If the world were to go to hell in a handbasket, the market would respond by going bullish on basket makers and transportation. Such is the lens of a trader. Despite the volatility and uncertainty attached to a Trump presidency, the sell-off in the moments following the Trump election quickly corrected by the time markets opened. For observers of the market, it was a unique lesson in how quickly the great voting machine that is the stock market can recalibrate to figure out where the opportunities lie and where they don’t. What does a ‘Trump’ world look like for Canadian online brokerages and DIY investors? There may not be a simple answer, but the simple lesson seems to be: be prepared for the unexpected.
In this week’s roundup we take a closer look at the latest Canadian discount brokerage to bring a referral program to back online and how it stacks up to offers currently in play. From there we’ll take a look at one non-bank owned brokerage and how its latest set of features are making it more competitive. To round out this week, we’ll take a look at the latest tweets from investors and what forum users were chatting about.
Virtual Brokers Casts a Vote for Friendship
After a break of several months, the refer-a-friend promotion from Virtual Brokers is back on the list of active deals being offered. With the relaunch of this referral program, Virtual Brokers joins three other online brokerages (Questrade, Scotia iTRADE and BMO InvestorLine) that offer some kind of referral program bonus for both the new enrollee as well as the individual who made the referral. Interactive Brokers, another popular online brokerage, does offer a referral bonus but only to the individuals making the referral, not to the individual enrolling for a new account.
Of the group of referral offers, Virtual Brokers’ minimum requirement of a $5,000 deposit is second behind that of Questrade’s and significantly lower than that of either Scotia iTRADE (minimum requirement of $10,000) and BMO InvestorLine (minimum deposit of $50,000). Like offers from Questrade and Scotia iTRADE, Virtual Brokers’ referral plan offers an increase in cash-back reward for higher deposit levels.
Key differences in the refreshed version of their cash back promotion include offering up more money and an additional deposit tier. While the previous promotion offered two tiers, the new referral structure offers 3. The tiers of Virtual Brokers’ new referral plan range from between $5,000 to $24,999 ($25 bonus given), $25,000 to $49,000 ($50 bonus given) and $50,000+ ($75 bonus given). For the individual doing the referring, the amount they receive for each referral ($25) remains unchanged as does the additional amount for every third referral ($50).
Of course, like any offer, it’s important to look closely at the details to see exactly what’s on the table. For the Virtual Brokers referral offer, there are some important caveats.
First, the referral can only happen between friends or family which are defined as follows:
“A friend, for the purposes of this offer, is someone with whom you have a personal relationship. A “personal relationship” is defined as a relationship between two people who have had direct, voluntary two-way communications where it would be reasonable to conclude that the relationship is personal.”
“Family relationship” for the purposes of this offer sharing is a relationship between two people related through a marriage, a common law partnership, or any legal parent-child relationship, who have had direct, voluntary two-way communications (sic)
Of the different referral programs offered by Canadian discount brokerages, only Virtual Brokers and Scotia iTRADE explicitly define the terms “Friend” and “Family relationship” and both use the same definition as part of the terms and conditions. By comparison, neither Questrade nor BMO InvestorLine make this distinction a part of qualifying for their referral programs.
Another important detail for this offer is that referral amounts will be deposited into the referring parties’ margin accounts by March 31, 2017. Between now and that time, the individuals receiving the referral have to keep their account in good standing (i.e. no margin calls) and the referee also has to ensure a minimum qualifying balance is maintained.
Third, similar to the conditions stipulated by Scotia iTRADE, this referral offer is not open to residents of Manitoba or Quebec. Curiously, neither Questrade nor BMO InvestorLine have these geographic restrictions in place.
So how do the referral offers stack up with one another?
From the graphic shown below, what DIY investors receive as part of their participation in a referral program depends on what they deposit.
Of the four Canadian discount brokerages offering referral programs, Questrade is offering the most to DIY investors and their friends, across all deposit tiers up to the $50,000 mark, where they are tied with Scotia iTRADE.
In the $1000 to $4,999 deposit range, Questrade’s referral bonus stands uncontested.
For Virtual Brokers, the table above shows that they appear to be competing more closely with bank-owned brokerages rather than going toe-to-toe with Questrade’s amounts, even though the payout structure to referrers is identical to the Questrade model.
Finally, what this chart also shows is that BMO InvestorLine, regardless of the deposit tier, is not really interested in attracting deposits underneath $50,000 and is not prepared to offer up what other brokerages are in terms of a referral bonus offer. The one caveat to that is that unlike other brokerages, BMO InvestorLine allows their referral bonus to be combined with another promotion – which at this time only includes an offer that requires a minimum deposit of $100,000 to qualify.
The addition of a new deal into their list of offerings puts Virtual Brokers back on the board for referral offers and gives DIY investors looking for an online trading account one more potential reason to consider starting out with Virtual Brokers, an advantage over the 8 or so other brokerages not offering a referral-based sign up bonus.
From a business perspective, offering a referral bonus makes quite a bit of sense in that referral plans help Virtual Brokers fix their cost of acquiring a new client. In a marketplace that is so competitive, every new client matters and how much it costs to get that new client is increasingly becoming more expensive. Added to that, the fact that the offer is a cash-back promotion rather than a commission-free offer makes it significantly more appealing to DIY investors hunting for a deal.
Ultimately, whether someone wants to recommend a brokerage to a friend or family member comes down to how well a brokerage is doing its job. While enticing, the referral amounts are not set nearly high enough to have someone put their own reputation on the line for a substandard experience. So, while setting up a referral program is a good first step to growing a client base, the success of that program will depend on how great an online brokerage makes its existing customers feel.
Back the Feature with Qtrade
Over the past several weeks, Qtrade Investor has been rolling out new features and pricing changes that signal they’re committed to evolving their offering to DIY investors. In last week’s roundup, several of their feature ‘enhancements’ were referenced, notably their expansion of the list of commission-free ETFs as well as improvements to the online user experience.
A few more features that warrant a mention include their dividend reinvestment tool that simplifies setting up dividend reinvestment strategies as well as additional Morningstar ratings categories for ETFs and mutual funds based on sustainability, which were launched in March of this year.
Another interesting development at Qtrade Investor is the lowering of the threshold to qualify for a transfer fee credit (up to $150) from $25,000 down to $10,000. Although not stated on the website, representatives from Qtrade have indicated this offer is open until the end of December. This update to their transfer fee promotion positions them atop the transfer fee offer group, ahead of second place RBC Direct Investing who requires a minimum transfer amount of at least $15,000 to be eligible for their transfer fee credit and well ahead of the standard amount of $25,000.
Looking at the big picture for Qtrade, with this long list of features, they are working to remove the ‘friction’ involved in becoming a client.
The combination of lowering pricing, expanded product selection (ETFs), improving accessibility to their platform, both in terms of technology (via mobile trading), as well as by implementing steps such as the transfer-in credit referenced above, mean that over the past year, Qtrade Investor has managed to make big strides in staying competitive with the larger bank-owned brokerages as well as their non-bank owned peers. While not calling out a winner in the upcoming online brokerage rankings, these elements certainly make Qtrade Investor seem like they’re going to finish 2016 much stronger than when they started.
Discount Brokerage Tweets of the Week
As this week’s election has proven, Twitter can spell the difference between election glory or defeat. For Canadian discount brokerages, this past week spoke volumes in terms of what prompted users to speak up and speak out about. Mentioned this week, CIBC Investor’s Edge, Questrade, Scotia iTRADE, TD Direct Investing and Virtual Brokers.
From the Forums
TFSA trading
When is a trade not a trade? It’s a fine line to walk for those actively trading their TFSA accounts – something that is the source of a great deal of controversy. In this post from reddit’s Personal Finance Canada section, more than a few users chimed in to help provide their perspective and learning on when trading in a TFSA might not be so tax-free after all.
Into the Close
That’s a wrap for this week. If ever there was a TGIF card to play, it is definitely going to get played here. Of course, while it would be easy to recoil into sports, Netflix or some other well-deserved distraction, today more than any other it is important to remember and honour the sacrifice and service of the many men and women who helped fight for the freedom, democracy and way of life we enjoy in Canada. Thank you to our veterans and to those unsung heroes working to keep Canada safe and welcoming.
Patience is a virtue. Or for some, it’s a way of life. Cubs fans can finally celebrate winning the world series, somewhat ironically on a week when market bears were also cheering their recent victories. For Canadian discount brokers, more than a handful have decided that they’re done playing the waiting game and are going to be chasing the prize of getting new clients as we head into the final stretch of 2016.
Heading into the unofficial ‘Halloweekend’, just one small piece of news from the US was enough to spook the markets. Investors were left trying to figure out if the latest news on the US presidential race was more trick or treat. Of course, not everything coming out of the US this past week was doom and gloom, especially for a pair of online brokerages.
Well it has certainly been a week to remember. Not so much for what happened in the markets but rather for what happened around them and what this weeks events may do to markets everywhere. While the presidential debate or the loss of championship run were big news, perhaps the biggest news is the major outage of some of the world’s biggest websites because of exploits in technology. Heading into the weekend, it is a stark reminder that with more of the world moving to online, technology is not without its risks.
Like the Toronto Blue Jays’ bats, fall colours are also in full swing. As we head into the halfway point in October this edition of the roundup has an equally interesting feature – something that all Canadian online brokerages are going to want to tune into.
It’s been a tough week for some birds. Turkeys have seen their number come up, the blue bird of Twitter has seen its number go down, and for Orioles, orange was the new eliminated. Of course, there’s still one cuckoo left set to take the stage on Sunday. Thankfully, the Canadian online brokerage space hasn’t gone to the birds – in fact, far from it. There have been lots of (good) surprises to chirp about.
There are busy weeks and then there are busy weeks. With all the news focused on the debate between Clinton and Trump, it’s kind of difficult to remember that the world doesn’t revolve around those two. Of course, those two are fighting it out to get attention (the good kind anyway) which is a fight all Canadian discount brokerages know about all-too-well.
For Isaac Newton a falling apple sparked inspiration about gravity. For traders and investors this week, Apple defied gravity and seemed to spark a rally in a falling market. The lesson seems to be clear: don’t fight the obvious. Markets for DIY investing are clearly giving signals to Canadian discount brokerages and this week it was interesting to see which brokerages are making moves to be on the right side of the next big thing.
