to be marketed as well, so it seems like even though new items are going live in the summer, they’re going to be around and in the spotlight for quite some time.
Here’s a run-down of some important new developments:
Interactive Brokers Launches Credit Card in Canada
Convenience has always been one area that bank-owned online brokerages in Canada have enjoyed a clear advantage over independent brokerages. Whether it’s Canada Post, tech giants like Apple, or retailers like Walmart, the walls around the banking business are being pursued on a number of fronts. This past week, the credit card landscape in Canada just got a little more crowded, and the online brokerage space a whole lot more interesting, as Interactive Brokers Canada announced the arrival of the prepaid Mastercard for Canadians.
This credit card has been available to Interactive Brokers clients in the US for several years, and offers incredibly low interest rates. The fact that it is now being rolled out into Canada is a signal that this program can be delivered cost effectively and with a high degree of confidence. In short, Interactive Brokers has likely figured out how to position this service to its clients – many of whom are active traders – as a way to deepen the relationship with these clients.
While the headline and interest rate will undoubtedly get the attention of financially savvy investors, the details for this card will certainly be a bit of a barrier to adoption. In particular, there are restrictions on the number of point of sale transactions that can be done in a day, as well as limits on withdrawals and purchase amounts.
That limitation in mind, combined with the ultra-low interest rate, suggests that this product offering may represent an alternative to having to tap into a HELOC. With an advertised interest rate of 1.63% (at the time of publication), it will almost certainly raise some eyebrows. In several reddit forums, it has already generated an interesting discussion regarding how and when this kind of card could be useful.
While research may not seem like the most popular user feature, in reality it makes a big difference to finding or validating a trading decision. Historically, Questrade has lagged behind its peers in the research component, however, this latest foray into the research pool will be interesting to watch.
From the Forums
Who Let the Doge Out?
This past week offered Canadian online investors a boost as Wealthsimple added 14 new coins to its suite of cryptocurrencies offered to trade. With so many coins available to be traded now, users on this reddit post weighed in on the expansion of crypto trading at Wealthsimple, and shared what coins they’d love to see become available.
Mass Market
With a clear interest in increasing the accessibility of investing, is it any wonder that marketing would need to be involved? Cue Wealthsimple Trade, who was called out in a (mostly respectful) exchange on reddit. At issue is the saturation of advertising for Wealthsimple Trade and how clients and observers are “not over it.”
Into the Close
Canada Day is just around the corner, and the week ahead will be shorter because of the statutory holiday. Similarly, the US statutory holiday the following week will also slow things down on the trading front for Canadian DIY investors. Wherever you choose to spend this year’s holidays, we hope it is safe and restful.
There’s a lot that goes into the production of a Weekly Roundup that many readers don’t see. Looking back on the week that was is as much a habit as knowing which letters to capitalize in an online brokerage’s name. Despite the hundreds of times having done this, occasionally something happens in a week that forces a pause from business as usual.
This past week there was a terrible tragedy that took place in London, Ontario. Four members of a family were murdered simply for looking and being different than what someone decided was appropriately Canadian. They were murdered because they were Muslim.
Like many Canadians, it is hard to find words to capture how thoroughly awful and traumatic this event was. And so, we are left with yet another heavy but necessary exercise: to not turn away from the terrible news but this time to watch and engage.
The news cycle will move on before the people will. A young boy will be left to figure out the rest of his life without his parents and sister beside him. Muslims and other religious and ethnic communities across Canada will forever be slightly less trusting that everything will be OK.
Before getting back to business as usual, I wanted to call attention to Islamophobia and the responsibility all of us bear to call out prejudice when and where we see it.
All of us have a part to play in looking out for each other.
This mural was made by 15 year old Yumna Afzaal. Her star was stolen by hate but the spirit of her inspiring words cannot be denied. It should be shared & never forgotten. This is what every Canadian should aspire to #OurLondonFamilypic.twitter.com/aAYF9bKpw0
A Tale of Two Tables: 2021 MoneySense Online Brokerage Rankings Released
It’s hard to believe, but the DIY investor datapalooza (or datastravaganza?) that is characterizing 2021 continues to chug along well into June.
Earlier this month, a popular Canadian investment publication, MoneySense magazine, published their 2021 Canadian online brokerage rankings, essentially capping off the last of the major discount broker rankings for the summer.
Even though the fall feels far away, online brokerages are undoubtedly at work planning for their ramp up at the end of the year. These latest Canadian online brokerage rankings will ultimately prove to be a big part of what will help online investors shape their perceptions and decisions around which online broker they choose to go with, and ultimately impact how online brokerages market and talk about themselves for the rest of the year.
Why is this Online Brokerage Ranking Important?
Now in its ninth year, the MoneySense rankings have become a go-to resource for many DIY investors curious about the online brokerage marketplace in Canada. As the landscape evolves for online brokerages and self-directed investing, so too do these rankings.
Helping MoneySense stay on top of those changes is Surviscor, a financial services research firm that evaluates Canadian online brokerages across a number of different parameters.
Frequent readers of the Weekly Roundup will already be familiar with the research and in particular, the online brokerage rankings, produced by Surviscor. For a timely throwback, be sure to check out our Look Back/Look Ahead series featuring Glenn LaCoste, President and CEO of Surviscor, and the author of this year’s MoneySense online brokerage rankings.
With yet another online brokerage ranking appearing this year, it’s a lot for online investors to digest. The MoneySense rankings in particular offer an interesting way to see the importance of defining what’s “best” when it comes to online brokerages. Also, in digging through the data, we uncovered an interesting relationship between a major driver of investor decision making, cost of services, and the performance on measures of investor experience – like service.
There’s lots to dig into, so grab some caffeine and get ready to scroll.
Methodology
Online brokerage rankings and evaluations help to make sense of the often-confusing question: “which online brokerage is best?”
With several Canadian online brokerage rankings available for online investors to consult, it is important to come back to a familiar concept – that each online brokerage ranking measures the idea of what’s best in a different way.
The MoneySense online brokerage rankings are often cited as a resource to evaluate almost all of Canada’s online brokerages. Like most of the other comprehensive rankings, information is published annually, and as a result, the data takes a snapshot of the past year or so in the world of DIY investing at Canadian online brokerages.
It is important to note that the data for the MoneySense online brokerage rankings comes from financial services research firm Surviscor. Specifically, according to the methodology, the MoneySense rankings are based on a combination of the following Surviscor reviews:
1. Online experience
2. Mobile experience
3. Cost of services experience
4. Service experiences
Points were assigned to each online brokerage according to a points-based system in which each brokerage received a score based on its ranking within the seven sections of the review:
1st = 5 points
2nd = 4 points
3rd = 3 points
4th = 2 points
5th = 1 point
The overall score was the sum of the awarded sections and reported as points.
In addition to reporting on the points earned by each brokerage as part of this review, the MoneySense rankings also reported the “Best online brokers” by category. The breakdown is as follows:
Best online broker for fees
Best online broker for customer service
Best online broker for ETF investing
Best online broker for stock investing
Best online broker for financial literacy
Best online broker for market data
Best online broker for customer onboarding
Best online broker for mobile experience
Within each of these categories, the top two firms were reported.
Strengths & Limitations
One of the strengths of the review is that there is lots of data reported for investors to consider, and it has been published in a way that identifies the top two firms in each of the stated categories. This saves a lot of time for investors or readers who simply want or need a quick answer from a reputable source.
A big plus this year is that there is a companion publication on the Surviscor blog which dives into detail on the scores and provides more context on the process.
In terms of limitations, presenting this volume of information can be a challenge. For example, the methodology stated:
“Each firm was assigned a score based on its ranking within the seven sections of review (5 points for first; 4 for second; 3 for third; 2 for fourth; and 1 for fifth), and the overall score was the sum of the awarded sections.”
Given that there are eight reported categories (noted above), it was not immediately clear which seven sections of the review were being referred to, and as a result, validating the math or seeing how scores varied across sections would have added important context to rankings.
For example, one of the immediate questions that jumps to mind with the points system is what the maximum possible score would be? Without that information, it is hard for the reader to get a sense of just how good a particular brokerage is. And, when the scores are close, or tied, the value of points and how they get calculated becomes even more important to contextualize results.
Results
The results for the 2021 MoneySense online brokerage rankings are shown in the following table.
Questrade took the top spot in this year’s rankings with a total of 36 points, followed closely by National Bank Direct Brokerage (31 points), and TD Direct Investing in third place (with 25 points). Again, without a maximum score, it is difficult to know exactly how well any one brokerage could have done.
The methodology states that there are seven “sections” and a five-point maximum which would imply a maximum score of 35. However, Questrade has clearly exceeded that score, hence some confusion.
Data outside of the top five brokerages was not published in the MoneySense rankings, however, it was available on the Surviscor site, which helped identify additional context on how the entire field of online brokerages performed this year.
One of the first noteworthy items is just how sharp the drop off is from fourth to fifth place in these rankings. Qtrade Direct Investing placed fourth with 22 points. However, BMO InvestorLine, with just nine points, managed to make it into the top five.
Even though on a relative basis, a top five finish may not sound so bad, in the case of this year’s ranking, the distance between fourth and fifth is materially different.
Another interesting observation about the data is the number of firms who tied for eighth place. CG Direct, Desjardins Online Brokerage, Virtual Brokers, and Wealthsimple Trade are very, very different firms, and yet each tied for eighth place with four points.
Somewhat stunning are the positions of CIBC Investor’s Edge and HSBC InvestDirect, who placed 12th and 13th respectively. In the case of the former, being a “Big Five” bank-owned brokerage should in theory enable it to have the resources to score better, but with a score of two points, it implies that Investor’s Edge was rarely a top five brokerage in any of the evaluated categories. Similarly, HSBC InvestDirect scored one point, and it too barely placed in a top five finish in any of the categories measured.
Surviscor’s “behind the scenes” look at the MoneySense rankings also provided some additional context and important takeaways when it came to this year’s analysis. The following five statements were made in reference to the data and the items that online investors (and online brokerages) should pay attention to.
Beware the marketing when it comes to fees
Firms never get a second chance to make a first impression
Financial literacy is weak
Mobile experience is still not where it needs to be
$0 commission is not always worth it
With so much data to crunch, it can be a challenge for DIY investors and industry analysts alike to form a “big picture” of what’s going on in the online brokerage space.
Surviscor’s multiple studies to measure online brokerages got us curious, so we compiled the ranking data from each of the four online brokerage analyses cited in the MoneySense rankings, and crunched the numbers to see what the correlation would be between the combined rankings of each evaluation and the MoneySense ranking data.
Methodology, Part Deux
First a(nother) note on methodology. The rankings in each of the four different Surviscor evaluations used in the MoneySense ranking were averaged out and reported along with a standard deviation. The computed rank is one that we generated based on the average rank across each of the evaluations.
To try and get as close to an apples-to-apples comparison of how different online brokerages ranked against each other in each of the four evaluations, it was necessary to make some minor adjustments to the data.
In the Service Experiences, Interactive Brokers was actually evaluated, so for the sake of consistency across comparisons, they were excluded from the data and the ranks of other brokerages adjusted upwards by one. Wealthsimple Trade was assigned the lowest value for not having been able to be measured. For the actual service experience scores, check the link here.
Adjustments were also made in the Online Experience and Mobile Experience rankings. Laurentian Bank Discount Brokerage and CG Direct were assigned the lowest rank since they did not offer anything that could be evaluated using those tools.
Results
One of the first things to stand out is that the top four brokerages in the 2021 MoneySense online brokerage rankings are the same four online brokerages when computing scores across the four Surviscor evaluations, however, the order in which they appear is different.
In the computed rank, the measure that we calculated, Qtrade Direct Investing came in first, followed by National Bank Direct Brokerage, Questrade, and TD Direct Investing, respectively. What also stood out in the top three is that the average rank between Qtrade Direct Investing, National Bank Direct Brokerage, and Questrade is very close, ranging between 4.0 and 4.8. Having the standard deviation handy (shout out to the stats profs who drove home the point about standard deviations) as a measure of consistency, however, adds a bit more nuance to the top three online brokerages.
Specifically, Qtrade Direct Investing has a relatively low standard deviation (2.3) indicating their ranking is relatively consistent from one evaluation to the next. By comparison, Questrade has the highest standard deviation of the group (5.7), which points to the remarkably poor ranking they received in the Cost of Services evaluation (they ranked 13th). Having the context of all the data helps to illustrate where exactly the top three online brokerages excel relative to each other, and to see how consistently (or inconsistently) online brokerages are scoring.
Consistency cuts both ways, however.
RBC Direct Investing had the lowest standard deviation (1.2) of all of the rankings, implying a fairly consistent score across different evaluation studies. Their average rank was sixth, and the computed rank put them in fifth place overall.
By comparison, Virtual Brokers also had a very low standard deviation score (relatively speaking) at 2.1, but their average rank of 9.8 landed them with a computed rank of 13th overall. This implies that Virtual Brokers has consistently performed poorly on the four Surviscor evaluations for 2021.
It was also intriguing to note that after about eighth place in the MoneySense ranking, the divergence between these scores and the computed rank became more pronounced. In particular, CIBC Investor’s Edge ranked 12th in the MoneySense ranking but ninth in the computed ranking, only slightly behind Scotia iTRADE and Desjardins Online Brokerage.
Takeaways
Being able to step back and take a big picture view of the data provides a unique window into how the different evaluations generated by Surviscor come together, and how they compare to the MoneySense rankings.
When placed side by side, the combined Surviscor studies used in the MoneySense ranking show that firms that are strong on experiential factors, such as online, mobile, and service, tended to do better overall in the rankings.
Interestingly, with the exception of National Bank Direct Brokerage, firms that tended to do well on pricing had a negative correlation to performance on the MoneySense or combined Surviscor rankings. This points out that perhaps there is an inverse relationship between the cost of services and the experience of online investing.
Thus, having the additional data presented in a big picture format does help illustrate what exactly online investors would have to trade off. For example, in choosing between Questrade and National Bank Direct Brokerage, investors can see that the tradeoff might be one of “cost of services” versus “online experience.”
Clearly there is lots of data to explore, which can be both a pro and a con for online investors looking for a quick answer to “which online brokerage is best?”
The reality is that rankings help to compress a lot of the analysis into an easy to digest number. However, as illustrated above, how one defines “best” – even when using the same underlying data – can impact how specific brokerages are perceived and reported on by media, online brokerages themselves, and other DIY investors.
What is evident in looking at the big picture of this data is that the field of Canadian online brokerages is crowded, and with even more new entrants poised to add to the numbers, keeping on top of the evolving space is an ongoing challenge. For those that want to avoid the spreadsheets and comparisons, rankings offer a quick shortcut. But like everything else when it comes to investing online, it pays to do your homework.
Into the Close
That’s a wrap on this week’s Roundup. It’s been a difficult week but here’s hoping we can look for, find, and create the good in the week ahead.
It’s Memorial Day weekend in the US, which means that markets there are closed. Here in Canada, however, despite it being a short week last week, the volume of newsworthy developments was quite hefty. There’s lots to catch up on.
In this edition of the Roundup, we look at a big Canadian online brokerage making a splash by jumping into commission-free ETFs. From there, we continue to plumb the depths of more DIY investor data with an important online brokerage rankings release. As always, we cap things off with a snapshot of investor chatter from the DIY investing forums.
Every now and then a tipping point development takes place in the Canadian online brokerage space. This past week, we might have just witnessed another important milestone in the price reduction for DIY investors.
This is clearly a big deal given the prominence of BMO InvestorLine in the Canadian online brokerage landscape. And, while they are not the biggest or most popular online brokerage, they do command a respectable amount of attention in online brokerage rankings, and they are part of the “Big Five” bank-owned online brokerages.
Commission-free ETFs at Canadian online brokerages are neither novel nor are they new to Big Five banks either.
Scotia iTRADE, for example, has a list of 49 (as of the date of publication). However, they launched this feature back in 2011 – almost ten years ago – and were followed by Qtrade (with a list of 100 commission-free ETFs) and Virtual Brokers in 2012.
National Bank Direct Brokerage also offers commission-free ETF buying and selling on all ETFs (Canadian and US) so long as minimum purchase amounts are met (minimum 100 units). And, for good measure, Questrade and Virtual Brokers offer commission-free buying of ETFs. Not to mention Wealthsimple Trade, where all Canadian ETFs can be traded commission-free.
Thus, BMO InvestorLine is not the first to jump into the pool by any means, but their offer is already making a splash among DIY investors, who are reacting with the same enthusiasm they did almost a decade ago when these free offerings first hit the market. The difference between now and ten years ago, however, is that commission pricing and consumer preferences and expectations have changed dramatically. Online brokerages in 2021 have to work a lot harder to impress investors today than they did in 2011.
What is interesting about the latest launch by BMO InvestorLine are the “strings” attached to trading these commission-free ETFs. While the list of eligible ETFs is respectable at 80, there is a restriction that investors must hold the ETF for at least one business day from the date of purchase, which is bound to create some friction with some active users. Upon deeper reflection, however, it seems like the math still works out in BMO’s favour.
By implementing the “speed bump” on the timing between purchase and selling, the day traders are going to be excluded (for now). This implies the feature is targeting “investors” (or swing traders), and will almost certainly challenge National Bank Direct Brokerage’s approach of the required minimum buy
Directly challenging Qtrade Direct Investing and Scotia iTRADE will come down to other features and conveniences that BMO InvestorLine can offer clients. As such, it seems like a faceoff between Scotia iTRADE and BMO InvestorLine – but in a great move at the puck drop, BMO InvestorLine has posted a public statement about wait times on its website. This is a direct shot at Scotia iTRADE, which has suffered extended wait times on its phone lines for years, reaching almost unimaginable durations during the past year.
BMO InvestorLine is a large enough competitor to the steady state operations of both TD Direct Investing and RBC Direct Investing, that this latest move to include commission-free ETFs will not go unnoticed. It will also not go unnoticed by the Wealthsimple Trade crowd who find the lack of additional features or slow money transfer annoying at times.
Interestingly, at the time of publication, we had yet to see a big, splashy announcement, but that is almost certainly forthcoming. What BMO InvestorLine’s latest foray likely signals, however, is that one of the standard features an online brokerage needs to come to the table with in 2021 and beyond is ultra-low cost ETF trading.
While wishing for industry-wide dominos to fall might have been premature in 2011, even with a prominent bank-owned online broker getting into the mix, the famous last words of “it’s this different this time” ring true.
Most of the Canadian online brokerage field has managed to do just fine up until now without having to concede ground on commission-free ETFs, let alone commission-free trading. That said, treading water when it comes to pricing or innovation in features no longer feels like an option when the investor tide has clearly turned towards lower-priced alternatives.
Latest Canadian Online Rankings Point to Underwhelming Experiences for DIY Investors
If April showers bring May flowers, it seems like those showers also have brought with them a deluge of data on the DIY investing space in Canada, the US, and even around the world.
Now in its 13th year, this study measures “investor satisfaction” among Canadian DIY investors who are clients at a number of popular online brokerages. This year, as in the past few years, eight of 14 or so Canadian online brokerages were included in the analysis, providing a reasonably good approximation of the state of investor satisfaction among Canadian investors.
Of course, regular readers of the Roundup know what’s about to come next when talking about another data report on DIY investors or online investing: we have to dive into the methodology to understand what is being measured and better contextualize the findings.
Like many other online brokerage rankings we’ve covered recently, this year’s J.D. Power investor satisfaction study contains a rich source of insight about DIY investors. And, while the reporting format is fairly standard to its historical structure, what caught our eye this year were the important changes that were made to how investor satisfaction was defined.
Methodology and definition changes aside, it was fascinating to unpack the data on this year’s win, but also to contextualize this year’s results against the historical data from this survey. This has helped to really clarify who has been working hard to consistently improve, who has struggled in 2020/2021, and what the DIY investor can expect when it comes to online brokerages in Canada (hint: it’s not great).
What are the rankings about – what do they measure?
Before diving into the results, it’s extra important to spend some time reviewing the methodology and what’s changed about what this study measured in its latest edition.
According to the press release announcing the findings, there were 2,011 Canadian investors surveyed from December 2020 to February 2021 about their perspectives on various components of the online investing experience.
As mentioned in previous coverage of this study, the definition of “investor satisfaction” is made up of multiple components, and this year the factors that comprise that definition changed. The table below shows the seven components that “investor satisfaction” was measured against in 2020 and in 2021.
Change in Definition of Investor Satisfaction: 2020 vs 2021
2020
2021
Firm interaction (1)
Trust (1)
Account information (2)
Digital channels (2)
Commissions and fees (3)
Ability to manage wealth how & when I want (3)
Product and service offerings (4)
Products and services (4)
Information resources (5)
Value for fees (5)
Investment performance (6)
People (6)
Problem resolution (7)
Problem resolution (7)
While there are a couple of components, such as products and services and problem resolution, that appear in the same level of priority in both frameworks, the rest of the changes point to a significant difference in the drivers of investor satisfaction.
At the top of the list for 2021, “Trust” is now the most important driver, followed by “Digital channels” and the “Ability to manage wealth how & where I want.” In 2021, pricing – as measured in “Value for fees” – falls to fifth from third place.
One of the important limitations of the published rankings is that they did not provide detailed definitions of what these terms refer to specifically. And, with a term like “trust” there could be many different interpretations of what that refers to. Nonetheless, there are some reasonable assumptions that can be made around most of what these categories refer to. The most important point to take note of is that the construct of “investor satisfaction” – or even which online brokerage is “best” – is highly dependent on how that is being measured.
DIY investors place different weights on the importance of each of these factors, so although this survey provides a systematic approach to comparing investor attitudes and beliefs about the online brokerage experience, individual investors are likely to have differing opinions on how well or poorly these results match their own experiences.
What are the findings from this year’s results?
With some important qualifiers out of the way, the results from this year’s study paint a portrait of an industry that has struggled to keep pace with the level of demand from DIY investors. Whether it was on the customer service front, where wait times and getting through to a human was nearly Sisyphean, or it was on platform stability on the most volatile of trading days (or some not-so-volatile days either), how online brokerages weathered the storm became evident through the data gathered in this study.
Perhaps the most telling finding in this regard is that 24% of investors reported having at least one problem with their firm in the past 12 months, up from 14% in 2020 and more than double the rate in the US (11%). For active investors, this is a big problem when it comes to assessments around reliability. For less active investors, however, if the most “exciting” days to be in the market are fraught with outages, delays, or interruptions to service, there is almost no second chance to make a first impression.
And, according to additional findings in the data, those hiccups matter. 20% of investors who experienced a problem stated they are considering switching, which is more than three times the rate of those without issues who would consider switching online brokerages.
According to Michael Foy, Senior Director and Head of Wealth Intelligence at J.D. Power:
“Especially for newer clients, those who have not yet developed strong loyalty with these firms, who are more likely to leave if they have a bad experience. Investors today have more choices and firms need to raise the bar on the experience they deliver.”
Of course, beyond the contextual information, the focal point of the rankings is the list of how each online brokerage scored.
National Bank Direct Brokerage
654
Questrade
645
RBC Direct Investing
615
BMO InvestorLine
607
Desjardins Online Brokerage
599
TD Direct Investing
591
CIBC Investor’s Edge
585
Scotia iTRADE
576
The table above shows the numerical scores achieved by Canadian online brokerages that were reported on for this study. The scoring for the online brokerage ranking by J.D. Power is out of 1,000, so it was interesting to note that this year the scores were lower on average than they have been historically (more on that in a moment).
The average score across the eight online brokerages that were reported on was 602. On an absolute basis, it is tricky to compare year over year results now that the evaluation criteria has dramatically shifted. However, on a relative basis, it is possible to derive additional insight.
One of the first things that is important to point out is the spread between first and last place. In this case, the distance between the top and bottom of the ranking is 78 points. By comparison, last year’s ranking saw a difference of only 33 points between top and bottom. It is therefore fair to say that volatility in this year’s rankings reflect some meaningful differences in the way online brokerage operations are impacting investor satisfaction.
The difference between first place ranked National Bank Direct Brokerage and second place Questrade was only nine points, but the difference between second and third place (RBC Direct Investing) was a whopping 30 points. What this implies is the top two firms substantially outperformed the remainder of their peers on the measures contained in this ranking.
Curiously, the difference between placements from third place onwards is a fairly consistent six to nine point drop. This linear decrease is probably an artifact of certain kinds of measures, but it implies that the bottom six online brokers could make significant strides on this index with a minimal amount of effort invested in customer satisfaction.
What is not a coincidence, however, is that five of the bottom six online brokerages in this ranking are the Big Five bank-owned Canadian online brokerages. The differentiating factors between these brokerages are minimal, so it stands to reason that investor satisfaction levels with these bank-owned online brokerages is probably pretty close too.
In contrast, the data from the latest online brokerage survey imply that the firms at the top have found the right mix of service and pricing with DIY investors in 2020, which has created a big gap between these firms and the rest.
National Bank Direct Brokerage and Questrade were able to do something very different and appealing for their clients, compared to the rest of the industry in 2020.
How do this year’s results stack up over time?
It’s at this point that historical data is incredibly helpful to provide additional context around online brokerage performance on the J.D. Power Investor Satisfaction rankings.
Analyzing the results from 2017 to 2021, one of the first things that immediately jumps out is that the average investor satisfaction scores with Canadian online brokerages, regardless of how they’re measured, have been decreasing.
Scores from J.D. Power Canadian Self-Directed Investor Study 2017 to 2021 (heatmaps applied to each year).
The stretch from 2020 to 2021 is an anomalous one in terms of customer composition for online brokerages because so many new investors have joined the client pool.
As the J.D. Power study pointed out, many of these new clients haven’t had the benefit of seeing what the experience was prior to this year. With the number of service and performance issues many online brokerages suffered from, the risk of new clients who joined an online brokerage leaving shortly after joining is likely higher than it’s been in the past.
For DIY investors who have been around since 2016 (which is what the 2017 data would have captured) or earlier, J.D. Power’s satisfaction scores imply being a DIY investor has probably felt like an investment with diminishing returns at most of the brokerages analyzed. Even if pricing has become more competitive, the value proposition has not improved overall, at least in the firms whose data was published as part of this ranking.
Since not all online brokerages were reported on, it is hard to say what the DIY investor experience has been like at Qtrade Direct Investing or Interactive Brokers or even Wealthsimple Trade, names that are often associated with significant enthusiasm in either rankings or DIY investor community discussions.
Another remarkably consistent pattern that stands out with these rankings is not so much who’s at the top, but rather who has remained at or near the bottom.
In three of the past four years, Scotia iTRADE has ranked as the online brokerage with the least satisfied clients, with TD Direct Investing not too far behind. Historical data also shows that CIBC Investor’s Edge has gone from being among the top online brokerages as recently as 2019 to second last in 2021.
Looking back over the past five years, Questrade stands out as an online brokerage that has continuously strengthened its satisfaction scores, and although it dropped from top spot last year to second place this year, it continues to move in a positive direction for DIY investors, even under the new evaluation criteria. On a relative basis, RBC Direct Investing has gone from a consistently average score to one that is better than average.
Historical investor satisfaction data also helps to quickly spot online brokerages who had an especially rough year in terms of maintaining investor satisfaction.
Desjardins Online Brokerage, for example, went from a market leading (or high scoring) position from 2017 through 2020 to being below average in 2021. Another unusual score was BMO InvestorLine’s. Like Desjardins, BMO InvestorLine consistently placed at or near the top from 2017 through 2020, however for the 2021 results, BMO InvestorLine just barely beat the average.
As mentioned above, the changes in the methodology used to define investor satisfaction make comparing absolute scores from one year to the next hard to do, but the relative position of each of these Canadian online brokerages to one another makes it clear who the leaders and laggards are. Perhaps most compelling is that the bottom of the pool did not really change in 2020 and 2021 despite the shift in how things are being measured.
Takeaways
There are a number of very interesting takeaways from the latest online brokerage rankings by J.D. Power.
As other data points have indicated, most Canadian online brokerages were not ready for the crush of new business in the form of DIY investors wanting to sign up for new accounts, or for the flood of investor trading volume that came with it. What the J.D. Power satisfaction study helped put into sharper focus was the impact to firms via the voice of their customers.
The new methodology by the investor satisfaction study puts Trust at the top of the criteria that they now evaluate online brokerages with. In a world where pricing among online brokerages is increasingly under pressure, DIY investors are still going to expect that an online brokerage platform be reliable, and when pricing is high, so too are expectations around the ability to perform when needed.
National Bank Direct Brokerage appears to have figured out some key ingredients. Low commissions, and entirely free commission buying and selling are important on the pricing front, and whatever they happen to be doing on the service front is working as well.
The latest evaluation by Surviscor highlights the pricing advantage that National Bank Direct Brokerage offers relative to other brokerages, and National Bank Direct Brokerage is starting to gain traction in discussions on social media channels. With this additional accolade, the “trust” profile and the interest in National Bank Direct Brokerage is sure to grow.
According to the J.D. Power Investor Satisfaction Study, Canadian online investing satisfaction scores are nothing to write home about. The troubling trend the historical data has uncovered is that there is a palpable gap in innovation and enthusiasm to do better for clients. Compared to the US, most Canadian online brokerages are trailing in areas that are critical to building loyalty and client delight.
The opportunity to any Canadian online brokerage who reviews this data is that an extraordinary service or innovative experience can earn and win a lot of praise. As the saying goes, there is far less traffic on the extra mile, so firms doing more in either service or innovation are going to stand out (in a good way).
From the Forums
Riding the Commission-Free Waive
It’s hard to keep a deal this good a secret for long. Eagle-eyed DIY investors spotted a new commission-free ETF feature at BMO InvestorLine before any official announcement. Here are a few links of interest worth browsing:
Is the grass (and account statement) really greener on the other side of the $10 commission per trade? One forum user sparked a lively discussion of DIY investors on the topic of switching away from paying higher fees for trading online. Read more about what users had to say here.
Into the Close
With US markets closed, there’s only one story that matters to many Canadian DIY investors – will the Leafs beat themselves? Ironically the last time the Toronto Maple Leafs were in the Stanley Cup playoffs was the same year Friends signed off, which was 2004. In 2021, it’s going to be debatable who had the bigger comeback.
With the weather starting to warm up, flowers aren’t the only thing springing up at every turn. This month, it seems like DIY investing data continues to bloom, offering some very colourful perspectives on the current online trading landscape.
In this edition of the Roundup, we dig into yet another treasure trove of online brokerage and DIY investor data and find out why measuring the similarities between online brokers is challenging. Also, we’ve got reactions by DIY investors to interesting survey results and more in the forum chatter.
Another week, another big online investing data report to talk about.
This past week, fees at Canadian online brokerages were under the microscope, as Canadian financial services research firm Surviscor published a significant analysis of the fee structures at 15 Canadian online brokers and found some surprising – and at times controversial – results.
If there’s been any recurring theme to the coverage of the reports we’ve analyzed over the past few weeks, it’s that context matters. In particular, while it is tempting to focus on the headline results, it is often crucial to understand the methodology underpinning a study to properly understand the outcomes.
In the case of this latest analysis by Surviscor, this is especially true, because question at the heart of this study is “Who is Canada’s lowest cost online brokerage?” As any long-time reader of the Weekly Roundup will know, however, the answer is usually “it depends.”
So, before diving into the results, we’ll start by looking at the methodology and process information provided about this study which will better enable readers to understand how the results were ultimately arrived at.
Method Matters
One of the most interesting features of the Surviscor online brokerage fee analysis is sheer number of different factors that it considers. Like anything, however, the devil is in the details.
At a high level, the following six cost categories were measured:
Equity trades
Options trading commissions
ETF commissions
Data costs
Account interest rates
General account fees
Stock commissions
When it comes to equity trades, over 12,600 simulated equity orders were analyzed. Specifically, 6,300 buy and sell orders for Canadian and US equities, respectively, were measured. The prices and volumes of securities varied and ECN fees were applied where applicable.
Options commissions
Treated as a sub-category, options commissions on a total of 340 option orders, split into 170 Canadian and US buy and sell orders (of various price and contract levels), were measured.
ETF commissions
Over 350 ETF orders consisting of over 175 Canadian and US buy and sell orders were analyzed, each order consisting of 700 shares per order.
Data costs
Market data fees were examined in this category, and consist of the fees charged by firms to provide real-time quotes, streaming quotes, trading dashboards, and “enhanced” research and tools.
Account interest
This category measured debit and credit interest for both non-registered and registered accounts in Canadian and US accounts.
General account fees
Fees included and measured in this category refer to inactivity fees, non-registered and registered account annual fees, charges to transfer assets, confirmation fees, closure fees, and account investigation fees.
Another important methodological point to understand is that profiles of traders/investors were broken into the following five categories based on the number of trades made per month:
0-4 trades
5-9 trades
10-33 trades
34-49 trades
50+ trades
Results & Analysis
The table below shows the rankings of all the Canadian online brokerages measured as part of this study.
The online brokerage that took the top spot in this edition of the online broker cost ranking was as much of a surprise as two of the bottom three rankings.
Starting from the top of the podium, National Bank Direct Brokerage came out on top in this study with the highest score of 93%.
Although it was not entirely clear based on the methodology what the percentage refers to exactly, on a relative basis it is clear that this bank-owned online brokerage managed to outrank its competitors because of lower standard commission pricing (which impacts equities and commissions trading), as well as the fact that it offers commission-free ETF buying and selling when at least 100 ETF units are either bought or sold.
Taking second place with 86% was a name that many newer investors and much of the popular press on online investing has characterized as the lowest cost online brokerage: Wealthsimple Trade. There was a heavily telegraphed caveat to the results of this study (the elephant-sized asterisk) when it came to Wealthsimple Trade, which, for several reasons to be covered below, makes them a very controversial pick for second place overall in this ranking.
In third place was Desjardins Online Brokerage – the direct rival to National Bank Direct Brokerage – who scored 83%. Desjardins Online Brokerage was the winner of this ranking last year, and depending on whether or not to include Wealthsimple Trade’s limitations, this online broker might have ended up in second place overall.
Aside from Wealthsimple Trade, what is noteworthy about two of the top three online brokerages in the fees ranking is that they are both heavily focused on the Quebec market. Not that many Canadian online investors outside of that province are likely to know about these two providers.
The fact that both of these brands compete aggressively with one another means that there is pricing available for active traders at each of these firms that is unheard of at other online brokerages across Canada. Desjardins Online Brokerage, for example, charges $0.75 per trade if more than 30 trades per month are made. By comparison, National Bank Direct Brokerage charges $0.95 per trade for clients who make 100 trades per quarter.
Looking at the top five ranked firms in this latest study, it shows that having a low standard commission price significantly improves the ranking position. Again, excluding Wealthsimple Trade, four of the top five online brokerages in this latest ranking have a standard commission rate that ranges from $6.88 to $6.95 per trade. Also worth noting is that the only big-five bank-owned online brokerage to appear in the top five is CIBC Investor’s Edge, however, both National Bank Direct Brokerage and HSBC InvestDirect (which placed fourth overall) are bank-owned online brokerages.
Thus, one of the biggest findings that this study helps put into focus is that value-conscious online investors can find competitive pricing and convenience with banking products, all in one online brokerage.
Another interesting set of results emerged with the three online brokerages tied for seventh place and two that tied for tenth. The scores for online brokerages that ranked seventh were 54%, while the scores for tenth place were 53% – a razor thin margin. While it seems strange to be focusing on this middle-of-the-pack group, four of Canada’s biggest five banks have an online brokerage that appeared in either seventh or tenth place when it came to fees. Perhaps the most shocking or surprising finding is that relative unknown Laurentian Bank Discount Brokerage was tied with RBC Direct Investing and Scotia iTRADE, and it managed to do better from a cost perspective than TD Direct Investing and BMO InvestorLine.
That so many of the biggest bank-owned online brokerages in Canada performed so closely to one another is a signal that when it comes to fees, these brokerages are virtually indistinguishable. This result likely reinforces the perception that there is no real difference when it comes to commission or trading price for big-bank-owned online brokerages. The differentiators will come in features or service elements.
While the bottom ranked online brokerages typically don’t get much attention in online brokerage reviews, this time seems different. Specifically, three big names often associated with low cost of trading online managed to make up three of the bottom four spots. Virtual Brokers, Questrade and Interactive Brokers, ranked 12, 13 and 15, respectively.
One feature that each of these three online brokerages have in common when it comes to pricing is that they have a variable component to how they charge for trading stocks. Virtual Brokers and Questrade, for example, charge $0.01 per share with a minimum trade cost and maximum trade cost. Similarly, Interactive Brokers charges $0.01 per share with the maximum charge being 0.5% of the trade value.
Arguably, aside from the variable pricing, there are also ECN fees which factor into the total commission cost for trading with Virtual Brokers, Questrade, and Interactive Brokers. So depending on the type of order placed (e.g. limit order versus market order), the cost of executing a trade can be far higher than just the commission price.
Method Determines Measures
Why it was so important to start this exploration of the Surviscor report by highlighting the methodology is because the way in which certain components were measured influenced the overall ranking outcome.
One example that stands out is with respect to ETFs. Recall that according to the ETF component of the cost evaluation, 700 “shares,” or units, was used as the standard buy or sell amount. It is difficult to say what the “average” or even the weighted average number of ETF units would be during a typical transaction. However, for many investors, that could represent a significant dollar purchase.
Consider, for example, the cost for purchasing 700 units of one of the most popular ETFs among Canadian online investors – VBAL. The last price for this ETF was $29.15 so an order to buy 700 units would cost $20,405 before commissions.
This transaction would be commission-free at National Bank Direct Brokerage, Wealthsimple Trade, Questrade, and Virtual Brokers. If, however, the number of units purchased was lower, say 50 units, then the commissions for the transaction (buy and sell) would see Wealthsimple Trade come out on top with zero commissions, followed by Virtual Brokers and Questrade, while the transaction at National Bank Direct Brokerage would cost $13.90 ($6.95 for each of the buy and the sell).
That picture changes dramatically, however, if the transaction was for a US-listed ETF. For an ETF like VTI, which had a closing price (at the time of publication) of $215.54 US, 700 units before commission would cost $150,878 US. The commission prices for National Bank Direct Brokerage, Questrade. and Virtual Brokers would be zero. However, at Wealthsimple Trade the foreign exchange fee would be 1.5% times the corporate foreign exchange rate (which at the time of publication was $1.21070). In this example, that means the rate of $1.2289 would apply, which means that instead of costing $182,668 CAD, the forex conversion cost would work out to $185,408 CAD, and would mean a difference in cost of $2,740.
It is for that dramatic difference in potential cost to consumers that, as part of this cost analysis, Wealthsimple Trade comes with a very substantial asterisk. Certainly, there are some situations, such as trading Canadian securities, where Wealthsimple Trade could come out ahead in terms of cost relative to other Canadian discount brokerages. However, any substantial transactions taking place for US-listed securities would be significantly more expensive.
Given that Wealthsimple Trade also has restrictions on the securities and markets that DIY investors can trade on, whereas many other online brokerages do not, it becomes harder to rank Wealthsimple Trade on an apples-to-apples basis.
It is unclear how Wealthsimple Trade was graded for the US-listed securities that would have been traded (700 shares/units of US ETFs and which US stocks) as part of the testing framework, as well as how Wealthsimple Trade was graded for options trading and margin lending (which are not currently offered by Wealthsimple Trade).
Without knowing which securities were used in the test and which order types, it is harder to pinpoint why Wealthsimple Trade ranked as highly as it did, despite limitations for currency conversion and trading certain securities that other online brokerages would have no issues with. Similarly, this could potentially have an impact on other online brokerages such as Questrade or Virtual Brokers, where buying ETFs is commission-free, or for Qtrade Direct Investing and Scotia iTRADE, where there are certain ETFs which are completely commission-free to trade.
Takeaway
With so much data being analyzed, it is no small feat to be able to organize and score all of Canada’s online brokerages even on something as quantifiable as cost.
Surviscor’s latest evaluation of online brokerage costs reveal the challenge of trying to deconstruct a lot of intentional differentiation effort on the part of Canadian online brokerages. If it is not easy for the professionals to do it, it is certainly a lot harder for DIY investors to run these kinds of deep analysis exercises to find the cheapest (or best value) online brokerage.
There are other variables, such as age of the investor, or what ticker symbols or the amounts of stock/securities being transacted, that can influence what kinds of costs a DIY investor pays for commissions or account fees.
One of the most interesting consequences of Surviscor’s latest analysis, however, is that the low pricing structures of online brokerages such as National Bank Direct Brokerage, Desjardins Online Brokerage, and HSBC InvestDirect are going to pique the curiosity of more and more investors.
Despite having a major focus on the Quebec market of DIY investors, based on the exposure this latest evaluation is getting online, National Bank Direct Brokerage will benefit from the attention. By implication, the bigger bank-owned online brokerages and traditionally viewed “low cost” providers will have to adjust course to compete even more aggressively with brokerages who are able to provide the convenience and confidence of a bank with a price point that, as yet, cannot be beaten by most online brokerages.
From the Forums
Price of Fame
Continuing on the theme of low cost online brokerages, reddit was abuzz discussing the findings of the latest Surviscor report. Check out posts here and here for users commenting on National Bank Direct Brokerage’s latest win and what DIY investors think about commission pricing at Canada’s online brokerages.
Flipping the Switch
Moving between RRSP providers can be nerve wracking. In this post, one redditor looks for community guidance in choosing between two very popular online brokerages.
Into the Close
That’s a wrap on another data-filled episode of the Roundup. Admittedly it was hard not to drop a doge reference into the whole article so what better way to channel “long” energy than by signing off on a meme-filled ending ahead of the long weekend! Be safe!
Spring has officially arrived. And while the arrival of the new season didn’t fall on a quadruple witching day, in the online brokerage world it nonetheless lived up to its reputation of bringing change, volatility, and the promise of sunnier days ahead.
In this edition of the Roundup, we look at the latest trading commission price drop from a bank-owned online brokerage and the potential consequences it will have for DIY investors and fellow online brokerage competitors. Next, we jump into some interesting deal activity that’s taken place this month, including the launch of a new offer that might trigger even more promotions to start sprouting this spring. As always, we’ve got chatter from DIY investors courtesy of Twitter and the investor forums.
National Bank Direct Brokerage: Commission Price Drop
The days of the $9.95 standard commission pricing for trades at Canadian online brokerages are numbered. How much lower they go from here and how quickly these changes take effect will depend on who among the larger or more popular players decides to act. A recent commission pricing drop by National Bank Direct Brokerage, however, is likely to add significant cause for other Canadian online brokerages, big and small, to revisit their own commission pricing structures.
This month, we noted that the standard equity commission pricing at National Bank Direct Brokerage (NBDB) dropped about 30%, from $9.95 down to $6.95 for all clients. Previously, NBDB charged $9.95 per trade to all clients, but for those clients who were also a client of National Bank – the parent brand to NBDB – a discounted price of $6.95 was available. That restriction is no longer in place, and the $6.95 price is available to all.
Why NBDB chose to lower their commission rate to the $6.95 level and why they decided to do so now are a good indication of how the industry as a whole has approached lowering their commission prices, even in the face of a growing competitive presence in Canada of zero-commission trading and increasing expectations (thanks to Robinhood and other US online brokerages) that trading online should be commission-free. Online brokerages in Canada, for the most part, are taking a measured and stepwise approach to lowering commission pricing, taking cues from competitors as a way to estimate the prices for commission rates that can be supported.
One important driver for National Bank Direct Brokerage is likely competition from its longtime local competitor, Desjardins Online Brokerage.
The drop in standard pricing brings National Bank Direct Brokerage in line with Desjardins Online Brokerage, which lowered the standard commission pricing for the “everyday investor” product, Disnat Classic, to $6.95 in early 2020. While there are still pricing gaps between these two Quebec-focused online brokerages at the very active trader pricing segment, the interesting consequence to National Bank Direct Brokerage enabling all clients to have access to the $6.95 pricing is that National Bank is pursuing an expansion strategy across Canada, implying that NBDB would now also set their sights on other markets outside of Quebec.
The takeaway for the online investing space in Canada is that a much more robust bank-owned online brokerage offering is now available to Canadian DIY investors. Unlike the lower-cost non-bank-owned online brokerages, National Bank Direct Brokerage brings with it many of the features and the convenience of a big five bank-owned online broker. This means that someone looking for the lower cost pricing typically available at an independent online broker but the convenience and perceived security of a larger institution will now have a serious look at NBDB as an online broker. And, once they start looking, there will be some interesting things for investors of all activity levels to find.
For young investors, for example, National Bank Direct Brokerage offers 10 commission-free trades per year and an even lower commission pricing of $4.95 per trade, simply for being 30 years old or younger. No other Canadian bank-owned online brokerage (yet) has this double feature set. Also, the threshold of 30 years old is higher than at several competitors, where the definition of “young” typically ends at age 25 or 26.
Very active traders at National Bank Direct Brokerage also have access to deeply competitive pricing, at $0.95 per trade, and an advanced trading platform, Market-Q. While Desjardins Online Brokerage’s active trader brand, Disnat Direct, does have cheaper pricing, at $0.75 per trade, the reality is that at the sub-dollar-per-trade range, the other factors of banking convenience might come into play.
Lowering commission pricing is something that Canadian online brokerages have seen as inevitable. That said, how quickly the commission pricing drops has shown itself to be highly dependent on who is the one setting the pace.
Despite the existence of a zero-commission provider, for example, there haven’t been any other Canadian online brokerages that have felt compelled to drop their standard commission prices to that level. Instead, we have observed that certain products, such as ETFs, have become the entry point into zero-commission trading, with firms such as Qtrade Investor, Questrade, Scotia iTRADE, and most recently with TD Direct Investing’s Goal Assist. In the category of commission-free ETFs, National Bank Direct Brokerage has also been somewhat of a leader among the bank-owned segment of online brokerages. In 2017, they launched completely commission-free ETF trading – both buying and selling, albeit with minimum purchase requirements.
For NBDB to capitalize on this latest pricing shift, the challenge, it seems, will be to overcome the marketing and advertising hurdle created by the likes of Interactive Brokers, Questrade, TD Direct Investing, and Wealthsimple Trade in markets outside of Quebec. Another online brokerage that has significant market awareness with large markets across Canada is Qtrade Investor, courtesy of their multiple wins and strong finishes in the online brokerage rankings of influential financial research sources. Each of these brokerages commands significant awareness, and, as a result, NBDB has their work cut out for them to start becoming part of the mainstream conversation of online brokerages.
That said, with 14 Canadian online brokerages for National Bank Direct Brokerage to compete against, their pricing immediately makes them worthy of a top-five or -six consideration. When competing against bank-owned online brokerages, however, they could potentially move into the top three.
Undoubtedly, TD Direct Investing would be high on the list of bank-owned competitors, followed, potentially, by BMO InvestorLine in terms of active marketing and advertising. Clearly, by lowering their standard commission rates to $6.95 per trade, National Bank Direct Brokerage has just earned themselves a major advantage relative to their peers. The online broker with the biggest risk of being displaced is CIBC Investor’s Edge, which, up until now, had retained the position of offering the lowest standard commission among the big bank-owned online brokerages.
When we first reported the pricing drop by CIBC Investor’s Edge to $6.95 per trade in 2014, the impact among DIY investors was immediate. Our data showed that DIY investors soon came to see CIBC Investor’s Edge as a value-based option for trade execution. Even so, the pricing structure reflected some of the limitations for active trader experience at Investor’s Edge.
In this case, National Bank Direct Brokerage has pricing for the “passive investor” but also has platforms and pricing for very active investors and young investors. This makes them unique among the “banking” peer group.
Given the propensity of Canadian online brokerages to make smaller moves – especially among the bank-owned online brokerages – we expect that standard commissions might not be the starting point to match the new pricing at National Bank Direct Brokerage. Other places that online brokerages might be able to target to retain clients would be in their definition of “young” investors, which NBDB defines as 30 and under, or with commission-free ETF trading.
National Bank Direct Brokerage’s latest commission pricing move has made them an option that many DIY investors will be hard-pressed to ignore going forward. As a result, it may not be too much longer before the bank-owned online brokerages cannot ignore them either, and yet another wave of commission pricing drops ensues.
So long as the commission-pricing at NBDB stays quiet, the online brokerage industry in Canada won’t have to move quickly. That said, in a day and age of Reddit threads and social media reach, all it might take is one post for that to change.
Deals & Promotions Updates
March is synonymous with spring and with the changes that accompany a new season. While the beginning of the month saw a significant reduction in the number of Canadian online brokerage offers from larger players, we predicted that it would likely not be too much longer before new offers sprouted up again. And, it turns out, we didn’t have to wait that long after all.
This month, we’ve already seen BMO InvestorLine replace an outgoing deal with a new cash-back promotion, and, excitingly, this past week we noted that National Bank Direct Brokerage also launched a new 100-commission-free-transactions offer. More on that in just a moment.
Starting with the BMO InvestorLine cash-back promotion, the new promotion, like its predecessor, is a tiered cash-back offer. The starting deposit tier for the latest offer is higher, however, starting at $25,000, compared to the previous $15,000. Cash-back amounts have also been scaled back significantly at most deposit tiers. Starting tier deposits qualify for a $50 cash-back (compared to $150 the last time), and the highest deposit tier, $1 million and over, still qualifies for a bonus of $2,000.
For National Bank Direct Brokerage, this has been a big month, with newer pricing (see above) and the revival of a 100-commission-free-transactions offer. The new offer provides 100 commission-free trades, which are good for use for up to one year after the account is opened. This new promotion runs until the end of June and is open to new and existing clients so long as the account type is new. Interestingly, the offer applies to trades of stocks and options (and ETFs), which are sometimes not available during certain commission-free trade promotions.
The (re)launch of a commission-free trade offer from National Bank Direct Brokerage, along with their new pricing offer, might prompt other online brokerages to consider coming to market with an offer this spring as well. Interest in investing and trading remains elevated among DIY investors. However, if the thesis that the catalyst for the surge of interest was individuals working from home or putting stimulus money into investing products, then the reopening of the economy (and sports and travel) could lead to decreased interest or availability of individuals to continue actively trading.
Most Canadian online brokerages elect to take a “wait and see” approach to emerging trends rather than risking taking the position as a leader in innovation. With that in mind, deals and promotions offer a proven method to continuously stay on the radar of investors – especially those who might be lured to leave because of dissatisfaction with pricing or service.
What deals and promotions cannot do is solve for technology or service gaps (even though we have seen compensation in the form of trading commissions help smooth out some service shortcomings). So, it is likely – perhaps even sound business strategy – for those online brokerages who are confident in their ability to deliver strong service and technology to lean into promotional offers at a time when other firms are struggling or lagging. As such, a promotional offer could be seen as a sign of confidence and strength in the service delivery model, and an absence of one – at least in the near term – might have DIY investors asking why certain brokerages are choosing to stay out of the spotlight.
In this post, an investor who is unsure and nervous about how the Canada Revenue Agency defines day trading asks if it’s okay to sell stocks from a TFSA after owning the stocks for just a few days. The CRA doesn’t provide a clear definition, so Redditors weigh in with their opinions.
New Tuber in Town
A new investor asks in this Reddit post if the Canadian Couch Potato method of investing is still relevant in 2021. An in-depth discussion ensues, touching on ETFs, meme stocks, and more.
Into the Close
That’s a wrap on another week. While markets and investing are the focal point of the Roundup, there’s also a human side to this, and this past week was a dark chapter for the AAPI community. Sadly – and, frankly, unacceptably – the level of hate crimes against women and Asians in particular has increased during the pandemic. It is up to all of us to speak up against racist behaviour wherever possible. Here are some steps from Stop AAPI Hate that anyone can take to assist a person experiencing a racist attack or hate crime:
Take action: Approach the targeted person, introduce yourself, and offer support.
Actively listen: Ask before taking any actions, and respect the other person’s wishes. Monitor the situation if needed.
Ignore the attacker: Using your discretion, attempt to calm the situation by using your voice, body language, or distractions.
Accompany: If the situation escalates, invite the targeted person to join you in leaving the area.
Offer emotional support: Help the other person by asking how they’re feeling, and assist them in figuring out what they want to do next.
March is here in full force. Even though the RSP contribution deadline for 2020 is now behind us, there is no shortage of activity taking place this month on the digital front. From Fraud Prevention Month to International Women’s Day to rising oil prices to NFTs to a bombshell interview from Oprah, there is a lot to tune in to. And one more thing: There’s still a global pandemic.
This edition of the Weekly Roundup leans into the convoluted but interconnected web of signals to pull out two fascinating stories on the online brokerage space in Canada. The first story looks at the deals and promotions for March but dives deep to provide context on the current state of deals activity against a new competitive landscape. And, speaking of competition, Canadian online brokerages that might not be concerned about a new entrant showing up any time soon may want to rethink that position as we profile the long and winding journey of one US online brokerage that is poised to make a move north of the wall. Of course, what would a Roundup be without comments and perspectives from DIY investors? Be sure to check out some thought-provoking conversations taking place in the forums and on Twitter.
Online Brokerage Deals & Promotions Update
It’s official. The 2020 RRSP season is officially over, and while the huge rush to ensure that money moves to the appropriate place by the contribution deadline has ended, the data analysis on the campaigns deployed by Canadian online brokerages is now in full swing.
Normally, the start of a new month is accompanied by a deals update that follows a standard format of recapping the latest deals and promotions offered by Canadian online brokerages, as well as discussing what deals are new and which ones have expired.
Contextually, however, 2021 is still very much an anomalous year when it comes to DIY investing and especially online brokerage promotions.
One of the most important insights to emerge over the past year at Canadian online brokerages is that there can actually be too much of a good thing. Normally, promotions and deals are used by online brokers to incentivize DIY investors – new and experienced alike – to consider choosing a particular brokerage.
Last year, however, we saw numerous online brokerages, especially around March and April, pull back or withdraw their offers altogether. It was the first time we had witnessed that happening in at least five to six years. The reason: Demand for online accounts was simply too high, and Canadian online brokerages were overwhelmed and opportunistic. If people were willing to pay (and also to wait), a promo probably wasn’t required to get them to sign up.
The dry spell in deals started to clear toward the tail end of 2020. At that point, we started to see a more normal course of activity, with multiple large Canadian online brokerages offering up cash-back promotions as part of their lead-up to RSP season. And then January 2021 happened.
Recall that it was just over a month ago that yet another surge of online investors poured into the world of DIY investing and trading, this time fueled by trading communities like Wall Street Bets and social media channels feeding a frenzy of momentum trading.
Data we reported on in the previous Weekly Roundup about Interactive Brokers, for example, showed that January 2021 resulted in a 221% month over month increase in new accounts and an almost 700% increase over the same period last year. The latest metrics released by Interactive Brokers from February revealed that almost 76,000 new accounts were opened during the month. While significantly lower (-35%) compared to January in terms of net new accounts opened, when compared to the same point last year, the number of accounts opened in February is over 400% higher.
In the Canadian marketplace, data from financial services research firm Investor Economics also shows that over 2 million online brokerage accounts were opened in 2020, up from just shy of 850,000 in 2019. It is thus not hard to triangulate that, for the beginning of 2021, and in particular RSP season, Canadian online brokerages have had another exceptional year in terms of volume of interest.
The short answer is that it does seem like Canadian online brokerages are willing to deploy promotional offers between now and the kickoff to next RRSP season, which generally happens at the beginning of November. For anyone keeping score, that is about six months away. Here’s why we think that’s the case.
First, there’s the inevitable restart of the economy through the summer. While folks have been working from home, it has probably been a lot easier and less noticeable to nosey coworkers to have a trading window open or be trading online or watching stocks on your phone. When offices start reopening and individuals begin going to the office again – as will happen – the mechanics of being able to trade from work are going to become harder. That bodes well for deals and promotions since a more “normal” cadence of activity is likely to require online brokers to work harder to get individuals to pay attention to investing while those individuals go back to juggling life as usual.
Another reason we’re bullish on deals and promotions heading into the stretch between now and the start of November is that there is increased competition for incumbent Canadian online brokerages – especially from Wealthsimple Trade but also from potential new entrants looking to make a splash in the Canadian market (see next story below).
For anyone who’s spent any time on YouTube, Wealthsimple Trade’s barrage of advertising should be a clue that they’re heavily investing in spending big money to get attention. Wealthsimple Trade’s commission structure alone should garner them attention, but it was still fascinating to see them start to launch promotional offers at the tail end of 2020 as well as some even bigger promotions linked to referral offers mid-February 2021.
Larger or more well-known Canadian online brokerages may have a buffer against this advertising and promotional onslaught, but outside of three to four online brokerages in Canada, the rest of the field has to reevaluate a lot about how, when, and where they show up to Canadian DIY investors.
One viable option for online brokerages to compete is through offering deals and promotions on an ongoing basis, with different offers available at different points in the year. Another option is better marketing around offers that are already available – with a case in point being Scotia iTRADE. They have a promotion for commission-free trades that is bundled with a premium banking package offered by their parent brand, Scotiabank. Despite having traction with value-hungry consumers, this offer is relatively under-advertised to the general public.
On the good news front for DIY investors, there are still online brokerages offering deals and incentives for investors looking to get into the markets or who are interested in a new service provider.
Promotional offers from RBC Direct Investing – a major bank-owned online brokerage – are still available through the end of March, and BMO InvestorLine also launched a new cash-back offer to replace their RSP campaign. In the case of BMO InvestorLine, the minimum deposit amount on their new cash-back offer was raised to $25,000 and expires on June 1st, 2021.
Also, as stated earlier, it is bullish that a firm that currently has zero-commission trading is offering promotions on top of their ultra-competitive pricing. And considering Wealthsimple Trade’s aggressive marketing, it is unlikely that their competitors can afford to stay quiet for much longer.
Whether it is because of elevated trading activity, the dynamic nature of the restart of return to work, or the new competitive landscape for online brokerages in Canada, we believe that more Canadian online brokerages than normal will turn to promotional offers as a fast, effective way to stay relevant to DIY investors.
What the data from 2020 and early 2021 have shown is that large pools of DIY investors can quickly rush to market to get on board with a trading opportunity. Online brokerages looking to get ahead of the next big push, as well as to get in front of the big return-to-work shift, will likely be considering deals and promotions as a tactical way to be visible throughout these next few months. The takeaway: Investors who haven’t already joined the market can anticipate some interesting offers without having to wait until the fall to take advantage of them.
A Taste of Something Different: Signals Point to 2021 Arrival of Tastyworks in Canada
It started out, at least for me, in the Las Vegas airport on a journey back to Canada in 2014. I stared up at the TV in the departure lounge and saw a strange cherry logo alongside messages about online trading. It all seemed very Vegas, but the name tastytrade was something I made a mental note to remember.
Little did I know at the time that the combination of curious name and logo would potentially become one of the bigger stories in the Canadian online brokerage space in 2021.
What Is Tastytrade?
Back in 2014 and 2015, it was difficult to answer exactly what this firm was all about. After doing a little bit of research on tastytrade, it became clear that this brand was something different in the online investing space.
Launched in 2011, it was all about providing content on investing, with a heavy focus on options trading, mixed in with some fun and insightful segments. One thing it wasn’t short on was opinion and debate. But, they were American, and being in Canada meant that aside from an alternative to programming on CNBC or BNN, the talking heads on tastytrade probably wouldn’t have a direct influence on life here in Canada. At best, it seemed like a fun channel to tune in to for trading banter.
The next time tastytrade came back on my radar was October 2015. Back then, my hair, like the Weekly Roundup, was shorter, and the big news of the day was that TD Direct Investing had just “officially” joined Twitter. And, for good measure, one of TD Direct Investing’s early tweets: tastytrade would be coming to Canada for the first time on October 26th as a guest of TD Direct Investing.
I was fortunate enough to attend that first session at the CBC studios in downtown Toronto. In the before times, when travel and live events were a thing, investor education was also something Canadian online brokerages invested in far more heavily than they do today. Calendars on online brokerage websites were crammed with investor education events – which, at the time, is what this seemed like it would be.
Little did anyone know at the time how big of a deal it would be that the largest online brokerage in Canada was bringing a new financial brand north of the wall.
The session itself lasted the better part of a day. While spending a good portion of a day at an investor education event geared toward options was something I had done before (a couple of times), it was clear from the get-go this event was different.
First, it was impressive that instead of an education session, it felt more like a rock concert. There was fancy sushi (no boring sandwiches here), and the auditorium was filled with a community of fans who came to see and hear the founder of tastytrade, Tom Sosnoff, do his thing live. The energy in the room was unique. It could have been, in part, because attendees were actually part of the live broadcast of the tastytrade show. They could see that the personalities they tuned in to for options trading and market chatter were the same in person as they were behind the screen: funny, chill, and very smart.
While the actual segments of the shows were interesting, the most interesting thing to observe and experience was what happened during breaks.
Sosnoff was approached and literally encircled by a flock of adoring fans peppering him with questions about trades and options. He was able to engage an audience with a topic that most people – even back then – found opaque and mysterious. Again, this was Canada and it was 2015. No big rush to Robinhood, no GameStonks, no Reddit army. Whatever the following and fan base here, it was likely significantly higher in the US.
For TD Direct Investing, at the time, it was a big score to have tastytrade come to Canada. This event was a huge deal for their active options trading audience and, as it turns out, for their associates who ran the thinkorswim platform. Fun fact: Sosnoff created thinkorswim and sold it to TD Ameritrade in 2009 for US$750 million.
The next few years for tastytrade were spent continuing to grow and engage with their audience across the globe and launching their own online brokerage, tastyworks, in 2017. In the US online brokerage market at or about that same time, Robinhood was starting to make more waves among online investors. Not too long after the launch of tastyworks did we start to see comments left by DIY investors on SparxTrading.com that the best pricing for options trading was being provided by tastyworks.
In a very short period of time, the tastytrade and tastyworks brands established themselves as a powerful force for active traders and investors who want to get the full experience of trading online, offering a unique community and great trading tools and user experience.
In a Weekly Roundup from February 2019, we spotted tastyworks’ rise in the US online brokerage rankings, where they appeared to be gaining ground on traditional online brokerage names in the space. Again, this was just two years after the tastyworks launch. The following interview from the Moneyshow in Toronto was also telling of the footprint tastytrade had developed in Canada by that time.
It wasn’t until 2020, however, that chatter around tastyworks coming to Canada started to pick up steam. To be clear, prior to 2020 the tastyworks team mentioned publicly that they intended to come to Canada. Unfortunately, regulatory and technology hurdles made coming here much slower.
Despite several suggestions in the past that didn’t quite work out, things seem different this time. The series of signals that the arrival of tastyworks in Canada is imminent seems to be growing. If we rewind back to January 2020, a tweet from the current Co-CEO and President of tastyworks, Kristi Ross, about the online brokerage coming to Canada was the first strong indicator big things were coming:
Hmmm, I like it!! Although we do have a team working on TW Canada 🇨🇦…just sayin’…I know I’ve put out dates before, but Q4 2020…possibly a late holiday gift 🎁!
We were primed to see a new online brokerage set up shop in the Canadian market before the end of the year, but it did not end up happening. As it turns out, though, the tastyworks folks were also busy with some big news of their own.
After about a decade, Tom Sosnoff had done it again, turning an idea about trading options and building a community of users into a multimillion-dollar payout. According to the press release, the management of the tastyworks brand was to continue on, but it did raise some questions about whether or not a move to Canada was still in the cards. That question, however, was put to rest in a video in early February:
Although the video clearly signals tastyworks’ own acknowledgement of yet another delay, this article from The Globe and Mail about tastyworks coming to Canada was published last week, lending more weight to the idea of tastytrade’s Canadian launch actually happening this year. One of the biggest questions will be “What is tastyworks?” and, in all likelihood, this article is but one of many to come that will seek to answer that question as the tastyworks and tastytrade advertising machinery ramps up.
The journey to Canada for tastyworks has been a long and winding road.
Since their first hints in 2018 of coming to Canada, the online brokerage landscapes in both Canada and the US have changed significantly, with the biggest change being the shift in commission pricing. As we’ve seen over the early part of 2021, however, just because a platform offers a great user experience and low pricing does not guarantee customer delight. There has to be something deeper.
For online investors, especially active ones, community is huge, and Sosnoff is well aware of this. Tastytrade is a financial content powerhouse, boasting an audience in Canada of 10,000 daily viewers and a global audience of about 900,000. These aren’t just passive viewers, however. Scan comments and forums relating to options trading and pricing conversations and tastytrade comes up a lot – and with a lot of (generally) positive emotion. It has a loyal fan base and a vibrant community.
For Canadian online brokerages, the move north by tastyworks will be an inflection point for the standard of online investor experience. Tastytrade content is engaging, entertaining, and educational. There are 20 shows that take place on the network. There is fresh content every day, and you can watch the founder and other members of his team trade throughout the day. They don’t just talk about this stuff, they actually do it. Add to that the price for trading stocks and options that tastyworks will bring, and the picture forming is that most Canadian online brokerages are staring at a potential game-changer coming soon.
The irony of the tastytrade and tastyworks journey coming to this point in 2021 is not lost on me.
When, seven years after the fact, an online brokerage can get you to remember the first time you ever saw their name (let alone on a return trip from Vegas), that says something about the power of the brand. The fact that TD Direct Investing set in motion the chain of events that led to tastyworks coming to Canada, and that I have been able to watch it unfold, is amazing.
Also pretty cool is seeing that having a penchant for disruption, a passion for giving online investors great experiences, and keeping your hair long can end up working out after all.
In this post, a 40-something investor with a wife and children asks for advice on how to rebuild after a financial catastrophe – that he brought upon his family through a series of bad bets on leveraged ETFs. Hundreds of Redditors offer words of encouragement and advice on everything from investing in simple ETFs to being grateful for family during tough times.
Risky Business?
A new investor with a lot of money to invest for 20+ years asks in this post how risky an ETF is and wants to know if a HISA or GIC would be a better choice. Redditors have strong opinions on the matter.
Into the Close
That’s a wrap on another edition of the Roundup. As alluded to in the opening, there’s a lot happening this month, and the Oprah interview is just the tip of the iceberg. We’re still tuning up the new features on the SparxTrading.com website and are looking forward to upcoming enhancements. While we might not get Oprah as a guest contributor (just yet), we are looking forward to including more interviews with interesting folks in the near future. In the meantime, we want to wish our readers tuning in today (Monday) a happy International Women’s Day and a profitable week ahead!
*Updated March 23* It seems that time flies when you’re hurtling towards the RRSP contribution deadline. At least, that’s the sentiment among many-an-online brokerage as the start of March heralds a new month as well as the end of the busiest stretch in the year for most online brokerages.
And, speaking of busy, the end of RRSP season also means that many online brokerage deals and promotions have expired or will be expiring soon. Specifically, offers from most of Canada’s largest bank-owned online brokerages are set to expire in the first week of March, drastically reducing the number of cash back offers for DIY investors hoping to open an online trading account.
Interestingly, the news isn’t all bad. Wealthsimple Trade actually launched a new promotion at the tail end of February that is part referral bonus, part contest, and offers clients who refer in new customers a shot at winning one of six prizes of $10,000. The timing and nature of this offer, are like most things Wealthsimple Trade, a challenge to other incumbents in the space.
“Normally” promotions filter out at this point with only a select number of online brokerages launching new offers which generally extend through the spring. Wealthsimple Trade’s new offer, described below, is relatively short in duration, large in terms of prize money and lands exactly at the point in the calendar where activity is busiest.
Also new to kick off March, the deals and promotions experience at SparxTrading.com. Readers can still get a quick overview of the latest deals and promotions offered by Canadian online brokerages in this post, but we’ve now added interactive tools to search for and filter deals information based on different parameters like the kind of offer, or account type or even the minimum required deposit.
The good news for DIY investors is that despite the big pull back in offers from some of the bank-owned online brokerages, smaller brokerages might use this opportunity to launch some new offers without having to fight for a crowded field. There is a higher-than-historically-normal amount of interest in trading and investing which means there are still online investors interested in opening up new accounts. While it is not at the excessive levels seen last March, it is actually a bullish signal for online brokerages to continue to compete by providing some kind of incentive offer.
We’ll continue to monitor the turnover in the deals space and if you have any offers or promotions that would be of interest to other online investors, let us know so we can highlight them here.
Expired Deals
At the time of publication there are no deals that have expired however here are the list of deals scheduled to expire on the first day of March:
March 1:
Qtrade Investor Cash Back
Scotia iTRADE Cash Back
TD Direct Investing Cash Back
Extended Deals
No extended deals to report at this time.
New Deals
*Updated March 23: National Bank Direct Brokerage (NBDB) has just (re)launched a commission-free trade offer. They are offering up to 100 commission-free trades, which are good for one year, to individuals who sign up for a new account. This promotion is open to new and existing clients and expires at the end of June. See the deals and promotions section for more details.*
Wealthsimple Trade has launched a new contest combined with their referral program that offers existing clients who refer in new clients the opportunity to enter a draw for one of six prizes of $10,000.
This new promotion, which runs until March 15th, enables existing clients to refer in a new client and if that new client trades at least $100, then the referrer gets $25 plus one entry into the contest and the referee gets $10. Draws for winners will take place on March 2nd, 9th and 16th and in order to enter or receive the prize, an individual must hold or open a Wealthsimple Trade account. Be sure to read the terms and conditions for more information.
It’s fitting that after so much discussion about “shorts” in the news, we also now have a short(er) trading week upon us. With one fewer trading day, it also means the deadline for RRSP contributions is ticking closer, adding to the pressure that is evidently already building at Canadian online brokerages this month.
In this edition of the Weekly Roundup, we take yet another look at the customer service angle at Canadian online brokerages, this time zeroing in on another recent set of rankings that measure digital interactions. From there, we dive into some exciting new features being launched by Canadian brokerages that will help take some of the guesswork out of investing before and during retirement. As always, we’ll serve up a generous helping of investor commentary from Twitter and the investor forums.
Canadian Online Brokerages Struggle at Delivering Service Online
The drumbeat for better customers service among DIY investors in Canada is getting louder by the day.
Increased coverage among high-profile financial writers in Canada, as well as a number of studies by financial research firms, validates what we have been seeing for many months on social media: Most Canadian online brokerages are falling short on providing timely customer service experiences.
Columnist @rcarrick said he’s received complaints about several bank-owned firms, but @TD_DirectInvest was named most often. As the largest player in the brokerage business, TD has had issues keeping up with client demand to speak to its live reps. https://t.co/J7SXJWBNWx
While data has been emerging this year that puts the issues faced by online brokerages in the spotlight, it is somewhat confusing for online investors since different studies measure different aspects of the “service” experience.
Both the actual wait times experienced by Canadian DIY investors and the unpredictability of what users can expect when reaching out as either a customer or an interested consumer have potentially far-reaching consequences to the industry as a whole. And, as the data shows, if these issues are not addressed, the recent online brokerage challenges taking place in the US could spill over to providers here in Canada.
The Story in Numbers
At the end of January, a couple of important Canadian online brokerage rankings were published. We covered The Globe and Mail’s online brokerage rankings in detail earlier this month, with a significant amount of time spent diving into the wait times that were measured at Canadian online brokerages in January (2021).
Online Brokerage
Wait Times (min)
BMO InvestorLine
87
CIBC Investor’s Edge
101
Desjardins Online Brokerage
170
HSBC InvestDirect
125
Interactive Brokers
66
National Bank Direct Brokerage
69
Qtrade Investor
28
Questrade
128
RBC Direct Investing
90
Scotia iTrade
179
TD Direct Investing
58
Virtual Brokers
7
For a quick refresh, the table above contains the average wait time data reported as part of the online brokerage rankings among the 12 firms that were reviewed. Interestingly, in a post by DALBAR on LinkedIn, additional information about the wait times was provided that illustrates the range of wait times at each firm. Readers of the Weekly Roundup post in which these numbers were thoroughly examined can appreciate why average values, on their own, might not convey the full picture. The study data cited by The Globe and Mail rankings reported the average wait times, but the graphic below adds additional context around those average values.
Aside from the 25x difference between the average of the lowest wait times (Virtual Brokers) compared to the highest average wait times (Scotia iTrade), one of the most striking trends to jump out is variation in wait times that occurred as online brokerages took longer to respond. At the far right of the chart shown above, five firms in particular stand out with highly variable wait time ranges:
Of these firms, it was most evident that Questrade had the highest range of wait times, which stretched from about 50 minutes to just under 300 minutes, with an average of 128 minutes. By comparison, HSBC InvestDirect had an average of 125 minutes but a much narrower range of wait times, stretching from just over 60 minutes to about 210 minutes. When ranges this wide are part of the service experience, it is essentially a gamble for DIY investors as to exactly how long they are going to have to wait before connecting with a service agent.
Another striking feature of the data on the chart is where Qtrade Investor landed in terms of wait times. Their “worst” wait time (of about 50 minutes) was approximately the best wait time that any firm behind them could achieve.
These data points are also important because of how they compare against another set of online brokerage rankings that focused specifically on service levels. Financial services research firm Surviscor also released online brokerage service rankings at the end of January and concluded that there were clear and persistent shortcomings in the response times of most Canadian online brokerages.
Unlike the DALBAR study, which took a snapshot of one week’s worth of telephone data in January 2021, Surviscor conducted 163 service inquiries per online brokerage between January and December of 2020 on contact forms, emails, and social media channels.
The average industry response time in 2020 ended up being 55 hours, which was actually an improvement over 2019, in which response times across the industry averaged out to 62 hours. One of the most compelling points observed in the Surviscor analysis of service response times, however, was that service has been trending in the wrong direction for many years now, and although COVID-19 can certainly be considered a contributing factor, the data shows that even before the pandemic, meeting customer response times online was a challenge.
Change the Channel or Channel the Change
When comparing the data from the Surviscor and DALBAR studies, it’s clear that the kind of service experience a consumer can encounter with a Canadian online brokerage depends on the channel used, which is a big problem on a number of levels.
First, and perhaps most ironic, is that when it comes to online capabilities for service touchpoints at Canadian online brokerages, in spite of the hairpulling wait times, it is still faster (in most cases) to wait on the phone than it is to send electronic correspondence.
In fact, when comparing the magnitude of the difference between the phone and online channels, the range went from 1x (Questrade) to 786x (Virtual Brokers). Excluding the outliers, the average factor difference was 39x between phone and online interactions. One clear standout in both the digital and telephone categories was Qtrade Investor, which had the shortest wait time on the phone and the second-fastest response time online.
To Surviscor’s point, the digital interactions may have been deprioritized compared to phone channels because customers would be more likely to use the phone channels; however, as far as making a first impression count, most Canadian online brokerages would not get a flattering response.
A second important consideration is that for the financial services industry as a whole, trust is an integral part of consumer confidence.
Granted, DIY investors are flocking to the markets in droves because of perceived generational opportunities to build wealth, but when those same investors are hitting roadblocks to getting issues addressed or questions answered, confidence takes a hit. If you add issues of platform stability to that, then individual investors lose faith that financial services firms are up to the task of safely and reliably providing the opportunities for wealth creation that much of the marketing suggests is possible.
With just a few weeks to go until the RSP contribution deadline for 2020, this is prime time for DIY investors looking to online brokerages for RSP options. It is against this backdrop that the wait times experienced by Canadian investors stand out as something that could ultimately become a much more important component to online brokerage selection than has been the case in the past. Deeper than that, however, the notion of lag time is anathema in the age of online investing.
The recent Robinhood debacle that resulted in trading in certain securities being restricted has been blamed on wait times for trade settlement – a stunning vulnerability in the year 2021. For DIY investors in Canada, the clear and present risk to consider is an online brokerage’s capacity to meet a respectable service delivery standard, especially during times of market volatility or heightened interest (which is arguably when those systems are needed the most).
For Robinhood, not only did they suffer a blow in the court of public opinion, but they are also going to have to answer tough questions from lawmakers and face the wrath of an increasing number of lawsuits. Other than the growing chorus of complaints from Canadian consumers and financial media, there isn’t anyone holding online brokerages accountable for their service standards.
Ironically (again), the longer Canadian online brokerages take to address these service gaps, the more likely it is that the industry will find themselves taking centre stage in a mass media story or, worse, the focal point of a Reddit wave. Make no mistake, the clock on this story is most certainly ticking.
New Features From Online Brokerages Chip Away at Guesswork
After talking at length about where Canadian online brokerages are struggling, it’s a nice change of pace to shift the focus to areas in which they’re looking to innovate and deliver additional value to clients as well as to DIY investors more broadly.
Readers of SparxTrading.com know that we regularly engage with Canadian online brokerages on a number of new features and developments (case in point: our Look Back / Look Ahead series). Two interesting features that were brought to our attention from Canadian online brokerages are worth highlighting to readers.
BMO InvestorLine Launches a Checkup for Portfolios
With a tsunami of new investors joining the stock market, one of the biggest challenges many of them face is understanding how to answer a very basic question: “Am I on the right track?”
Fortunately for DIY investors, BMO InvestorLine recently announced a new online tool that helps investors analyze their current portfolios against a set of investor profiles, to see whether or not their portfolios are in line with their desired investment objectives.
The adviceDirect Portfolio Health Check tool is interesting for a number of reasons, but chief among them is that it is freely available to the general public to use, and it is both simple and fast to complete.
Individuals can enter details about their financial picture (no personally identifiable information is captured) and assess it on four key parameters: asset allocation, diversification, security ratings, and risk. In about three steps, users can quickly see where they measure up to their “personality” type and also see what they may want to consider changing in order to bring their portfolio in line with their respective investing personality type.
In terms of who might be interested, this tool appears to be built around investors (rather than traders) who are interested in taking a portfolio approach to building wealth. This means that the tool is likely to have mass appeal, and it serves as a great starting point to the conversation about whether or not the composition of a portfolio is on target.
From a business development standpoint, this is also an interesting and savvy move by BMO InvestorLine to be part of the conversation about wealth management. Analogous to mortgage calculators helping potential homeowners understand some of the mechanics around house purchases and borrowing, the adviceDirect Portfolio Health Check tool is a timely resource for anyone wanting to get a digital “second opinion” on how their investments stack up. This is entirely in line with their adviceDirect offering, which enables investors to consult with a licensed investment professional about recommendations but leaves the actual work up to the investors themselves to implement.
In a crowded landscape of online brokerages that would normally be focusing on commission pricing, this public-facing tool will enable BMO InvestorLine to be visible to the right kinds of investors at the right moment and, because it is free, for the right price.
Looking in the RRIF-View Mirror
Against the backdrop of service enhancements at Canadian online brokerages, one important feature launched at the end of 2020 will help clients of RBC Direct Investing who are thinking about income when retiring.
Starting in December 2020, RBC Direct Investing enabled clients with Registered Retirement Income Fund accounts (such as RRIFs, LIFs, LRIFs, RLIFs, PRIFs) to be able to view payment details online, without needing to call or wait for a letter. In light of the wait times on the phone channel, this is a timely development.
To help navigate the most important details of a RRIF, the “RRIF View” provides a snapshot of a client’s plan, with information on the required minimum annual withdrawal amount and scheduled payment dates.
While this is a small development, it is an interesting example of a feature that is important to users who have this kind of account – it got a quick highlight as part of the Navigators series that publishes updates at RBC Direct Investing.
At this time of year, there is a lot of discussion about contributing to RRSPs, but there isn’t nearly as much information available on the next steps of funding retirement, in particular the variety of options available to individuals with an RRSP.
Fortunately, RBC Direct Investing also has a fairly good guide explaining RRIFs, which is helpful for individuals needing to navigate this new account type. With this new feature, RBC Direct Investing might also have the opportunity to spark a conversation about online brokerage platforms and the ease with which RRIF account holders can stay on top of key information.
A potential investor asks in this post whether they should wait until after the stock market crash – or at least massive correction – that many experts predict is imminent, in order to buy stocks at rock-bottom prices. Fellow Redditors share their strong opinions about the value of time in the market versus trying to time the market.
Up, Up & Away
From boredom to FOMO to a record bull market, there are many reasons that retail investing is surging in Canada right now. In this post, hundreds of Redditors discuss meme stocks, cryptocurrency, market bubbles, crashes, index funds, interest rates, and a whole lot more.
Into the Close
With the combination of Lunar New Year, Valentine’s Day, and Family Day, there have been many reasons to celebrate this past week, and Friday being that much closer certainly adds one more item to the list. There’s a lot of gripping drama playing out in the US this week, with the GameStonks trade under the microscope. With snow and cold showing up just about everywhere, including Texas, this is going to be a weird one. Hang in there.
Just because the month is short, doesn’t mean we can’t be long on fun! From Lunar New Year to Valentine’s Day to Family Day, there is much cause for celebration – with safe social distancing in mind, of course. Another reason for DIY investors to rejoice: there’s still time to meet the RRSP contribution deadline for 2020!
Amidst the recent stock market volatility, there is one constant to look forward to at this time of year: a steady stream of promotions from online brokerages ahead of the RRSP contribution deadline. With over 30 kinds of promotional offers in the mix, there’s bound to be something available from most Canadian brokerages.
For all those looking for sweet deals during this rosy month, be sure to keep reading for all the latest promotions from Canadian online brokerages for February. We forward to a month filled with new surprises, and we will continue to monitor and provide updates on new online brokerage deals throughout the month.
In the spirit of Lunar New Year, we wish everyone an upcoming year filled with good luck and great prosperity – we’re hoping it will start with finding your perfect online brokerage deal here!
Open a new RBC Direct Investing account by March 31, 2021 and fund it with at least A) $5,000; B) $25,000; C) $50,000; D) $100,000; E) $250,000; F) $500,000 or G) $1M+ by May 31, 2021 and you may receive a cash back of A) $50; B) $100; C) $200; D) $300; E) $500; F) $1,000 or G) $2,000; plus 10 free trades to be used by August 31, 2021. The fund must be from a non-RBC investment account.
Use promo code WCMP2 during account opening and be sure to review the full Terms and Conditions.
A) $5,000
B) $25,000
C) $50,000
D) $100,000
E) $250,000
F) $500,000
G) $1M+
Cash Back:
A) $50
B) $100
C) $200
D) $300
E) $500
F) $1,000
G) $2,000
Plus 10 free trades
Scotia iTRADE is offering two choices for new investors who open accounts before March 1, 2021 and fund it with at least A) $5,000; B) $10,000; C) $25,000; D) $50,000; E) $100,000; F) $250,000; G) $500,000 or H) $1M+:
Option 1: you can use promo code C21 to receive cash reward of A) $25; B) $50; C) $100; D) $200; E) $400; F) $750; G) $1,000 or H) $1,500; plus a discounted commission of $6.99 per trade until June 30, 2021.
Option 2: Use promo code FT21 and you may be eligible for A) 10; B) 20; C) 50; D) 100; E) 200; F) 300; G) 400 or H) 500 free trades to use for 90 days after the account is funded.
See terms and conditions for full details.
A) $5,000
B) $10,000
C) $25,000
D) $50,000
E) $100,000
F) $250,000
G) $500,000
H) $1M+
Cash Back:
A) $25
B) $50
C) $100
D) $200
E) $400
F) $750
G) $1,000
H) $1,500
or Free Trades:
A) 10
B) 20
C) 50
D) 100
E) 200
F) 300
G) 400
H) 500
Fund your new or existing CIBC Investor’s Edge account before March 2, 2021 with at least A) $10,000; B) 25,000; C) $50,000; D) $100,000; E) $500,000 or F) $1M+ and you may be eligible to receive a cash back reward of up to A) $50; B) $100; C) $200; D) $500; E) $1,000 or F) $2,000. To qualify, the fund must be from outside CIBC. No promo code required. See terms and conditions for full details.
A) $10,000
B) 25,000
C) $50,000
D) $100,000
E) $500,000
F) $1M+
Cash Back:
A) $50
B) $100
C) $200
D) $500
E) $1,000
F) $2,000
Open a new qualifying account at BMO InvestorLine with new assets worth at least A) $15,000; B) $50,000; C) $100,000; D) $250,000; E) $500,000 or F)$1M+, and you may be eligible to receive a cash back reward of up to A) $150; B) $250; C) $500; D) $800; E) $1,000 or F) $2,000. Use promo code SPARXCASH when registering to qualify. Be sure to read full terms and conditions.
A) $15,000
B) $50,000
C) $100,000
D) $250,000
E) $500,000
F) $1M+
Cash Back:
A) $150
B) $250
C) $500
D) $800
E) $1,000
F) $2,000
Open a new TD Direct Investing account by March 1, 2021 with promo code INVESTNOW and fund it with new assets worth at least A) $15,000; B) $25,000; C) $100,000; D) $250,000 or E) $500,000, and you may be eligible to receive a cash back reward of up to A) $100; B) $200; C) $300; D) $500 or E) $1,000. The fund must be deposited to the account by April 30, 2021 and at least one trade is placed by June 30, 2021.
In addition, you may also be eligible for another $100 cash reward by setting up a Monthly Contribution Plan (min. $100 per month) with the first contribution occur before April 30, 2021.
The maximum reward one could receive is $1,100. See terms and conditions for full details.
A) $15,000
B) $25,000
C) $100,000
D) $250,000
E) $500,000
Cash Back:
A) $100
B) $200
C) $300
D) $500
E) $1,000
New clients who open and fund a new Qtrade Investor account before March 01, 2021 with at least A) $25,000; B) 50,000; C) $100,000; D) $500,000; E) $1M or F) $2M+ may be eligible to receive a pre-paid Visa gift card of up to A) $50; B) $100; C) $250; D) $800; E) $1,500 or F) $2,000. Only the first 500 customers are eligible. Please use promo code VISA2K. See terms and conditions for full details.
A) $25,000
B) $50,000
C) $100,000
D) $500,000
E) $1M
F) $2M+
Cash Reward:
A) $50
B) $100
C) $250
D) $800
E) $1,500
F) $2,000
New accounts opened between Jun 22 and Dec 31, 2020 will be awarded 100 free online trades in one year. This promotion applies to new and existing NBDB clients who use the code “FREE2020” to open new accounts. There’s no minimum funding requirement, however some other restrictions may apply.
Open and fund a new account (TFSA, Margin or RRSP) with at least $1,000 and you may be eligible to receive $88 in commission credits (up to 17 commission-free trades). Use promo code SPARX88 when signing up. Be sure to read terms and conditions carefully.
Open and fund a new account (TFSA, Margin or RRSP) with at least $1,000 and you may be eligible to receive 5 commission-free trades. Use promo code 5FREETRADES when signing up. Be sure to read terms and conditions carefully.
Open a new RBC Direct Investing account by December 31, 2020 and fund it with at least $5,000 by March 5, 2021 and you will receive commission rebates for 25 trades that occur within 1 year of account opening. Be sure to use promo code NTBW2 during account opening. You will be charged regular commissions on the trading date, and the rebate will be deposited back into your account after 3-5 business days. If you are an existing customer to RBC DI, the type of the new account being opened must be different from the account types that you current have.
Open and fund a new qualifying account with at least $25,000 and you may qualify for one month of unlimited commission-free trades and up to one month free of an advanced data package. Use promo code ADVANTAGE14 when opening a new account. Be sure to read terms and conditions for full details.
$25,000
commission-free trades for 1 month + 1 month of advanced data.
Refer a friend to Questrade and when they open an account you receive $25 cash back and they receive either A) $25; B) $50; C) $75; D) $100; or E) $250 depending on the amount deposited amount. Enter code: 476104302388759 during account sign up to qualify. Be sure to read the terms and conditions for eligibility and additional bonus payment structure and minimum balance requirements.
A) $1,000
B) $10,000
C) $25,000
D) $50,000
E) $100,000+
$25 cash back (for referrer per referral; $50 bonus cash back for every 3rd referral)
For referred individuals:
A) $25 cash back
B) $50 cash back
C) $75 cash back
D) $100 cash back
E) $250 cash back
Cash deposited into Questrade billing account within 7 days after funding period ends (90 days)
If you refer a friend/family member who is not already a Scotia iTRADE account holder to them, both you and your friend get a bonus of either cash or free trades. You have to use the referral form to pass along your info as well as your friend/family members’ contact info in order to qualify. There are lots of details/conditions to this deal so be sure to read the details link.
A) $10,000
B) $50,000+
A) You(referrer): $50 or 10 free trades; Your “Friend”: $50 or 10 free trades (max total value:$99.90)
B) You(referrer): $100 cash or 50 free trades; Your “Friend”: $100 cash or 50 free trades (max total value: $499.50)
You may receive $10 cash incentive for each new client that you refer to Wealthsimple Trade. They must use your unique referral link during account opening and make a trade value of at least $100. The referred friend will also get $10.
If you (an existing Qtrade Investor client) refer a new client to Qtrade Investor and they open an account with at least $1,000 the referrer and the referee may both be eligible to receive $25 cash. See terms and conditions for full details.
$1,000
$25 cash back (for both referrer and referee)
Cash deposited at the end of the month in which referee’s account funded
If you (an existing BMO InvestorLine client) refer a new client to BMO InvestorLine and they open an account with at least $5,000 the referrer and the referee may both be eligible to receive $50 cash. To qualify the referee must use the email of the referrer that is linked to their BMO InvestorLine account. See terms and conditions for full details.
$5,000
You(referrer): $50; Your Friend(referee): $50
Payout occurs 45 days after minimum 90 day holding period (subject to conditions).
Transfer $15,000 or more into a new HSBC InvestDirect account and you may be eligible to have up to $152.55 in transfer fees covered.
$152.55
$15,000
Confirmed via email contact with HSBC InvestDirect Rep. Contact client service for more information.
none
Transfer $15,000 or more to Qtrade Investor from another brokerage and Qtrade Investor may cover up to $150 in transfer fees. See terms and conditions for more details.
Transfer at least $25,000 or more in new assets to TD Direct Investing when opening a new account and you may qualify to have transfer fees reimbursed up to $150. Be sure to contact TD Direct Investing for further details.
$150
$25,000
Transfer Fee Promo
Contact client service for more information (1-800-465-5463).
none
Transfer $25,000 or more into a CIBC Investor’s Edge account and they will reimburse up to $135 in brokerage transfer fees. Clients must call customer service to request rebate after transfer made.
$135
$25,000
Confirmed with reps. Contact client service for more information (1-800-567-3343).
none
Open a new qualifying account with BMO InvestorLine or fund a qualifying existing account and you may be eligible to have transfer fees covered up to $200. Contact client service for more details.
$200
Contact client service for more information
Contact client service for more information (1-888-776-6886)
none
Expired Offers
Desjardins Online Brokerage is offering up to $150 to cover the cost of transfer fees from another institution. To be eligible, new/existing clients need to deposit $10,000 into a Desjardins Online Brokerage account. You’ll have to call 1-866-873-7103 and mention promo code DisnatTransfer. See details link for more info.
The minimum commission per equity trade ($1.99) is waived for new accounts from account opening till December 31, 2020. As a result, your commission is just 1¢/share (max $7.99). However, this offer does not apply to Odd Lot orders (i.e. orders with quantity less than 100 shares if price >= $1 or price < $0.10; or less than 500 shares if price in the $0.10 – $0.99 range).
Please be reminded that at Virtual Brokers ETFs are always free to buy.
Submit your information via the Hardbacon website to be referred to National Bank Direct Brokerage. Open and fund a qualifying account and you may receive up to 200 commission-free trades and discounted trading commissions. Be sure to read full terms and conditions.
Open a new Non-Registered trading account and fund it with at least $100 by December 18, 2020 and you may receive a random cash bonus ranging from $1 to $4,500. The cash bonus amount will be equivalent to the value of one of the fifteen stocks that have been selected by Wealthsimple Trade for this program. Please refer to the Terms and Conditions for more details.
Desjardins Online Brokerage is offering 5 commission-free trades for new 18-30 years-old Disnat Classic clients depositing at least $1,000. See terms and conditions for full details.
Scotiabank StartRight customers can receive 10 commission-free trades when investing $1,000 or more in a new Scotia iTrade account. Trades are good for use for up to 1 year from the date the account is funded. Use promo code SRPE15 when applying (in English) or SRPF15 when applying in French. Be sure to read full terms and conditions for full details.
Be one of the first 100 clients to open and fund an account with a minimum of $10,000 at Qtrade Investor using the promo code TRADE695 and you may be eligible for 100 trades at a preferred commission rate of $6.95 for 6 months. See terms and conditions for more details.
Open and fund a new Questrade Portfolio IQ account with a deposit of at least $1,000 and the first month of management will be free. For more information on Portfolio IQ, click the product link.
Open a new SmartFolio account and fund it with at least $1,000 and you could receive 0.5% cash back up to $1,000. Use promo code SFJAN1000 when opening a new account. See terms and conditions for full details. This offer is limited to new SmartFolio clients only, and can be combined with the refer-a-friend promotion.
BMO SmartFolio clients will receive $50 cash back for every friend or family member who opens and funds a new SmartFolio account. Friends and family referred to SmartFolio will receive $50 cash back for opening and funding an account, plus automatic enrollment into SmartFolio’s mass offer in market at the time. See offer terms and conditions for more details.
Transfer at least $25,000 into Virtual Wealth when opening a new account and you may be eligible to have up to $150 in transfer fees covered by Virtual Wealth.
Professionals and students in the below fields can benefit from a reduced pricing structure:
* Engineering students
* Legal, accounting and business students
* Healthcare students
* Health sciences students
* Nursing students
Benefits:
* $5.95 commission on equities
* $0 commission on ETFs
* $0 annual administration fee
Accounts holders who are 30 years old or younger are offered 10 free trades each year. After the free transactions, a commission rate of $4.95 per transaction will be applied (which is just half of the regular price).
So. Much. To. Unpack. Unlike most pundits this week, we’re not going to talk about GameStonks, at least not in the kind of depth we normally would. No, for the moment we’ll save the commentary for the forum chatter and DIY investor feedback from Twitter.
There’s plenty on the menu for this edition of the Roundup. In fact, there’s so much to say about the latest online brokerage rankings from Rob Carrick at The Globe and Mail that we’ve decided to focus this edition on the wealth of data and insights the latest edition has delivered. To keep things on point with the conversations happening online, we’ve also included highlights from the forums and on Twitter. Get comfy – this is going to be a long (but fun) ride.
The Unsettled Elephant in the Room
We can safely say this up front: This current market is unlike anything we’ve ever seen before.
Specifically, the mobilization of massive waves of investors pouring into stocks that are heavily shorted and being able to generate shockwaves through the capital markets. Never before, or at least not in recent memory, have so many people learned so much about shorting, squeezing, margin, clearing, and settlement as they have in this past week.
Moreover, the lesson in what matters most to online investors – content and community – came courtesy of Reddit, a website that eschews modern aesthetics.
An almost incalculable number of lessons are to be learned from the time we’re living through (especially as DIY investors), so we won’t be covering these in this edition of the Roundup because there’s simply not enough time and space this week for all of it. In fact, in compiling the reactions online to the Canadian discount brokerages via Twitter, the software we use crumbled under the sheer volume of the conversation, taking with it hours of work sifting through visceral and convulsive reactions by online investors (traders) to the trading of GameStop, AMC, Blackberry, and others.
For now, it’s sufficient to leave this video as a tongue-in-cheek summation of events.
Rest assured, as the dust settles (probably faster than trades from Robinhood – had to do it), the spotlight will move to the seismic shift in trading behaviour we’re witnessing right now.
ICYMI: Robinhood CEO Vlad Tenev spoke out yesterday after the company decided to restrict trading in GameStop and other stocks. “In order to protect the firm and protect our customers we had to limit buying in these stocks,” he told @andrewrsorkin. https://t.co/LsJ5iNjJABpic.twitter.com/XutnOQn9YN
2021 Canadian Online Brokerage Rankings: Spotlight on Service
Now in its 22nd edition, The Globe and Mail online brokerage rankings, authored by Rob Carrick, are one of the most popular rankings available for Canadians who are shopping around for a new online brokerage or are simply interested in making sense of trends in the DIY investing space.
This past week, the latest edition of the rankings was published, and this one is by far one of the most interesting editions yet.
Fair warning, this post is going to be a long one, in part given the historic nature of current market conditions but also because of additional data added to this year’s review that doesn’t ordinarily appear in it.
What Goes Into the Online Brokerage Rankings?
Over the past two decades, there have been numerous changes to the review, ranging from what time of year it gets published, to the criteria used to evaluate brokerages, to the accessibility of the reviews themselves. These small changes make comparing absolute performance from year to year a challenge, so as a result, one of the best ways to understand the meaning of these reviews is on a relative basis. Contextually, there are important changes or factors that arise over time that make up part of how online brokerages get evaluated.
An important factor to note in the assembly of the rankings is that this review is based on data from the prior year. Or at least that’s how things used to operate. While the bulk of the 2021 online brokerage rankings are based on data from 2020, there is a significant addition to this year’s results: telephone customer service wait times that were collected in mid- to late-January of 2021. The data, which was supplied by financial research firm DALBAR Canada, tested the telephone wait times at all Canadian online brokerages.
It bears mentioning that the likely reason behind including telephone customer service experience stems from the many (many) complaints from online investors over the past year and especially in the latter portion of 2020 (and early 2021) concerning reaching an online brokerage by phone. If there is one thing that Rob Carrick’s reviews and commentary on the online brokerage space in Canada have evolved into, it’s a barometer for some of the most salient issues (and frustrations) faced by DIY investors.
With some important context out of the way, let’s dive into the results themselves to see what the scores looked like across the board this year, who was included (and who was not), as well as some of the important drivers of success in this year’s rankings.
Results from the 2021 Canadian Online Brokerage Rankings
To help put this year’s results into context, the table below compares the most recent set of scores to those of the past two years (2020 and 2019).
One of the first things that jumps out is in relation to first place in these rankings and which online brokerage scored the best: Qtrade Investor.
For the past three years, Qtrade Investor has achieved the highest score in this ranking and, in 2019, had to share that accolade with Virtual Brokers and TD Direct Investing. Since 2019, however, Qtrade Investor has handily outscored its rivals – including last year, when it scored an A+ rating. This year, Qtrade did earn the highest mark, an A, but it was a lower score than last year. No stranger to the podium, Qtrade Investor has been voted best online brokerage by The Globe and Mail 12 times in the 22-year history of the rankings.
Coming in second this year was TD Direct Investing, which is one of Canada’s largest and most popular online brokerages. As with Qtrade Investor, TD Direct Investing saw their score in 2021 drop from 2020, in this case falling to an A- from an A.
Third place, interestingly, was a tie between Interactive Brokers and Questrade, both of whom received grades of B+. One of the reasons this is an interesting result is because Interactive Brokers was, for many years, not included in The Globe and Mail rankings since they primarily catered to more active investors and traders (as opposed to the “everyday investor”) and they lacked an RRSP offering, which they now currently do offer. Since 2019, Interactive Brokers’ score has remained fairly level at B+, but Questrade has seen their score slip slightly, from an A- in 2019 to B+ in both 2020 and 2021. This year, however, that B+ was good enough to tie for third place.
While the middle-of-the-pack experience has largely remained intact, HSBC InvestDirect has consistently remained at the bottom of the rankings for the past three years. Despite their low commission rates, international access, and award-winning client service, several factors that matter more to these ratings, such as mobile accessibility, impacted the scores.
Also of note this year, only two of the 12 Canadian online brokerages covered this year improved in their scores relative to last year. BMO InvestorLine raised their score from a B- to a B, and CIBC Investor’s Edge improved from a C to a C+. In contrast, five online brokerages dropped in scoring compared to last year, the most notable among them being Scotia iTrade, which went from an A- to a B. Another interesting negative trend showed up for Virtual Brokers. In 2019 they tied for the highest score, an A that year, with Qtrade Investor and TD Direct Investing. In 2020, however, they slipped to a B+, and in 2021 they scored a B.
Not on the list of Canadian online brokerages reviewed for this ranking was Wealthsimple Trade – a notable absence given both the visibility and the popularity with younger investors. This is not the first review that the newest kid on the online brokerage block has had to sit out. However, in the context of Wealthsimple Trade’s features, pricing, and volume of interest, not to mention sheer growth in numbers, DIY investors are likely curious about how the brokerage would fare in the rankings framework.
As far as grades go, a comparison to 2019 shows that performance across the board has, on a relative basis, worsened. The strongest drivers for scoring on The Globe and Mail brokerage rankings have always leaned toward the experiences of “everyday investors” rather than more-active traders. This year, the ranking criteria are based on:
Convenience and security
Cost
The investing experience
Tools
Importantly, a big part of the convenience and security component of this year’s results included phone access, something that has been a major pain point throughout 2020 but especially into the end of the year.
Call Options
To address this timely topic, in addition to relying on data generated from 2020, this year the online brokerage rankings included telephone wait time data supplied by financial services research firm DALBAR Canada – and those results were also fascinating.
One of the first, and most glaring, results from that snapshot is that wait times in January at online brokerages averaged out at 92 minutes, with a standard deviation of almost 52 minutes. The importance of reporting the standard deviation here is clear because, while an average wait time of 92 minutes is bad enough, it doesn’t accurately convey how bad things are right now for DIY investors trying to contact customer service.
For a more accurate view, there’s going to be a little bit more math required.
What the overall average of wait times doesn’t convey is that the data has a couple of very clear outliers at both the short and the long ends of wait times. To help put this into perspective, the shortest wait time average was 7 minutes (Virtual Brokers), and the longest was 179 minutes (Scotia iTrade). That works out to almost 26x more time spent waiting to speak to someone at Scotia iTrade than at Virtual Brokers.
These two extreme data points suggest they were outliers, and outliers tend to add noise or skew the more realistic picture. The next outlier in the data was Qtrade Investor, with an average wait time of 28 minutes – which is still long by most reasonable standards but is significantly lower than the next highest online broker, TD Direct Investing, where telephone wait times were 58 minutes on average.
Excluding the wait times of Virtual Brokers and Qtrade Investor as outliers, the average wait times at 83% of the Canadian online brokerages worked out to be 107 minutes, more than double what it would be if Virtual Brokers and Qtrade Investor were included in the analysis. Even more telling, the standard deviation drops to 42 minutes. At the upper end of the wait time range, if we exclude Scotia iTrade, with a wait time of 179 minutes, and Desjardins Online Brokerage, with a wait time of 170 minutes, a much more accurate view of wait times emerges.
The average wait time drops from 107 minutes to 91 minutes (about a 15% decrease), and the standard deviation drops from 42 minutes to 26 minutes (a 38% decrease). This represents 66% of the data, or eight out of 12 online brokerages.
Wait Times
Average (mins)
Standard Deviation (mins)
% of Brokers Represented
All Brokerages
92
52
100
Shortest Outliers Excluded
107
42
83
All Outliers Excluded
91
26
66
3 of Big 5 Banks (outliers excluded)
93
7
25
In light of the above data (that excludes outliers at the upper and lower extremes), and assuming a normal distribution, 68% of the time, calling an online brokerage in Canada in January would have resulted in a wait time of between 65 and 117 minutes. And 95% of the time, or 19 times out of 20, the wait time for a DIY investor would have been between 39 and 143 minutes. And 99.7% of the time, a Canadian DIY investor would have waited between 13 and 169 minutes. In other words, getting served quickly would be more because of good fortune than because of the system working as it should.
Let that sink in for a moment. These are private, profit-driven, million- or billion-dollar brands (in some cases) that are posting these kinds of numbers. For illustration, three out of the big five Canadian bank-owned online brokerages posted a remarkably consistent range of wait times: 93 minutes with a standard deviation of 7 minutes. On a peer-to-peer basis, this highlights how far ahead TD Direct Investing’s scores (with wait times of 58 minutes) would be relative to the others and how far behind Scotia iTrade sits. In either of these two cases, these would be considered so far outside of a statistical norm that it is not by accident that they’re achieving these numbers.
Imagine the frustration, dropped calls, and erosion in trust that occurs when an on-demand world meets a two- or three-hour wait time. And this doesn’t even factor in waiting by online chat.
It naturally raises the question: What are Virtual Brokers and Qtrade Investor doing so well, which causes them to be able to answer the phone so fast (relatively speaking), and what are Scotia iTrade and Desjardins Online Brokerage doing so poorly? One possible conclusion points to a capability of being ready to scale up, as pointed out in the Influencer Edition of the Look Back / Look Ahead series.
Now, to be clear, these numbers do not indicate whether or not issues were resolved, just how long it took for someone to answer the phone. Also, these are snapshots in time, and there is no comparable data taken from similar time periods to benchmark against. The fact that these tests added to the caller queue means they affected wait times, even if the impact was slight, so the numbers do need to be treated with some caution.
Even so, it is cause for concern for DIY investors to see that wait times can be meaningfully measured in hours instead of minutes. Coming into the peak season for RRSP contributions, it means that volume will only increase, as will frustration levels. If there are any outages, huge rallies or crashes in the market, or other market-moving events, then RRSP contributions via telephone are going to be nearly impossible at most Canadian online brokerages.
Of course, telephone service isn’t a major selling point for a lot of online investors. In fact, many will never have to deal with a client service rep on the phone, but there are some things that can happen only by talking to a representative. For a portion of the DIY investor population, that translates into being forced to wait.
That said, there are indications that this is clearly an issue of concern to certain online brokerages and that relief may be on the way.
Relief for Long Wait Times
First, in an interesting interview by Preet Banerjee with BMO InvestorLine’s president, Silvio Stroescu, there were some fascinating insights on the impact of the past year on this online brokerage. According to Stroescu, the huge influx of demand for online investing accounts, as well as from investors looking to “upgrade” their accounts, took customer service wait times from an average of five minutes in early 2020 to about 40 minutes in 2021.
The numbers reported by Stroescu for 2021 are still much higher than he was happy with, and in the interview he did explain a number of steps that BMO InvestorLine is undertaking to close the service gap. In fact, as early as this past summer, Stroescu mentioned that BMO InvestorLine undertook significant hiring and ramp-up to provide additional service support. Nevertheless, the observed results of DALBAR’s numbers and reported numbers of Stroescu all point to a significant wait time for online investors calling in.
Another interesting piece of news came from Questrade, in advance of the RSP season rush, in the form of a client email. In that email, they acknowledged that “longer wait times are the norm with all brokerages at this time,” that over the past year they have doubled the number of client service specialists, and that in the “coming weeks” they are slated to add over 100 customer service agents.
Putting the Pieces Together
Clearly, there’s much to digest from the data in this year’s edition of the Canadian online brokerage rankings by The Globe and Mail’s Rob Carrick.
So much of the story that started in March of 2020 was about the volume of activity as well as the influx of individuals who wanted to trade on the market. The impact on Canadian online brokerages, in terms of service as well as stability, has been clear. The statistics point to a systemic lack of capacity to be able to address the surge in interest in online investing coupled with technology and operational shortfalls.
What, as a DIY investor, is especially worrisome about the online brokerage experience is that it has taken so long to remedy the capacity issues. Markets rely on confidence, and confidence comes from certainty. The relative stability of scores in the Canadian online brokerage space points to a “business as usual” pace that was moving far too slowly, or did not plan adequately, for the kind of strain that ultimately emerged over the past year. That said, at certain online brokerages, the persistent wait times point to a much deeper issue and lack of prioritization of client service. Conversely, some other brokerages have clearly shown the capacity to keep up somewhat reasonable wait times.
The qualitative commentary this year was in line with previous years; however, one of the great features for investors trying to get a quick answer on comparing features is toggling comparisons for key items like commission-free ETFs, high-interest savings ETFs, and performance reporting.
As much as we have said about this year’s rankings, there’s also a lot that we haven’t yet covered, including the reactions of investors to this data. This year’s rankings generated almost immediate reactions by readers, with the dominant theme being wait times at various brokerages.
With the latest rankings data in hand, it won’t just be hedge funds feeling the squeeze this year. The online brokerages in Canada now have added pressure to solve the customer service wait time issue and win back the trust of investors. Failing to do so quickly would almost certainly, at this point, raise the prospect of additional regulation and compliance to mandate accessibility and accountability.
After so many years of the markets doing well and interest rates dropping, one investor wonders in this post if a market downturn is now unlikely, if not impossible. Other Redditors share their strong opinions on whether the stock market can stay up forever.
Into the Close
That’s a wrap on just one of the several big events that transpired this past week. Looking forward, there’s a new month, which means a deals update is on its way, and there will likely be no letup from the buying army of retail investors who’ve firmly locked into all sorts of shorted stocks, including silver. Buckle up for volatile times ahead.
