Tag: Wealthsimple Trade

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Discount Brokerage Weekly Roundup – May 3, 2021

It’s hard to fathom, but May is already/finally here. For the superstitious market participants, it’s the month that investors tend to seek an exit (sell in May and go away). The data, however, paints a different picture to trying to time an exit – and interestingly enough, we’ve got data in spades this month.

In this edition of the Weekly Roundup, we launch into a new month with a quick update on the latest deals and promotions activity, and then take an ultra-deep dive into a huge report on DIY investing published by one of Canada’s most influential securities regulators. Given the length of this week’s Roundup, we’ll save reporting on the forum chatter for next week.

Discount Brokerage Deals Update for May

It’s the start of a new month, and that means our regularly scheduled check-in on the online brokerage deals landscape for Canadian DIY investors.

This month, online brokerage deals and promotions are effectively on cruise control, with no major offers launching or ending to begin the new month. That said, there are some interesting observations about the current status of deals and promotions, as well as some other interesting developments that point to activity “off Broadway” when it comes to how certain online brokers are approaching the deals and promotions space.

One of the first important observations for this spring is the paucity of cash-back offers. BMO InvestorLine is the only Canadian online brokerage offering a mass-market cash-back bonus promotion. In a world where the race between bank-owned online brokerages is as close as it is, BMO’s offer will undoubtedly boost their exposure for DIY investors looking for a big-bank option.

Instead of cash-back offers this spring, it appears that most other online brokers coming to market with a promotion are opting for commission-free trade bonuses. After the RSP contribution deadline, HSBC InvestDirect launched their commission free trade offer. Prior to that, National Bank Direct Brokerage also launched a sizeable commission-free trade promotion. Other online brokerages, such as Questrade, have maintained their commission credit promotions throughout the year with no signs that they are concluding.

The takeaway here seems to be that Canadian online brokerages are looking to control their costs by offering up commission-free trades, which while valuable to consumers, also cost less than cash-back promotions.

Interestingly, for one online brokerage that already offers commission-free trading, Wealthsimple Trade, cash back is the go-to option. We’ve noted that over the past few months there have been cash-back bonuses ranging from $50 to $100 for new clients of Wealthsimple Trade. These bonuses have been available through different affiliates that work with Wealthsimple Trade.

From a big picture perspective, data on the interest in retail investors signing up to open new accounts (a key target for online brokerages) shows that this traffic is slowing down.

While some stories, like cryptocurrencies, continue to generate interest and participation in trading online, stock markets are nowhere nearly as “cheap” or as volatile as they were a year ago. As a result, without the added catalyst of a contribution deadline looming, or significant market volatility, it appears that the speed and intensity of account openings will decrease.

What that means for deals and promotions throughout the rest of the spring and into summer, however, is that online brokerages who want to gain more attention and possibly market share have an opportunity to do so now before both the cost and complexity of doing so goes up in the fall – when the ramp up to next year’s RSP contribution season begins.

It is especially curious that given the important changes taking place in the industry – such as the recent rebrand of Qtrade, potential new entrants to the Canadian online brokerage space, and the rise in prominence of commission-free trading provider Wealthsimple Trade, that online brokerages are not more assertively coming to market with promotional offers.

Deals and discounts provide an opportunity to win the attention of DIY investors looking for a good fit for online brokerage services, and promotions – including commission-free trade promotions – enable DIY investors a low-risk route to try out the experience with an online brokerage.  It’s a low-cost, win-win option, especially when the alternative for most Canadian online brokerages is to win the race to provide outstanding digital experiences faster than a commission-free brokerage can provide features investors want.

DIY Investor Deep Dive: Recent Study Provides Insights on Online Investors

Last month, the Ontario Securities Commission (OSC), which is the securities regulator in Ontario, released an in-depth study of retail investors in Canada in response to the rise in interest of online investing during the past year.

Clocking in at 59 pages (46 if you don’t count title slides), this report was a treasure trove of data that explored many facets of the online investing experience, and was organized into the following categories:

  • The impact of the COVID-19 pandemic
  • Products and performance
  • Reasons for being self-directed
  • Risk preferences
  • Markets and order types
  • Information used to determine investments and trading decisions
  • Time spent investing
  • Tools, features, and apps

With so much data to dig into, there’s a lot to digest about the online investor space in Canada, especially as it relates to attributes about DIY investors. That said, there are a few key areas of interest that warrant mentioning in the Roundup, given the impact to the online brokerage space in Canada.

Methodology

Before diving into some of the more noteworthy findings of the report, it is useful and appropriate to highlight the methodology and background of the study to appreciate just how valuable the data is that was collected and released.

The OSC self-directed investor report studied 2,000 Canadian investors using an online poll administered by research firm Leger, between November 17 and December 6, 2020. To qualify for the survey, individuals had to identify as a self-directed investor for one of their accounts, and they were required to have at least one of a series of investment products, such as individual stocks, ETFs or REITs, bonds, mutual funds, or other types of securities or derivatives.

While the report disclosed standard demographics like gender, age, and geography, it also reported interesting parameters such as the value of DIY investments (which 85% of respondents disclosed). With a concentration of focus in Ontario (43%), and skewing male (60%) there is clearly an overrepresentation in the data towards the behaviour and perspectives of a sub-group of Canadian DIY investors.

Another important note to keep in mind is that this report stated that it would have a margin of error of +/- 2%, 19 times out of 20, based on its sample of 2,000 respondents. Why that is particularly relevant will become clear in diving into some of the data that was reported, and how the data from this study stacks up against reports of the online investing space over the past year from other sources.

The “Rise” of DIY Investing

The first major finding of this survey is perhaps its most controversial: that “10% of investors opened their self-directed account during the pandemic.”

Looking closely at the data underlying that claim, 10% of respondents claimed to have had their direct investing account for less than nine months. Compared against the number of respondents (9%) that claimed to have had their accounts for between 9 months and one year, the number of survey respondents that actually opened an account during the pandemic seems shockingly low.

A report by the Investment Industry Regulatory Organization of Canada (IIROC) in February of this year cited a statistic from financial research firm Investor Economics that showed there were more than 2.3 million online brokerage accounts opened in 2020 (from January to December) compared to 846,000 in the same period in 2019.

The 170% increase in account opens reported by Investor Economics implies that the sample taken by the OSC study does not materially reflect the actual percentage of investors who opened an online brokerage account for the first time between March and December. As a result, the first claim should probably be restated as:
“10% of the investors who participated in this survey opened their self-directed account during the pandemic”

Interestingly, this more accurate phrasing was part of the OSC report’s press release in one place, but not in others, and as such could be misleading to readers trying to understand what online brokerages, investors, and other research studies have indicated as a historic year in online investing.

That important caveat about who this data actually represents in mind, this report did provide an extensive view into an important collection of online investor attributes, behaviours, and perceptions that is worth reading through.

DIY Investors Enjoy It

One of the more fascinating findings of this survey was that of the underlying motivation to being a DIY investor.

When queried as to why they do not use an advisor to manage their investments, it was surprising to see that 44% of respondents stated that they enjoyed managing their investments. The next most popular answer was that 34% found that having an advisor manage their investments was too expensive.

The responses provided shed light on a narrative that doesn’t get nearly enough attention in the world of online investing – that individual DIY investors enjoy managing their own investments. It is important to note, however, that alongside the average (44%) there were additional attributes that helped to make a more nuanced assessment of the response data.

For example, there was clearly a significant preference for respondents whose household investments were greater than $500K, compared to respondents with lower amounts of investments. Specifically, 64% of respondents whose investments exceeded $500K stated they enjoy managing their own investments, compared to 39% for those that had less than $100K, and 45% for those who had between $100K and $500K.

Another interesting contextual piece is that there was a significant relationship between individuals who reported enjoying managing their own investments and their self-perceived knowledge of investing. 56% of individuals who reported having a high perceived knowledge of investing reported that they enjoyed managing their own investments, compared to only 22% of respondents who had low self-perceived knowledge.

The key takeaways here are that the more money you have and the more you believe in your understanding of investments, the more it seems you like to be a DIY investor.

With so much focus on commission price when it comes to selecting an online brokerage, it was equally fascinating to see the data pattern emerge from respondents when it came to perceptions of value for management of investments. Stating that something is “too expensive” could be in reference to many things, but what was fascinating to note was that regardless of the perceived knowledge or the amount of household investment, between 33% and 40% of respondents agreed that the price of advice was too high. Though it was not deemed statistically significant, it was nonetheless intriguing to see that more household investments a respondent had, the more likely they were to see advice as too expensive.

Although it might not have scored as the primary motivating factor in this sample of DIY investors, the level of agreement between investors of different knowledge levels and asset levels that advisors are “too expensive” reflects one of the strongest value propositions for online brokerages: perceived value matters.

Again, coming back to the fact that 80% of the respondents of this survey have had their DIY investing accounts for more than a year, the fact that just about one third of DIY investors in the survey had price as a key driver implies that there is a very big segment of online investors who are prepared to do the work required to manage their own finances, including some of them who don’t believe they can get a better return themselves.

Perceived Knowledge: The Double-Edged Sword

At its core, all investing is speculative. When investors claim to have a high degree of perceived knowledge about investing, the term “knowledge” could mean different things to different people. Of course, feeling like you know, as it turns out, could have a huge impact on whether or not you enjoy DIY investing.

Another interesting data point to emerge from this survey is that 69% of respondents reported feeling satisfied with their experience overall as an investor (20% report being very satisfied and 49% reported being somewhat satisfied). Any reader of social media comments about online brokerages over the past year would probably have a different view of this data. This serves to illustrate that what conclusions you can draw about the industry or the endeavour of investing online depends heavily on who you ask, and where those investors are sourced.

The contextual information alongside the percent satisfaction illustrates an interesting pattern that shows the greater the size of investments ($500K or over) and the higher the perceived knowledge, the more likely an investor will be satisfied with their experience as a DIY investor. This was the same data pattern observed in asking why DIY investors did not want to go with a financial advisor. The number that really jumps out is the difference in satisfaction between individuals with high perceived knowledge (84% of them claimed to be satisfied), versus those with low perceived knowledge (37%). Clearly, if online brokerages can address the perceived knowledge gap, there’s reason to believe that satisfaction will improve.

Of course, a little bit of knowledge can be a dangerous thing, and another fascinating data point to emerge was when respondents were challenged to answer five skill-testing questions about marketplaces and orders. 

Shockingly, none of the 2,000 investors polled answered all five of the questions right, and only 4% got four of five questions right.

Perhaps even more shocking (and a touch ironic), even the survey authors made a mistake on the name of a major stock exchange in Canada, the Canadian Securities Exchange (CSE). It begs the question: if regulators and survey creators can get this stuff wrong, what hope do DIY investors have?

It is fascinating to see that 13% of individuals who self-identified as having high perceived knowledge of investing thought that Wealthsimple Trade, which was used as a decoy option, was a real stock exchange. The lack of investor awareness of the different securities exchanges in Canada, as well as where stocks can be traded, highlights a gap in understanding of some of the basic information that would be material to an investor, like where to go to find more information about a security they invested in, or what happens to an order if the exchange experiences an outage.

The fact that respondents could score so poorly on questions about the mechanics of trading online, while at the same time rate their satisfaction with being an online investor so highly, implies that much of the process of online investing itself is disconnected from really having to understand some basic (but important) information about the assets being traded. Ironically (again) this was brought up just this past week by investing sage Warren Buffet who implied that online brokerages, in particular those like Robinhood with a focus on younger investors (and who saw a massive surge in new accounts during the pandemic), are catering towards the gambling instincts of investors.

Key Takeaways

There’s a lot in the latest OSC report on DIY investors in Canada that didn’t get covered or explored in this week’s Roundup. What was clear, however, is that there is a lot of valuable information that was published about a certain segment of DIY investors that were polled by the survey conducted.

One important (perhaps clear) takeaway is that it is important to carefully qualify the limitations of the data of any study or survey when it comes to making broad statements about the full population of DIY investors in Canada. The insights provided by this report appear to heavily describe investors who have been at investing for at least a year and are largely centered in Ontario. Ultimately, anyone hoping to get more insight into the Canadian DIY investor space learned some very interesting things from this report.

Perhaps the biggest point of interest is that the experience of online investing is one that is not only driven by price, which tends to dominate the narrative. Instead, there are clearly very human features – like enjoying the process – that comprise a significant part of why people choose to invest online as a DIY investor.

Where both industry and regulatory associations might be able to improve the experience is clearly in investor education. Not only in terms of understanding more about investing, but also when it comes to the important and often overlooked details of marketplaces and operational issues (including things like taxes) that DIY investors either don’t pay attention to, or aren’t being provided sufficient resources on.

Finally, it would be great to see reporting like this done at a regular cadence so that changes over time could be tracked and understood. There are numerous stakeholders that could benefit from this data, and it’s great that the OSC was able to publish this data set, but tracking these trends requires ongoing data capture. Just like watching a portfolio requires taking a long-term approach, there are now more DIY investors than ever, and tracking what shapes their experience over time is going to be perennially important to understand.

Into the Close

That’s a wrap on this data-intensive version of the Roundup. The good news for online brokerage industry nerds/enthusiasts is that there are a few more data reports that we didn’t get a chance to dive into this week, so be on the lookout next week for even more data insights. Now that May is upon us, it feels entirely appropriate to end with a strong meme! Stay safe!

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Discount Brokerage Weekly Roundup – April 26, 2021

It’s been a week of stranger things. Starting with the Federal budget with numbers so staggering they seem like they’re from the Upside Down, and ending with an announcement that Elon Musk would host Saturday Night Live, Glenn Close dancing to “Da Butt” at the Oscars, and a beaver taking down internet and cell phone service. All of this underscores just how tricky trying to figure out what’s coming next can be, except it seems, in the world of online brokerages.

In this edition of the Weekly Roundup, we dive into the hazy cloud of online forum chatter to highlight some interesting developments coming soon to Canada’s online brokerage landscape from two very popular players. Also, we’ve got updates on the latest activities here at Sparx Trading that will help readers stay engaged and smiling. Finally, we close out the Roundup with more interesting conversations from the online forums.

The Chatters that Matter

Every so often, it’s fun to spill the tea.

Usually, when we talk about the latest features and developments at Canadian online brokerages, it’s in reference to things that have already launched or are well on their way to launching.

The reason is that we want to be able to attribute the story back to a reasonable source. Rumours are interesting, but we like to do our due diligence and provide citations or links to sources wherever possible, so that others can validate our work.

Of course, between the official statements that come via press releases and the conjecture from different social media and forum users, there is the “grey zone” of chatter that comes from official social media or investor forum accounts owned by online brokerages. Sometimes, online brokerages will let slip some interesting details and updates in response to user queries, and this past month we spotted two noteworthy features to discuss.

Questrade to Launch a New Mobile Trading App Later This Year

With so many new investors jumping into online trading since early last year, it’s no secret that online brokerages are now focusing more of their attention on this segment of investor. Typically younger and more tech savvy, newer online investors also demand best-in-class digital experiences, which for online brokerages, means having a very strong mobile trading user experience.

Earlier this month on reddit, a user started this thread highlighting their angst about Questrade’s current mobile trading experience. Intriguingly, this thread touched off quite a bit of discussion around the mobile trading app at Questrade and whether it cuts the mustard as an online trading app.

Here are some of the critical things that people said:

“Who else is sick of the spinning wheel on Questrade app? Anytime you switch to other apps and come back to Q it shows spinning wheel. Looks like Questrade is still using mom and pops app developer or platform.”

“sick and tired of the spinning wheel of you’re not going to trade today.”

“Yeah… the “app” is terrible. I mainly trade on my computer because of it, but it would be great to be able to trade from phone if I’m away from my computer without the spinning black wheel and having to constantly log back in. It would be a dream for a new app to come out. Wealthsimple has Questrade majorly beat in this category.“

Given there is no one clear leader across the board when it comes to online investing in Canada, DIY investors have to make some tradeoffs when it comes to features at different brokerages. It’s not uncommon for online investors to have multiple online trading accounts with different online brokers specifically to access certain features (e.g. US trading).

It is therefore interesting to learn from a user associated with Questrade’s reddit account that this online brokerage is planning on launching a new and improved mobile trading app later this year.

Also on deck for the year ahead are improved research tools.

Although many Canadian online brokerages are continuously hard at work with new features and enhancements, there’s often a gap between what they’re doing and what they’re prepared to talk about. The one exception to this appears to be Wealthsimple Trade (see below for more details), who publishes their feature request directory along with how many votes each feature receives.

With Canada gradually achieving increased vaccinations (11+ million Canadians have had at least one vaccine shot at the time of publication), and the US already administering over 225 million vaccine shots, with almost 95 million people fully vaccinated, economic activity (and therefore stock market activity) is pointing towards recovery.

What that could mean is that the trend that has caused so many investors to be able to have the time to spend focusing on the markets is coming to an end. Users simply cannot pay attention to their jobs full time and maintain the pace of active investing. Further, without significant swings in volatility, active traders will also likely step back.

Canada, because of this lag in vaccinations, is likely to see online investing from home continue for longer than it will in the US. That said, once things start opening up again, being able to monitor and place trades on the go will become more important. Reliability (especially uptime and speed) is going to be paramount for anyone who’s considering very actively investing.

Although Questrade is already telegraphing improvements to its mobile trading app experience later this year, in reality, the macro picture of economic recovery and demographics of new traders likely suggests that other online brokerages in Canada are also thinking about, if not working on, improving their own mobile experiences.

That said, by letting people know that they are working on this new feature and targeting a launch later this year, Questrade is one brokerage that Canadian DIY investors won’t be guessing about for much longer when it comes to mobile trading.

Wealthsimple Trade Hints at USD Trading Accounts “Coming Soon”

There’s no doubt that Wealthsimple Trade has made significant strides in becoming a popular choice among cost-sensitive online investors. With their zero-commission trading offer, at least for Canadian securities, online investors have flocked to this online brokerage en masse.

Despite all the things people typically cite (beyond just the price) that they enjoy about Wealthsimple Trade, there are clear concerns and gripes that also accompany DIY investor conversations about this online brokerage. In an earlier Weekly Roundup, we covered what people don’t like about Wealthsimple Trade in some detail.

Among the list of things that users wanted to see changed at Wealthsimple Trade is having US dollar-denominated trading accounts. The reason: foreign exchange fees. Currently, Wealthsimple Trade charges 1.5% per transaction to convert from CAD to USD (and vice versa).

Earlier this month, one user on reddit posted a screenshot of a support interaction in which Wealthsimple stated that they are planning to support USD trading in “the near future” – potentially as part of their new suite of premium features.

This response from Wealthsimple’s client support was especially interesting given that Wealthsimple Trade publishes a list of roadmapped features (along with the votes in favour of those features). Specifically, US dollar accounts has been on the requested feature board for two years, and has received 282 votes to date (at the time of publication). Unlike other features which have tags to indicate that they are either planned or launched, the US dollar accounts feature isn’t tagged as being planned.

Given the significant response on reddit to this feature, and that (many) users are discussing what they would be prepared to pay per month to have this feature, this suggests that even if it goes live as part of the newly launched Wealthsimple Trade premium program, it could see considerable interest.

There are many questions about how USD accounts at Wealthsimple Trade would work, and often the devil is in the details. The most important detail for now, though, is when exactly this feature will go live.

Updates from Sparx Trading

We’re doing it for the ‘gram

What do Die Hard and the Sound of Music have in common? The answer is on the newly launched SparxTrading.com Instagram page.

We’re firm believers in having fun between the YOLOs & FOMOs of every day stock market conversations. So, for a lighter side of what we’re celebrating and working on at SparxTrading.com, be sure to follow @sparxtrading and let us know if you have any requests to see DIY investor bulls & bears having some fun in everyday life.

Check Out Our Newsletter

The Weekly Roundup is an awesome way to kick off your week, however, there are times when it’s maybe too hard to tune in to all of the interesting things taking place across the online brokerage space.

Cue the Sparx Trading newsletter!

The latest edition of our newsletter is now live, and it features quick recaps of the big stories shaping the world of online investing.

If you’re looking for something that feels even more awesome than starting your week with the Roundup, the newsletter is it!

Subscribe to the newsletter to make sure you get the next issue delivered straight to your inbox.  

From the Forums

Dialed into Service

The last year has presented a real challenge to online brokerages and DIY investors alike in terms of communicating by phone. One DIY investor had enough, and was compelled to make a change of online brokerage based on needing to have access to phone support. Read what other DIY investors had to say in this post on the Financial Wisdom Forum.

Broken Records

One DIY investor new to the world of trading online found out that keeping detailed records of online trading is only half the battle. Reporting those trades also presents a challenge. Find out what tips fellow DIY investors offered to help ease the angst of filing trade information.

Into the Close

That’s a wrap on another edition of the Roundup. It’s a mixed bag of news – hope for vaccinations and also stories of things continuing to worsen before they get better, or weirder. Markets, however, are positioning for better days ahead, so if there’s a beacon of positive news that seems to be it. Stay safe & profitable in the week ahead!

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Discount Brokerage Weekly Roundup – April 19, 2021

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

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

Qtrade Charts a New Course for DIY Investors

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

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

New Logo, New Identity

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

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

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

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

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

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

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

Breaking Bored

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

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

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

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

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

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

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

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

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

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

New Colours

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

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

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

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

New Website

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

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

Some noteworthy items dropped from their previous website include:

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

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

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

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

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

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

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

What’s in a Name?

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

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

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

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

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

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

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

Why Qtrade’s Rebranding Matters

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

One possible answer is competition.

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

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

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

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

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

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

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

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

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

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

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

From the Forums

Off the Charts

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

One Trade to Rule Them All

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

Into the Close

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

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Discount Brokerage Weekly Roundup – April 12, 2021

Another week, another record high on the stock market. Despite the gloomy news on COVID-19 numbers here in Canada and in many parts of the world, stock markets are pricing in brighter days ahead as major economies continue their path to reopening…

In this week’s Roundup, we take an in-depth look into some interesting data which reflects the challenges and opportunities confronting commission-free trading in Canada. Also, we’ll tee up some interesting discussions about online investing we spotted on investor forums.

What’s Wrong with Wealthsimple Trade?

If you were to ask most Canadian online investors what their number one gripe about trading online would be, trading commissions would almost certainly be at or near the top of the list.

What would happen if you removed commissions from the equation, though? Would investors still find reasons to be unhappy with the fact that they don’t pay any trading commissions? The answer, according to some surprising data gathered from reddit, is apparently yes.

Even though zero-dollar commission trading hasn’t yet fully taken over the online brokerage industry in Canada, Wealthsimple Trade has emerged as the clear first mover with this pricing model. With the rest of the Canadian online brokerages still charging up to $9.99 per trade, an interesting consumer preference experiment is playing out in real time.

Consumers and industry alike are witnessing that going commission-free isn’t without costs.

In the race to bring zero-dollar trading commissions to the Canadian online investing market, it appears that Wealthsimple Trade had to choose between features they were going to make available to online investors right away, and features that would have to wait. The result is that Wealthsimple Trade does not offer many of the features that other online brokerages do. And this has generated mixed feelings about the low-cost provider.

On one hand, the price of zero dollars for some trades is right for DIY investors. On the other, there are fees, such as foreign currency conversion, that some other online brokerages don’t charge.  In addition, there are also many features being offered by competing brokerages that Wealthsimple Trade does not (yet).

Last month, there was a rather fascinating reddit post that posed the following question: What’s the biggest problem with Wealthsimple?

While polls about other Canadian online brokerages exist in forums – including across reddit – this poll was unusual in a few respects.

First, it was a poll posted in the Wealthsimple Trade subreddit. That Wealthsimple Trade has its own subreddit is perhaps not surprising given their target demographic, however, it is unusual among Canadian online brokerages. They are not the only Canadian online brokerage to be on reddit, but they are the most popular.

Questrade has had its own subreddit since 2014, and has amassed a following of 11K. Wealthsimple Trade joined reddit in 2019 and has 14.8K members.

Seeing a poll about what users were unhappy with on the actual subreddit of the online brokerage in question is unusual. It would be hard to imagine, for example, an analogous situation arising at larger Canadian bank-owned online brokerages who elected to open themselves up to the unchecked reaction of the reddit crowd.

Another unusual aspect to this poll was the sheer scale of participation.

Almost two thousand respondents weighed in on the poll. While questions of what individuals are not happy with periodically surface in forums and social media, this poll clearly struck a nerve with the community of Wealthsimple Trade users on reddit.

As a result of having so many responses, and assuming no nefarious voting, data such as this offers a unique glimpse into the sentiment around user experience with Wealthsimple Trade.

The leading pain point for individuals polled was clearly dissatisfaction with transfer times for funding accounts, which are currently pegged at three to five days. Despite Wealthsimple Trade implementing near-instant deposits of $250 for users, the reality is that trading accounts require larger amounts of funds be available faster for most users.

The next issue poll respondents were unhappy with was delayed stock price quotes. Currently, prices shown on Wealthsimple Trade are delayed by 15 minutes, a real disadvantage to anyone who actively trades. This time delay requires users who want more accurate views of pricing to find another service that provides real time information (including other brokerages), or to simply guess at pricing and use limit orders.

Following the delayed quote data, lack of options trading was also flagged by respondents as a reason Wealthsimple Trade was falling short. Options trading has skyrocketed in popularity over the past year, especially within reddit investment circles, so for Wealthsimple Trade to not offer this feature is a significant limitation to DIY investors on reddit who are eager to trade options.

Perhaps the least surprising data point was that user interface was the last on the list of things that users were unhappy with, an indicator that Wealthsimple Trade is probably doing quite a bit right in this department.

While the data provided by this poll does shed light on what the limitations of Wealthsimple Trade are, the poll doesn’t tell the whole story. Venturing deeper into the post reveals more pain points that didn’t get included in the poll, such as US dollar account costs and the lack of availability of certain stocks to trade.

Despite the critical tone of the comments, it was fascinating to observe the number of comments in which users indicate they are supportive of Wealthsimple Trade. There is a very active community of Wealthsimple Trade users who believe in the model, and who are willing to step up to defend against or challenge statements that are overly negative.

Users of Wealthsimple Trade won’t have to wait much longer to have some of their biggest pain points addressed, however.

This past week, Wealthsimple Trade launched a premium service offering that charges a monthly subscription of $3 for access to real-time snap quotes and instant transfers of $1,000. These two items address, in part, two of the most significant pain points raised in the reddit poll.  While it might be a good start, there is still lots of ground to make up compared to what other online brokerages offer.

For example, real-time snap quotes, while unquestionably better than delayed data, are not as good as real-time streaming quotes which would automatically update without users having to constantly hit refresh. Though this feature is likely more appealing to an active trader, it is hard to imagine the core client of Wealthsimple Trade enjoying having to manually query stock prices.

Further, transfer amounts of $1,000 being available instantly is better than $250. But for larger trades, this cap is still a limitation to accessing bigger opportunities.

Deploying a “premium” version of Wealthsimple Trade is similar to what US online brokerage Robinhood has done with their Robinhood Gold premium version. Interestingly, the dollar amount Robinhood Gold users can instantly deposit depends on their account balance, with deposit amounts ranging between $5,000 and $50,000. Robinhood does not charge for real-time quotes, but does include level 2 data as part of the Robinhood Gold program.

The timing of the reddit poll launched last month and the release of these new features at Wealthsimple Trade seem fortuitous. Coincidence aside, Wealthsimple Trade launching new features signals to its users that it is working to address the gaps that it knows its users are aware of.

Still, it may not be good enough. Other Canadian online brokerages may charge more for commissions per trade, however, they do have the features that Wealthsimple Trade is playing catch-up on.

This theme is clear throughout the comments from users on reddit who, despite liking what Wealthsimple Trade is trying to do, still have accounts with competitors because those features keep them there. It seems likely, then, to be a question of when rather than if other Canadian online brokerages bring their commission rates down to a point where the cost per trade is negligible in the face of other features that are available.

Perhaps in a twist of irony, the new subscription model being launched by Wealthsimple Trade might accelerate other Canadian online brokerages to offer zero-commission trading (or drop commission prices significantly).

If the experiment at Wealthsimple Trade proves to be a success, other Canadian online brokerages can explore “unbundling” the online investing experience and charging customers for the kinds of features that best suit their usage habits and patterns.

The numbers speak for themselves at Wealthsimple Trade when it comes to their customer growth over the past year. That said, there are clearly hurdles for clients of other online brokerages hoping to get the full set of features available at Wealthsimple Trade similar to what they currently have at their existing brokerage.

The data from the reddit poll offers online brokers in Canada an opportunity to highlight their advantages relative to Wealthsimple Trade and to make strategic improvements to their own offering. Whether that means lowering prices, or enhancing features, or both, it would serve to keep existing clients happy enough to stay, and perhaps encourage online investors to see that zero-commission trading, while possible, isn’t without its tradeoffs.  

From the Forums

One Day(trade) at a Time

Trading stocks has seen a resurgence in interest over the past year. But how much trading is too much? When it comes to defining what a day trader is, the answers aren’t so clear. Find out what redditors offered one DIY investor in terms of advice in this post here.

Dues and Don’ts

When it comes to investing in the markets, there are no shortcuts. At least that’s the point of view from one redditor who laid out a lengthy but informative post on the merits of due diligence before jumping into an investment. Read more here.

Into the Close

That’s a wrap on another week. There are a few big stories in the works this month, so enjoy the reprieve for the moment. One big story that did drop this past week was a monkey being able to control a video game using only its mind. While we might be trading stocks with our minds one day, until then, you’ll have to click on the link below the old-fashioned way. Have a profitable week!

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Discount Brokerage Weekly Roundup – April 5, 2021

Despite the short week last week, markets didn’t mind and leaped ever higher. While patient investors were rewarded, not everyone was so hoppy, it seemed.

In this edition of the Weekly Roundup, we jump into the latest deals and promotions activity spotted at Canadian discount brokerages in April, and the trends that seem to be emerging from the latest offerings. Next, we take a look at why some investors are not so keen on markets grinding upwards and what that could mean for Canadian online brokerages through the rest of the year. Tweets will be off for a few weeks, but we’ll wrap up with interesting discussions taking place on investor forums.

Online Brokerage Deals Spring Into Action

There’s good news for DIY investors on the hunt for a deal when opening an online trading account. April brings with it more than just rain and signs of spring, as another Canadian online brokerage has also decided to step into the deals and promotions pool, bringing the post-RSP season count of new deals to two.

It might seem unusual to make a big deal out of just two online brokerages doing anything, however, it’s not just any two online brokers. While it’s too soon to call something a trend outright, there are some interesting parallels that make a case for a possible pattern emerging.

To start off the month, HSBC InvestDirect launched a new commission-free trading offer that features 60 commission-free North American equity or ETF trades which are good for use for up to 60 days. The offer, which launched at the beginning of April, runs through the end of June and is available to both new and existing clients.

Midway through last month, National Bank Direct Brokerage also launched a massive commission-free trading promo, ponying up 100 commission-free trades which were good for use for up to one year.

With a competing commission-free trading offer already on the market that is both larger and longer in duration, why might Canadian DIY investors consider HSBC InvestDirect’s promotion?

One of the reasons that HSBC InvestDirect’s new offer might appeal to new clients is because HSBC InvestDirect has the lowest standard commission rates for a Canadian bank-owned online brokerage, at $6.88 per trade. It might seem like a few pennies per transaction when compared to National Bank Direct Brokerage’s or CIBC Investor’s Edge standard commission of $6.95 per trade. However, investors who are ultra-price sensitive and who want to have the convenience that a bank-owned online brokerage affords, as well as the potential security of one provider for their personal financial and wealth management needs, can find all of these with HSBC InvestDirect.

Another key reason why investors might lean towards HSBC InvestDirect is because this online brokerage is fairly unique among most Canadian online brokerages in that it enables trading on international stock exchanges, something that is of increasing appeal. It is why in the fine print of the new offer by HSBC InvestDirect, trading is restricted to North American equities and ETFs. No other online brokerage makes it a point to stipulate that commission-free trades apply only to these geographies.

In comparing the commission-free trading offers from HSBC InvestDirect and National Bank Direct Brokerage, both show that the numbers of commission-free trades being offered are relatively high. By comparison, Questrade, one of the online brokerages that has a long-standing promotion for commission-free trades, comes in at a much more modest range (up to 18 commission-free trades), depending on how commission credits are used.

Based on our long-term deals and promotions research, commission-free promotions are less appealing to DIY investors than cash back offers. That said, some investors will find free trades valuable when considering opening an online brokerage account. It might be just the component to help tip an investor in the direction of either one of these non “big five” bank-owned online brokerages.

The fact that the two newest online brokerage promotions to come to market after RSP season are commission-free trading offers points to a possible preference by online brokerages to use this kind of deal to stay on the radars of online investors.

The good news in the near term for DIY investors is that Canadian online brokerages appear to be shifting from taking a passive stance on promotions to taking a more active one. This means there are likely other online brokerages (that aren’t the “big five”) which will consider launching offers in the coming weeks and months.

In terms of timing, launching a new promotional offer at this point in the calendar year might offer some advantages, because the competition for attention isn’t as fierce (and therefore expensive) as it is leading up to RSP season, or into the end of the year.

One of the big milestones in April is the deadline for filing income taxes at the end of the month. We have already observed that Wealthsimple is using products in its ecosystem, Wealthsimple Tax (formerly Simple Tax) and Wealthsimple Trade, to combine these two worlds in a very unique promotional offer. Users of Wealthsimple Tax’s paid feature can be eligible to receive a free stock in their, wait for it, Wealthsimple Trade account. No other online brokerage has this streamlined marketing capability between the world of taxes and the world of investing, despite how tightly intertwined these two worlds actually are (especially this time of year).

For any Canadian online investors who couldn’t, or didn’t need to, capitalize on the offers from online brokerages in the first calendar quarter of this year, the good news is they can now choose from two sizable commission-free trade deals and, if history is any indicator, perhaps a few more as the spring progresses.

For Canadian online brokerages, the fact that another two bank-owned online brokerages stepped into the deals and promotions pool with commission-free trade offers is a signal that this kind of offer is one possible way to stay visible with online investors while keeping costs low at the same time.

Commission-free trades are not as costly as cash back programs to administer, and thus offer greater flexibility. For example, the minimum deposit requirements for cash back promotions tend to be higher than for commission-free trade promotions, which in turn makes it less likely for potential clients to sign on.

The current market climate for online investors is also something worth considering.

Unlike the same point in time last year, there is much greater clarity and certainty available to the stock markets on the direction of the major global economies. Yes, it appears that the return to “normal” will be slow, but already markets have seen a significant drop in volatility and therefore opportunity for rapid wealth growth (or loss).

Thinking longer term, however, this year will be interesting for commission-free trade incentives overall.

In Canada, there is already one online brokerage that offers standard commission-free trading (Wealthsimple Trade), and there was recently news of another commission-free online broker possibly launching towards the end of 2021. There is also the possibility that Tastyworks shows up with an ultra-low standard trading commission structure for Canada this year, too. With so many commission-free providers in the mix, it could prove to be the catalyst for most Canadian online brokerages to have a standard commission-free trade offer if they don’t want to lower their commissions to zero right away.

As always, we’ll simply have to wait and see how the rest of the spring and summer play out as far as promotions. With the launch of these recent deals and the looming uptick in commission-free trading offers, we find it hard to believe that most online brokerages won’t be taking this opportunity to ramp up their marketing efforts, including using incentives, to solidify their own growth goals.   

Have We Reached Peak “YOLO”?

This past week, the S&P 500 closed above 4,000 points for the first time ever, and it seems that some investors have had enough.

With volatility decreasing while indices like the S&P 500 make new highs, the get-rich-quick crowd appears to have hit a wall.

For anyone paying close attention to the world of online investing, especially over the past year, one of the biggest catalysts for investors jumping headfirst into the markets was the massive shock to stock prices that followed initial news of the pandemic lockdowns. With the outside world in chaos, individual investors hunkered down inside. Whether they were working from home or just at home, one of the only places that had any signs of life was the stock market.

Online brokerages in Canada and the US saw this play out firsthand.

It started as a surge in online account openings followed by backlogs in call centre wait times. One other odd thing occurred too – many Canadian online brokerages started to retreat from offering deals and promotions. The reasoning was clear: demand was so strong that they didn’t have to create even more by running incentives. We believe, however, the pendulum of investor interest in trading is about to swing back.

This past week, Interactive Brokers released their monthly operating metrics. However, in those numbers was a stunning figure: a 21% m/m decline in new account opens. This is the second consecutive month of double-digit drops (February saw a 35% m/m decline) and while that might normally be a shocking occurrence, on a year-over-year basis, Interactive Brokers new account opens are up 51%.

These massive drops in new account openings in 2021 are the result of a statistically anomalous period for investors being interested in trading the stock market, and the sharp drops from the highs in January underscore numerically just how strange the push to begin the year has been. The fact that these numbers at Interactive Brokers are dropping, however, suggests the heightened enthusiasm might be waning.

Other sources point to this online investor pullback being true as well.

According to a recent article analyzing US retail investor behaviour, there has been a staggering drop off of stock buying, to the tune of 60% near the end of March, and estimates of traffic decreases to US online brokerage Robinhood’s website are pegged at 63%.

In Canada, an article from the Globe and Mail describing the allocation of CERB money to online investing also conveys a sentiment of caution, rather than the frenzied “YOLO” trades that were taking place at the end of January or during this point last year in various beaten down travel stocks.

DIY investors simply aren’t jumping into the markets because there isn’t the perception of opportunity that comes with stable markets. That said, the data now suggests that while the big surge may be over, interest in stocks and trading remains elevated as a result of those who did enter the markets during 2020 and 2021.

So, what could this shift in investor interest mean for Canadian online brokerages?

One of the most immediate consequences is that new account openings will likely continue to drop off. Interestingly – perhaps almost counterintuitively – new account openings might be inversely correlated to the volatility of stock markets, which would force a rethink of how online brokerages position themselves for choppy markets.

While volatility has historically been a warning signal to stay away from markets, there is now a cohort of investors who have seen that doing the opposite actually pays off. Going forward, Canadian online brokerages will likely have to be prepared to bolster systems to deal with the increased interest that accompanies volatility.

Another near-term consequence will likely be how online brokerages approach attracting new clients.

The surge in investor interest over the past year exposed gaps among various online brokerages, in terms of being ready to take on new clients. Those online brokerages with online sign-up processes already in place were able to win clients more quickly than those who had not invested in these systems. As such, new clients found the path of least resistance into markets.  

With a pullback in investors wanting to trade, however, we expect there to be heightened deals and promotions activity among Canadian online brokerages, especially at brokerages agile enough to deploy these offers.

Marketing campaigns can take weeks or months of planning, so it is safe to assume that the planning for promotions in November through March of next year will be discussed during the summer. The fact that there will likely be fewer new investors coming to market means that online brokerages will have to factor this into their planning.

Also, as mentioned above, with new entrants to the Canadian online brokerage market on the horizon and fewer new investors, promotions pricing will be a key lever to get and keep attention.

The “new normal” in terms of online investing is already presenting itself. Stock markets tend to be future focused, so it is perhaps no surprise that investor behaviour might serve as a bellwether for other sectors of the economy. Many investors found their way into the markets because of rapid drops in prices of big-name stocks and a hope of getting rich fast. As life returns to “normal” and these larger names see appreciation in prices, there are fewer places for investors to find fast-money opportunities.

If there’s one thing that the “YOLO” investors don’t like, it’s when things get too hard. And, as any veteran of the market could tell you, doing nothing in the markets is a lot harder than it looks.

From the Forums

I Do Declare

Some big news coming out of the Canadian securities regulators prompted a wave of discussion among online traders in this reddit post. Cryptocurrency trading platforms operating in Canada will soon have to be registered as investment dealers with IIROC, the same governing body that oversees online brokerages. Check out the frenzy of discussions as confusion sets in over how this is all going to work, and what investors think of the move towards increased regulation.

Sibling Remedy

Helping family members with financial affairs can be dicey at the best of times. In this post on reddit, one younger sibling steps in to help an older one plan for a retirement that’s not too far away. There were many tips on to help navigate a touchy subject.

Into the Close

That’s a wrap on this edition of the Roundup. Even though it was a short week, there were still lots of egg-citing developments taking shape. Economic numbers continue to point towards the US economy starting to recover, and the new frenzy du jour here in Canada is real estate, where despite a recession and pandemic, housing sales numbers continue to skyrocket. If there was any question as to where the get-rich-quick crowd might have turned to after stocks and crypto have started to become less volatile, this might be a clue.

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Discount Brokerage Deals & Promotions – April 2021

If you’re fortunate enough to be in a place where spring is starting to arrive, the sight of new growth is a welcome change. Another spot where there are some pleasant surprises of growth: our online brokerage deals and promotions section.

This month, we’re excited to see a new commission-free trade deal cross the wires at the start of the month from HSBC InvestDirect. After the appearance of a new commission-free offer last month from National Bank Direct Brokerage it appears the look for the spring season is commission-free trading.

Of course, what would April be without some clouds and rain? Offers that expired heading into the month include RBC Direct Investing’s cash back (plus free trades) promotion.

As the saying goes, however, April showers bring May flowers and there seems to be more pleasant surprises showing up this month, so stay tuned for updates and be sure to check out our new deals and promotions filter to analyze the latest offers.

Expired Deals

March was a blustery month for deals activity among Canadian online brokerages. Most of the offers that were timed around RRSP season expired early in the month however there were two interesting promotions later in the month that also wound down.

In the middle of the month, Wealthsimple Trade’s latest referral contest expired. And, at the end of March, RBC Direct Investing’s cash back plus free trade promotion officially concluded.

Extended Deals

No extended deals to report at this time.

New Deals

Great news for deal hunters looking for commission-free trades as the start of this month features two new offers to review.

First, HSBC InvestDirect launched a new commission-free trade offer of 60 commission-free equity and ETF trades (North America only). This offer enables qualifying customers to trade commission-free (up to 60 trades) for 60 days. This promotion expires on June 30 and applies to both existing and new clients.

Second, be sure to review National Bank Direct Brokerage’s massive 100 commission-free trade offer. This crossed our radar in March and coincided with their recent commission-price drop, making this a competitive offer from a Canadian bank-owned online broker.

Review all the available online brokerage deals using our new deal filter tools here.

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Discount Brokerage Weekly Roundup – March 29, 2021

Now that the Ever Given has been officially refloated, we can all go back to making memes about other things. Bad puns aside, there has been a boatload of activity this past month, and it points to 2021 being a transformative year for Canadian DIY investors.

In this week’s Roundup, we look at an important development in the online brokerage space as a new entrant prepares to toss its hat into the commission-free trading ring later this year. Also, with all of the excitement taking place in online trading this past year, we quickly dip into an important theme raised during Fraud Prevention Month and highlight who we saw participate and who we didn’t. As always, we’ll close out with commentary from DIY investors on the forums and from Twitter..

Mogo Sets Its Sights on Zero-Commission Trading

The Suez Canal wasn’t the only place getting crowded this past week. It seems the Canadian online brokerage landscape is on the cusp of trying to fit even more online brokers into a very tight market.

Canadian fintech firm Mogo announced they are acquiring Moka in an all-stock transaction valued at about $64 million. Moka is a Canadian analogue to Acorns, a service in the US that enables users to automatically “round up” amounts on purchases to the nearest dollar and then invest those funds into portfolios comprised of ETFs.

As part of the transaction, Mogo stands to gain the 500,000 or so users of Moka, which will grow Mogo’s client base to 1.7 million individuals.

It is an interesting move, to say the least, to venture into the online investing space in Canada, especially when starting from the ground floor.

The Canadian online brokerage market is crowded in terms of existing players, with 14 already, and there are clearly challenges to be overcome with regards to generating revenue per transaction using commissions.

By coming to the Canadian market by advertising zero-commission trading, Mogo is going to naturally attract attention from price-sensitive shoppers. However, unlike other online trading choices, Mogo also carries with it the controversy that comes from its short-term loan, aka payday loan, business.

According to the website, the MogoMini Line of Credit product, for example, charges an annual interest rate of 47.42%.

Compare the marketing pitch for their short-term loans against their effective interest rate of over 47%. When the online stock trading capability of Mogo/Moka comes to market, reading the fine print will be a must for potential clients.

Personal finance communities online are reacting with skepticism over the potential hidden costs or fees that may accompany the new online trading provider.

So, how will Mogo gain traction with the online investing crowd in Canada in the current landscape and with the reputational baggage it carries?

One big clue is that they appear to be aggressively leaning into connecting with Gen Z investors by focusing on themes and products, such as Bitcoin, that are clearly coveted by this group and by emulating phrases and calls to action that other zero-commission providers have used in order to sound and look the part of an online broker.

Mogo’s aggressive embrace of Bitcoin, for example, makes no secret of their product or ramp-up strategy in this area. In an open letter about Bitcoin, Mogo stated that “all Canadians should consider having Bitcoin” because of its potential for generating wealth. In that same letter, they essentially make a FOMO argument that not jumping on the Bitcoin rocket means missing out on potential massive gains.

Another clue to their positioning in relation to wealth-building is that they support (or believe they are helping to champion) “democratizing finance.” If this sounds familiar, it’s because it is the famous catchphrase used by US online broker Robinhood, also known for charging zero commission fees.

The tie-up between Moka and Mogo is an interesting one, especially in light of the seemingly conflicting brand promises and services offered by each. Whereas Moka was about eliminating debt and creating regular savings in measured growth ETFs, Mogo is known for just about the opposite. How these two brands ultimately come together is going to take some time and public relations/marketing finesse to achieve.

Then, there are the UX and features issues that accompany competing in the online investing space that will provide a steep challenge to any new entrant.

Any regular reader of the Weekly Roundup will know that Twitter is filled with all kinds of reactions to the expectations and service requirements not being met by online brokerages. How Mogo/Moka intends to address these kinds of shortcomings is anybody’s guess, but zero-dollar commissions won’t be enough to win positive praise or ratings, especially if the typical pain points of online trading platforms aren’t addressed.

Depending on what segment of the online brokerage market Mogo is most interested in pursuing (we can infer that segment skews younger, based on the marketing and positioning of their service offerings), there might be a foothold that Mogo could establish in the online brokerage market in Canada. That said, it won’t be easy, as many competing online brokers will be ratcheting up their efforts to improve different elements of their own service offerings. Also, there is still chatter around more online trading platforms launching in Canada in 2021, notably Tastyworks.

While the news of a new option for DIY investors to trade the stock market, especially at zero commissions, should be cause for celebration, history has shown that even if these kinds of products can make it to market, there are usually feature restrictions or really long periods of time required before which this kind of offering starts to make an impact on the established online brokerages.

When Wealthsimple Trade launched in 2018, for example, it wasn’t clear then exactly how long it would take for it to really challenge the existing online brokerage market into lowering commissions or improving service or user experience.

While incumbent online brokerages were certainly aware of the new entrant and the interest it was garnering, the reality was nobody in the online brokerage industry appeared pressured to act to aggressively compete against Wealthsimple Trade on commission price. Instead, the lack of features such as a desktop trading platform made it difficult for Wealthsimple Trade to establish itself as a competitive threat to online brokerages.

For DIY investors, they appeared to have a love/hate relationship with Wealthsimple Trade.

On the one hand, the modern user interface and price point for commissions were something that invoked joy in users. However, it was clear that technology and feature constraints continued to chip away at users fully committing to the platform for their investing needs.

Building a successful new online brokerage in Canada is no easy feat. There are many elements to get right, and the competition will likely not stand still long enough to allow a new entrant to simply come in and disrupt any significant business. The move by Mogo to acquire Moka and provide zero-commission trading by the end of the year might be possible, but price-conscious and reputation-savvy consumers will also see the online stock trading offering from Mogo in the context of the larger set of businesses.

For every zero-dollar commission provider, there is one central issue to address: Everyone will want to know how Mogo will be able to afford to offer commission-free trading. As we’ve come to learn, free trades don’t mean that there aren’t costs.

Quick Recap: Fraud Prevention Month

March has been Fraud Prevention Month across Canada. As more of our lives have shifted online, so too have the opportunities for fraudulent activity to negatively impact us. For DIY investors in Canada, Fraud Prevention Month is an opportunity to either get to know or get reacquainted with the securities regulators in our respective jurisdictions. Earlier this month, each of these regulators participated in a joint news release that explained what activities they were undertaking for the month.

Among the interesting themes was a focus on younger investors, such as millennials and Gen Z. The BC Securities Commission, for example, had a FOMO-focused initiative that provided a series of videos to educate investors about warning signs of fraud.

In Alberta, the Alberta Securities Exchange had a unique approach to engaging visitors about investment fraud. They created and launched checkfirst.ca/takesometime, a chatbot-style site that generates rather colourful excuses to provide to people pressuring them to invest. The hope is to “buy some time” that will enable someone to do more research.

Curiously silent throughout the month were most of Canada’s online brokerages – at least on social media. Given the opportunity to create content and educate potential and existing clients about an important reality of trading online, this seems like a missed opportunity to talk about features that help keep online investors safe and to explain the requirements that ensure companies comply with an anti-fraud guarantee. Maybe next year?

Discount Brokerage Tweets of the Week

From the Forums

Dough Another Day

In the popular movie franchise, Bond never dies. In the world of DIY investing, things might be different for the asset class that shares a name with the suave spy. An investor asks in this post if bonds are dead and if we all should be changing the “safe” part of our investment portfolios to something else, such as preferred stock ETFs. Redditors have much to say on the topic.

Topped Up

In this post, a 31-year-old investor with a full TFSA, full RRSP, and no interest in owning a home right now asks what to do next, especially to minimize taxes. Redditors offer opinions on everything from unregistered accounts to reconsidering the benefits of home ownership.

Into the Close

That’s a wrap on another eventful week. It’s hard to believe, but March is almost over. With Easter just around the corner, it means that this week is going to be a shorter one in terms of trading days. Lots has happened this month, and with so much going on it’s challenging to know where to point the spotlight. One place that does deserve more attention, however, is the inequality between women’s sports coverage and treatment versus men’s. While we technically shy away from making investment recommendations, it’s plain to see that underinvesting in women’s sports is a wrong that needs to be corrected. So, to close out the month, this tweet on the NCAA women’s basketball tournament seemed fitting to post here.

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Discount Brokerage Weekly Roundup – March 22, 2021

Spring has officially arrived. And while the arrival of the new season didn’t fall on a quadruple witching day, in the online brokerage world it nonetheless lived up to its reputation of bringing change, volatility, and the promise of sunnier days ahead.

In this edition of the Roundup, we look at the latest trading commission price drop from a bank-owned online brokerage and the potential consequences it will have for DIY investors and fellow online brokerage competitors. Next, we jump into some interesting deal activity that’s taken place this month, including the launch of a new offer that might trigger even more promotions to start sprouting this spring. As always, we’ve got chatter from DIY investors courtesy of Twitter and the investor forums.

National Bank Direct Brokerage: Commission Price Drop

The days of the $9.95 standard commission pricing for trades at Canadian online brokerages are numbered. How much lower they go from here and how quickly these changes take effect will depend on who among the larger or more popular players decides to act. A recent commission pricing drop by National Bank Direct Brokerage, however, is likely to add significant cause for other Canadian online brokerages, big and small, to revisit their own commission pricing structures.  

This month, we noted that the standard equity commission pricing at National Bank Direct Brokerage (NBDB) dropped about 30%, from $9.95 down to $6.95 for all clients. Previously, NBDB charged $9.95 per trade to all clients, but for those clients who were also a client of National Bank – the parent brand to NBDB – a discounted price of $6.95 was available. That restriction is no longer in place, and the $6.95 price is available to all.

Why NBDB chose to lower their commission rate to the $6.95 level and why they decided to do so now are a good indication of how the industry as a whole has approached lowering their commission prices, even in the face of a growing competitive presence in Canada of zero-commission trading and increasing expectations (thanks to Robinhood and other US online brokerages) that trading online should be commission-free. Online brokerages in Canada, for the most part, are taking a measured and stepwise approach to lowering commission pricing, taking cues from competitors as a way to estimate the prices for commission rates that can be supported.

One important driver for National Bank Direct Brokerage is likely competition from its longtime local competitor, Desjardins Online Brokerage.

The drop in standard pricing brings National Bank Direct Brokerage in line with Desjardins Online Brokerage, which lowered the standard commission pricing for the “everyday investor” product, Disnat Classic, to $6.95 in early 2020. While there are still pricing gaps between these two Quebec-focused online brokerages at the very active trader pricing segment, the interesting consequence to National Bank Direct Brokerage enabling all clients to have access to the $6.95 pricing is that National Bank is pursuing an expansion strategy across Canada, implying that NBDB would now also set their sights on other markets outside of Quebec.

The takeaway for the online investing space in Canada is that a much more robust bank-owned online brokerage offering is now available to Canadian DIY investors. Unlike the lower-cost non-bank-owned online brokerages, National Bank Direct Brokerage brings with it many of the features and the convenience of a big five bank-owned online broker. This means that someone looking for the lower cost pricing typically available at an independent online broker but the convenience and perceived security of a larger institution will now have a serious look at NBDB as an online broker. And, once they start looking, there will be some interesting things for investors of all activity levels to find.

For young investors, for example, National Bank Direct Brokerage offers 10 commission-free trades per year and an even lower commission pricing of $4.95 per trade, simply for being 30 years old or younger. No other Canadian bank-owned online brokerage (yet) has this double feature set. Also, the threshold of 30 years old is higher than at several competitors, where the definition of “young” typically ends at age 25 or 26.

Very active traders at National Bank Direct Brokerage also have access to deeply competitive pricing, at $0.95 per trade, and an advanced trading platform, Market-Q. While Desjardins Online Brokerage’s active trader brand, Disnat Direct, does have cheaper pricing, at $0.75 per trade, the reality is that at the sub-dollar-per-trade range, the other factors of banking convenience might come into play.

Lowering commission pricing is something that Canadian online brokerages have seen as inevitable. That said, how quickly the commission pricing drops has shown itself to be highly dependent on who is the one setting the pace.

Despite the existence of a zero-commission provider, for example, there haven’t been any other Canadian online brokerages that have felt compelled to drop their standard commission prices to that level. Instead, we have observed that certain products, such as ETFs, have become the entry point into zero-commission trading, with firms such as Qtrade Investor, Questrade, Scotia iTRADE, and most recently with TD Direct Investing’s Goal Assist. In the category of commission-free ETFs, National Bank Direct Brokerage has also been somewhat of a leader among the bank-owned segment of online brokerages. In 2017, they launched completely commission-free ETF trading – both buying and selling, albeit with minimum purchase requirements.

For NBDB to capitalize on this latest pricing shift, the challenge, it seems, will be to overcome the marketing and advertising hurdle created by the likes of Interactive Brokers, Questrade, TD Direct Investing, and Wealthsimple Trade in markets outside of Quebec. Another online brokerage that has significant market awareness with large markets across Canada is Qtrade Investor, courtesy of their multiple wins and strong finishes in the online brokerage rankings of influential financial research sources. Each of these brokerages commands significant awareness, and, as a result, NBDB has their work cut out for them to start becoming part of the mainstream conversation of online brokerages.

That said, with 14 Canadian online brokerages for National Bank Direct Brokerage to compete against, their pricing immediately makes them worthy of a top-five or -six consideration. When competing against bank-owned online brokerages, however, they could potentially move into the top three.

Undoubtedly, TD Direct Investing would be high on the list of bank-owned competitors, followed, potentially, by BMO InvestorLine in terms of active marketing and advertising. Clearly, by lowering their standard commission rates to $6.95 per trade, National Bank Direct Brokerage has just earned themselves a major advantage relative to their peers. The online broker with the biggest risk of being displaced is CIBC Investor’s Edge, which, up until now, had retained the position of offering the lowest standard commission among the big bank-owned online brokerages.

When we first reported the pricing drop by CIBC Investor’s Edge to $6.95 per trade in 2014, the impact among DIY investors was immediate. Our data showed that DIY investors soon came to see CIBC Investor’s Edge as a value-based option for trade execution. Even so, the pricing structure reflected some of the limitations for active trader experience at Investor’s Edge.

In this case, National Bank Direct Brokerage has pricing for the “passive investor” but also has platforms and pricing for very active investors and young investors. This makes them unique among the “banking” peer group.

Given the propensity of Canadian online brokerages to make smaller moves – especially among the bank-owned online brokerages – we expect that standard commissions might not be the starting point to match the new pricing at National Bank Direct Brokerage. Other places that online brokerages might be able to target to retain clients would be in their definition of “young” investors, which NBDB defines as 30 and under, or with commission-free ETF trading.

National Bank Direct Brokerage’s latest commission pricing move has made them an option that many DIY investors will be hard-pressed to ignore going forward. As a result, it may not be too much longer before the bank-owned online brokerages cannot ignore them either, and yet another wave of commission pricing drops ensues.

So long as the commission-pricing at NBDB stays quiet, the online brokerage industry in Canada won’t have to move quickly. That said, in a day and age of Reddit threads and social media reach, all it might take is one post for that to change.

Deals & Promotions Updates

March is synonymous with spring and with the changes that accompany a new season. While the beginning of the month saw a significant reduction in the number of Canadian online brokerage offers from larger players, we predicted that it would likely not be too much longer before new offers sprouted up again. And, it turns out, we didn’t have to wait that long after all.

This month, we’ve already seen BMO InvestorLine replace an outgoing deal with a new cash-back promotion, and, excitingly, this past week we noted that National Bank Direct Brokerage also launched a new 100-commission-free-transactions offer. More on that in just a moment.

Starting with the BMO InvestorLine cash-back promotion, the new promotion, like its predecessor, is a tiered cash-back offer. The starting deposit tier for the latest offer is higher, however, starting at $25,000, compared to the previous $15,000. Cash-back amounts have also been scaled back significantly at most deposit tiers. Starting tier deposits qualify for a $50 cash-back (compared to $150 the last time), and the highest deposit tier, $1 million and over, still qualifies for a bonus of $2,000.

For National Bank Direct Brokerage, this has been a big month, with newer pricing (see above) and the revival of a 100-commission-free-transactions offer. The new offer provides 100 commission-free trades, which are good for use for up to one year after the account is opened. This new promotion runs until the end of June and is open to new and existing clients so long as the account type is new.  Interestingly, the offer applies to trades of stocks and options (and ETFs), which are sometimes not available during certain commission-free trade promotions.

The (re)launch of a commission-free trade offer from National Bank Direct Brokerage, along with their new pricing offer, might prompt other online brokerages to consider coming to market with an offer this spring as well. Interest in investing and trading remains elevated among DIY investors. However, if the thesis that the catalyst for the surge of interest was individuals working from home or putting stimulus money into investing products, then the reopening of the economy (and sports and travel) could lead to decreased interest or availability of individuals to continue actively trading.

Most Canadian online brokerages elect to take a “wait and see” approach to emerging trends rather than risking taking the position as a leader in innovation. With that in mind, deals and promotions offer a proven method to continuously stay on the radar of investors – especially those who might be lured to leave because of dissatisfaction with pricing or service.

What deals and promotions cannot do is solve for technology or service gaps (even though we have seen compensation in the form of trading commissions help smooth out some service shortcomings). So, it is likely – perhaps even sound business strategy – for those online brokerages who are confident in their ability to deliver strong service and technology to lean into promotional offers at a time when other firms are struggling or lagging. As such, a promotional offer could be seen as a sign of confidence and strength in the service delivery model, and an absence of one – at least in the near term – might have DIY investors asking why certain brokerages are choosing to stay out of the spotlight.

Discount Brokerage Tweets of the Week

From the Forums

My Definition Is This

In this post, an investor who is unsure and nervous about how the Canada Revenue Agency defines day trading asks if it’s okay to sell stocks from a TFSA after owning the stocks for just a few days. The CRA doesn’t provide a clear definition, so Redditors weigh in with their opinions.

New Tuber in Town

A new investor asks in this Reddit post if the Canadian Couch Potato method of investing is still relevant in 2021. An in-depth discussion ensues, touching on ETFs, meme stocks, and more.

Into the Close

That’s a wrap on another week. While markets and investing are the focal point of the Roundup, there’s also a human side to this, and this past week was a dark chapter for the AAPI community. Sadly – and, frankly, unacceptably – the level of hate crimes against women and Asians in particular has increased during the pandemic. It is up to all of us to speak up against racist behaviour wherever possible.  Here are some steps from Stop AAPI Hate that anyone can take to assist a person experiencing a racist attack or hate crime:

  • Take action: Approach the targeted person, introduce yourself, and offer support.
  • Actively listen: Ask before taking any actions, and respect the other person’s wishes. Monitor the situation if needed.
  • Ignore the attacker: Using your discretion, attempt to calm the situation by using your voice, body language, or distractions.
  • Accompany: If the situation escalates, invite the targeted person to join you in leaving the area.
  • Offer emotional support: Help the other person by asking how they’re feeling, and assist them in figuring out what they want to do next.

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Discount Brokerage Weekly Roundup – March 15, 2021

One look at the past week in March and daylight savings isn’t the only reason to be losing sleep. From the excitement of Bitcoin’s highs to the now-constant (like Pi Day) news of platform outages to Beyoncé’s smashing of a Grammy record, March has been full of surprises. Interestingly, it seems like Canadian online brokerages also picked up on this theme heading into the Ides of March.

In this edition of the Weekly Roundup, we review some of the newest features to sprout up at Canadian online brokerages and analyze the shifting landscape of financial services in Canada. From there, we dive into some strange and interesting signals surrounding the “new” retail investor and look at how they are impacting online investing. As always, we’ve got some interesting and…colourful…commentary from DIY investors in the forums and from Twitter.

Out to Launch: New Features Sprouting Up in March

March is synonymous with spring and, therefore, also with new and exciting things.

This year, there’s already much to look forward to. However, when it comes to the Canadian wealth management landscape, there are some interesting developments sprouting.

BMO InvestorLine Launches adviceDirect Premium

Starting first with BMO InvestorLine. This past week, BMO InvestorLine formally announced the launch of a new premium tier of their adviceDirect service offering. The new feature, adviceDirect Premium, is geared toward clients with $500,000 or more in investable assets and offers a range of new functionality, most notably enhanced planning and research resources.

Now over eight years old, adviceDirect has often occupied a niche role in the world of online investing. As a hybrid between the world of DIY investing and digital advice, it has evolved a number of times to find its identity as the “middle child” of the wealth management suite offered by BMO.

The timescale of the product is especially relevant given the context of what the product offers and the current state of online investing. AdviceDirect is unique in that online investors can contact a licensed investment representative to review their portfolio and to get additional insight on possible investment decisions. Although the investment rep does not necessarily have to put orders through, the key value driver is that a DIY investor can get an informed opinion about their particular investment picture and goals.

Prior to the mad rush into the markets instigated by COVID-19, the need for orientation to the markets was somewhat measured. Passive investing was all the rage, and the numbers of DIY investors who were new to trading or who wanted to get into investing were increasing at a manageable pace.

Fast forward to today, however, and the wealth management industry – in particular the online investing space – is filled with chatter centred around the lack of experience of investors entering the market. This past week, for example, a pair of articles essentially found that the kinds of questions new investors were seeking answers to reflected a significant lack of knowledge about the world of investing online. Of particular note was the following stat: “A Deutsche Bank survey found that almost half of U.S. retail investors were completely new to the markets in the past year. They are young, mostly under 34.”

While the Canadian online brokerage market is different, the overall trend of newer investors coming to online investing is likely similar. The takeaway: There are lots of new investors in the market who don’t quite know what they have gotten themselves into.

It is interesting, then, that adviceDirect has chosen to launch a premium product at this point. On the one hand, a premium tier is consistent with an overall trend for BMO InvestorLine to seek out clients with larger deposit amounts or investable assets. At a macro level, however, the timing couldn’t be better to bring on clients who would likely benefit from having a “voice of reason” available for consultation before making some big investing decisions. Investor forums now routinely have stories of DIY investors who bet big and lost considerable amounts of money by taking risky trades. Those risks far outstrip the management fees charged by the adviceDirect platform.

The online investing world has typically been a place where either you’re a DIY investor or you’re not. BMO InvestorLine’s latest enhancement to its long-standing hybrid model offering might have finally found itself ready for a world where “DIY” doesn’t imply an all-or-nothing proposition. The challenge, however, is whether or not adviceDirect can ramp up its marketing and appeal to DIY investors faster than other online brokerages or roboadvisors can.

Questrade Launches Mortgages

This past week, the line between online brokerages and banks got a little blurrier as two wealth management firms continued their push into banks’ traditional territory of mortgages and money transfers.

Starting first with mortgages. Questrade, which acquired Community Trust Co. in 2019, has been quietly building up to a formal launch into the world of offering mortgages. That day, it seems, has arrived, and last week, Questrade clients received the formal announcement that QuestMortgage has officially gone live.

For the moment, QuestMortgage is open to Questrade customers only. Given the current frenzy over real estate in Canada, however, it is likely that the timing of launching to all Canadians is on the minds of the folks at Questrade. The QuestMortgage prime rate is 2.45% at the time of publication, and a five-year fixed-rate closed mortgage ranges between 2.04% to 2.24%.

While these rates are higher than at other firms, the reality is that there will likely be a curious set of existing clients who either know and/or like Questrade and would be willing to see what a mortgage through QuestMortgage might be like. That said, one of the challenges of the bank-owned online brokerage approach is that service in one category of product tends to impact the decisions and perceptions in another.

This past week, for example, Questrade’s platform suffered an outage during trading hours, and, as a predictable result, lots of clients were understandably angry – including to the point of wanting to leave. If there are hiccups and issues during this rollout with Questrade clients, it could alienate existing clients, giving them cause for concern with the brand as a whole.

Wealthsimple Relaunches Cash Solution

Another big development in the world of money for Canadians came from Wealthsimple.

Typically, we would be referencing Wealthsimple in the context of online trading or even online investing through their roboadvisor service. However, this past week, Wealthsimple published an article in their Wealthsimple Magazine and sent out an email campaign highlighting their Cash app, in an effort (it seems) to ramp up the awareness of this new(ish) product.

What’s so special about Wealthsimple Cash? To start, it promised to enable instant money transfers between parties. And, going way back to the announcement of the cash feature in 2020, there are some other key features such as bill payments, ATM cash withdrawals, and a highly sought-after physical card.

As with the comment about Questrade venturing into mortgages, however, the rollout and client experience with one part of the brand will invariably influence the perception of the brand as a whole. There are now several apps in the Wealthsimple ecosystem, each representing a possible relationship with a consumer. As a result, a negative experience in one of these areas has the potential to cause someone to leave the whole set of products.

In the case of the Wealthsimple Cash app, there is already skepticism and negative sentiment brewing – in part relating to the delay in the rollout of the promised features that the Cash app was launched with. While Wealthsimple had hoped to be transformative with the technology and user experience (and, to be fair, the proposed user flow in terms of sending cash seems straightforward), ultimately it comes down to reliability and execution, which is where the current reviews and reactions from Wealthsimple clients stem from.

Despite the slow rollout of the most sought-after features, Wealthsimple is clearly going after the business domain of the traditional big banks in Canada. The convenience factor that emerges when individuals are able to manage multiple parts of their financial lives in one easy-to-use platform is a very powerful force. Equally powerful in Canada, however, is inertia. Individuals who are content to stay where they are because of a perceived amount of effort to change are not yet hearing the kind of enthusiasm about the Wealthsimple Cash feature that would induce them to switch. Though the banks might be safe for now, it’s clear(er) that the winds of change are starting to blow.

Neighbourhood Watch

If there’s one thing that living through 2020 has taught us, it’s that these are really unusual times. Just when traditional wisdom implies that things ought to zig, we see them zag. Nowhere has this been more true than in the world of DIY investing. What has started to emerge from a series of discussions about the world of online investing appears to be a sense of impending doom – almost as if there’s an iceberg in the water and the “new” stock market is the Titanic.

To be fair, there are perennial pessimists when it comes to the stock market. Since the Great Financial Crisis of 2008/9, naysayers have been waiting and calling for a massive correction in the markets. The same could be said for the sentiment post-March 2020. Looking at historical data on crashes and bear markets, however, paints a less dire picture than the market doomsday prophecies would imply.

That said, there appears to be an undercurrent of pessimistic conversation surrounding DIY investors who are new to markets and trading that is unlike anything witnessed in recent memory, such as in a pair of articles from this past week (here and here).

Some of the key takeaways paint a picture of the “new retail investor” who relies on social media for orientation to the markets and for trading ideas. Anecdotally, this would appear to be the case with communities on Reddit, such as Personal Finance Canada, growing to an exceptional size and rivalling traditional media sources for information on topics related to personal finance (including investing). At the time of publication, the Personal Finance Canada community on Reddit has grown to almost 480,000 members.

Data cited in a MartketWatch article (sourced from Magnify Money) is also consistent with this observation. It found that almost 60% of Gen Z and millennial investors (aged 40 and younger) were a member of an investment community such as Reddit. Also, just over 40% of respondents to the Magnify Money survey reported turning to YouTube for investing information.

This past week, there was also yet another hearing held in the United States, this time by the Senate Banking Committee, that put the commission-free trading model of Robinhood under the microscope and, with it, the activities of very active traders or investors.

Other insights from data being shared during the heightened scrutiny of Robinhood show that the majority of the high-volume trading is coming from a very small number of trading accounts. Approximately 2% of clients would be considered day traders, according to one report, which is shockingly small. A similar scope of influence was recently reported by Wealthsimple Trade about its client base, which revealed 14% of clients traded GameStop stock, with 81% of those who did purchasing seven shares or less.

What these different data points suggest is that there’s a very different type of trading behaviour taking place in the current markets. Specifically, with so many new investors joining the markets, with more time and access to some discretionary capital, and with new technologies and lower barriers to trading, the ability for investors to “pile” into a trade – and to do so quickly – the mindset of younger investors is decidedly different and is material to market behaviour.

For online brokerages, while COVID-19 lockdowns and restrictions persist, being visible on the channels that online investors are turning to makes sense. It is likely why, in Canada, aggressive advertising by Wealthsimple Trade shows up on YouTube, and Questrade commercials air during sporting events. What remains to be seen is how trading activity changes if and when working from home becomes less common for those younger investors. That said, the data shows that while there might be more excitement and engagement in markets overall, the ultra-active segment of investors might be vulnerable to retreating quickly if market conditions shift or macro conditions – like having to go back into the office – surface.

At the heart of much of what we’ve learned over 2020 and now 2021 is the growing power of the financial community of users on social media platforms. For online brokerages to remain relevant and go beyond commoditized providers of online trading services, job one still remains being able to connect people to the markets. However, not far behind is to figure out how to tap into the power of online communities of DIY investors.

Discount Brokerage Tweets of the Week

From the Forums

School Daze

In this post, an investor with two young children who wants to start saving for their education debates the relative merits of setting up two RESPs, a family RESP, or a high-interest savings account. A lively discussion ensues, with Redditors talking about everything from government grants and TFSAs to couch potato investing and what happens if the children decide not to pursue higher education.

No Time Like the Present

A 32-year-old with a spouse and a child is worried about having no savings for emergencies, retirement, or the child’s education and asks in this post how to start investing in the stock market. Redditors offer a wealth of suggestions – and reassure the nervous investor that age 32 is still relatively young to be embarking on the path to financial security.

Into the Close

That’s a wrap on another highly eventful week. With so many wheels in motion, the recovery trade and talk of stimulus in the US has put a spring in the step of the economy. It seems fitting that in a week following the Grammys, we’ll be watching some chart-toppers in the stock markets. While the choreography won’t compare, the drama is almost sure to be newsworthy.

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Discount Brokerage Weekly Roundup – March 8, 2021

March is here in full force. Even though the RSP contribution deadline for 2020 is now behind us, there is no shortage of activity taking place this month on the digital front. From Fraud Prevention Month to International Women’s Day to rising oil prices to NFTs to a bombshell interview from Oprah, there is a lot to tune in to. And one more thing: There’s still a global pandemic.

This edition of the Weekly Roundup leans into the convoluted but interconnected web of signals to pull out two fascinating stories on the online brokerage space in Canada. The first story looks at the deals and promotions for March but dives deep to provide context on the current state of deals activity against a new competitive landscape. And, speaking of competition, Canadian online brokerages that might not be concerned about a new entrant showing up any time soon may want to rethink that position as we profile the long and winding journey of one US online brokerage that is poised to make a move north of the wall. Of course, what would a Roundup be without comments and perspectives from DIY investors? Be sure to check out some thought-provoking conversations taking place in the forums and on Twitter.

Online Brokerage Deals & Promotions Update

It’s official. The 2020 RRSP season is officially over, and while the huge rush to ensure that money moves to the appropriate place by the contribution deadline has ended, the data analysis on the campaigns deployed by Canadian online brokerages is now in full swing.

Normally, the start of a new month is accompanied by a deals update that follows a standard format of recapping the latest deals and promotions offered by Canadian online brokerages, as well as discussing what deals are new and which ones have expired.

Contextually, however, 2021 is still very much an anomalous year when it comes to DIY investing and especially online brokerage promotions.

One of the most important insights to emerge over the past year at Canadian online brokerages is that there can actually be too much of a good thing. Normally, promotions and deals are used by online brokers to incentivize DIY investors – new and experienced alike – to consider choosing a particular brokerage.

Last year, however, we saw numerous online brokerages, especially around March and April, pull back or withdraw their offers altogether. It was the first time we had witnessed that happening in at least five to six years. The reason: Demand for online accounts was simply too high, and Canadian online brokerages were overwhelmed and opportunistic. If people were willing to pay (and also to wait), a promo probably wasn’t required to get them to sign up.

The dry spell in deals started to clear toward the tail end of 2020. At that point, we started to see a more normal course of activity, with multiple large Canadian online brokerages offering up cash-back promotions as part of their lead-up to RSP season. And then January 2021 happened.

Recall that it was just over a month ago that yet another surge of online investors poured into the world of DIY investing and trading, this time fueled by trading communities like Wall Street Bets and social media channels feeding a frenzy of momentum trading.

Data we reported on in the previous Weekly Roundup about Interactive Brokers, for example, showed that January 2021 resulted in a 221% month over month increase in new accounts and an almost 700% increase over the same period last year. The latest metrics released by Interactive Brokers from February revealed that almost 76,000 new accounts were opened during the month. While significantly lower (-35%) compared to January in terms of net new accounts opened, when compared to the same point last year, the number of accounts opened in February is over 400% higher.

In the Canadian marketplace, data from financial services research firm Investor Economics also shows that over 2 million online brokerage accounts were opened in 2020, up from just shy of 850,000 in 2019. It is thus not hard to triangulate that, for the beginning of 2021, and in particular RSP season, Canadian online brokerages have had another exceptional year in terms of volume of interest.

This backdrop is important when looking at the current slate of deals and promotions offered by Canadian online brokerages, especially with a view toward whether or not more promotional offers can be expected to show up in the near- to intermediate-term. Having deals from large providers such as TD Direct Investing, Scotia iTRADE, CIBC Investor’s Edge, and Qtrade Investor expire at the same time is enough to cast some doubts on what happens for the next few months.

The short answer is that it does seem like Canadian online brokerages are willing to deploy promotional offers between now and the kickoff to next RRSP season, which generally happens at the beginning of November. For anyone keeping score, that is about six months away. Here’s why we think that’s the case.

First, there’s the inevitable restart of the economy through the summer. While folks have been working from home, it has probably been a lot easier and less noticeable to nosey coworkers to have a trading window open or be trading online or watching stocks on your phone. When offices start reopening and individuals begin going to the office again – as will happen – the mechanics of being able to trade from work are going to become harder. That bodes well for deals and promotions since a more “normal” cadence of activity is likely to require online brokers to work harder to get individuals to pay attention to investing while those individuals go back to juggling life as usual.

Another reason we’re bullish on deals and promotions heading into the stretch between now and the start of November is that there is increased competition for incumbent Canadian online brokerages – especially from Wealthsimple Trade but also from potential new entrants looking to make a splash in the Canadian market (see next story below).

For anyone who’s spent any time on YouTube, Wealthsimple Trade’s barrage of advertising should be a clue that they’re heavily investing in spending big money to get attention. Wealthsimple Trade’s commission structure alone should garner them attention, but it was still fascinating to see them start to launch promotional offers at the tail end of 2020 as well as some even bigger promotions linked to referral offers mid-February 2021.

Larger or more well-known Canadian online brokerages may have a buffer against this advertising and promotional onslaught, but outside of three to four online brokerages in Canada, the rest of the field has to reevaluate a lot about how, when, and where they show up to Canadian DIY investors.

One viable option for online brokerages to compete is through offering deals and promotions on an ongoing basis, with different offers available at different points in the year. Another option is better marketing around offers that are already available – with a case in point being Scotia iTRADE. They have a promotion for commission-free trades that is bundled with a premium banking package offered by their parent brand, Scotiabank. Despite having traction with value-hungry consumers, this offer is relatively under-advertised to the general public.

On the good news front for DIY investors, there are still online brokerages offering deals and incentives for investors looking to get into the markets or who are interested in a new service provider.

Promotional offers from RBC Direct Investing – a major bank-owned online brokerage – are still available through the end of March, and BMO InvestorLine also launched a new cash-back offer to replace their RSP campaign. In the case of BMO InvestorLine, the minimum deposit amount on their new cash-back offer was raised to $25,000 and expires on June 1st, 2021.

Also, as stated earlier, it is bullish that a firm that currently has zero-commission trading is offering promotions on top of their ultra-competitive pricing. And considering Wealthsimple Trade’s aggressive marketing, it is unlikely that their competitors can afford to stay quiet for much longer.

Whether it is because of elevated trading activity, the dynamic nature of the restart of return to work, or the new competitive landscape for online brokerages in Canada, we believe that more Canadian online brokerages than normal will turn to promotional offers as a fast, effective way to stay relevant to DIY investors.

What the data from 2020 and early 2021 have shown is that large pools of DIY investors can quickly rush to market to get on board with a trading opportunity. Online brokerages looking to get ahead of the next big push, as well as to get in front of the big return-to-work shift, will likely be considering deals and promotions as a tactical way to be visible throughout these next few months. The takeaway: Investors who haven’t already joined the market can anticipate some interesting offers without having to wait until the fall to take advantage of them.

A Taste of Something Different: Signals Point to 2021 Arrival of Tastyworks in Canada

It started out, at least for me, in the Las Vegas airport on a journey back to Canada in 2014. I stared up at the TV in the departure lounge and saw a strange cherry logo alongside messages about online trading. It all seemed very Vegas, but the name tastytrade was something I made a mental note to remember.

Little did I know at the time that the combination of curious name and logo would potentially become one of the bigger stories in the Canadian online brokerage space in 2021.

What Is Tastytrade?

Back in 2014 and 2015, it was difficult to answer exactly what this firm was all about. After doing a little bit of research on tastytrade, it became clear that this brand was something different in the online investing space.

Launched in 2011, it was all about providing content on investing, with a heavy focus on options trading, mixed in with some fun and insightful segments. One thing it wasn’t short on was opinion and debate. But, they were American, and being in Canada meant that aside from an alternative to programming on CNBC or BNN, the talking heads on tastytrade probably wouldn’t have a direct influence on life here in Canada. At best, it seemed like a fun channel to tune in to for trading banter.

The next time tastytrade came back on my radar was October 2015. Back then, my hair, like the Weekly Roundup, was shorter, and the big news of the day was that TD Direct Investing had just “officially” joined Twitter. And, for good measure, one of TD Direct Investing’s early tweets: tastytrade would be coming to Canada for the first time on October 26th as a guest of TD Direct Investing.

I was fortunate enough to attend that first session at the CBC studios in downtown Toronto. In the before times, when travel and live events were a thing, investor education was also something Canadian online brokerages invested in far more heavily than they do today. Calendars on online brokerage websites were crammed with investor education events – which, at the time, is what this seemed like it would be.

Little did anyone know at the time how big of a deal it would be that the largest online brokerage in Canada was bringing a new financial brand north of the wall.

The session itself lasted the better part of a day. While spending a good portion of a day at an investor education event geared toward options was something I had done before (a couple of times), it was clear from the get-go this event was different.

First, it was impressive that instead of an education session, it felt more like a rock concert. There was fancy sushi (no boring sandwiches here), and the auditorium was filled with a community of fans who came to see and hear the founder of tastytrade, Tom Sosnoff, do his thing live. The energy in the room was unique. It could have been, in part, because attendees were actually part of the live broadcast of the tastytrade show. They could see that the personalities they tuned in to for options trading and market chatter were the same in person as they were behind the screen: funny, chill, and very smart.

While the actual segments of the shows were interesting, the most interesting thing to observe and experience was what happened during breaks.

Sosnoff was approached and literally encircled by a flock of adoring fans peppering him with questions about trades and options. He was able to engage an audience with a topic that most people – even back then – found opaque and mysterious. Again, this was Canada and it was 2015. No big rush to Robinhood, no GameStonks, no Reddit army. Whatever the following and fan base here, it was likely significantly higher in the US.

For TD Direct Investing, at the time, it was a big score to have tastytrade come to Canada. This event was a huge deal for their active options trading audience and, as it turns out, for their associates who ran the thinkorswim platform. Fun fact: Sosnoff created thinkorswim and sold it to TD Ameritrade in 2009 for US$750 million.

The next few years for tastytrade were spent continuing to grow and engage with their audience across the globe and launching their own online brokerage, tastyworks, in 2017. In the US online brokerage market at or about that same time, Robinhood was starting to make more waves among online investors. Not too long after the launch of tastyworks did we start to see comments left by DIY investors on SparxTrading.com that the best pricing for options trading was being provided by tastyworks. 

In a very short period of time, the tastytrade and tastyworks brands established themselves as a powerful force for active traders and investors who want to get the full experience of trading online, offering a unique community and great trading tools and user experience.

In a Weekly Roundup from February 2019, we spotted tastyworks’ rise in the US online brokerage rankings, where they appeared to be gaining ground on traditional online brokerage names in the space. Again, this was just two years after the tastyworks launch. The following interview from the Moneyshow in Toronto was also telling of the footprint tastytrade had developed in Canada by that time.

It wasn’t until 2020, however, that chatter around tastyworks coming to Canada started to pick up steam. To be clear, prior to 2020 the tastyworks team mentioned publicly that they intended to come to Canada. Unfortunately, regulatory and technology hurdles made coming here much slower.

Despite several suggestions in the past that didn’t quite work out, things seem different this time. The series of signals that the arrival of tastyworks in Canada is imminent seems to be growing. If we rewind back to January 2020, a tweet from the current Co-CEO and President of tastyworks, Kristi Ross, about the online brokerage coming to Canada was the first strong indicator big things were coming:

Then, in June, another interesting update, again from Twitter:

Then, in September, on Twitter:

We were primed to see a new online brokerage set up shop in the Canadian market before the end of the year, but it did not end up happening. As it turns out, though, the tastyworks folks were also busy with some big news of their own.

Tastyworks announced at the beginning of 2021 that they were being acquired for $1 billion by IG Group Holdings.

After about a decade, Tom Sosnoff had done it again, turning an idea about trading options and building a community of users into a multimillion-dollar payout. According to the press release, the management of the tastyworks brand was to continue on, but it did raise some questions about whether or not a move to Canada was still in the cards. That question, however, was put to rest in a video in early February:

Although the video clearly signals tastyworks’ own acknowledgement of yet another delay, this article from The Globe and Mail about tastyworks coming to Canada was published last week, lending more weight to the idea of tastytrade’s Canadian launch actually happening this year. One of the biggest questions will be “What is tastyworks?” and, in all likelihood, this article is but one of many to come that will seek to answer that question as the tastyworks and tastytrade advertising machinery ramps up.

The journey to Canada for tastyworks has been a long and winding road.

Since their first hints in 2018 of coming to Canada, the online brokerage landscapes in both Canada and the US have changed significantly, with the biggest change being the shift in commission pricing. As we’ve seen over the early part of 2021, however, just because a platform offers a great user experience and low pricing does not guarantee customer delight. There has to be something deeper.

For online investors, especially active ones, community is huge, and Sosnoff is well aware of this. Tastytrade is a financial content powerhouse, boasting an audience in Canada of 10,000 daily viewers and a global audience of about 900,000. These aren’t just passive viewers, however. Scan comments and forums relating to options trading and pricing conversations and tastytrade comes up a lot – and with a lot of (generally) positive emotion. It has a loyal fan base and a vibrant community.

For Canadian online brokerages, the move north by tastyworks will be an inflection point for the standard of online investor experience. Tastytrade content is engaging, entertaining, and educational. There are 20 shows that take place on the network. There is fresh content every day, and you can watch the founder and other members of his team trade throughout the day. They don’t just talk about this stuff, they actually do it. Add to that the price for trading stocks and options that tastyworks will bring, and the picture forming is that most Canadian online brokerages are staring at a potential game-changer coming soon.

The irony of the tastytrade and tastyworks journey coming to this point in 2021 is not lost on me.

When, seven years after the fact, an online brokerage can get you to remember the first time you ever saw their name (let alone on a return trip from Vegas), that says something about the power of the brand. The fact that TD Direct Investing set in motion the chain of events that led to tastyworks coming to Canada, and that I have been able to watch it unfold, is amazing.

Also pretty cool is seeing that having a penchant for disruption, a passion for giving online investors great experiences, and keeping your hair long can end up working out after all.

Discount Brokerage Tweets of the Week

From the Forums

Hitting Rock Bottom

In this post, a 40-something investor with a wife and children asks for advice on how to rebuild after a financial catastrophe – that he brought upon his family through a series of bad bets on leveraged ETFs. Hundreds of Redditors offer words of encouragement and advice on everything from investing in simple ETFs to being grateful for family during tough times.

Risky Business?

A new investor with a lot of money to invest for 20+ years asks in this post how risky an ETF is and wants to know if a HISA or GIC would be a better choice. Redditors have strong opinions on the matter.

Into the Close

That’s a wrap on another edition of the Roundup. As alluded to in the opening, there’s a lot happening this month, and the Oprah interview is just the tip of the iceberg. We’re still tuning up the new features on the SparxTrading.com website and are looking forward to upcoming enhancements. While we might not get Oprah as a guest contributor (just yet), we are looking forward to including more interviews with interesting folks in the near future. In the meantime, we want to wish our readers tuning in today (Monday) a happy International Women’s Day and a profitable week ahead!