Tag: Virtual Brokers

Virtual Brokers

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Online Brokerage Weekly Roundup – April 10, 2022

Change is certainly life’s only constant. And even though, historically, change has been relatively slow to take effect among Canadian online brokerages, when it does show up, the effects tend to endure. As we steer into the season of change, it seems like both the pace and breadth of change are starting to accelerate, with some remarkable developments.

In this (we’ll call it “toddler time-distorted”) edition of the Roundup, we look at an unusual pattern emerging in the deals and promotions activity at Canadian online brokerages and what it could signal for promotions going forward. Next, we highlight a new look that one online brokerage is sporting for spring, and whether it is dressed in what the cool kids are into these days. Finally, we’ll wrap up with some timely topics self-directed investors are chatting about online.

It’s Reining in Deals

And now for something completely different. At least from this month’s deals and promotions activity.

Usually around the start of each month we go through the latest deals and promotions to see what new offers have shown up and whether there are any interesting developments in the ongoing race to garner attention (and assets) from self-directed investors. This month, however, there was a signal of continued unusual activity among the Canadian online brokers that suggests there are some interesting changes coming to the way in which online brokerages create and launch promotions.

Of course, “change” is a relative term, so, before diving into what seems to be evolving with online brokerage deals and promotions, it’s useful to get a sense of what is “typical.”

Although many online investors now know that Canadian online brokerages offer deals and promotions, especially during RRSP season, that hasn’t always been the case. There was a time many years ago that most Canadian online brokerages were reluctant to use promotions and incentives to attract in new self-directed investors. Interestingly, as commission prices began to drop in a meaningful way, roughly around 2014, so too, it seemed did the resistance to trying out using offers to encourage new users to try out a brokerage.

At that time, one of the most active Canadian online brokerages when it came to special offers or promotions was Questrade – who aside from much lower commission prices than their peers – was a constant name to watch because they ran so many promotional offers. The kinds of promotions they ran ranged from various commission-free trade offers to promotions featuring a free iPad.

It was not long after other online brokerages lowered their commission prices, that one of the first big shifts in the deals and promotions activity took place: Questrade stopped offering so many promotions.

Instead of offering so many different promotions, Questrade decided to consolidate their offers and focus their promotional offers on their affiliate program and referral bonuses (and later launching TV ads). Many of the same promotions, such as their five free trades or first month free, are still available today. Regardless of the season – including RRSP season – Questrade’s strategy was still the same when it came to promotions. Namely, stick to their core offers.

It’s difficult to characterize just how significant of a shift that was at the time; however, by the time Questrade did ramp down, other online brokerages, notably BMO InvestorLine, had picked up the practice of regular promotions outside of RRSP season. In fact, since that time, BMO InvestorLine has effectively carried the torch for launching “new promotions” just about every season.

So, if there was one online brokerage in Canada that we did not expect to see a break in promotional cadence, it was BMO InvestorLine. And yet, this month that is exactly what’s taken place.

To be fair, BMO InvestorLine hitting pause on deals is not without precedent. That said, the last time they did so was near the start of the pandemic, when BMO InvestorLine’s unprecedented investor interest overwhelmed systems.

This time, however, there isn’t a rush of investors flooding the systems of BMO InvestorLine with new applicants, which begs the question, what would cause BMO InvestorLine to pause offering an already live tiered cash back promotion at a time when major rivals still have open offers?

It’s difficult to know exactly why, however, it seems that shuttering an active deal is likely the result of something abrupt instead of something planned, especially given the timing being so close to the launch of their latest cash back promotion.

Perhaps the economics of a tiered cash back offer simply don’t work for BMO InvestorLine, or perhaps the costs of running a campaign to acquire new clients exceeded the benefit those clients would bring. The latter point is one of the drivers behind online brokerages typically choosing to launch promotions during RRSP season instead of during the whole year. When online investors are “in market” for a new online brokerage or seeking to park new assets in an account, as is the case during RRSP season, online brokerages want to be as visible as possible.

That said, instead of stopping promotions outside of RRSP season, one of the strategies BMO InvestorLine has employed in the past was to raise the deposit threshold at which an individual investor could qualify for a promotion. Thus, instead of requiring a minimum deposit of $15,000, BMO InvestorLine could raise the minimum deposit to $50,000 so that only those individuals who bring the kind of value BMO is seeking qualify for incentives.

So, though speculative, if costs of a program suddenly get put under the microscope to the point that they lead to a decision to cut loose a promotion in midstream, then a good candidate reason why would be a “cost cutting” program. And for that to take place at BMO InvestorLine, a bank-owned brokerage, that is very interesting timing indeed. If, after all of the years of running this program, something fundamentally has changed (or is about to) for promotions-led acquisition, it does beg the question as to what BMO is encountering now that makes the math for promotions untenable at this time.

Though the online promotion of the deal is now gone, self-directed investors interested in the cash back promotion at BMO InvestorLine may be able to access the offer via customer service touch points (e.g. in branch) on a case by case basis. When a client is of sufficiently high value (what that value is, we don’t yet know), then they might be offered a cash back incentive.

The latest move by BMO InvestorLine to shutter an active offer is a step change for an online brokerage that has almost consistently leaned into “always on” promotions and bears a resemblance to the structural shift in promotional strategy that Questrade undertook many years ago. Unlike that decision, however, BMO InvestorLine does not have the same magnitude of affiliate channels nor social media community support that Questrade had when it decided to shift its promotions strategy.

Instead of being a leader among Canadian bank-owned online brokerages when it comes to promotional activity, it seems BMO InvestorLine is more content to run with the pack. With no other big bank-owned online brokerages currently offering cash back promotions right now, all attention for self-directed investors looking for a cash back deal on a new trading account is being directed to Qtrade Direct Investing.

The bigger consequence to bowing out of the post RRSP season promotions race may not be felt for some time but will almost certainly resurface again next RRSP season. One of the biggest benefits of an always on campaign is to continuously attract attention of investors and to be among the list of names those investors consider when the need for a solution arises. In this case, BMO stepping back simply opens the door to another lesser known or not historically active name to fill that void.

An alternate view is that online brokers may also be more willing to be agile when it comes to promotional activity. A case in point is the current cash back promotion from Qtrade Direct Investing.

Qtrade did something highly unusual at the beginning of this year by revising upward the amount they were willing to offer to new clients. They did not “set it and forget it” with the deal that launched last year but rather saw that their offer was not nearly as competitive as their peers and adjusted accordingly.

The fact that BMO InvestorLine was the only big bank-owned online brokerage in market with a cash back promotion perhaps made them realize they were overspending to acquire new clients. That they were willing to do so mid-campaign is maybe a sign of different kind of structural change: online brokerages are becoming nimbler.

This year alone we’ve seen Qtrade Direct Investing change deal amounts, BMO InvestorLine effectively shut down an already live deal, and RBC Direct Investing move around the expiry date on an unprecedented commission-free trade offer. If there was ever a case for expecting the unexpected, Canadian online brokerages seem to have made it their theme for 2022.

CI Direct Trading Sporting a New Look

Spring seems like the opportune moment for new beginnings. This month, CI Direct Trading, the brand formerly known as Virtual Brokers, officially rolled out their new public-facing website. Gone is the familiar combination of red, black and white, and instead, the new website reflects the last stage in the integration of Virtual Brokers with the CI Financial common look and feel.

While a “new” website isn’t necessarily a big step change, building a new online brokerage website in an ultra-competitive environment does present an opportunity to intentionally lean into the brand identity. Secondarily, for seasoned observers, it offers a glimpse into where the priorities are for a particular provider.

In the case of the new CI Direct Trading website, there are a number of interesting observations to comment on; however, the biggest theme that jumps out is integration.

Unlike Virtual Brokers, which was effectively a standalone online brokerage, CI Direct Trading’s new site was intended to fold the online brokerage into the CI Financial ecosystem. And, at first blush, it appears they’ve done so – perhaps too well.

In fact, in the drive to create a common look and feel between brands, the point at which CI Direct Trading starts and where CI Direct Investing stops is very blurry.

Navigating between the CI Direct Investing and CI Direct Trading is so seamless that as a user, you wouldn’t know where you are unless you look at the logo on the page, and even then, you’d have to really pay attention to the small text under the word “direct” in the logo. Recall that one of the principles of user-centred design is to answer a simple question: am I in the right place? On the new CI Direct Trading website, the answer for DIY investors in particular is unclear.

On a more nuanced note, the decision to use the names “CI Direct Investing” and “CI Direct Trading” is confusing because almost no other online brokerage in Canada uses the term “Direct Trading” in their names. Three big names in the “Direct Investing” space jump out, for example:

  • Qtrade Direct Investing
  • RBC Direct Investing
  • TD Direct Investing

Virtual Brokers used to be a direct competitor to these particular providers; however, CI Direct Investing (rather than Direct Trading) seems like it would be the place where a user would look to find a service similar to Qtrade Direct Investing, TD Direct Investing or RBC Direct Investing. Except, they would be incorrect. CI Direct Investing is more akin to a roboadvisor solution, not a DIY one.

Although it seems like semantics, in reality, the “DIY investor” industry has been undergoing its own identity crisis for the past decade. Ten years ago, the entire space was almost uniformly calling themselves “discount brokerages,” then it shifted to “online brokerages,” and now they are positioning themselves as “direct investing” solutions providers.

Why this matters so much is because when it comes to being found online, something that is exceptionally important in a hypercompetitive environment, individual investors are going to search based on what they know and think is the term they need to use in order to access the category of service providers. When the category shifts, so too does the audience searching for it.

Another interesting theme is that the new website leans heavily into the “less is more” look. There are fewer options and less text as well as clear headings so that there is less information to have to parse through on the front page. From a visual perspective, there is also a heavy presence of mobile screens, a decision that undoubtedly is intended to relate to a generation of “mobile first” traders.

In a tinge of irony, the screenshots of the CI Direct Trading iPhone app show the symbol of a well-known Canadian bank (TD) instead of using the opportunity to have the publicly-traded CI Financial ticker (CIX) on there.

Even in the app store, the Virtual Brokers legacy association is still visible too, a reminder that all brand touch points need to be considered in the rebrand process. Of greater consequence, however, is that the legacy star ratings for the app experience are likely to impact user impressions on the brand. With a 2.5 star rating on the Apple App Store for CI Direct Trading, there is much work to be done to improve the perception of the mobile app as being an enjoyable way to engage with the service, especially with the mobile-first crowd.

When Virtual Brokers was acquired by CI Financial in 2017, it was unclear what direction the popular online brokerage would go in. Fast forward to today, it is now clearer that the successor to VB, CI Direct Trading is offering many of the same features and pricing as Virtual Brokers but is wrapping itself into the CI Financial ecosystem.

It has been a relatively quiet four years since the integration was first announced but now it seems the real work will begin for CI Direct Trading to be able to tell its story to online investors (traders?) and establish its niche in a very crowded field.

If the new design is a signal they’re looking to court a younger generation of investors, simplifying the website is a step in the right direction. Clearly, though, there is much work to be done in the seasons ahead to evoke the same kind of emotion, curiosity, and enthusiasm that their direct competitors have already managed to successfully achieve.

From the Forums

Transferrable Skills

Moving day is always a chore. When it comes to moving mutual funds, however, it’s a problem that needs more than pizza to solve. One reddit user reaches out to the community of investors in this post for some guidance on how to navigate transferring away from Manulife and into a popular online broker.

Under the Influencer

A big theme among online brokerages heading into this year has been investor education. An interesting discussion emerged in this reddit post about seeking out “education” on investing and trading from a relatively well-known Canadian personal finance influencer.

Into the Close

That’s a wrap on another edition of the Roundup. If news among the online brokerage space is anything like the weather in April, it’s going to be a mixed bag of activity throughout the month. For the loyal readers that have managed to make it this far, we’re also going to be sharing more updates in the weeks ahead on the new special SparxTrading Pro and other tools we’ve been working on, so be sure to tune in for sunnier news coming around the corner. Until then, keep your powder and yourselves dry, you never know what might come up as an interesting buy.

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Discount Brokerage Weekly Roundup – January 6, 2022

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

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

Online Brokerages Review 2021 & Offer Exclusive Preview of 2022

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Themes and Memes: Online Brokerage Highlights from Q2 2021 onwards

April: In with the New

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

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

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

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

May: Statistics and Outliers

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

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

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

June: More New Features

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

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

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

July: No Strings Attached

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

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

August: Coming This Fall

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

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

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

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

September: Adding Up

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

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

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

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

October: And Another One

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

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

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

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

November: Let the Games Begin

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

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

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

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

December: Free Fallin’

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

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

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

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

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

Into the Close

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Discount Brokerage Weekly Roundup – November 8, 2021

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

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

Online Brokerage Promotions: Playing Cash Up

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

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

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

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

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

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

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

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

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

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

Flying the Nest: Online Brokerages Migrating Away from Twitter

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

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

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

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

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

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

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

From the Forums

Hold the Music

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

Character Flaw

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

Into the Close

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

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

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Discount Brokerage Weekly Roundup – October 11, 2021

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

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

Appetizing Canadian Online Brokerage Updates

BMO adviceDirect Lowers Fees to Attract New Clients

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

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

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

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

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

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

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

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

Virtual Brokers Now CI Direct Trading

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

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

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

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

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

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

Robinhood Launches 24/7 Phone Support

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From the Forums

Zeroing in on Commissions at Questrade

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

Not So Simple After All

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

Into the Close

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

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Discount Brokerage Weekly Roundup – September 20, 2021

With the Canadian federal election finish line in sight, whatever the decision, there’s likely to be a shakeup for self-directed investors and wealth management in general. It’s a toss-up, though, on whether any candidate will get more votes than Ted Lasso at the Emmys.

In this edition of the Roundup, we kick things off with one US online brokerage that continues to gain traction by listening to clients and is poised to grow with the launch of a new feature that is the envy of other brokerages. Next, we look at one Canadian online brokerage poised for a name change and potentially much more heading into the fall. Finally, we close out with some interesting chatter from self-directed investors about US-themed topics.

Interactive Brokers Positioned for Growth

Earlier this month, Interactive Brokers reported their activity metrics for August, and though they continue to show strengthening core performance stats, one figure in particular caught our attention: continued growth in new accounts.

Given that Interactive Brokers typically targets and appeals to active traders, the continued growth in new accounts despite month/month declining volume of trades presents an interesting picture. There is clearly an appeal to individuals seeking out Interactive Brokers despite them having a paid commission structure. To be clear, Interactive Brokers also has a zero-commission option called IBKR Lite; however, the majority of their trading accounts come from their paid commission structure.

As Canadian online brokerages contemplate the shift towards zero-commission trading, there might be a clear lesson to being able to provide clients with a quality trading experience that they would be willing to pay for.

New Account Growth Momentum Continues

As the chart below clearly illustrates, new account growth at Interactive Brokers has been on a bit of an upswing after bottoming out in May.

One of the reasons that traders might be turning to Interactive Brokers is because of market volatility. When markets are volatile, it tends to attract in active traders and “fast money” seekers. While it may not be predictive of a volatile turn in the market (especially since the data was from August), there’s a sense that some kind of big market downturn is nearing. Recent comments by founder of Interactive Brokers Thomas Peterffy about upcoming “compression” in the markets is also a sign that certain online brokerages are thinking about a market downturn as well.

Another factor driving new account growth could be driven by Interactive Brokers eliminating inactivity fees in July.  By preventing clients from leaving, the hurdle to positively impact net new accounts is lowered. Though Canada makes up a very small portion of the Interactive Brokers business, chatter from online investors in Canada nonetheless shows that bringing over less active accounts, such as TFSAs and RRSPs, makes more sense now that those additional accounts won’t incur inactivity fees. This fits with the view that accounts are continuing to be opened despite trading activity falling.

Cryptocurrency Trading a Catalyst for Customer Growth

Another catalyst for account growth at Interactive Brokers will likely come from their latest decision to launch cryptocurrency trading.

As we reported two weeks ago, the roll out was interestingly quiet. However, this past week, the PR machinery kicked off with the official announcement and appearance by Peterffy on CNBC.

The shift in messaging by Interactive Brokers regarding cryptocurrency trading has been interesting to watch. For quite some time, there was a notable skepticism about digital “currencies,” however, it seems that now there is a different thesis emerging: a small but important risk associated with individuals losing faith in traditional currencies.

While a billionaire is hardly representative of the mass market, it seems that he, like the clients of advisors using Interactive Brokers, wanted direct exposure to cryptocurrencies. Despite Peterffy’s deep skepticism on digital currencies, he’s savvy enough to recognize that some exposure to them is now a requirement to hedge against the scenario that confidence in traditional currencies falters. Intriguingly, Peterffy admitted that he’s been a holder of bitcoin in his portfolio for at least three years.

Interactive Brokers launching cryptocurrency trading is a very big deal for the online brokerage space.

While regulatory uncertainty may still prevent other brokerages from following suit right away, that Interactive Brokers figured out a way forward will expedite other brokerages wanting to seriously figure out how to deliver this as well. Robinhood already does; however, they have not yet figured out how to grow without attracting significant regulatory scrutiny. The experience in navigating regulatory hurdles, however, is something that may work in favour of larger and more established brokerages.

The source of interest in cryptocurrency has now gone beyond the “fast money” and extends to the “smart money” that is using exposure to cryptocurrency as a hedge. And, if Peterffy is an indicator of “smart money” then he has already validated the thesis on crypto.  

For Canadian online brokerages looking at the US market is a little bit like peering into the future. Now that the zero-commission trading trend, which emerged in meaningful way in the US in 2019, has arrived in Canada, figuring out how to generate revenues outside of commissions on equities trading will be a priority. While the focus for revenue drivers from active traders will likely still be options trading (for those brokerages that offer them) in the near term, the convenience (and temptation) of crypto exposure and trading is on the horizon.

It will likely be some time before Wealthsimple Trade, the only online brokerage in Canada that has an associated product to trade cryptocurrency, faces competition from other online brokerages on the crypto trading front. Exactly how long, however, will be tough to tell. As was the case with National Bank Direct Brokerage launching commission-free trading, competition for online brokerage market share can come from unexpected places.

Looking at the latest stats for Interactive Brokers and the launch of cryptocurrency trading as well, we anticipate there to be continued strength in new accounts heading into the end of the year. Any kind of spike in cryptocurrency prices or volatility will. The lesson to Canadian online brokerages is clear on a few fronts. Despite what personal feelings executives may harbour about crypto, the reality is clients from entry level retail investors to sophisticated ultra-wealthy clients are looking for access to cryptocurrency. And, as Interactive Brokers has shown, listening to and delivering on what clients want is a great way to keep them.

Virtual Brokers Rebranding Moving Ahead

This past week Virtual Brokers sent out a notice to clients that they will be updating their branding…soon. It’s been in the works for a while but back in May of 2020, we reported that the parent of Virtual Brokers, CI Financial, announced that they would be consolidating brands they owned (including Virtual Brokers) to a streamlined CI-containing name: CI Direct Investing. When it comes to branding, the “direct investing” label has grown in popularity, replacing terms like “discount brokerage” and “online brokerage.”

Since the mention of the rebranding in 2020, advertising and marketing from Virtual Brokers has been notably quiet. Prior to their acquisition by CI Financial, Virtual Brokers was a visible presence online and especially in the Globe and Mail online brokerage rankings.

Now that a new moniker seems imminent, we expect that regaining the spotlight will also be a part of the plan.

What the CI-branded online brokerage has in store for a big splash could be interesting, especially given the timing. While traditional advertising and marketing might generate some curiosity, in a marketplace where zero-commission trading is now a reality at National Bank Direct Brokerage and Desjardins Online Brokerage and, to some extent, Wealthsimple Trade, getting noticed is going to have to come along with a hefty promotional offer and/or lower commission pricing.

In terms of timing, CI will not want to miss the opportunity to challenge other online brokerages this RSP season, the marketing ramp up to which typically starts in October and November. Already it’s shaping up to be a busy season.

Earlier this year, Qtrade Direct Investing also launched a significant rebranding effort and heading into RSP season they will likely be looking to make a bolder move to advertise to Canadian investors. We noted in an interesting reference to Qtrade Direct Investing’s new marketing strategy that their new agency, King Ursa, has a campaign scheduled for launch in November.

And, on the deals and promotions front, Wealthsimple Trade recently announced that they’re not doubling but tripling down on their referral program, offering triple the stock rewards to encourage new accounts to sign up.

While Virtual Brokers was a well-known name to the investors and traders, CI Financial’s move to rebrand under the parent entity makes a lot of sense for the long run. For their part, CI has been aggressively growing and it’s clear they’re not afraid to think big or punch heavy. With $320 billion dollars of assets under management and annualized revenues of $2 billion dollars, the CI brand brings with it much more financial horsepower than the Virtual Brokers brand alone ever could have.

There’s also another picture emerging too, based on the strategy to globalize their brand, which could see CI setting itself up to take some of its digital and direct investing/trading capabilities further than just Canada. Their aggressive moves to acquire US wealth management firms could be setting the stage for a wider push beyond Canada, and the digital platform could set CI Financial up to challenge online brokerages there too. After all, PayPal recently reaffirmed its commitment to roll out stock trading to its clients in the US, so there are still financial services providers willing to bet on direct investing as a way to gain or keep market share.

It won’t be too long before we see what the formal roll out for the new Virtual Brokers will be. Based on the recent developments across the self-directed investing space in Canada, we’re betting we won’t be able to miss the launch, and neither will Canadian online brokerages.

From the Forums

Taste Tested

The rumour mill keeps swirling around US-based online brokerage Tastyworks coming to Canada. In this post on reddit, find out what investors had to say about the potential arrival and the long wait.

Wealthsimple Trade USD…Coming Soon?

Also from the rumour pile, this post from reddit caught our attention regarding a highly sought-after feature from Wealthsimple Trade: USD accounts. Along with a potential update on the timeframe, the fact that the post was written by someone already transferring away from Wealthsimple was fascinating – especially in seeing what Wealthsimple is doing to get people to stay.

Into the Close

That’s a wrap on another eventful week. Technically this past week did feature an official announcement from Desjardins Online Brokerage lowering their commissions to zero, so the conversation around prices dropping for self-directed investors continues. It’s going to be a wild week of earnings announcements and now that the dominoes have started to fall with regards to commission pricing, it’s going to be anybody’s guess as to what online brokerages in Canada start doing heading into the end of the month. Hold on tight.

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Discount Brokerage Weekly Roundup – June 14, 2021

Taking a Moment

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.

Please take a moment and either watch or read about this family.

All of us have a part to play in looking out for each other.

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.

FirmMoneySense PointsMoneySense Rank
Questrade361
National Bank Direct Brokerage312
TD Direct Investing253
Qtrade Direct Investing224
BMO InvestorLine95
Scotia iTRADE66
RBC Direct Investing57
Desjardins Online Brokerage48
Wealthsimple Trade48
Virtual Brokers48
Canaccord Genuity Direct48
CIBC Investor’s Edge212
HSBC InvestDirect113
Laurentian Bank Discount Brokerage014

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.

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Discount Brokerage Weekly Roundup – May 31, 2021

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.

BMO InvestorLine Launches Commission-Free ETF Trading

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.

News started to spread among DIY investors that BMO InvestorLine has launched commission-free ETF trading for a list of 80 ETFs.

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.

The latest landmark data release to launch (publicly) occurred last week, when J.D. Power released the 2021 edition of their Self-Directed Investor Satisfaction Study for Canadian online brokerages.

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
20202021
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 Brokerage654
Questrade645
RBC Direct Investing615
BMO InvestorLine607
Desjardins Online Brokerage599
TD Direct Investing591
CIBC Investor’s Edge585
Scotia iTRADE576

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:

BMO InvestorLine Now Offering Commission Free ETFs (reddit)

Zero Commission ETFs (Financial Wisdom Forum)

Commission Free ETFs at BMO Investorline (Red Flag Deals)

Commission-Free at Last

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.

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Discount Brokerage Weekly Roundup – May 17, 2021

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.

Reviewing Online Brokerage Pricing: Latest Rankings Challenge Perceptions of Low-Cost Online Trading

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:

  1. Equity trades
  2. Options trading commissions
  3. ETF commissions
  4. Data costs
  5. Account interest rates
  6. 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:

  1. 0-4 trades
  2. 5-9 trades
  3. 10-33 trades
  4. 34-49 trades
  5. 50+ trades

Results & Analysis

The table below shows the rankings of all the Canadian online brokerages measured as part of this study.

RankOnline BrokerageScore
1National Bank Direct Brokerage93%
2*Wealthsimple Trade86%
3Desjardins Online Brokerage83%
4HSBC InvestDirect77%
5CIBC Investor’s Edge76%
6Qtrade Investor (now Qtrade Direct Investing)61%
T-7RBC Direct Investing54%
T-7Scotia iTRADE54%
T-7Laurentian Bank Discount Brokerage54%
T-10TD Direct Investing53%
T-10BMO InvestorLine53%
12Virtual Brokers50%
13Questrade45%
14Canaccord Genuity Direct42%
15Interactive Brokers22%

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!

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Discount Brokerage Weekly Roundup – April 19, 2021

Apparently, stock markets are not sheepish about sounding like a broken record, especially when they’re breaking records. Yet another week has gone by, and with it, stock markets continue to press higher, appeasing the bulls, unnerving the bears, and delighting online brokerages.

In this edition of the Weekly Roundup, we take a deep dive into the big news from the past week: a major rebrand of one of Canada’s most popular online brokerages: Qtrade. Dig in to learn about the updates to the brand, and what it means for DIY investors and online brokerages in Canada. Also on the menu for this edition, interesting chatter from the investor forums.

Qtrade Charts a New Course for DIY Investors

This past week, a lot of things changed about Qtrade, one of Canada’s most popular online brokerages. Specifically, they launched a major brand overhaul, which included a new logo, new colour and design schemes, and an update to their website. They also changed their name to Qtrade Direct Investing.

While these substantial changes are visually apparent, there are also subtle changes that have taken place. When analyzed in conjunction with one another, these big and small changes paint a very interesting picture of the new direction for Qtrade, and potentially for the Canadian online brokerage industry as a whole.

New Logo, New Identity

Though there are over a dozen different online brokerages in Canada, they all face the same problem: standing out.

Advertising and marketing have been important tools to help online brokerages in Canada get onto the radar of investors, however, the reality for many DIY investors is that price often becomes the most important differentiator between online brokerages. Now that most online brokerages offer trading commissions at about the same price, communicating what makes an online brokerage special or unique is becoming increasingly important.

Beyond pricing, one common way to segment the Canadian online brokerage space is into “bank-owned” online brokerages and “independent” online brokerages.

Why this matters so much for Canadian online brokerages is because the same thing that is an advantage for bank-owned online brokerages, which is the affiliation with the larger parent bank brand, is also a limitation when it comes to leading change and innovation. The criteria, such as convenience or perceived security, that bank-owned online brokerages tend to have associated with them are not necessarily things that can be evolved quickly.

As a result, the larger online brokers have many more moving parts to coordinate, so change can almost by definition only happen slowly and, in many cases, reactively.

For independent or non-bank-owned online brokerages, however, the advantage to being small(er) and potentially more focused on online investing is that innovation and change can happen more frequently. Accordingly, the features can be tailored specifically towards DIY investors without running afoul of other considerations of the parent brand – such as banking or lending products, or even other investment services (such as mutual funds).

As such, for Qtrade, the launch of a new brand identity – including a new logo – is an opportunity to reaffirm to the market of DIY investors what is special about their brand, and to position themselves for a new vision of the future.

Breaking Bored

In an industry that is increasingly viewed as a commodity, standing out is not only important, but arguably vital. Big bank-owned brokerages are associated with boring because that’s generally what older online investors have valued: stability. What new entrants, like Wealthsimple Trade, and even edgier independent online brokerages like Questrade have shown, however, is that a newer DIY investors are paying attention to innovation.

Loyal, excited clients have to see the value in the brand and they have to connect emotionally with the brand. Typically, however, this kind of excitement is driven by online brokerages who can deliver a stable trading experience and strong value (read: low trading costs).

In the current landscape of Canadian online brokerages, it is hard for most DIY investors to be aware of more than a handful of providers, let alone know what the corporate branding looks like or get emotional about it.

Instead, most online investors tend to be aware of online brokerages by name only – whether that be by parent brand affiliation (such as a bank-owned online brokerage) or the name of the online brokerage directly.

With those challenges in mind, the new Qtrade logo and brand identity appear to position them to look bold and distinct. Their choice of colours, and even the logo itself, are very different to what is “traditionally” seen among their competitors. This makes Qtrade immediately striking.

The new Qtrade logo focuses on their core brand name, Qtrade – something we’ll touch on in more detail below – which is crucial to existing clients and existing DIY investors who would or should know the name. Gone from the logo, however, is the word “Investor,” which has also been dropped as part of their new name update.

Another interesting feature of their logo is that it progresses up and to the right – something that is very noticeably different than other online brokerage logos which move horizontally from left to right. The direction of moving up and to the right is incredibly meaningful to online investors, as that is the general direction that most investors want to see the progress of their investments move in.

Finally, the fact the new logo presents the word Qtrade in all caps instead of just capitalizing the first letter the way the previous logo did, ties together the whole brand name and subtly elevates the word “trade” to new prominence.

The new Qtrade logo communicates confidence and is thoughtfully designed with features that speak to the online investor experience. No longer is it just about the “Q”, which encircled the previous logo, but rather where the brand can potentially take an investor.

It is this last point that really drives home the power of what a logo can communicate without needing to deconstruct it in a (*cough*) long post. The visual medium communicates information more quickly and impactfully than processing words can. And, in a world where interactions take place in fractions of a second, the new Qtrade logo is able to communicate a lot because of the way it has been designed.

New Colours

Another related component to the new Qtrade brand identity is the colour palette. If it was Qtrade’s goal to stand out from their peers with the use of colour, then it’s safe to say they have achieved it.

Their use of vibrant colours sets them apart completely from many of the colours that dominate their financial service competitors, and the colours that comprised their previous brand identity.

Most of the colours used by Canadian online brokerages are green, red or blue, however Qtrade’s use of dark pinks, mandarin orange, and lime green against the dark backgrounds (blues and grey) instantly communicate something bold and noticeable.

While there is a lot that could be said about psychology of colour that would be relevant to this rebranding of Qtrade, the most important point is that the new colour palette differentiates Qtrade from their online brokerage competitors and on a more subtle level, the vibrancy of colour choices is not meant to communicate “calm” but rather something quite opposite – and rare in finance – “excitement.”

New Website

The next major components to unpack are the changes to the Qtrade website.

If the new site feels like the difference is “night and day,” it’s because the updated website has a dark mode feel to it, in stark contrast to the previous site, which used white as a background.

Some noteworthy items dropped from their previous website include:

  • removing the photos and imagery
  • removing the financial data ticker with different market indices

But the most interesting change, aside from the visuals, is the absence of pricing. There are no longer commission prices or commission-free ETFs prominently displayed (or displayed at all) on the homepage.

Instead, the focus of the new homepage is on the key value drivers they want to present going forward. The top three for now (presumably because they are mentioned on the homepage) are:

  • Industry-leading tools
  • Award-winning platform
  • Canada’s best support

Further, there are short but meaningful explanations for investors of different experience levels that are featured prominently on the homepage.

Compared to the websites of their peers and against the previous version of their own site, the new Qtrade website has struck a balance between having fewer items on their website that don’t directly communicate what they do, the features/benefits of their platform, and wandering entirely into the minimalist design. Again, psychologically, it seems like a great deal of thought went into positioning Qtrade as a brand that exudes and communicates confidence, and the new website ties this together really well.

Another notable difference is the age and diversity of the individuals in the imagery chosen for their photos. While there is still a reliance on stock photographs, it appears that these images are more reflective of the diversity of their client base as well as from an age point of view, an indication of who they are hoping to resonate with: a younger investor.

What’s in a Name?

The new look and feel of Qtrade also features a new name. Qtrade Investor has now officially become Qtrade Direct Investing.

While changing colours and logos are big decisions on their own, changing the name of the brand is also a very big decision, especially given the fact they’ve had their name for 20 years and have earned a significant amount of media coverage with it. Thus, dropping or changing the name Qtrade to something else seems like it would be a tough sell.

That said, Qtrade has also, for better or worse, often been confused with Questrade, the other online brokerage in Canada that starts with a Q and has “trade” in the name. So, despite the rebrand efforts, abbreviated discussions (like the kind that happen on social media or reddit) will likely still result in some confusion.

Choosing to drop “Investor” and replace it with “Direct Investing” is a curious decision from a branding perspective, however.

On the one hand, “Investor” does imply a certain type of personality – perhaps a “buy and hold” type – something that is at odds with the future direction that Qtrade wants to move towards. That future, it seems, would favour individuals who have the confidence to “trade” rather than those investors who might remain passive and “do nothing.”

On the other, if there was some brand confusion before, adding “Direct Investing” to the mix may also run the risk of confusing DIY investors since there are already two big bank-owned online brokerages (TD Direct Investing and RBC Direct Investing) that use the “direct investing” label, as well as smaller brands CG Direct (Investing) and CI Direct Investing (that’s also going to be very confusing for DIY investors when that shift takes place for Virtual Brokers).

Thus, while Qtrade’s brand refresh is intended to have them stand out, by virtue of their name, it seems like Qtrade is going to be sometimes confused with other “direct investing” providers and still with Questrade. As an aside, the move to “direct investing” as a name to describe what online brokerages do, also suggests a continued move away from “discount brokerage” or “online brokerage,” which is potentially something we may see other online brokerages adopt – especially now given Qtrade’s name update.

Why Qtrade’s Rebranding Matters

Clearly, rebrands are a big undertaking with significant investment required to make the kinds of changes that Qtrade Direct Investing has. The simple question, it seems, is why? In particular, why now and why to this degree?

One possible answer is competition.

While competition among Canadian online brokerages is not as fierce as it is in the United States, there are, nonetheless, several firms that are consistently active when it comes to updates and improving their position in the market. Qtrade is definitely one them.

Regardless of their platform or website front end, Qtrade has been one of the few online brokerages in Canada that has kept itself in the spotlight, primarily by winning or earning recognition from various online brokerage reviews.

Given that rebranding is a decision with a timescale of years, however, it seems that winning top billing in the limited number of online brokerage reviews in Canada isn’t going to be enough to carry the brand forward into the future.

With so many online brokers in Canada, and even more on the way, the reality is that one of the biggest challenges to the online brokerages is figuring out how to stand out.

By changing their name and visual identity, Qtrade Direct Investing is signaling they are embarking on a new direction for their business. Their bold colour palette, excited tone, and increased inclusion both from a diversity standpoint and with younger investors in their imagery, means that Qtrade is focused on appealing to a new cohort of investors who represent the future of Qtrade Direct Investing.

The decisions to include emotion and excitement in the world of finance is a signal that financial services brands need to appeal to novelty rather than history. It doesn’t seem to matter to younger investors that an online brokerage may be new, but rather that the client experience be easy and fast.

The first impression of the digital touchpoint will be formative, so the new front end of the brand needs to be striking and memorable just to establish relevance in otherwise noisy world.  The fact is, a lot of online investors will start their journey either with their own bank-owned brand (out of convenience) or will look to the conversation online, especially in forums and social media more so than in traditional media – such as a magazine or newspaper (even an online one). As such, rankings and ratings won’t be enough. Investors will need a reason to get excited about Qtrade Direct Investing (or any other online brokerage).

Despite the amount of time and effort that has already been invested in crafting the next chapter of the Qtrade story, the reality is that a lot more work lies ahead of this online brokerage to win the attention and accolades of online investors in the places that those investors consume content.

It seems clear that for the time being, Qtrade wants to shift the conversation away from pricing and towards features and client experience, two areas in which they are competitive. To do so successfully, however, Qtrade will have to put itself on the radar of those DIY investors for whom those other features matter. For that reason, we expect to see a ramp up of activity across content and marketing channels to reach investors and amplify the new brand direction of Qtrade.

There is a lot more to dig into with regards to the Qtrade Direct Investing rebrand, however, given their perennial appearance in the online brokerage rankings, it is safe to assume that their competitors are paying close attention to this development at Qtrade.

The shift in tone and design towards building a more emotional connection with users is something other online brokerages will undoubtedly look to emulate as a result of this latest brand relaunch by Qtrade. As such, there will certainly be more to say about the consequences of this rebranding effort, including how DIY investors and competitors ultimately react to an online brokerage that is turning the energy level up.

From the Forums

Off the Charts

Active DIY investors are always on the lookout for charting tools, however, not all Canadian online brokerages offer them at a competitive price. In this reddit post, some DIY investors have found a clever solution to get their chart fix.

One Trade to Rule Them All

When it comes to passive investing, the ideal approach is “set it and forget it.” In this post, one online investor was looking for a single investment to make that would take the work out of DIY investing, and it seems that redditors were able to provide a suggestion.  

Into the Close

That’s a wrap on a big week. Markets aren’t the only things flying higher and online brokerages aren’t the only ones launching things: the first ever helicopter flight is set to take place on Mars. While we’re certainly facing our own share of struggles here on Earth, it’s great to have a reminder that there’s still lots of opportunity to celebrate. Hope your week is out of this world!