Tag: Weekly Roundup

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Discount Brokerage Weekly Roundup – May 20, 2016

Source: Twitter

Even the best investors can be caught off guard by sudden moves in the market. It’s a humbling lesson and usually the tuition for poor risk management isn’t cheap. For Canadian discount brokerages, there are definitely signs in the US brokerage market that the risks for certain brokerages are rising.

In this week’s roundup, we take a deeper look into some interesting moves that took place in the US online brokerage market and what that might mean for Canadian online brokerages as the competition and race for technological supremacy heats up. Next, we take a look at standard online brokerage commission pricing, to see why it’s not exactly an apples-to-apples comparison across the board. From there we’ll take a look at the reactions from DIY investors on Twitter and close out with comments from the online investor forums.

Keep on Surviving

Why is a market so exciting? It settles debates from opposing sides using dollars and cents. The business of being a brokerage is something that we cover regularly in the weekly roundup and this past week there were some interesting developments that are shaping up to make the ‘online brokerage’ marketplace even more exciting.

On the one hand there’s a bullish case to be made with interest rates being telegraphed to rise. For borrowers this isn’t great news but online brokerages are also lenders and as we reported several weeks ago, significant portions of online brokerage revenues come from their margin lending. One of the long time messages Schwab has been trying to communicate to its shareholder base is just how material even small increases in interest rates will be for their financial performance.

On the other hand, there are the bears. Interestingly, the case is not entirely a bearish one considering the source, Thomas Peterffy, CEO of Interactive Brokers. According to a recent interview in the Financial Times, he is forecasting that 80% of brokerages in the US will disappear because of constrained revenues, changing investor habits, compliance costs and advances in technology. So, while this is clearly a bearish call for most of the players on the field, for some, including Interactive Brokers, it may be a self-fulfilling prophecy that they’re left standing after this massive cull.

This is not the first time he has pointed to this data this year either. Peterffy alluded to this point in a recent earnings conference call with an analyst which suggests that this forecast is both a clever marketing pitch to professional brokers that want to lower their cost and a way to showcase the merits of Interactive Brokers’ model of heavy automation. In either case, Interactive Brokerages certainly stands to benefit from brokerages either folding, being gobbled up or deciding to use Interactive Brokers for their platform of choice. Well played IB.

There is, however, one potential ‘canary’ in the Canadian online brokerage coal mine.

Now that Virtual Brokers has changed (i.e. raised) their commission structure and is starting to shift their focus towards ‘value’ rather than price, it may signal that they too are feeling the pinch of the low cost game. Unfortunately for small brokerages like VB, value is a game that the bigger financial brands in Canada have a clear edge over (think bundling of services and convenience).

To compound the challenges facing the independent brokerages they need the scale of client accounts (or trading activity per client) to be large otherwise commission prices need to be lower in order to offset the greater convenience offered by the bank-owned brokerages. The only other viable alternative for non-bank-owned brokerages is to invest in making their product experience exceptional – which is not a small investment in either the people running the brokerage or the technology needed to pull it off.

For Canadian DIY investors, ultimately, the scenario where costs/fees decrease is a good one.

Unfortunately for the non-bank-owned brokerages are now quite vulnerable to being priced out. There’s already proprietary data we’re seeing that shows they’re losing their edge against the banks, and the introduction of robo-advisors certainly doesn’t help matters either.

If the bank-owned brokerages were to drop their standard commission fees down even further, the traditional “low cost” or non-bank owned online brokerages would have a difficult time competing demonstrating yet again that the debate over the best online brokerage may just come down to who’s left standing.

Unpleasant Sur-price

Nobody likes discovering what’s in the fine print, especially after receiving a charge from their brokerage. Yet, despite all of the forms and acceptance of terms and conditions, so many DIY investors get tripped up by the fine print put forward by online brokerages.

Interestingly, this past week there were two examples of two different investors who unfortunately appeared to get dinged for fees they didn’t see coming.

The first was in a post in the Canadian Money Forum in which a Qtrade Investor client was charged $22 commission for a trade they thought should only cost $8.75.  In the second case posted on Twitter, a user was clearly caught off guard by the commission rates.

Of specific interest is the situation of the trade at Qtrade Investor. In this particular instance the individual in question stated they were charged a fee that was generated on top of their ‘commission fee’. As it happens, this fee appears in the “other fees” section of the Qtrade website pricing page where it states that a charge of 1/30th of 1% or (0.00033) of the value of the trade.

Breaking down the math of the trade, the standard rate of $8.75 per trade means that this individual incurred a charge of $13.25 in ECN fees for this trade. In order to generate that level of ECN fee they would have had to have a trade value of $39,750. Now since we know they sold 500 shares of BMO.TO that gives us a trade price of $79.50 (sounds like a good round number limit order price) which turns out to be a plausible price for BMO to have hit on April 12th – so the math checks out (13.25 divided by 0.00033333 = 39,750).

There are a number of interesting things about this scenario.

Perhaps the most fascinating is that this person described themselves as a relatively infrequent trader (<20 trades per year) with a six-figure portfolio. Yet for the surcharge of an extra $13.25 of a $39,750 order, the individual went through the motions of reconsidering their relationship with Qtrade Investor to consider moving their crosstown rival Credential Direct (or others who may offer truly flat pricing). And, not so much because of the $13.25 but as noted by the individual it was “the principle of paying double”.

It is important to mention that, while Qtrade Investor does offer to waive this fee for clients who make over 150 trades/quarter or who have at least $500,000 in assets across all Qtrade accounts, for this investor, the standard pricing rules applied.

From a business perspective, the bigger question is what is it worth to an online brokerage have that client or to try to win them back? The answer to this question is probably why, in some part, many bank-owned brokerages have decided to offer flat commission pricing rather than pass through the ECN charge.

For DIY investors, flat pricing is usually a more favourable option to have than variable pricing and the difference can certainly add up depending on the manner or volume of trade being executed. Flat pricing also simpler and more predictable.

Interestingly, Virtual Brokers is the only non-bank-owned brokerage to offer the flat commission pricing as a standard option. It should be noted that Virtual Brokers does pass through the SEC fee for US securities trades at the rate of $0.0002/share.

Brokerage Standard Commission Price
BMO InvestorLine 9.95 flat
CIBC Investor’s Edge 6.95 flat
Credential Direct 8.88 (not flat)
Disnat Classic 9.95  (not flat)
HSBC InvestDirect 9.88 (not flat)
Interactive Brokers 0.01/share (not flat)
Jitneytrade Variable pricing (not flat)
National Bank Direct Brokerage 9.95 flat
Qtrade Investor 8.75 (not flat)
Questrade 4.95 – 9.95 (not flat)
RBC Direct Investing 9.95 flat
Scotia iTRADE 24.99 (not flat)
TD Direct Investing 9.95 flat
Virtual Brokers 9.99 flat
Note: Flat is defined as no additional charges on the trade (e.g. no ECN fees will be charged)

With flat commission pricing the independent or “low cost” discount brokerages in the Canadian market are now not necessarily less expensive than the bank owned discount brokers. Other fees, such as account administration fees or inactivity fees certainly bear consideration but when looking at flat vs variable cost on a per trade basis – flat makes a compelling case.

Coming back to the bigger issue of changing a brokerage on principle, this example offers an important insight into the value that DIY investors place not only on transparency of fees, but also on clarity and customer choice.

DIY investing does mean that there will be fine print and unfortunately as individual investors, everyone who signs up for an online trading account is responsible to know some of the “quirks” and important conditions for trading through a particular online brokerage.

1/30th of 1% may not seem like much but it was enough to cause one client to take to the internet to voice their displeasure.

The lesson to brokerages seems clear: leave the surprises in price to the stock market and not in the commission structure of those doing the trading.

Discount Brokerage Tweets of the Week

We had a few technical difficulties with the tweets of the week, so only a selection of tweets are shown here. We will update this when we’re able to access the other tweets. In the meantime, there appears to be no shortage of reasons that caused investors to reach out – most notably an outage from TD Direct Investing’s web broker.

From the Forums

The Price of Advice

In this post from Canadian Money Forum, a product that we don’t often hear much about – BMO InvestorLine’s Advice Direct, was mentioned by someone considering the service. Interestingly there was also the mention of bonus trades for InvestorLine to sweeten the deal to the tune of 160 free trades per year. There’s an interesting debate about robo-advisors in there as well. Worth a read.

The Cost of Advice

In this post from reddit, an alleged interaction with a Questrade representative stating that someone should over contribute on their TFSA sounded alarms with other readers and also with Questrade community reps who replied. An interesting example of why it’s always good to trust but verify.

Into the Close

That’s a wrap on another week. Heading into the May long weekend remember that Canadian markets will be closed on Monday. Have a safe and fantastic weekend and for all the Raptors fans, hang in there!

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Discount Brokerage Weekly Roundup – May 13, 2016

Even in a world of robo-advisors and trading algorithms, human traders and investors are still prone to believing in the power of luck. Of course, it being Friday the 13th, the more superstitious folks probably are focused on avoiding the bad luck. For Canadian discount brokerages, however, it seems like they’re betting on the power of luck to reignite interest in the world of DIY online trading.

In this week’s edition of the roundup, we highlight the latest online brokerage-run contests that have come to market. Next we’ll do a quick scan of updates from across several brokerages that are busy rolling out new features. As always we’ll take a look at the latest tweets from the online brokerage space and close out with what investors were talking about this week.

Exchanges Only: Scotia iTrade Launches Contest

After sitting on the sidelines for April, Scotia iTrade rolled back into action launching the latest revival of their commission free trade offer. This latest version of the offer, however, comes with a twist. First there are no ‘cash back’ choices as there were previously. Second, there is also a contest that is being branded as a ‘shopping spree on the TSX’ worth $10,000 attached to the promotion. Also back on the list of deals is the refer-a-friend offer at Scotia iTrade. More information can be found in our deals and promotions section.

This is not the first time (nor probably the last) Scotia iTrade has tried their hand at a contest. Last year they tried to entice visitors to their Investor Centre with a Twitter selfie contest, the prizes for which were movie passes.

So why do online brokerages run contests? Do they work? For the most part, contests are a great way for online brokerages to a) get potential customer information and b) to lower the cost of getting a client. As for whether or not they work, the question is really whether or not they are cost-effective which is tricky to measure.

What is interesting about the latest offer from Scotia iTrade is that it pairs together their familiar offer of commission-free trades with a headline grabbing amount of cash as part of a contest. While 50 free trades may not get attention, $10,000 most certainly will. Headlines aside, it’s important to take a look at all deals with a clear understanding of what’s being offered and what special conditions are associated with the offer.

When looking at the tiers of the offer itself, it is worth noting that individuals typically don’t see the number of free trades go up proportionately to the amount of money being brought in. For example, whether individuals deposit $100,000 or $1M, the number of free trades offered differs by 50. In fact, at $250,000 the number of commission-free trades does increase even if deposit size does; the ‘sweetener’ is the contest ballots which increase the odds of winning. It will be interesting to see whether someone would move and/or park $1M with Scotia iTrade for a few extra chances to win $10K.

Scheduled for January 2017, the draw for the shopping spree is quite some time away. For DIY investors who’ve entered and stayed within the terms and conditions, at least they’ll have enough time to make a list and check it twice.

Jumping into Fintech: BMO InvestorLine Stirs the Technology Pool

It almost goes without saying these days that technology is evolving exponentially. For banks and bank-owned brokerages in particular, the buzzword of the day is “fintech” or the convergence of finance and technology.

There are signs everywhere that startups are already provoking change at the bank-owned brokerages. Robo-advisors, for example, are directly challenging the wealth management divisions of the major Canadian banks so much so that several brokerages have either partnered with or created their own in-house robo-advisor (although they don’t want to label it as such).

This week, BMO InvestorLine showed signs they are stirring as they launched an invitation to clients to participate in an ‘advisory panel’ survey and are rolling out some changes to their login protocols.

In terms of the survey to clients, the survey itself is about 25 questions and covers topics designed to get to know who their clients are demographically but also where they may have other accounts and how users interact with the services provided by BMO InvestorLine.

One of the questions that was particularly interesting was a question in which users were asked about any other brokerages where they held accounts.

Screenshot from InvestorLine Survey

On that list were all of the major Canadian online brokerages, however there were also 3 robo-advisor firms on the list: Wealthsimple, Nestwealth and Wealthbar. This is clearly a signal BMO InvestorLine is curious to know what kind of presence the robo-advisors are gaining with their clients.

To encourage users to participate in the survey, BMO InvestorLine is offering a draw for $1,000.

In addition to the survey, respondents can sign up to be a member of the BMO InvestorLine “advisory panel.” It appears that BMO InvestorLine is hoping to create and tap a pool of individuals for feedback and create an engaged community of brand loyalists. Fortunately, there are also opportunities for participants to win money via ongoing draws that users get entered into for completing surveys.

Another interesting angle to the evolving ‘fintech’ story at online brokerages is that of security.

As client data and interactions shift decidedly to the online experience, security is of paramount concern at all Canadian brokerages. To that end, BMO InvestorLine is about to roll out 2 step verification in which users attempting to log into their BMO InvestorLine account may need 2 steps (such as entering in a username & password on the website followed by a notification code being sent to their mobile device) to confirm their identity.

The story on fintech goes beyond security and automation. It also means rapidly evolving features and functionality at a pace never seen before in this space.

Questrade, for example, is repositioning itself as a leader in the ‘fintech’ race among brokerages. Already they’ve opened up their app marketplace which enables 3rd party technology partners to add functionality to the Questrade platform. In addition, and most interestingly, they’ve also created an API that allows the community of Questrade users to come up with interesting tools and improvements to their trading experience in true DIY fashion.

For brokerages big and small, the race to adapt to a leaner technology model is ramping up. The future investors and traders – the ones who have the time horizon and risk profile to actively trade equities and options – are going to demand smooth user interfaces and digital experiences that look and feel current. This means that online brokerages, like BMO InvestorLine, will increasingly be asking and listening to what customers want and, most importantly, now they’ll have to figure out how to build it quickly.

Discount Brokerage Tweets of the Week

In this week’s tweets, technology is giving brokerages lots to keep them busy. Mentioned this week: Questrade, Scotia iTrade, TD Direct Investing and Virtual Brokers.

From the Forums:

Getting a DRIP

In this post from the RedFlagDeals.com investing forum, one user is interested in harnessing the power of compounding by using a DRIP. The only catch was actually knowing how to set it up at TD Direct Investing. Hear what others had to say about setting up a DRIP at their broker and at TD.

Earning for Learning

Putting funds aside for a child’s future educational needs is sound financial planning. Figuring which brokerage was best for RESPs was the focus of this post from reddit. Find out why one user was weighing either Questrade or TD Direct Investing as their top 2 choices.

Into the Close

It’s been quite a roller coaster week for folks trading on Bay St as well as those further south on Bay in the neighbourhood of Jurassic Park. We’ve talked a lot about luck in this week’s roundup and heading into the weekend it looks like the Raptors are going to need all the luck they can get their claws on. On a slightly different note – it’s great to see the magnificent response to the needs of folks in Fort Mac as the outpouring of support continues. Certainly there are things and people to feel lucky to have. Enjoy the weekend!

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Discount Brokerage Weekly Roundup – May 6, 2016

Source: Twitter

Crisis and opportunity. For traders it’s often two sides of the same coin. The human toll of the tragic events in Fort McMurray are impossible to quantify however for those seasoned veterans of markets who can only watch in disbelief at this surreal disaster, the scale and impact of these wildfires are what need to be traded around – which means speculators are trying to quantify the impact to oil, the Canadian dollar and the insurance industry. That said, like markets, it is encouraging that because of the bravery of first responders and the steely resolve of those displaced by these unrelenting fires, individuals are looking to the future, patiently awaiting the chance to rebuild.

In this edition of the roundup we’ll take a look at the latest deals and promotions to hit the stands at the outset of the month. Following that, we do a lightning round of small updates at several brokerages which show that the ground is still shifting and highly dynamic. We close out the roundup with chatter on Twitter and in the Canadian investor forums.

Making a Market for Promotions

Even though markets seemed to have had a solid bounce off their February lows, for online brokerage deals, it seems that the case is quite the opposite. The number of deals and promotions from Canadian brokerages has steadily receded so that heading into a new month we’ve now spotted 17 advertised promotional offers.

Despite a couple of brokerages flashing bearish signals on offering DIY investors deals, the great thing about competitive markets is that there are other brokerages who are bullish, and as a result, the next few months should have some really interesting changes start to take shape.

Since March, it appears that Questrade and Scotia iTrade in particular have turned bearish on deals. After years of promotional activity that typically resulted in a new offer every few weeks, these firms have been noticeably more quiet – perhaps too quiet. In such a dynamic space, sometimes it not what players do but what they don’t that raises eyebrows. In this case, such a longstanding practice of headline grabbing offers suddenly pulling back is sign that something is definitely up.

In contrast, Virtual Brokers has decided to pick up its promotional pace in 2016. They head into May with a contest driven promotion ($500 Apple gift certificate prize draw) and more recently they’ve also teamed up with 5i Research to provide special access to this newsletter/information service to VB’s clients whose balances are greater than $4,000 (this is being marketed directly to existing clients for the moment although it is open to new clients).

Another brokerage that stepped back into the promotional arena this month was National Bank Direct Brokerage. In NBDB’s case, they are once again sponsoring the Horizons Exchange Traded Funds “Biggest Winner” ETF trading competition. The simulated trading competition involves contestants trading Canadian ETFs to see who can have the best performance over the 6-week competition. Top prize for the ‘biggest winner’ is $7500.

Incidentally the contest sponsorship coincides with National Bank Direct Brokerage’s commission-free ETF offer (for Canadian ETFs only), so the contest promotion has some overlap with the free ETF promotion as well.

Overall, the number of actively advertised deals has declined since the start of the year, owing in large part to the retracement of Questrade in this space.

That said, certain brokerages are running unadvertised marketing campaigns to select clients and there are already brokers that have signaled a pickup of deals activity heading into the fall.

While brokerages may not be too enthusiastic about dishing out free trades or cash-back incentives, the challenge of attracting new clients and standing out from one another still remains. It looks like the strategy across multiple brokerages is to stay away from price drops and focus on the value added experience (i.e. getting additional research or getting promotional items).  The fact there are several brokerages actively running contests as part of their incentive program could be signs of an early trend emerging.

Whatever the route that brokerages choose to take, the reality of attracting new clients while staying ahead of the competition has only gotten more complex. The notion that you have to ‘give to get’ is one that will remain true for brokerages, so it will be interesting to see who does the giving and what form those gifts take.

Lightning Roundup

This week there were a number of small developments across the online brokerage space. Though they might be small, however, they do highlight that this space is still a dynamic one, even heading into the second half of spring.

Qtrade Shifting the Focus

In an interesting shift of messaging on the front end of their website, Qtrade Investor has replaced their now-expired deal announcement with an image focusing on the customer service aspect of dealing with Qtrade.

Source: Screenshot of Qtrade Investor website

The choice of what to make front page news on a company’s website homepage is a deliberate and important one. In Qtrade’s case, the focal point on good service is one they most likely want to ensure gets equated with their brand.

This is another in a series of front-facing improvements Qtrade has made so it is interesting to see what this evolves into.

Interactive Brokers Trading Metrics

Interactive Brokers once again released their trading and company metrics for April. While there were mixed performances across different metrics, what continued to show consistency is their account growth. On a month over month basis, client accounts grew by 1% but on a year over year basis, this figure was +15%.

Interactive Brokers continues to attract more clients than they lose, a sign that traders are still stepping up to the plate. Looking a little deeper, they are continuing to maintain their dominant position with highly active traders with the average number of trades per client estimated at 444/year.

The Digital Transition

One of the biggest advantages that bank-owned brokerages have enjoyed over the non-bank owned brokerages has been the fact that there is the convenience of a physical branch to go into. That notion of convenience, however, is clearly becoming increasingly digital.

An area in which that has become particularly evident has been in investor education. Specifically, in looking at the educational events provided by TD Direct Investing, there has been a noticeable shift away from doing in-person/live events and towards doing online webinar style events.

Here are two images comparing the educational events across Canada from 2014 and that same picture heading into May 2016. It is interesting to note that there are more in-person events taking place in BC than there are in Ontario, despite the population size difference. Further, there are now fewer (if any) in person events in Quebec and regions outside of Ontario, Alberta and BC. For what it’s worth, TD Direct Investing also does in person events (such as their Tastytrade event in Toronto last fall) which are bigger in scale and offer much more of a spotlight on their brand than perhaps the network of small educational seminars could offer.

Source: Screenshot TD Direct Investing Seminars Page

Interestingly, looking at other educational event providers at the bank-owned brokerage level, Scotia iTrade tends to hold almost all of their educational events as online webinars while their in person events are largely as a sponsor of Larry Berman’s educational ‘road show’.

National Bank Direct Brokerage, on the other hand, does not tend to do large/big name events and tends to concentrate their efforts primarily in Quebec. Over time they’ve shifted from being mostly in-person events to now about an even split between online and in-person events.

The reality of busy people today is that technology exists to give investors the convenience of webinars rather than forcing them to commute and coordinate being in a room to listen and learn. Although this transition has clearly taken some time to manifest, the trend towards digital transition in financial services is evident and there’s really no going back from here. As everything around consumers gets more and more digital, the expectation that banks and online brokerages demonstrate leadership and agility with technology will be key to their survival. It is perhaps why Scotiabank announced a mindboggling spend of $275M to upgrade their technological infrastructure. The technology arms race has already begun so it will be interesting to see how and where online brokerages continue to digitize going forward.

Discount Brokerage Tweets of the Week

It looks like customer service in the digital age includes being able to connect on Twitter. Online brokerages that had their customer service skills tested included BMO InvestorLine, CIBC Investor’s Edge, Questrade, RBC Direct Investing, Scotia iTrade, TD Direct Investing and Virtual Brokers.

From the Forums

As they say in the markets, sometimes the volume thins out. This week in the forums discount brokerages weren’t making waves. Nonetheless, there were a few ripples in the water.

Questrade vs Wealthsimple

The battle of the brokerages has now spilled over into the robo-advisor arena. This post from reddit’s personal finance Canada section is a great example of what might be facing brokerages with and without their own robo-advisor service.

Mutually E-xclusive

In this post, also from reddit’s personal finance Canada section, there was an interesting example of an individual seeking some direction on how to access the TD e-series low cost mutual funds and the kinds of information they encountered along the way.

Into the Close

It’s been an incredibly tough week for the folks in Fort McMurray. While we typically hope for sunnier skies for the weekend, here’s hoping that Fort McMurray gets the rain and relief it needs.

Amidst the tragedy and fear, there are tremendously courageous folks who are going above and beyond the call of duty to help. Thank you to all the good Samaritans and first responders for their efforts and for Canadians for being Canadian when it counts the most.

On a slightly different and more positive note, here’s a great reminder of what Canadians know about one another when it comes to rising to the occasion.

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Discount Brokerage Weekly Roundup – April 29, 2016

It’s hard to believe but here we are at the end of April. For some, it’s a sprint to the tax filing deadline. For sports fans, it’s been a lottery filled week with ‘mathletes’ trying to calculate who pick up prospects in the NFL and NHL. Of course, Canadian discount brokerages know all too well the value of being a first round pick for DIY investors – and they also fortunately know not to tweet embarrassing videos of themselves (at least they haven’t yet).

In this week’s roundup, we take a look at the latest Canadian discount brokerage comparison to see which brokerages ended up gaining accolades. Next, we take a look at a fascinating court case involving a trade gone wrong and a discount brokerage on the bad end of an unhappy trader. From there we cap off this week’s roundup with a look at more unhappy traders in the discount brokerage tweets of the week and close out with chatter from the investor forums.

Comparing Canadian Online Brokerages

This past week, the latest ranking and comparison of Canadian discount brokerages hit the digital news stands as Monysense published its guide to online brokerages (the digital edition of the June issue is now available to digital subcribers). Authored by Dan Bortolotti with research and commentary provided by Glenn Lacoste of Surviscor, this is the fourth year in which Moneysense has collaborated with Surviscor to provide an overview of the Canadian discount brokerage space.

Comparing online brokerages is not an easy task. With more than a dozen providers and so many features to consider, it’s great to have summaries and commentaries to help provide some perspective and hopefully narrow down the research required.

Unlike most of the other rankings and ratings of Canadian discount brokerages, the Moneysense approach tends to segment out top brokerages by key features or by the specific types of investors (e.g. beginner investors) that would find a particular brokerage attractive. In addition to the commentary, they usually also provide a good summary table that organizes a lot of the information DIY investors care about.

This year’s edition of the table has a neat inclusion of robo-advisors ETF services available at three brokerages: BMO InvestorLine, National Bank Direct Brokerage and Questrade (although most of these brokerages would not characterize their service as a “robo-advisor”).

Of course, when it comes to comparing brokerages, the devil is always in the details. And, as a recurring reminder to readers of SparxTrading.com, it’s important when looking at rankings and ratings to try and understand exactly what’s being measured and driving the title of “best online brokerage”.

To that end here are a couple of interesting items that stood out.

First, it was interesting that instead of crowning a “best online brokerage” overall Moneysense chose two categories that distinguish brokerages: either bank-owned brokerages or independent brokerages. The following table shows the breakdown of category winners and honourable mentions.

Category Top Pick Honourable Mention
Getting Started BMO InvestorLine Virtual Brokers
Ease of Use Scotia iTRADE Questrade
Fees & Commissions Questrade Qtrade Investor
Customer Service Qtrade Investor Scotia iTRADE
Reporting & Record Keeping Scotia iTRADE BMO InvestorLine
Market Data TD Direct Investing Credential Direct
Best Overall Bank-Owned Scotia iTRADE BMO InvestorLine
Best Overall Independent Qtrade Investor Questrade

While the distinction between bank-owned and independent does exist, the piece did not really dive into why this was a critical distinction to make.

As a result it was a challenge to get an ‘apples to apples’ view of the online brokerage field especially since both independent and bank-owned brokerages were compared side by side according to particular features.

Another interesting component to the comparison was the reporting of the average time to respond. As was drilled into me by multiple university stats profs, the average alone is not as informative as knowing both the average and standard deviation. Reporting the range and number of attempts at each firm would give a much clearer picture of how consistent that average really is.

Finally, a place in which readers should be cautious with this comparison is in the standard commission fee category.

Given the importance of the standard online commission fee for equity trades to consumers who want to find out how much they would presumably have to pay per trade, the way in which these numbers were reported was slightly confusing.

In particular the standard equity trade for Scotia iTRADE is reported as $9.99 per trade which happens to only be true for individuals whose account is worth at least $50,000. For individuals who do not achieve that threshold, the standard equity commission is at least $24.99 per trade. Unfortunately the “basic” commission at Scotia iTRADE according to this table seems like it is $9.99 (the fact that it is $24.99 is reported in the next row). The fact that a minimum account value is required in order to receive a ‘basic’ value is confusing, especially since it would imply that $50,000 is a ‘basic’ balance. Further, it would mean that HSBC InvestDirect’s commission would be $8.88 per trade at that balance level and not the $9.88.

Another caution is in the choice was to not mention CIBC Investor’s Edge as having the lowest commission structure under the fees & commissions section. At $6.95 flat per trade, this is one of the most competitive standard equity trade commissions available to DIY investors, including those investors making frequent small trades. In particular it is the fact that the commissions are capped (inclusive of ECN fees) that makes CIBC Investor’s Edge (and any brokerage that caps fees) a compelling choice.

While the Moneysense discount brokerage ratings do offer a unique, user oriented overview, it’s clear that there’s lots of information for DIY investors to try and digest when comparing.

Ratings and summaries such as this do help with navigating the maze of data however it is always important to check brokerage fee schedules and the fine print as many of the terms/conditions can’t easily be captured or communicated in one easy view.

Oh no he DI-n’t

If you’ve ever been blown out of a bad trade and/or been on the unfortunate other end of a margin call, it can be about as much fun as a root canal, perhaps less so. Examples abound on Twitter and in forums, however, of traders who’ve had trades go the wrong way on them in a hurry and as a result have to take a significant hit. When it happens, it’s not pretty.

That said, there was an incredibly interesting (for those keenly following the discount brokerage space) case where one trader got caught (or taken) offside and tried to take their online brokerage to court for over $340M in damages.

The brokerage in this case was TD Direct Investing and (sorry for the spoiler) no, the trader was not successful in his attempt to claim anything back for his trades gone wild.

Given the length and detail of the examination and case, there is a trove of interesting stuff in the court filings. For those that don’t want to wade through the 14 thousand words, here are some of the highlights:

First, options trading is risky. And, while risky is a term that is synonymous with trading, it’s important to spell it out: when DIY investors trade, they risk losing their money. And when trading on margin it means that you can lose a considerable amount of it.  For added edutainment, here’s a South Park clip from Margaritaville that nails it:

The trader in this case (Frank Oktay Turkson) got caught offside when a company he had written put options on went belly up (the stock was GTAT). So, while he did manage to get himself a premium of about $14K (and paid a commission of $47.49 USD) the loss more than wiped out any gains he would have received (he also had to pay $43 commission for the assignment). The fact that he had his other securities liquidated to meet the margin call was a rather unpleasant lesson in the powers that brokerages have to ensure that an account is kept within its stated risk limits.

In this case, it was interesting to see it pointed out that ‘discount brokerages’ do NOT provide advice or recommendations on where or how to trade. Discount brokerages simply communicate over and over again in the terms and conditions, and in the sign up forms (account opening documents) that trading involves potential for financial loss and that by opening an online brokerage account, DIY investors accept that they could lose money.

This is even more so the case with options. This was a case where in spite of having gone through the terms and conditions, and having signed that they understood them, a trader got burnt and tried to go after the brokerage for margin call and loss on the position.

One of the most interesting revelations from this court case was that a brokerage has the option to liquidate a margin position whether or not the position is at a loss. This implies that even a high flying gainer on margin can be shut down at the brokerage’s discretion.

If there’s one takeaway it’s that the documentation that brokerages provide at the outset of opening an account basically protects them from having to take responsibility in the case that things go wrong on a particular trade. Discount brokerages are a business and they are not prepared to take on someone else’s risk or subsidize a risky trader with margin.

DIY investors need to be aware that the risks of trading and financial loss are seldom presented with as much excitement or fanfare as the prospect of winning or the ease with which trading can occur. The conversation is definitely in favour of “making money” and how easy it is to trade rather than stating how easy it is to lose money.

Options are especially risky so it is important to be clear on how they work and how to manage the risks associated with them before trading them. Unfortunately for the trader, they had to learn a very expensive and hard lesson that when it comes to DIY investing, it’s every party for themselves.

From the Forums

Counting Potatoes

While the ‘couch potato’ approach to investing is popular with many investors, it’s important to know what buying and rebalancing will cost in terms of trading commissions. In this post from reddit’s Personal Finance Canada section, one investor heeds some handy math when considering RBC Direct Investing for their ETF investing strategy.

Need a Joint?

Wedding season is soon to be upon us. As couples tie the knot they may start to find their finances starting to also get a little more complicated. In this post from Canadian Money Forum, one user asks about a potential joint TFSA with Credential Direct. Find out the interesting feedback that helped shed some light on how TFSA’s work and how to access a spouses account.

Into the Close

That’s a wrap for this week. In case you missed it, today was also International Dance Day and there was a running man challenge, both of which were captured in this football themed video courtesy of ‘Gronk’ of the New England Patriots. That’s a whole lot of meme action to close out the week (triple witching meme?). Enjoy the rollover into May and have a great weekend!

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Discount Brokerage Weekly Roundup – April 22, 2016

With storm clouds thicker than this week’s 420 protests-turned-celebrations and tension greater than the imminent showdown coming in the next installment of Game of Thrones, it seems the fog of war has set in with online brokerages. On the home front, things are nervously quiet, however from the revelations this past week in the US, the battle of the brokerages south of the border is raging.

In this week’s roundup, we extend our coverage of the latest performance of the major online brokerages in the US to glean where the industry there (and eventually here in Canada) is headed next. From there we’ll update the latest move from one independent brokerage that suggests a shift in strategy that other brokerages have yet to respond to. As always, we’ll scan the latest chatter from investors on social media and investor forums and also highlight some of the upcoming investor education events.

Quest for the Best

Last week we reported on the latest earnings from Schwab. This week saw earnings releases from the three other major publicly traded online brokerages in the US: E*trade, Interactive Brokers and TD Ameritrade.

Collectively, these four brokerages earned just under $2.5B (USD) in revenues and $1B USD in net income for the quarter. Overall, each of the firms posted relatively strong performances in the quarter, attracting new accounts, in some cases breaking records for earnings and trading activity.

Aside from these mind-boggling numbers (especially when compared to Canadian online brokerages) the real story is revealed by reviewing what gets said on the earnings call which feature commentary from senior executives (often CEOs and CFOs) as well as questions from analysts that cover these companies.

One of the biggest themes from this last set of earnings calls had some very real concerns about the impact of the latest investor protection measures (the “Fiduciary Rule”) being implemented in the US.

While the mammoth (apparently 1000 page long rule) being put forward by the US Department of Labor (DOL) impacts retirement accounts specifically and what it means to be considered a ‘fiduciary’ the online brokerages are still digesting exactly what the requirements and costs to meet those requirements will be. Ironically talking about the sheer volume of added paperwork this rule has generated and will generate on Earth Day underscores the unintended consequences of well-meaning regulation.

This push towards greater investor protection, especially within the ‘advice-based’ or managed wealth realm is not unlike the CRM2 regulations being phased in here in Canada. The goals of achieving greater transparency on fees charged for services and for improving the disclosure from financial advisors are aligned in both cases, although it appears the Canadian approach is less onerous.

While the DOL rule and CRM2 may make it more challenging for some advisors to convince investors to park their money in the ‘managed’ space, this move actually may play out in favour of the self-directed account providers. The thinking is that when investors see what they are being charged for their funds or for the advice they’re being provided, they’re likely to consider alternatives.

In addition to the self-directed route, one of those alternatives happens to be robo-advisors – a seemingly middle ground solution between the ‘human’ advice world and the DIY investor option.

Interestingly, after the DOL Fiduciary Rule concerns, robo-advisors and fintech appeared to be the ‘next big thing’ on the minds of analysts and executives. Specifically, all the brokerages were asked about robo-advisors and the extent to which they are either gaining traction (such as at Schwab which has pulled in $6B in assets within a year) or are not (such as with Interactive Brokers).  That said, there is a definite recognition of the importance of fintech.

One of the more interesting remarks came from the CEO of E*trade Paul Thomas Idzik who stated that they’re clearly interested in expanding the banking functions that a fintech solution could provide to their business. In other words, even though they’re an online brokerage, they’re looking to expand their financial services into what banks have traditionally done (such as bill payment and transaction processing).

The award for most interesting commentary, however, had to come from Thomas Peterffy, CEO of Interactive Brokers.

In response to a question from analyst Mac Sykes of Gabelli about the strategic direction of Interactive Brokers, Peterffy stated “Mac, I’m obsessed with trying to grow this to become the largest brokerage in the world. That’s the only thing I care about. I don’t care about the returns.”

Not only does this comment perfectly capture the intensely competitive nature of the online brokerage space within the US but it also shows Canadian brokerages that there are those in the space that have the capital and motivation to outperform those who don’t want to win badly enough.

Virtual Brokers Uptick

On this side of the border, the action is a bit sleepier. Nonetheless, this past week Virtual Brokers launched yet another promotion signaling their shift towards offering prospective clients more incentives and promotions than they have previously.

The latest promo from VB is actually a contest for a $500 Apple gift card (a promotion they’ve run previously) for individuals depositing at least $1,000 into a new Virtual Brokers account. Unlike many of the other promotions currently offered by Canadian discount brokerages, the ‘contest’ route doesn’t offer an immediate reward but it does offer those with low starting balances the possibility of getting another perk for signing up.  For the brokerages, however, this is a lower cost way of trying to attract new clients and/or leads for those who enter the contest.

While promotional activity at several other brokerages has geared down, it appears that Virtual Brokers (either by design or coincidence) is starting to ramp up their promotional strategy.

For VB the timing gives them an edge to get attention from DIY investors looking for an online trading account, especially since some of their closest rivals have elected to slow down in April. Heading into the end of the month, it should be interesting to see what May holds as even more offers (such as the free trade deal from TD Direct Investing) are scheduled to expire.

Tweets of the Week

This week’s tweets feature some interesting tech highs and lows. Mentioned this week are Questrade, RBC Direct Investing, Scotia iTRADE, TD Direct Investing and Virtual Brokers.

Event Horizon

Spring is in full swing, and it’s a glorious week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts, those interested in networking with other investors, and technical and fundamental analysis. ETFs, a review of recent TD Direct Investing rate changes, and a fundamental landscape overview round out this week’s selection.

April 25

Desjardins Online Brokerage (Disnat) – ETFs as Precision Tools

TD Direct Investing – Stock Talk

April 26

NBDB – Introduction to Technical Analysis : Supports and Resistances – [Fr]

TD Direct Investing – Understanding the Rate & Fee Changes Effective March 15, 2016

Desjardins Online Brokerage (Disnat) – Macro Masters Foundations Course

April 28

Scotia iTRADE – Beginner Options with AJ Monte

Desjardins Online Brokerage (Disnat) – Macro Masters Foundations Course

TD Direct Investing – Introduction to Fundamental Analysis

From the Forums

Chatterbots

Given the interest all around in what’s going on with robo-advisors, it’s no surprise that DIY investors are starting to become a bit more curious about how effective (or not) the robo-advisor ‘promise’ will live up to the hype. In this post from the Financial Wisdom Forum, the topic of robo advisors rebooted with some more recent chatter on the subject.

A Series of Fortunate E-vents

While a lot of the conversation about brokerages online tends to skew negative, it was nice to see something positive emerge. In this post from reddit’s Personal Finance Canada section, one investor shares their experience with getting their TD e-Series funds.

Into the Close

Heading into the weekend, there is definitely a cloud hanging over music lovers with the passing of a musical genius this week. While the artist may gone, the art will continue to inspire. On that note here’s an encore performance showcasing a talent that the world will definitely miss.

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Discount Brokerage Weekly Roundup – April 15, 2016

While one basketball legend is retiring another one is seeing his star rise. Whether it’s professional basketball or the world of DIY investing, performance is what counts. For the race that is the Canadian discount brokerages landscape, however, coasting along is not an option.

In this week’s roundup, we take a look at continued signs of life with one online brokerage who is getting prepped to move deeper into the investor education space. Next we take a look at the latest results from online brokerage in the US to see what trends are emerging across the brokerage industry as a whole. From there we’ll preview the upcoming investor education events in the week ahead and close out the round up with comments from DIY investors on Twitter and around the investor forums.

Making the Grade

This first few months of 2016 have been busy for Virtual Brokers. After their recent commission price adjustments, Virtual Brokers has tried to distance itself somewhat from the “ultra low cost” discount brokerage image and in place of the label try to introduce features and services that offer up more value for the dollars being spent on commissions. A recent article in the Globe and Mail featured a quote from Virtual Brokers CEO Bardya Ziaian in which he stated “I want to go beyond the notion that Virtual Brokers is a cheap way of trading, we want to add value.”

In line with this move to offer greater value, Virtual Brokers appears to be ramping up efforts to provide additional market research information and education to DIY investors. Their latest move was noted this week as they announced a webinar in partnership with Morningstar to discuss the Morningstar economic moat feature. In addition to the webinar, there are also plans in the near term to offer more value-added research and analysis of markets to clients. While details are still to come, it’s clear that Virtual Brokers is actively moving towards a ‘value’ focused offering.

As one of the relatively newer entrants into the DIY investing space, however, Virtual Brokers still has to outcompete the massive amounts of advertising and marketing resources being spent by their peers. The boost in exposure by being crowned the top online brokerage in the Globe and Mail has certainly made a material difference to Virtual Brokers. And, in order to keep atop the standings, there has to be a clear focus on delivering innovative and useful features. In other words, for Canadian online brokerages, the best way not to be noticed is to stand still.

Let’s Get Digital

Earnings and quarterly reports from US online brokerages are kicking off once again. What’s particularly interesting about this round of reports is that Charles Schwab, the largest online brokerage in the US, has just crossed the one year mark since they launched their robo advisor service (or as they call it the ‘digital advice’ segment), and, according to the numbers, there are about 6.6 billion reasons to celebrate.

On a year over year basis, Schwab had very healthy gains in net revenues (+16% to $1.8B), net income (up 36% to $412M) and modest account growth (+3%). Part of the reason for those gains came from their robo-advisor segment which attracted $6.6B in assets in just over a year’s time.

Despite being an online brokerage, Schwab makes the majority of its revenue from interest revenue, asset management and administration fees whereas trading revenue made up 13% of net revenues for the quarter. And, while the volatility over February and March may have provided a 12% quarter over quarter increase in trading revenues, the notion of what it takes to succeed in the online brokerage space clearly points to having something more than trading revenues to keep you going.

The reason these numbers matter is because they clearly demonstrate that there is a market for the ‘managed wealth’ that appears to be outpacing the DIY trading segment. Further, it also shows how sensitive the earnings at online brokerages are to interest rate moves and why low rates are a challenge to the business model.

For Canadian online brokerages, there has clearly been an interest in following suit with Schwab’s model of deploying robo-advisors; Questrade and more recently BMO began offering these ‘digital advice’ products as a way to capture market share from the not-so-do-it-yourself crowd. Virtual Brokers also appears to be positioning themselves within this space as they were recent sponsors of the Morningstar robo-advisor conference.

While the scale of the US wealth management market is considerably larger than Canada’s, it is interesting nonetheless to see how online brokerages are going to have to adapt their offering and business for a robo-world. Earnings for E*trade and Interactive Brokers are also on deck for the upcoming week so the picture of where investors are (or aren’t going) will be even clearer heading into the end of April.

Event Horizon

Patio weather has arrived, and it’s a refreshing week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts, those interested in international investing, and ETFs. Technical analysis, trading strategies, and a fundamental landscape overview round out this week’s selection.

April 18

NBDB – Technical Analysis with Mr. Gaetan Royer of Cobalt Investments – [Fr]

April 19

Scotia iTRADE – Dogs of the Dow – Easy as 1, 2, 3 with Pro Market Advisors

April 20

TD Direct Investing – Introduction to Investing in Options

NBDB – International Investing – [Fr]

April 21

Scotia iTRADE – Options Trading Using Technical Analysis with Montreal Exchange

TD Direct Investing – Introduction to Investing in Options

Desjardins Online Brokerage (Disnat) – Macro Masters Foundations Course

Virtual Brokers – Understanding Morningstar’s Economic Moat

Discount Brokerage Tweets of the Week

Spring is here. And while it brings flowers, and showers it also seems to bring bugs – at least for some. Mentioned this week are: BMO Investorline, Questrade, Scotia iTrade TD Direct Investing and Virtual Brokers.

 

From the Forums

Clouds Forming

For many investors keeping a handle on all of the official slips and forms and calculations can be, well, taxing. In this thread from reddit’s Personal Finance Canada section, however, the stress level for some of Questrade’s clients (and for many Questrade staff) spiked as it appears T3 forms for some clients were being sent to others. Whoops. The link is worth a read to see the reactions of investors as well as how Questrade stepped up to address the situation.

Green or Red?

It seems many investors looking for an online brokerage account tend to narrow the field down to a couple of choices and from there the hair splitting begins. In this post from Redflagdeals.com’s investing forum, the community weighs in on TD Direct Investing vs CIBC Investors Edge vs Questrade.

Into the Close

That’s a wrap for this week. With earnings season in full swing and a rally that nobody seems to trust, the next week will be fun one for traders. In the meantime, enjoy the spring weather and the human highlight reel that is Kobe Bryant (arguably a great DIY’er) in his last game.

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Discount Brokerage Weekly Roundup – April 8, 2016

While April showers might bring May flowers, April is also about the time to start nervously watching the calendar for the ‘sell in May and go away’ moment. For many Canadian online brokerages, however, the hope is that wherever investors decide to go this spring, that they take their brokerage account along for the ride with a smartphone.

In this week’s roundup, we keep it nice and light (we have to enjoy the great weather sometime right?) and take a look at the latest online brokerage to release a new client website.  From there we’ll take a look at a very handy resource for DIY and mainstream investors to enhance their own financial literacy. As usual, we’ll include a look the latest chatter from investors across social media and from the investor forums.

A Classic Move

Another week, another website release. Following on the heels of RBC Direct Investing’s announced rollout of a new website last week, this past week Desjardins Online Brokerage announced that they are launching a new client website for their Disnat Classic account type.

In 2015 Desjardins Online Brokerage unveiled their current website and their latest rollout of an update to the Disnat Classic website provides users with a consistent, clean look and feel. According to their description of the new website, the new ‘classic’ interface will create an easier navigating experience especially around account management.

Even though their branding has changed some time ago, Desjardins Online Brokerage still uses their original branding of Disnat for the two primary DIY accounts offered to investors: Disnat Direct and Disnat Classic.

While Disnat Direct is geared towards more active investors/traders, the Disnat Classic product is geared towards less active investors. And, as such, the new Disnat Classic interface does a good job of catering to the specific needs of the long-term or less active investor.

Screenshot of Disnat Classic’s new website teaser.

One of the great features of the new roll out is the support material that accompanies it. Desjardins has put together a solid selection of tutorials that walk users through the basics of navigating the new layout as well as performing key tasks (such as entering an order or managing accounts).

As far as interfaces go, the classic platform strikes a good balance between usability and features that investors/occasional traders use. In particular, there are handy research tools such as charting and analytics all within the same page and a ‘research’ tab offers more in-depth fundamental insights. While several of these tools (such as Recognia and Morningstar) are available with other brokerages

Similar to the rollout of their refreshed site just over a year ago, this new site for Disnat Classic users offers an interface geared towards modern investors.

The ability to access their new site across multiple devices and screens is even more appropriate for investors who want to stay informed about or manage their account on the go. What continues to be clear though is that Desjardins Online Brokerage continues to focus on user experience and it may just be a matter of time before more and more investors take notice of the efforts being made.

In the Loop

For individuals that are looking for a trusted resources to learn about current events impacting investors, there is a great resource in the newsletter from the Investor Office of the Ontario Securities Commission.

This week’s edition of their newsletter features a great selection of articles on topics such as the risks of binary options and understanding mutual fund series. In fact, there are a number of articles and alerts related to the dangers of binary options and binary options providers that most investors ought to read and stay on top of.

Launched at the end of October 2015, the Investor Office is specifically focused on providing quality information about finance and investing to ‘main street’ investors. And, while the content does definitely contain geographically specific information, the bulk of the material contained pertains to investors across Canada.

To sign up for their newsletter or to access previous issues of the Investor News, click here.

Discount Brokerage Tweets of the Week

Event Horizon

Spring has sprung, and it’s a spectacular week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts, yield hounds, and those who are new to investing. ETFs, technical analysis and trading strategies round out this week’s selection.

April 12

NBDB – Equities and ETFs – [Fr]

TD Direct Investing – Introduction to Fixed Income

Scotia iTRADE – Leveraged and Inverse ETFs – Understanding them and strategies for using them with Horizons ETFs

TD Direct Investing – Options Trading Using Technical Analysis

April 13

TD Direct Investing – Introduction to Investing in Options

April 14

TD Direct Investing – Introduction to Technical Analysis

Scotia iTRADE – Top Ten Investor Myths with AJ Monte

From the Forums

Green with ETF envy

ETF providers may be more than a little green with envy as TD’s six new ETFs commanding quite a bit of attention this past week in a couple of posts (here and here) on redflagdeals.com. Worth a read for those considering what TD may have to offer with the ETF mix.

Small Potatoes

Every investor has to start somewhere. For this investor from reddit’s personal finance Canada section, using Questrade’s RESP for a couch potato portfolio required a little bit of help from the DIY community.

Into the Close

That’s a wrap on another crazy week. Wherever you happen to be when reading this week’s roundup, don’t forget to take some time out to relax from behind the screen to have a little fun. In the meantime, for those considering the ‘sell in May’, here’s an idea that can get you in the summer spirit. See you next week!

via GIPHY

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Discount Brokerage Weekly Roundup – April 1, 2016

Welcome to April. While there may be pranks and gags to kick off the start of a new month and a new quarter, it seems like some Canadian discount brokerages are taking the chance to start anew a little too seriously.

In this week’s roundup we take a look at the latest deals action that shows some interesting changes to the makeup of the brokerage landscape. From there, we’ll take a look at a major online brokerage that sees nothing but upside as they bet big on technology. Technology also seems to be the focal point for many DIY investors on Twitter in this week’s tweets summary albeit for those brokerages that are still struggling with bugs. We close out the roundup with more interesting chatter about commission pricing from the investor forums.

Out with the Old

It looks like Canadian discount brokerages have taken spring cleaning seriously this year, especially when it comes to their deals and promotions.

Heading into a new month, the number of commission-free trade and cash back offers from Canada’s online brokerages saw a sharp decline, with a significant number of offers expiring at the end of March. While many of these deals were deployed specifically to capitalize on the seasonal interest in RSP accounts, only a handful of brokerages have standing offers that ran alongside RSP season and into what is now ‘income tax refund’ season.

That said, there are still 19 offers that we’ve noted, which still provides many DIY investors interested in an online trading or investing account some kind of incentive to try one brokerage over another. Of course, the big unknown for many brokerages is whether DIY investors are turning to more passive or automated strategies (such as Robo-advisors) or interest in markets is waning in favour of other more popular investment types.

While the firm numbers of account openings and assets brought into each firm will give the best idea of what’s going on, there is something that is definitely different about the start of Q2 2016 – especially in the deals and promotions space.

Specifically, what stands out as interesting is that one of the most active brokerages (historically) in offering commission-free and cash-back offers, Questrade, is not significantly present in this category at the launch of a new month and new quarter.

In addition, Virtual Brokers’ move to offer an as yet unrivaled commission-free trading offer means that the winds of change appear to be blowing in the discount brokerage deals space. In fact, the new promotions page on Virtual Brokers’ website also signals they’re likely to be more active in offering promotions which will pose a challenge to all other players on the field.

While 19 or so offers is still substantial, it is unlikely that the deals and promotions field will remain this thin for much longer. Whether brokerages are going to mix up their promotional offers to more partner or product offers (VR headsets anyone?) or rely on the tried and true commission-free trade offer, one thing is clear – there is all of a sudden a lot more room for brokerages to make a splash by offering up a bold offer to DIY investors.

View from the Top

Not one to shy away from the spotlight, the CEO and founder of Interactive Brokers Thomas Peterffy, was featured in an interesting interview from The Wall Street Transcript in late March.

The interview itself offers a great overview of Interactive Brokers’ focus on technology and automating as much of their process as possible in order to achieve efficiency and also cost advantages over their peers.

Three points from this interview stand out: the role of robo-advisors, mobile trading and technological preparedness.

With regards to robo-advisors, it’s clear that Interactive Brokers sees this as a significant enough trend to get in on. In particular, their acquisition of Covestor as well as their investor marketplace are both moves that diversify Interactive Brokers away from just the DIY investor client. In fact, many of the tools mentioned by Peterffy resemble the automatic or more passive investor strategies that don’t fit their typical ‘active trader’ client base signaling a clear interest in going after the ‘managed wealth’ space.

Another area in which Interactive Brokers is signaling they’re going to push into is mobile trading. This is particularly challenging to get right for active traders, many of whom are still trading on a desktop (with multiple monitors). That said, there is definitely a balance between form, function and features when going from one screen size and device to another.

The success and resonance of the Robinhood app with mobile users signals that thinking ‘mobile first’ tends to favour functionality over features. Interactive Brokers’ platforms, however, are appealing because they are so robust. Fortunately, smartphones now are powerful enough to handle heavy applications, however usability will ultimately determine whether a trader feels comfortable enough stepping away from their desk and letting their phone be their lifeline to the market action.

Finally, the most ominous (for competitor brokerages) comment came at the end of the interview where Peterffy was asked about the landscape of the online brokerage industry in the next five years to which he responded “Five  years  from  now  the  industry  will  have  fewer and technologically more advanced participants…” The pace of technological change and the associated costs of keeping up with that technology means that Canadian online brokerages who aren’t able to fund this technological arms race will likely be made obsolete.

Discount Brokerage Tweets of the Week

Even though the weather was improving outside, storm clouds were brewing on Twitter. From platform outages, to delayed tax slips and frustrations with reporting, Twitter users didn’t hold back when it came to the shortcomings of Canadian brokerages. Mentioned this week were Questrade, RBC Direct Investing, Scotia iTrade, TD Direct Investing and Virtual Brokers.

From the Forums

A valuable lesson

Whether you focus on price or value is the job of marketing departments and sales staff being able to tell one story or the other. In this post from Reddit, there is definitely some debate over whether recent fee changes at Virtual Brokers represent an increase in price or an increase in value.

Sound Bites

An article on discount brokerage commission fees from the Globe and Mail’s Rob Carrick this past week stirred up a lot of strong opinions about the current perception of price and value across the Canadian brokerage landscape.

Into the Close

That does it for another week. Here’s a great little roundup of April fool’s day ideas that are surprisingly not all that far-fetched. Enjoy the sunshine if you’re lucky enough to have some this weekend!

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Discount Brokerage Weekly Roundup – March 25, 2016

Source: Twitter

For those who can’t wait to see Old Man Winter actually leave, this weekend couldn’t come fast enough. But, rest assured, signs of spring abound and as #BirdieSanders showed, that offers something to smile about. Canadian discount brokerages also seem to be taking their cues from Mother Nature by doing a little spring cleaning of their own.

In this shortened week’s roundup, we take a look at the latest online brokerage to roll out a brand new website for DIY investors. Next we report on signs of life at one independent online brokerage that suggests they’re looking to be a more active presence in the brokerage space. As usual, we take a look at the latest chatter on Twitter and across the financial forums and highlight the upcoming investor education events for next week.

RBC Direct Investing rolling out new website

Spring is a great time to say goodbye to old and welcome in the new. For RBC Direct Investing, it looks like this spring will bring with it a dramatic update to their website.

The timing of RBC Direct Investing’s website roll out comes well after the big wave of updates that took place across 2014/2015 for many Canadian online brokerages. While going first means having to take a leap of faith in terms of design and whether or not users will respond (or cry foul) about certain choices, rolling out a ‘new’ website at this point RBC Direct Investing means that expectations for getting it right are likely to also be higher.

One of the biggest challenges for financial service providers, especially online brokerages and those closely linked to technology, is striking a balance between being innovative and being familiar. By having to also coordinate with their parent brand’s look and feel as well as with expectations from other service lines (like banking), there’s little wonder why redoing a website for a firm such as RBC Direct Investing would take considerable time and effort.

Of course, the time that it has taken to get their online presence to “appear” modern has not gone unnoticed.  In this past year’s Globe and Mail online brokerage rankings, for example, Rob Carrick commented that “Canada’s biggest bank should have a sharper product.” And, while that comment likely reflects the expectations of a firm (technically the parent of RBC Direct Investing) that netted a quarterly income of $2.4B, Carrick’s remark that “The homepage for RBC Direct Investing’s public website is old school. O-L-D school” is particularly stinging.

Like many things in the online world, change is inevitable. Let’s take a look at some of the features RBC Direct Investing’s new website includes (for more info, check out the video below).

Design/Aesthetics

The new RBC Direct Investing website appears to be designed to more than accommodate both desktop and tablet users. Like their parent banking website, there is a greater emphasis on panels/boxes so that tablet users can scroll and tap their way through sections of the new site. The switch in navigating styles will undoubtedly appeal to some more than others, however the use of boxes is a common trend among many more ‘tablet friendly’ responsive websites. That said, there as with the release of their banking site interface in January, there is bound to no shortage of strong opinions as people react to the new layout.

Placing an Order

Another significant change is the use of “Place an Order” instead of “Trade”. While it may take some getting used when existing users want to execute a trade, the new label is more meaningful and intuitive to new users.

Directing Attention

While there’s lots to say from a design and user experience perspective, what ultimately stands out about the design is the way in which the new tiled layout hopes to strategically meet user needs but also direct user engagement.

Areas like their “My Portfolio” section, for example, have much more visually noticeable and attractive elements (like pictures and illustrations) that naturally stand out against the very plain blue boxes. Those more noticeable elements, shown in the following screenshot, highlight where RBC Direct Investing would like to attract more deposits or engage more deeply in an article that undoubtedly positions RBC as a solution to a financial services need.

At first blush, the latest update to the website looks to make information easier and more intuitive to find. It is also readily apparent that they are turning a tiled design to optimize the user experience on tablets and mobile devices, however this may or may not go over well as it requires users to adapt their navigation style to include clicking on tiles.

Overall, like the roll out of any new product, it will ultimately have to face the test of time and users to see whether or not it hits the right mark with critics.  That said, with the pace of technology and the entrance of new, more agile and web-savvy competitors, it is likely the website refresh will (have to) happen a lot sooner.

Green Shoots

Some other notable developments this week included Credential Direct posting yet another webinar geared towards personal finance/investing. While they generally have flown under the radar in the news cycle, Credential Direct has nonetheless been quietly building up their activity level on both social media  (via their Twitter handle) and holding more interesting webinars/seminars. It shows they are not standing still despite having quite the uphill battle to fight in terms of pricing and user experience, neither of which will be cheap.

Tweets of the Week

For some brokerages, the weekend couldn’t come fast enough. Mentioned this week are BMO InvestorLine, CIBC Investor’s Edge, Questrade, Scotia iTRADE and TD Direct Investing.

Event Horizon

As March heads out like a lamb, it’s a wild and wooly week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts and those interested in short selling. Margin accounts, and tax-efficient investing round out this week’s selection.

March 29

NBDB – Take Advantage Of Margin Accounts – [Fr]

March 30

TD Direct Investing – Understanding Margin & Short Selling

TD Direct Investing – Tax-Efficient Investing

March 31

TD Direct Investing – Options as an Income Strategy

From the Forums

A Series of Questions

For many passive DIY investors, the TD e-series funds are a popular choice. In this post from RedFlagDeals’ investing forum, users weigh in on one user’s question about the merits of going all in on the e-series.

On Borrowed Time

Whether or not to borrow to invest is something that is often debated by investors in the DIY forums. In this post, an individual asks for help weighing the pros and cons of borrowing to invest in an RRSP with Questrade. It’s an interesting read for those contemplating the ‘borrow to invest’ approach.

Into the Close

That’s it for this shortened trading week. Next week DIY investors can begin hunting for more deals and promotions as the deals area is about to get a major reset. Until then, however, Easter treats will have to suffice. Have an egg-stra special long weekend!

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Discount Brokerage Weekly Roundup – March 18, 2016

If you were like most folks this week, getting adjusted to the one hour less made things feel a little bit foggy. Of course, if you’re following what’s happening with the US elections, candidates are taking all kinds of swings at one another as the contest for presidency heats up. Here in Canada, discount brokerages, while keeping it polite, are nonetheless starting to raise the stakes with one another in a big way this week.

In this week’s roundup we start by first looking at one brokerage’s continued pursuit of mobile trading with the launch of their latest smartwatch trading app. Next we take a look at a small brokerage that seems poised to make a big splash in the deals and promotions pool with a newly launched offer. The event horizon makes a comeback this week and we round out with the latest comments from DIY investors on Twitter and forums.

Watching the Markets

This week Scotia iTrade unveiled their latest upgrade to their mobile trading experience: an Apple watch based app. Their latest addition to the mobile trading suite, which includes smartphone and iPad versions, enables Apple watch users to take a pulse of what’s going on in the markets as well as within their own portfolio.

While the Scotia iTrade Apple Watch app does not let users actually trade from the watch, it does enable users to get updates on balances, monitor watchlists and keep an eye on market activity. Given the dependency of the Apple Watch on the iPhone, however, the full set of trading features available on the iPhone app offers users much more functionality should they need it.

In celebration of their new release, Scotia iTRADE also held a mobile day at their investor centre in downtown Toronto.

Canadian online discount brokerage Scotia iTrade tweeting about their new Apple Watch trading app.

When considering the mobile trading landscape, Scotia iTrade is certainly not alone in their pursuit of the smartphone and now smartwatch space.

Most Canadian discount brokerages have some kind of dedicated app or specific mobile site to accommodate smartphone users. In terms of smartwatches, however, there are three online brokerages that have Apple Watch apps specifically built for DIY investors, and two bank-owned brokerages who’ve bundled some of their online investing functionality into their overall banking app.

The three Canadian online brokerages with Apple watch trading apps are:

  • Interactive Brokers
  • Qtrade Investor and
  • Scotia iTrade

What is interesting about the online trading experience on mobile is that the smartwatch is typically limited to providing alerts and updates. In that sense, its role is mainly to monitor what’s going on.

With the Apple Watch in particular, because it is tethered to the iPhone, how an online brokerage’s iPhone-based trading app functions is something individuals interested in these products should also consider.

In the table below, it is particularly noteworthy that almost all Canadian online brokerages, whether they are bank-owned or are independent, have ranked poorly in terms of user reviews. The best rated online brokerage iPhone trading app, based on client reviews from the Apple App Store, turns out to be Qtrade Investor with 4.5 out of 5 stars (based on only 23 reviews). At the other end of the spectrum, Questrade’s IQ app garnered only a 1.5 out of 5 stars and it was based on the highest number of ratings (463) received by any online brokerages’ mobile app.

Online Brokerage Overall Star Rating* # of Ratings Support for Apple Watch
BMO InvestorLine 2 63 No
CIBC Investor’s Edge 2.5 133 No
Interactive Brokers 2.5 179 Yes
Questrade iQ 1.5 463 No
Qtrade Investor 4.5 23 Yes
Scotia iTrade 3 105 Yes
Virtual Brokers 2.5 10 No
Notes * based on all versions

What stands out in looking at these user ratings is actually how unfavourable consumer ratings are of the mobile experience provided by Canadian online brokerages.

In sharp contrast to the muted ratings received by most Canadian discount brokerages, was the rating of robo-advisor, WealthSimple’s mobile app, which received a glowing 4.5 star rating (based on 51 ratings).

As financial services firms cross the threshold from just being about services to really incorporating technology (ie. Fintech) as part of the service experience, the gap between the incumbent online brokerages and the new entrants into the wealth management space is starting to widen.

For added proof, one need not look further than US online brokerage Robinhood, whose mobile-first design approach has earned them incredibly positive design and user-experience recognition and a 4.5 star rating across 10,107 ratings.

So, while being able to get updates on the market might be nice, there is still a heavy reliance on the smartphone app trading experience and as such, there is clearly lots of work that many Canadian online brokerages need to do in order to win the hearts, minds and design accolades of the newer players in the space.

Virtual Brokers Goes All In on Trading Deal

For savvy traders, patience and timing are a virtue. In this case of deal watchers, this past week Virtual Brokers has launched a monster offer that has, surprisingly, not yet garnered much attention. We suspect that might change quite soon.

Earlier this week Virtual Brokers launched a promotion that offers 3 months free of their $150 USD/mo Edge Trader Pro trading platform which is part of their commission-free trading plan. The minimum deposit to qualify for this offer is $5,000.

What is remarkable about this offer is that it is actually one of the most aggressive free trade offers seen to date.

By signing up for this offer, it appears that an individual would be able to trade commission-free for 3 months with a deposit of $5,000. This seems to be the case since Edge Trader Pro is a required to qualify for the commission-free trading plan, however since the platform fee of $150 USD/mo would be waived, individuals could then trade commission-free (equities only and ECN fees/admin fees/handling fees still apply) for the period of the promotion. At least that’s what the terms and conditions of this offer seem to suggest.

Historically, the only brokerage that has consistently offered 3 months of commission-free trading has been Questrade however for to qualify for 3 months of commission-free trading, an individual would have to pony up a deposit of at least $100,000. Another interesting observation on Virtual Brokers’ latest deal is that there is no deadline stated in the terms and conditions despite it being marketed as a limited time offer.

A little more math, however, puts this offer into further context as to why it is such a big deal.

With 3 months of fees waived, the annual spend for being on the commission-free trading plan with a reasonably standard application-based trading platform totals $1350 USD which breaks down to $112.50 per month (for 12 months). For traders of US equities this works out to about 11 trades per month at the standard commission of $9.95 + any ECN fees or special handling fees – a threshold that many active traders can easily hit.

So, many folks might be wondering what the catch is. For starters, to stay on this program, whether on purpose or by accident will still cost $150 USD/mo once the free trial period expires. What this means is that individuals should carefully consider whether this is the right fit for their trading needs. Another important detail in the terms and conditions is that the $150 USD/mo applies to the Edge Trader Pro platform only, the data plan for which might not really be enough for most very active traders. Finally, Virtual Brokers reserves the right to change the offer at any time during the process, so users need to ensure they monitor the terms of the offer for any modifications that may arise.

With all of the above in mind, how this plays out for other Canadian discount brokerages will be very interesting. Virtual Brokers’ latest offer feels like someone going ‘all in’ at the poker table. One thing is certain, however, and that is that Virtual Brokers’ latest deal will finally uncover how serious other Canadian brokerages are about acquiring the most coveted tier of client: the active trader.

Event Horizon

Spring is in the air, and it’s an exciting week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts and those interested in risk management. Technical analysis and registered accounts round out this week’s selection.

March 22

NBDB – Stop Orders: A Winning Solution Worth Knowing – [Fr]

Scotia iTRADE – Introduction to Candlestick Charts with Pro Market Advisors

March 23

TD Direct Investing – Building Wealth Through Registered Accounts

TD Direct Investing – Introduction to Investing in Options

March 24

Scotia iTRADE – Introduction to Index Options with Montreal Exchange

Tweets of the Week

This week’s tweets show once again that clients are increasingly turning to Twitter as a customer service touch point for brokerages big and small. Mentioned this week were BMO InvestorLine, Questrade, RBC Direct Investing, Scotia iTRADE and TD Direct Investing.

From the Forums

Eminent Domain

Well, this is not one you see everyday. In this post from Reddit’s personal finance Canada section, one disgruntled Virtual Brokers user decided to leave after receiving a warning regarding the domain name being used to access streaming quotes (from Quotemedia). Worth a read as more than one individual came across the same issue.

Plan B

Having an employer group RSP plan is a great perk, however savvy investors know that sometimes there are ways to stretch their investment dollar further. In this post from the Reddit personal finance Canada section, one investor wanted to know if it was possible to get the best of both worlds by taking advantage of Questrade’s commission-free ETF buying. Find out what other people had to say about their own experiences trying to do the same.

Into the Close

With spring just around the corner, and St. Paddy’s that just passed, green seems to be the theme heading into the weekend – especially if you managed to be the lucky winner of an increasingly large lotto jackpot. Of course if you’re still betting against Canadian Vancouver real estate, with the recent interest rate announcements in the US, you might be inclined to see red for a while longer. Regardless, have a great weekend and strap in for a wild start to the spring next week!

via GIPHY