Tag: Wealthsimple Trade

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Discount Brokerage Weekly Roundup – December 13, 2021

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

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

Wealthsimple Trade Launches SaaSy New Subscription

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

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

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

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

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

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

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

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

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

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

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

2021 Online Brokerage Rewind: Part 1

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

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

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

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

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

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

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

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

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

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

From the Forums

Fees Squeeze

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

On Better Terms

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

Into the Close

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

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Discount Brokerage Weekly Roundup – December 6, 2021

And just like that, there are less than 19 days until Christmas (fewer if you aren’t reading this on Monday). This past week and year have seen more twists and turns than a pack of Twizzlers, but either by design or some kind of pleasant surprise, stock markets appear to be pricing in better times ahead – at least for some.

In this edition of the Roundup, it seems that gifts for self-directed investors are arriving in time for the holidays (no chip shortage here!). Read on for more insight into some big online brokerage deals and possibly bigger savings coming for self-directed investors into this cycle of RSP season. Next, we preview the upcoming edition of the Sparx Trading exclusive, Look Back / Look Ahead. Be sure to check out the teaser for interesting perspectives on what we’ve seen from brokerages participating this year. As always, we’ve included some banter from the forums to capture the sentiment from the past week.

Deal-cember: Big Savings for Self-Directed Investors this RSP Season

The number of deals and promotions that tend to show up around this time of year are driven by the interest in the TFSA and RSP contribution deadlines.

There’s fairly reliable data (see below) that shows that Canadians start asking more questions and inquiring about these investment vehicles at about the same time each year; however, it’s clear that the volume of searches on a relative basis favours RRSPs vs TFSAs. Not surprisingly then, the savvy Canadian online brokerages tend to time their promotions for opening new accounts or adding more funds to existing accounts around the same time as well.

What is interesting to compare with the current list of promotions is the expiry dates. Given that the RSP contribution deadline to qualify for the 2021 tax year is March 1, 2022, there are several online brokerage promotions currently running that are timed to expire at around that date. Notably, cash back promotions from TD Direct Investing, CIBC Investor’s Edge and Qtrade Direct Investing – all of which launched in November – are set to expire in the new year. In contrast, the cash back promotion from BMO InvestorLine is set to expire at the end of December, and the commission-free trade deal from HSBC InvestDirect is also set to expire at the end of 2021.

Why these dates matter is because if we look to last year, both BMO InvestorLine and HSBC InvestDirect ran cash back promotions heading into the RSP contribution deadline. Further, RBC Direct Investing and Scotia iTRADE were also on the list of online brokerages offering cash back (or combined cash back and commission-free trade) promotions.

So, as busy as the deals and promotions section is, there is certainly potential for more activity as we progress through December and into January if last year is any indicator.

At this stage of the year, however, it appears that the big bank-owned brokerages are the most aggressive in competing for new business. In particular, TD Direct Investing appears to be on the hunt for new accounts with the largest cash back amounts for deposits ranging from $1,500 to $49,999. This isn’t typical territory for a bank-owned brokerage to look to take a lead in; however, these are clearly not typical times.

Currently, TD Direct Investing’s offer outcompetes Questrade’s referral promotion (which is the only way to get a cash back bonus) at the sub $10K mark. And, in comparing the online brokerage promotions available at this time last year there are some even more startling developments. As seen in the chart below, TD Direct Investing dropped the minimum deposit threshold to qualify for a cash back promotion by 90%. Similarly, BMO InvestorLine and Qtrade Direct Investing also dropped the minimum requirement to qualify by 50% and 40%, respectively. So, while the cash back amounts have stayed relatively the same – or proportionately lower in the case of BMO InvestorLine – the deposit amounts required to qualify for those bonuses (i.e. the hurdle to qualify) has significantly decreased at three of the four online brokerages currently offering cash back promotions.

While no online brokerage aspires to have to spend heavily to acquire new clients, the reality is that when the largest online brokerage in Canada makes such an aggressive move, other peer firms are almost required to follow suit.

Aside from the published deals, it appears there are also very aggressive commission-price lowering efforts happening behind the scenes. While we typically don’t report on rumours, we’ve seen and heard reports of commission prices being lowered at CIBC Investor’s Edge and TD Direct Investing with rates going down to $2.95 to $4.95 per trade. Usually, this kind of price adjustment would be negotiated for very active traders. Now, it appears to be spreading to higher value accounts, which suggests it is a matter of time before a bigger public announcement takes place for commission drops.

All told, it appears that the online brokerage industry in Canada is at a tipping point heading into the next RSP season.

Deals and promotions activity is once again active; however, the fact that promotional offers are being led by the largest player in the space (right now) indicates that they are starting to play offense rather than simply position themselves according to their popularity. TD Direct Investing didn’t have to drop their cash back offer qualification rate for the same offer rate they were giving out last year; however, the fact that they did indicates they felt the need to.

One of the biggest catalysts, we suspect, is commission-free trading available at National Bank Direct Brokerage. Further, the cash bonus from Wealthsimple Trade and Questrade’s continued rise in popularity are additional factors that sway investors with sub-$15K amounts to deposit. With three quarters of the current cash back promotions now having offers for investors with $15,000 and half of the cash back promotions offering promos for investors with $10,000, we might be witnessing a trend by the larger or more established players to revisit their offerings in this segment of the market.

Additional threats to the incumbent online brokerages include newcomers, such as Mogo Trade, Tastytrade, Tradezero, and Free Trade to name a few, all of whom are promising to bring with them commission-free stock trading. At least two of those firms have stated that they will be looking to launch in 2022, if not sooner.

The takeaway is that there are likely to be some interesting offers coming to market for self-directed investors, especially between now and the first few days of January 2022. We expect there to be lots of investment by online brokerages to try and advertise these offers so it may not come as a surprise to see more than Questrade commercials show up from now until the end of February. This, perhaps more than in years’ past, December is really the most wonderful time of the year – especially if you’re looking to open an online brokerage account (or are considering switching online brokerages).

Getting Ready to Look Back, Can’t Wait to Look Ahead

The end of the year is just around the corner, and with it comes a slew of enjoyable traditions. It’s been a tremendous year for the self-directed investing space here in Canada, and with so much having taken place, it’s hard to keep track of everything that’s happened. Or at least it would be much harder were it not for the upcoming issue of the Look Back / Look Ahead magazine.

We’re thrilled to be launching this upcoming issue which features submissions from some of the leading online brokerages in Canada. This issue is currently in production; however, it provides some very rich insights into how the past year played out for Canadian online brokerages and highlights how big shifts in the industry, such as the flood of new investors or the launch of commission-free trading, have impacted firms in different ways.

One of the biggest draws of the magazine is to see what self-directed investors can expect from different Canadian online brokerages in the year ahead. And, there are some very interesting announcements we think are going to continue to shape the industry – especially as more competition enters into the market. From hints on pricing to innovative new ways for investors to get greater value out of their relationship with an online brokerage, some big changes are set to make landfall in early 2022.

Of course, it’s hard for anyone (as we know) to stay on top of developments and feature launches. That said, it’s also a challenge for the online brokerage industry in Canada as a whole to communicate what they’re up to. While press releases remain a mainstay for big feature announcements, we believe that a series of small announcements tend to accrue more value over time with DIY investors. Activity is certainly a marker of progress, however, so too is transparency in communication.

As we noted in a Roundup last month, we’ve seen communications strategy at Canadian online brokerages shift, especially on platforms like social media. Several once-active online brokerages, it seems, have run out of things to talk about or have opted to not say much in places that investors would frequent.

Thus, it is a bit of a paradox as 2021 draws to a close. Despite having more options for finding out information about online brokerages, it is increasingly more challenging for self-directed investors to find well curated and in-depth content about those brokerages.

The Look Back / Look Ahead is therefore a unique opportunity to get direct information from Canada’s online brokerages that would not necessarily be as easy to find anywhere else. It also helps to serve as an indicator of the online brokerages we can expect to hear and see more about heading into 2022.

From the Forums

Paid to Wait, Eh

Patience in the stock market can pay dividends, literally. For one Canadian self-directed investor, the recent news of dividend hikes at major Canadian financial institutions was confused when those hikes hadn’t yet been updated in a popular Canadian ETF, XIU. See what fellow investors had to say in this post about the pace of dividend updates and the virtue of patience.

Waiting on the Edge

The old adage of time equaling money is something that eventually comes home to roost for online investors who have to spend a lot of time waiting on customer service lines. Although it was a big issue early on in the pandemic, wait times appeared to recede to more “normal” levels. So, it was interesting to see this post on reddit from one self-directed investor who experienced an unusually long wait time and had lots of time to write a review and contemplate alternates.

Into the Close

If 2021 wanted to keep things interesting for everyone on its way out the door, it is certainly doing a good job of that. With just a few weeks to go, self-directed investors are getting into planning mode, with tax-loss selling, harvesting of gains, and culling of losses all on the docket heading into the home stretch of the year. Of course, when stocks are done for the week, there’s always crypto dipping to keep things interesting over the weekend.

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Discount Brokerage Deals & Promotions – December 2021

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

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

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

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

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

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

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

Expired Online Brokerage Deals

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

Extended Online Brokerage Deals

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

New Online Brokerage Deals

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

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

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

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Discount Brokerage Weekly Roundup – November 29, 2021

Just when we thought things couldn’t take a turn for the bizarre, Black Friday showed up, and with it, a whole new COVID-19 variant of concern. As a result, markets rapidly sold off, but as this edition of the Roundup is going live, there seems to be some enthusiasm that things will get better from here. 

In this edition of the Roundup, we review Qtrade Direct Investing’s latest move to launch real-time account opening, as well as look into the stats and rankings of online brokerages from Surviscor. As always, we serve up some healthy investor culture to end on. 

There in an Instant: Qtrade Launches Instant Account Opening

In a world where we can do almost anything online, it shouldn’t seem like instant account opening is a game changer, and yet, it definitely is when it comes to the world of online investing in Canada. 

This past week, Qtrade Direct Investing announced the launch of “real time” account opening for self-directed investors, and in doing so, has managed to get a highly-prized feature ready just in time for the start of RSP season. Importantly for Qtrade, this feature now enables them to provide a competitive onboarding experience relative to other Canadian brokerages that already have digital applications in place. 

Aside from being incredibly convenient for customers to be able to open accounts online, the speed with which an investor can get up and running has become an increasingly important determinant of whether or not investors will ultimately select a particular online brokerage. One only needs to look back at the past 18 months to see that the two major waves of self-directed investor interest tested the existing capabilities of online brokerages to be able to sign up clients fast enough. 

On both sides of the border, and in fact across the globe, self-directed investors poured into the stock market in unprecedented numbers. And, despite investors encountering long delays on customer service channels, as well as manual processes to actually complete an application, they nonetheless stuck it out because the opportunity (at least in the eyes of any traders) was there. 

And while it is difficult to predict whether or not something like the pandemic-driven sell-off in stocks will ever happen again, it is nonetheless important to acknowledge that the investor pool has dramatically changed. Those self-directed investors that have now become active in participating in markets have very different expectations about how quickly an online brokerage needs to be available to jump on fast-moving market opportunities. 

While online account opening seems like a natural feature for the online brokerage industry to adopt, the reality is that Canadian online brokerages have been fairly slow at doing so. Even with a more “digital” experience, approval times to get up and running can still take a few days. 

Another trend that has emerged over the past year relating to getting started quickly is in terms of funding accounts. Opening an account is only half the battle – there has to be a quick way to fund the account as well to be able to capitalize on market opportunities. In the case of Qtrade Direct Investing, opening an account is now faster, but funding it will still take time. Conversely, competitors of Qtrade, such as Wealthsimple Trade and Questrade, have digital account opening procedures and the ability to fund accounts right away, albeit with limited amounts. 

Heading into this RSP season, Qtrade Direct Investing has managed to address an important component of the onboarding process. In what is often a scramble to get an account opened or funded, Qtrade clients and those considering choosing Qtrade are in for a pleasant surprise. Conversely, the handful of online brokerages that still require printing or physical signatures of documents are increasingly going to be relegated to the sidelines until they can match the speed and efficiency of the instant account approval process. 

Ranking File: Questrade Notches Second Consecutive Top Mobile Experience Ranking

While the end of the year is typically the ramp up to RSP season, there’s also another important season for online brokerages that shows up around this time of year: online brokerage rankings.

This past week, financial services research firm Surviscor published their latest online brokerage mobile experience rankings, and it seems like this year there were a few surprises, as well as a fair share of tough love doled out to Canadian online brokerages.  

Before diving into the results, it is key to mention that when it comes to online brokerage rankings and ratings, methodology matters (a lot). Ultimately, the goal of online brokerage rankings is to be able to compare brokers to one another using some structured criteria. In this case, the mobile experience rankings are intended to measure the overall user experience of a self-directed investor via a phone or tablet device. 

Importantly, Surviscor uses a fairly comprehensive set of measures that assess various aspects of the service experience. Those components are then collated into six categories that can be used for a high-level view of the “mobile experience.”

Five of the six items that Surviscor reports on with respect to mobile experience at online brokerages include: 

  • Opening an Account
  • Navigational Design
  • Account Management
  • Market Information
  • Market Notifications

This year’s review covered 11 Canadian online brokerage firms. The four firms that were not covered were HSBC InvestDirect, Canaccord Genuity Direct, Laurentian Bank Discount Brokerage, and Interactive Brokers Canada. Interestingly, as part of the summary of the results of this year’s review, Surviscor revealed that while all online brokerages analyzed were invited to participate, several of them declined to do so. 

While the ranking data alone was interesting to see, to add deeper context on the ranking, we also gathered the scores associated with the above mentioned categories. In doing so, there are some fascinating observations of the state of mobile experience as defined by Surviscor.

The first important note to point out is that Questrade’s Edge platform was the one that was evaluated and not the recently launched QuestMobile. There has been considerable controversy among self-directed investors, in particular on user forums, about the switch to the new QuestMobile look and feel on the desktop platform. It is therefore important to distinguish between the way in which a user will interact with a platform on a mobile device compared to a desktop. 

Looking at the overall ranking more closely, the top three firms in the ranking, Questrade (77%), BMO InvestorLine (73%) and TD Direct Investing (72%) were relatively close to one another. Similarly, firms in positions six through nine were also very close in terms of overall ranking (range 54% to 57%). One very interesting result was just how poorly Wealthsimple Trade (33%) performed on this evaluation. Anecdotally, the aesthetic and user experience/user interface for Wealthsimple Trade is something that many self-directed investors specifically highlight as a positive feature. In this analysis, however, other than the account opening category, Wealthsimple Trade came up at or near the bottom of peer firms. 

Another interesting thing that jumps out from the full data set is that almost all online brokerage mobile apps do a poor job of notifications. Only four firms did not score 5%, with BMO InvestorLine scoring the highest in this category (95%). Market notifications are a particularly important feature for active investors, so it is curious to note that more firms would not make this component a more refined experience. 

One more pattern that emerged from the data is the correlation between navigational design and rank. In general terms, the better the navigation, the higher the ranking. That said, it was also interesting to see that navigation ranged from 67% to 90% and in this category; Wealthsimple Trade was a real outlier at 3%.

In the categories of Opening an Account, Account Management, and Market Information, the data show how variable the mobile experience can be in these categories. From a user perspective, this is the definition of hit and miss. It highlights some of the challenges associated with creating rankings and ratings, namely that there are some features that certain online investors will prefer and prioritize that others won’t. 

The mobile experience for self-directed investors in Canada, according to Surviscor’s latest report, has room for improvement and innovation. It seems like most online brokerages have managed to do a decent enough job of navigation but outside of that, there really isn’t a consensus from an industry perspective on what defines mobile experience. One goal to aspire to would be to do everything in an online brokerage account on a smartphone that you could do on a computer. 

From an execution standpoint, Surviscor didn’t hold back on a critique of some of the players in the online brokerage industry. The biggest critique, however, was that there was no app that “wowed” the rating team at Surviscor. There isn’t the kind of innovation or pace of innovation in the Canadian market that exists in other markets, such as the US. 

For self-directed investors looking for an online brokerage and for which mobile trading capabilities are important, this analysis is a great way to dive into the nitty gritty. There’s clearly work to be done by the online brokerages to provide a better trading experience. However, the tricky part will be understanding what clients generally want. 

From the forums

Live and Let Trade

In volatile markets, fortunes can change in an instant. For that reason, having access to accurate information on the latest stock prices is crucial to getting visibility on the best entry or exit points on a trade. In this post from reddit, one user looks to the self-directed investor community to find out which services other investors are relying on for real-time data.

Beware the Deals

Heading into RSP season, there’s no question that online brokerage deals and promotions are in full swing. Among the deal types, cash back offers are the most popular, but they’re not without some important considerations. In this post from RedFlagDeals.com, one forum user asks an important question about getting a cash back bonus for a registered account. 

Into the Close

Just when we thought we were out of the woods, Omicron surfaced and volatility came back into stock markets in a hurry and just in time for the weekend. It didn’t help matters much that the US had their shortened work week (because of Thanksgiving).  If there’s at least one silver lining, it’s that this time around, the world is much more prepared than previously. Stay safe and kind!

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Discount Brokerage Weekly Roundup – November 22, 2021

It’s been a tough week all around. As this edition of the Roundup goes to publication, there’s a tragedy unfolding in Wisconsin. And, in BC, there’s been a lot of bad news over the past week because of the floods. After the year and a half that has passed, when things rise to the level of exceptionally bad, it is often a moment to take a pause and reflect on the things to be thankful for.

In this shortened edition of the Roundup, the US online brokerage market is in the spotlight once again. We dive into recently released metrics to examine a possible shift in investor sentiment, as well as the uphill battle faced by Robinhood into the final stretch of 2021. To close out, we wrap up with some interesting chatter from the investor forums.

Growing Pains: Account Growth at Interactive Brokers and Schwab Spells Trouble for Robinhood

It’s barely winter, but already there are signs that online investor sentiment is “springing” back to life – albeit modestly.

Data from two large publicly traded online brokerages in the US, Interactive Brokers and Charles Schwab, appear to be pointing in the same direction with regards to positive month-over-month new account growth, the first time that has happened in 2021.

This year has certainly been a storied one for online brokerages. Right out of the gate, 2021 saw an unprecedented surge in retail investor enthusiasm based on the “meme stock” interest. All online brokerages in Canada and the US saw record-breaking activity in account opening and trading volumes. That interest, however, faded quickly as the meme stocks lost steam and the fast money sought other opportunities (such as crypto trading).

The October stats on new account growth at Schwab showed 397 thousand new accounts opened, an increase of just over 6% compared to September. By comparison, Interactive Brokers reported 46.3 thousand net new accounts opened in October, an increase of almost 6.7% month over month. Aside from the numbers of new accounts being vastly different at the two firms, the target clientele is also quite different. Interactive Brokers tends to target and attract active traders, whereas Schwab could be a better proxy for “main street” investors.

But what about the “new kid on the block” aka Robinhood?

With the surge of interest in online trading this year, a new segment of investor emerged that didn’t fit the traditional understanding and paradigm of “investor” and many (if not the vast majority) of those investors found their way to Robinhood.

Now that Robinhood is a publicly traded company, it is possible to get a better handle on what kinds of investors are gravitating towards this online brokerage and to see how account performance stacks up relative to incumbent firms. To compare apples-to-apples on account growth, it is important to note that, unlike Interactive Brokers or Schwab, Robinhood does not report monthly performance metrics. As such, we have compiled data on new accounts based on quarterly totals so that we could compare how Robinhood’s performance to Schwab and Interactive Brokers.

The chart shown above helps to put into perspective just how big of a wave of interest in online trading the first two quarters of the year represented to Robinhood’s business and the disruptive force Robinhood has been to the online brokerage market in the US. In the first calendar quarter of 2021, Robinhood added more accounts than Interactive Brokers and Schwab did in the first two calendar quarters combined.

Equally as evident in the chart above, however, is the enormity of the drop off in new account growth at Robinhood in Q3 2021. New account opens plummeted from 5.1 million accounts to just 700 thousand – which is still more than Interactive Brokers but well short of Schwab. Another table from the Robinhood earnings release provides additional context on what investors who signed up for Robinhood were most interested in trading, and as a result, where Robinhood earned most of its revenues each quarter.

Against the backdrop of revenue figures, it’s clear that options trading followed by equities trading dominated the revenue picture for Robinhood for Q1 2021, but in Q2, crypto became the primary driver of revenues. In Q3, Robinhood earned most of its revenues from options trading. Based on the revenue mix, it appears that Robinhood has both active traders – who would prefer options trading and cryptocurrency over equities – as well as less active investors, who would prefer equities and ETFs. For Q4 of 2021, Robinhood has already signalled to expect a soft quarter in line with the Q3 performance figures.

The latest numbers from Schwab and Interactive Brokers indicate a possible resurgence in interest with both active and passive investors which should seem like good news for Robinhood; however, we can’t help but wonder whether there is a significant number of accounts jumping ship from Robinhood. Neither the pace of growth in terms of new accounts nor the trading activity at Robinhood is clear enough at this point in the quarter to make a call either way. If Robinhood wants to attract investors interested in gaining exposure to online trading, they will likely have to change the way in which they report performance to bring them in line with other online brokerages. The fact that they haven’t yet done so does beg the question as to why those monthly figures don’t get published?

In the Canadian online brokerage segment, the data on online trading activity and new account openings is much less transparent. The US online brokerage market serves as a proxy for the performance of online brokerages and online investing on this side of the border. Interactive Brokers’ latest account figures reflect their continuous appeal to active investors and traders, and despite charging commissions for trade execution, people are prepared to pay. Schwab, by comparison, has shown that commission-free trading is only a small component of the wealth management opportunity to be had, a model other Canadian online brokerages are likely to look to when deciding which is worth more to their long-term success.

For the growing number of investors interested and curious about options trading, Interactive Brokers offers an experience that is hard to rival here in Canada – even when factoring in commission pricing. That said, if Robinhood is an indicator, commission-free options trading is something that is going to be increasingly sought after while cryptocurrency trading capability is also important to the newer segment of online investors. In terms of the latter, Wealthsimple Trade has an edge that offers self-directed investors direct exposure to cryptocurrencies and equities in one platform. The major downside, of course, is the cost for trading in US dollars and the lack of options trading. On the other hand, almost all popular Canadian online brokerages offer options trading as well as US-denominated trading accounts.

Until all three products: options, cryptocurrencies, and equities are available in a single online brokerage in Canada (and at a reasonable cost), it appears that Canadian self-directed investors are going to have to figure out how to combine providers to get the exposure they desire.

Turning back to the US online brokerage market, the latest performance figures from Interactive Brokers and Schwab point to an interesting scenario which we will be monitoring when Robinhood reports its next earnings release – namely, whether the account growth at Schwab and Interactive Brokers is coming at the expense of Robinhood clients.

It is difficult to know with certainty that clients leave one online brokerage to go to another; however, the revenue mix provided by Robinhood does suggest that Interactive Brokers is now a compelling alternative for cryptocurrency trading (of certain currencies) and definitely for options trading. Interactive Brokers, as of this past quarter, now offers the “trifecta” of options, crypto, and stocks at a professional trader’s level of sophistication. To boot, Interactive Brokers also now offers an ESG-focused trading tool that takes investor values into consideration when screening companies for possible investment opportunities.

At the other end of the spectrum, many of those investors that thought they could make a fast dollar on the meme-stock frenzy might have learned that investing profitably is a challenge and takes time and effort to do well. Those investors might now prefer a more hands off approach, or even value advice, which would point them towards Schwab.

The concurrent uptick in new account growth at Interactive Brokers and Schwab is a positive sign for both firms and an interesting development at this point in the year and stock market cycle. While it is difficult to know the source of those new clients, it’s clear that winning over Robinhood’s clients seems like part of the strategy of the existing players. Despite Robinhood’s success in bringing in new clients earlier this year, learning to hang onto those clients is an entirely different game altogether.

From the Forums

Exit Signs

While price is one reason online investors make decisions, there’s sometimes more to the story than that. In this interesting post from reddit, one user explains their reasoning behind saying goodbye to traditionally low-cost online brokerage to find greener pastures elsewhere.

Shopping for Options

With Black Friday just around the corner, it seems like Canadian investors are in the shopping state of mind. In this reddit post, one self-directed investor is interested in choosing a new online brokerage catering to options trading and receives some interesting perspective and suggestions.

Into the Close

It’ll be a short week for trading in the US because of American Thanksgiving, one that will undoubtedly be tough for community of Waukesha. Often in times of tragedy, it is the strength of communities that shine through and the kindness shown to others that makes an immeasurable difference. It certainly showed up here in BC when it was needed the most.

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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 25, 2021

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

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

TradeZero Coming to Canada

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

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

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

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

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

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

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

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

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

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

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

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

Interactive Brokers Puts Payments on Rails

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

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

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

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

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

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

From the Forums

Trade Interrupted

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

Hold On, For One More Day

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

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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 – October 4, 2021

And just like that, October is upon us. Changing leaves, falling temperatures, and costumes are now part of the normal routine; however, this year it seems like this month (and those coming after it) are going to be filled with new features and deals from Canadian online brokerages.

In this week’s Roundup, we catch up on the latest activity in the deals and promotions section, and highlight how commission-free trading is starting to shape the kinds of promotions we’re seeing emerge from online brokerages heading into RSP season. From there, we review the rocky start to QuestMobile, the new trading app experience launched by Questrade and the lessons to be learned from rolling out a new platform. With all of the commentary on the Questrade story, forum chatter was paused for this week (not to worry, there’s plenty to dig into) but will return again next week.

Tricks and Treats: DIY Investor Deals Update

October is often associated with treats and for Canadian self-directed investors, it seems like this month is shaping up to be especially treat-worthy.

The start of a new month is a great time to check in on deals and promotions being offered by Canadian online brokerages, and this month did not disappoint. With two big names, RBC Direct Investing and Qtrade Direct Investing, electing to extend commission-free trade offers and another bank-owned online brokerage, HSBC InvestDirect, launching a commission-free trade offer, there was a clearly a trend towards leaning into commission-free trading.

This year more than any other, promotions and incentive offers are going to play an important role in swaying online investor opinion – and loyalty.

Since the seismic shift in the Canadian online brokerage landscape from National Bank Direct Brokerage and Desjardins Online Brokerage offering commission-free trading (on equities and ETFs), there’s no doubt that other Canadian online brokerages are discussing how they might position themselves in a commission-free trading world.

While none of Canada’s online brokers are in a hurry to go commission-free, there is also a sense that this might be the last year in which commission rates can stay where they currently are. As such, commission-free trade promotions offer a middle ground for existing players to entice new clients while they configure themselves for a commission drop. In both the commission-free offers from Qtrade Direct Investing and RBC Direct Investing, the timeframe to use up a healthy number of commission-free trades (50 apiece) ranges from several months to two years, respectively. In terms of RBC Direct Investing, it is the longest that we’ve seen a commission-free trading offer stretch out to, a signal that the need to do so has clearly come.

A subtle but important maneuver we have also observed is the movement of expiry dates of the promotions themselves.

While extending offers is nothing new (Desjardins Online Brokerage famously kept extending their commission-free deal for a few years), the duration of recent deals seems to be a bit shorter than in years past. Wealthsimple Trade, for example, has been using shorter time frames than their competitors, and with the latest offer from RBC Direct Investing, the extension of the promotion expiry date was only for an additional month. Historically, promotional offers would last for several months; however, the tide has clearly shifted given everything that has happened this year.

Looking across the online brokerage landscape, it’s almost a given that big-bank online brokerages that don’t have a big deal will have to come to market with something enticing. Cash-back offers are hard to come by these days, which is why BMO InvestorLine currently stands alone in this category – especially when compared with its bank-owned brokerage peers. That said, long-duration commission-free trades seem to make the most sense for “occasional” investors who would enjoy the peace of mind that for the next year or two, there is a low likelihood of them needing to pay much (or anything) for equity or ETF trades. It would certainly sway investors away from opening a “test” account at zero-commission brokerage and instead open a new account or deposit new funds into an existing account.

The fact that we’ve already seen two big deal extensions and a new offer come to market at the beginning of October is a clear signal that online brokerages in Canada are gearing up for a busy RSP season battle.

Promotions offer a strategic option to online brokerages that aren’t ready to drop commission prices just yet. And, even at online brokerages that offer commission-free trading, such as Wealthsimple Trade, promotional offers still play an important role in capturing new client interest. Whichever route that brokerages take this fall, Canadian self-directed investors are in for a treat.

A (Cautionary) Tale of Two Screens: Questrade’s New Layout Generates Mixed Reviews

If there’s one big theme to 2021, it’s been new features and offerings from Canadian online brokerages. This past week, Questrade was the latest online brokerage to launch a new (and long-awaited) mobile trading experience.

Unfortunately, it didn’t quite go as intended.

The launch of a new website or app experience is something that wouldn’t ordinarily generate a lot of discussion or coverage. So, in that regard, this roll out was unusual in the degree to which many online investors did not like what they saw.

In fact, on the Questrade reddit thread, we collected (and read through) no fewer than 20 different threads complaining about the changes to trading experience. Twitter and other online investor forums also had a similar set of responses. For reference, here are some of the comments regarding QuestMobile on Questrade’s reddit:

  1. https://www.reddit.com/r/Questrade/comments/pwgqko/kiss_keep_it_simple_and_stupid_is_a_great/
  2. https://www.reddit.com/r/Questrade/comments/pwgxeb/i_think_this_is_the_silliest_change_ive_ever_seen/
  3. https://www.reddit.com/r/Questrade/comments/pwgyox/new_layout/
  4. https://www.reddit.com/r/Questrade/comments/pwhgt1/i_wanted_to_see_what_everyone_was_complaining/
  5. https://www.reddit.com/r/Questrade/comments/pwhide/why/
  6. https://www.reddit.com/r/Questrade/comments/pwifuw/how_do_i_view_open_orders_with_new_layout/
  7. https://www.reddit.com/r/Questrade/comments/pwiln8/wow_this_is_so_brutal_this_new_layout_im_already/
  8. https://www.reddit.com/r/Questrade/comments/pwj9qk/horrible_ui_update/
  9. https://www.reddit.com/r/Questrade/comments/pwjlg9/the_new_user_interface_is_awful/
  10. https://www.reddit.com/r/Questrade/comments/pwjney/feedback_on_questrades_new_changes/
  11. https://www.reddit.com/r/Questrade/comments/pwjqzw/new_ui_is_ridiculous_considering_leaving_after_4/
  12. https://www.reddit.com/r/Questrade/comments/pwjvr4/new_layout_heres_whats_wrong/
  13. https://www.reddit.com/r/Questrade/comments/pwkf2z/we_cant_see_the_bidask_spread_anymore/
  14. https://www.reddit.com/r/Questrade/comments/pwmg3r/go_back_to_old_ui/
  15. https://www.reddit.com/r/Questrade/comments/pwnymp/this_new_questrade_ui_is_god_awful/
  16. https://www.reddit.com/r/Questrade/comments/pwocab/new_ui_on_the_website/
  17. https://www.reddit.com/r/Questrade/comments/pytgrc/voicing_displeasure_with_new_ui/
  18. https://www.reddit.com/r/Questrade/comments/pwu4g8/the_biggest_problem_with_the_ui_update_imo/
  19. https://www.reddit.com/r/Questrade/comments/pwr4s6/new_mobile_app/

There is definitely a lot to unpack in reading through the investor comments and reactions to the new interface. Through some detective work, it is evident that online investors seemed to take issue with the fact that the desktop and mobile experiences were rendered in the exact same way, something that clearly didn’t sit well with desktop users.

While the new QuestMobile experience was designed around keeping things simple and easy to navigate, the biggest ask for users of the desktop experience was how to revert back to the way things were.

Unlike other rollouts of new platforms we’ve seen over the years, it wasn’t just the case that things were unfamiliar either, it was that information that users on desktop were used to seeing was no longer there. Information such as bid/ask spreads or watchlists were not part of the “new” default view. To find those features, users had to navigate to and install Questrade Edge, a separate platform that was what desktop users were used to seeing.

As feedback from the new rollout started to emerge, the responses from Questrade on reddit and social media seemed to reflect an understanding that something had not gone according to plan. Though it was clear they were aiming to simplify things, the reality is that many online investors were confused by the move.

The fact that Questrade now has two mobile apps, Questrade Edge and QuestMobile, is also a source of confusion (or choice) for users. What will need to emerge over the coming weeks is a clarification to existing clients as well as to prospective ones, as to the differences between the platforms.

The reality of the QuestMobile app, however, is that despite the issues and reactions mentioned in regards to the “desktop” experience, mobile users of the new app were generally positive on new layout and experience. On Google Play and on the Apple App Store, for example, ratings for the new app were relatively high (compared to the other Questrade mobile app), a sign that although not perfect, it was resonating with clients who tried it out.

It is also important to note that in addition to the “basic” overview of trading online, Questrade has also telegraphed that they are working on a new mobile app experience tailored for active traders as well.

As mentioned above, there is clearly a lot to unpack. For a few years now, Questrade has signaled to online investors that a new mobile trading experience was on its way. And, granted, while it took quite some time to arrive, it is clear that they have taken design cues from competitors like Wealthsimple Trade to try and simplify how trading information is presented in a mobile-first experience while also enabling a simplified navigation experience as well. The new QuestMobile is lighter than its Questrade Edge counterpart, for better or worse.

Although it is unclear when or if Questrade will adopt the commission-free trading model that peer firms in the online brokerage space have, it does seem like the QuestMobile trading experience hints at a path for lower cost online investing to happen. By effectively unbundling features from their current platform experience into a “lite” and “full featured” combination, it seems like Questrade could create two different pricing structures around those features. This is all speculative, of course. However, Wealthsimple Trade has shown that they are willing (and able) to charge users for a more premium experience, as has Robinhood in the US, so the precedent is established for zero-commission online brokerages to charge for specific features.

After 20 years in the online brokerage space, Questrade has learned a few things about handling missteps. One can go back to their decision to charge inactivity fees in 2012, for example, in which they had faced a similar firestorm from clients who were not happy with the move. Eventually, they phased them in anyway and then as market forces shifted, they phased them out.

Granted, there is now a renewed interest in trading online and there are even more channels to which investors can turn for information about online investing. So, the stakes for getting things wrong now are certainly higher than they were almost a decade ago. And yet, as was the case in 2012, Questrade is adapting to the times.

The new QuestMobile app was developed for a simpler use case for investing online and it is precisely because it has fewer features than what existing clients were used to that they voiced their discontent. But, those existing clients represent a different use case than potential new clients, in particular those who are not “active traders.” Individuals who are contemplating switching from other online brokerages, including Wealthsimple Trade, who are looking for a simple-to-use interface will find exactly that on the new QuestMobile platform. And, it seems with a bit of work on the communications front, making it easier to find and take advantage of the Questrade Edge interface can help with supporting more complex investing/trading needs – at least until the “active trader” version of QuestMobile gets released.

If there are any lessons for other online brokerages to glean from this roll out, it’s clear that giving existing users a clear way to opt out of a new platform is key to managing the transition between old and new interfaces. BMO InvestorLine did an especially good job of this in the roll out of their new online trading experience. Although the switch to a “new” platform experience took quite some time, users had the ability to toggle between the “old” and “new” and it is clearly stated in multiple places that users were able to do that.

Another important lesson to draw from the QuestMobile experience is the difference between mobile and desktop interfaces. Going “mobile first” doesn’t mean that mobile UI/UX translates well into desktop. They clearly do not map onto one another 1:1, which is something many of the responses pointed out.

Finally, it turns out that one of Questrade’s greatest strengths, the ability to reach self-directed investors on social media and in forums, is not without its risks. Building those strong communities online has helped propel Questrade’s growth. But as the reddit threads, investor forums and Twitter comments have shown, in 2021, online investors also on those channels are also much more willing to be vocal about what they don’t like. If there seems to be consensus across forums and social media that something needs to change with the QuestMobile experience, Questrade would be wise to pay attention.

From the Forums

With all of the forum chatter from this week, it seemed appropriate to cap coverage of investor commentary. Forum chatter will return again next week.

Into the Close

That’s a wrap on another week. It was an important week on many fronts – Canada marked the first National Day of Truth and Reconciliation and at Sparx Publishing Group, we also launched our first edition of Make The World Better Magazine. We know there is a lot of news that can be sad and disheartening; however, there is also a lot of great work being done by individuals and organizations who are out there trying to make a positive difference in the world, which is exactly what we wanted to feature.

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Discount Brokerage Weekly Roundup – September 27, 2021

Now that the Canadian federal election is (finally) behind us, there’s little to distract us from the fact that the RSP season ramp up is just around the corner. If there is one thing that is synonymous with elections, however, it’s constant polling – something that has interestingly become a focal point in the online brokerage space as well.

In this edition of the Roundup, we review the launch of a new investor sentiment index developed by one of Canada’s largest online brokerages and explore where the upside of sentiment tracking may lie. Next, we take a look at some important updates on the zero-commission trading file, including a big name entering the US and an update to what’s unfolding here in Canada. Finally, there’s lots of new-feature buzz in the forums – from crypto to new mobile apps.

Tracking the Pulse of Investors: TD Direct Investing Index

Regular readers of SparxTrading.com know that we’re bullish about bulls and bears – and measuring self-directed investor sentiment. So, we were delighted to see one of Canada’s largest online brokerages, TD Direct Investing, announce this past week, the official launch of a new tool that measures investor sentiment.

The TD Direct Investing Index is a compilation of metrics that reflect the optimism (bullish) or pessimism (bearish) of self-directed investors based on trading behaviour from the prior month. The four key areas that comprise the index measure whether investors were:

  • Buying or selling more
  • Buying (or selling) more on a rising market
  • Buying more at the top of a market
  • Retreating to less risky investments

Like all indices, however, the details on the underlying methodology matter.

The specific definitions of these parameters are detailed on the TD Direct Investing Index help page as is information on the frequency of publication of this data (monthly) and information that is on the index web page.

There is lots of interesting data for self-directed investors to poke around, most notably historical data on the overall sentiment score. Historic data exploration comes in two views: the past 13 months or the previous two years. What is especially appealing to the data enthusiasts is the filter function which enables users to analyze age, regional, trading style, and sector data in fairly granular fashion. Data can be filtered across stocks being bought, sold, or held.

Ultimately, how useful this index is will come down to what individuals can do with this information. For example, will DIY investors make decisions about investing based on what they’re seeing other investors do, especially given the lag time? Will it help them (reliably) identify a good time to buy or sell? Potentially identify names of interest to invest in? Or is it just “nice to know” information that will add to the noise of numbers and stats to sift through?

Regardless of the usefulness this tool ends up having for self-directed investors, for TD Direct Investing, the creation of a sentiment index provides a rich source of content to be able to talk about.

The TD Direct Investing Index web page contains a lot of data and is coupled with a video segment that reviews that data as well. While this tool takes things to a new level of depth and complexity, TD Direct Investing is not alone in reporting the activity of their user base for a source of content.

Among Canadian online brokerages, Wealthsimple Trade, Questrade and RBC Direct Investing, for example, all have reported on what investors on their respective platforms have traded. None, however, have taken it to level that TD Direct Investing has. And, in the US, there are several examples of online brokerages taking a similar approach to reporting. TD Ameritrade has its Investor Movement Index and E*TRADE regularly reports data on investor sentiment as well.  

Robinhood was infamously the source of investor trading data. That data was available via API and sites, such as Robintrack, reported on the trading activity of Robinhood investors, which, in turn, enabled other investors to trade alongside (or against) that activity (before Robinhood shut down their API in August 2020).

The amount of work put into the TD Direct Investing Index is sizeable, which also means that it is likely going to take considerable effort to maintain. So, while other online brokerages might be able to put something like the index or another sentiment-like indicator together, sustaining it will require considerable resources.

For now, it seems like return on investment for the TD Direct Investing Index will be in marketing value. The fact that the index data is available on the public facing website (versus being made available only to existing clients) offers a reason to keep coming back to that site for anyone interested in the data it contains.

Ironically, the complexity and detail that make the index useful for analysis might also be its biggest limitation.

There is a clear trend in design among online brokerages and fintech firms towards simplicity and reducing information. The TD Direct Investing Index, however, has so much data that only investors who are highly invested (pun intended) in learning about DIY investor sentiment would really keep coming back to this tool on a regular basis. Despite the strong pun game and occasional Drake lyric references in the write-ups (shout out to the compliance folks for letting the mullet references through), there’s a lot of information to process, which might lead some readers to say…I can’t even. (Not us though.)

Zero-Commission Revolut-ion Continues

With zero-commission trading now table stakes among the largest online brokerages in the US, and despite the chatter about clamping down on payment for order flow by the SEC, there are still fintech companies taking a shot at entering the online investing space.

This past week, another big fintech name, Revolut, signalled their intent to offer commission-free stock trading in the US. Last month, PayPal was in the spotlight after they too were reportedly making progress towards launching a stock trading platform, and while it wasn’t specified as to whether or not they too would be a commission-free trading platform, it is almost a given at this point considering rival Square’s Cash App provides commission-free trading.

Despite the extensive regulatory hurdles to entering the Canadian online brokerage market, it seems that Freetrade, the UK-based zero-commission online brokerage we first reported on in August, is continuing to add to its search for Canadian talent to help expand here.

Earlier this month, Mogo Inc, who announced earlier this year that they, too, would be entering the commission-free online trading space, completed the acquisition of Fortification Capital, which is being renamed to MogoTrade Inc. According to the press release, Mogo’s founder and CEO, David Feller stated “The acquisition of Fortification represents an important milestone towards the launch of our new commission-free stock trading platform, providing necessary components on the regulatory and technology side to complement our existing capabilities.”

After the launch of commission-free trading by National Bank Direct Brokerage, there has been a lot of discussion among Canadian self-directed investors, as well as online brokers, as to what will happen next. While we’re generally reluctant to report on rumours, there is chatter of a large bank-owned online brokerage prepared to roll out commission-free buying of stocks and ETFs, which if true, would almost certainly trigger others to match. Rumours are also swirling about a “digital” bank in Canada also.

Internationally, it appears that zero-commission trading is continuing to gain traction, so it’s now a matter of when, and perhaps how, not if Canadian online brokerages follow suit. The trend emerging is that fintech firms view stock trading as one of series of financial services that they can offer, which sounds like a familiar value proposition to the traditional message pitched by big bank-owned brokerages.

That said, even in the case of Revolut stepping into commission-free stock trading in the US required a significant runway (almost a year) of discussion with regulators before getting the green light to proceed. For firms looking to enter Canada, that runway could be substantially longer and barring any big name jumping into the Canadian space (like a certain well-known US financial institution), the existing online brokerage providers have a bit of time to position themselves accordingly.

From the Forums

App Quest

Fall leaves aren’t the only things changing colours this season. Big changes are coming soon at Questrade, as mentioned in this post on reddit. Find out the reactions from self-directed investors to recent news of a new mobile trading app and changes to the web interface.

Tales from the Crypto

It appears the crypto trading experiment at Wealthsimple Trade is gaining traction. In this post on reddit, investors weigh in on the pros and cons of being able to deposit more crypto into their Wealthsimple trading accounts.

Into the Close

With the end of September now almost here, it is important to recognize a couple of important upcoming events. First, the National Day for Truth and Reconciliation offers a chance for all Canadians to learn about, reflect, and engage in dialogue about the harrowing chapter in our history related to residential schools. September 30th 2021 will also mark the second “Make the World Better Day” at Sparx, where our team will be taking on the challenge of using our time and talents to positively impact the world around us. Anyone curious about the day can follow the Sparx Publishing Group on Instagram for updates.