Tag: Weekly Roundup

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Discount Brokerage Weekly Roundup – March 11, 2016

As week two of March comes to an end, there was one clear story that seemed to dominate the news cycle for Canadians – the visit of Prime Minister Justin Trudeau with US President Barack Obama. Of the many angles on the coverage of this visit, one of the most interesting was the theme of friendship between Canada and our neighbor to the South. The notion of friendship is something that Canadian discount brokerages also know a thing or two about, especially when it comes to trying to somehow rewarding clients for bringing their friends over to the same brokerage.

To kick off this week’s roundup, we take a look at the trading activity from a major US online brokerage who continues to gain market share with the most lucrative segment of online investors – active traders. Next, we provide a glimpse into an in-depth story on refer-a-friend promotions that we referenced in last week’s roundup. From there we’ll cover the conversations investors were having with Canadian online brokerages and with each other on Twitter and in the Canadian investing forums.

Interactive Brokers Trading Metrics

The machine that is Interactive Brokers continues to fire on all cylinders. Trading metrics from the month of February were released earlier this month and numbers across key company metrics continue to point to Interactive Brokers doing something right.

While trading volumes (measured as daily average revenue trades) were lower than last month by 8%, on a year over year basis, trading volumes of 767 thousand DARTs was a whopping 21% higher than the same period last year, reinforcing the fact that traders love volatility and traders tend to love Interactive Brokers. To that end, Interactive Brokers continued its monthly client growth chart with a 1% bump over January and 340 thousand clients now under their belt – with each client making an impressive 527 trades (on average) per year and an average commission per cleared client order of $3.78.

Another interesting observation of the Interactive Brokers Canada website is the requirement that individuals actually be an active trader to be their client. More specifically, the announcement on the Interactive Brokers Canada website section for RSPs and TFSAs, states that they require the following from customers:

“You must have executed at least 100 trades for any product type or 100 simulated trades in our real-time demo”

Source: Screenshot from Interactive Brokers Canada Website

This qualification is especially interesting within a registered account, since many individuals look at the RSP account as a ‘long-term’ play and a place to let dividend investing work its magic (since it is exempt from the US withholding tax on dividends from US listed stocks). It could also be equally contentious for individuals considering actively trading in their TFSA, since there have been some stories of the CRA scrutinizing individuals who’ve managed to substantially grow their TFSA by trading.

Nonetheless, it is also a very interesting approach to qualify who it is they want as a client. Clearly Interactive Brokers’ stats show they appeal to and are built around a strong base of active traders. The move to either require a history of a relatively arbitrary 100 trade threshold or to have an individual not only sign onto their demo but also place 100 trades with it means that they’re actively funneling prospective clients into their system in a much more meaningful way than just giving a simple demo platform access away.

In short, it looks like Interactive Brokers is continuing to build their strategy and product around the active trader experience, and with this latest qualification to join them, they’re not only building their brand as one that traders have to aspire to (century club anyone?) but at the same time, they’re very cleverly qualifying who they want as a client and who they are ok with turning away.

That’s What Friends are For

This week we saw a great story about friends getting together on an international stage. Of course while much of the goodwill is also about great public relations, there is no discounting the fact that the recommendations and referrals that come from one leader to another will impact the decisions each leader makes.

On a much smaller scale, the value of referrals to financial services is a pivotal way in which online brokerages can lower their cost of acquiring new clients and also likely get better clients as a result.

As part of our continued look into the deals and promotions landscape, this week we launched the first in a two-part series that analyzes the current refer-a-friend promotions available from four popular Canadian discount brokerages.

Specifically, the first part of this series take a detailed look at what the incentives are like for those who refer a friend or family member as well as the incentives for those actually opening and funding the account. When comparing the different offers side by side, it is not only interesting to see just how different the offer amounts are, but what was especially interesting to discover was how each online brokerage is actually valuing clients who have more money/assets. Click here to read part one of the series & stay tuned for part two next week.

Extra Mileage

While PM Trudeau was busy making front page news, SparxTrading also got a great little plug from Canadian personal finance writer Rob Carrick in the Globe and Mail. Specifically SparxTrading.com made the list of his top web links, especially for those on the hunt for a new brokerage. For any Air Miles enthusiasts the article is a good read especially in light of that program’s recent announcement to retire miles. Judging by the comments and shares from that article, the announcement has made some serious waves for passionate collectors.

Tweets of the Week

From outages to outrage, this week DIY investors voiced their concerns that technical glitches continue plague Canadian discount brokerages this week. Mentioned in this scan were BMO InvestorLine, Questrade, RBC Direct Investing, Scotia iTrade, TD Direct Investing & Virtual Brokers.

From the Forums

Which way to robo?

As readers may have already guessed, we love to compare things. In this post, from RedFlagDeals.com, one investor asks about some feedback on some of the more popular robo-advisor platforms currently available. Worth a read for those interested in seeing what folks are thinking about.

Questrade vs Virtual Brokers

It’s been a while since we’ve mentioned this ongoing debate between two of the long standing deep discount online brokerages, but this latest post on Reddit provide a good look at why people online have tended to stick up for Questrade more so than Virtual Brokers. Interestingly, Questrade’s community team rep also weighs in on the conversation.

Into the Close

Nothing takes the edge off losing an hour like the prospect of the opening bell coming an hour sooner. For those lucky enough to get some great weather this weekend, make the most of the extra sunshine! For those who need to fill their post-House-of-Cards binge Whitehouse cravings, here is some fun footage of President Obama and PM Justin Trudeau trading jabs at the state dinner. Have a great weekend!

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Discount Brokerage Weekly Roundup – March 4, 2016

While much of Canada (save for the Wet Coast) has been digging out from under piles of snow, it seems like Canadian stock markets have also managed to dig themselves out from underneath the recent avalanche of bad news. For Canadian discount brokerages, the turn in the markets has been a welcome relief, and they’re gearing up to try and ‘make it rain’ as they head into the next busy stretch in the calendar.

In this week’s roundup, we take a slightly deeper focus on the deals and promotions developments that occurred this week. Specifically, we recap the deals action that unfolded at the outset of the month and highlight one specific brokerage’s launch of a referral program that is the focal point of the second part of the roundup. From there, we’ll take a look at the latest chatter from investors on Twitter – especially in the face of several major network outages, as well as what DIY investors had to say across the forums.

Kind of a Big Deal

With the RRSP contribution deadline now in the rear-view mirror, many brokerages are likely taking a moment to catch their breath before the next big push comes along with tax return season. That break, however, will likely be short-lived.

In the deals and promotions section this month, there are already signs that promotional offers over the next two months will continue at a relatively significant pace, especially from ‘the usual suspects’ Questrade, BMO InvestorLine and Scotia iTrade. Interestingly, it appears that there are also several other brokerages that are stepping up promotional activities.

Heading into a new month, there’ve been a number of interesting developments to report.

The biggest news on the deals and promotions front was that Virtual Brokers launched a refer-a-friend campaign that runs until the end of May. This was an interesting maneuver because the offer itself looks to compete directly with what Questrade has put together for its refer-a-friend campaign (although Questrade’s offer is not a ‘limited time’ promo). More on that in just a moment.

In addition to Virtual Brokers’ deal, Questrade also timed their latest promotion around a tax season theme by teaming up with H&R Block to provide free access to H&R Block’s Platinum tax return preparation software. Rounding out the new promotions heading into March, Qtrade Investor lowered the minimum deposit level amount to have transfer fees covered to $10,000 (for which they’re willing to cover up to $150 in transfer fees).

The introduction of these three offers offsets the two Questrade deals that expired within the first week of March as well as their New Year’s year-long free trade promotion that concluded at the end of February. BMO InvestorLine extended their cash back + free trade promotion out into May, rebranding it as a ‘spring’ promotion instead of a ‘winter’ one.

Another piece of exciting news on the deals and promotions front is that we’ve improved the way deals and promotions are being covered here on SparxTrading.com. With the number and type of offers growing in size and complexity we felt it was time to evolve the deals and promotions section so that deals are easier and faster to research and evaluate.

To that end, there are now four categories of deal types which allows folks researching deals to get a better handle on what kinds of offers are being put forward.

Going forward, the deals section will be divided into four main categories:

  1. Commission Free/Cash Back Offers (11 currently live)
  2. Referral Programs (4 currently live)
  3. Transfer Fee Programs (10 currently live)
  4. Other promotions (4 currently live)

We’ve also reported the deals figures by each category, and, although we don’t expect the referral and transfer fee programs to be as volatile as the commission-free offers or the ‘other’ category, the recent deal from Virtual Brokers might touch off a few more creative responses from other brokerages.

Let us know what you think of the latest update by leaving your comments below.

Friend Zone

One of the most potent sources for new discount brokerage clients is actually other discount brokerage clients. Finance is one of those areas where there is clearly a lot of (well placed) skepticism from consumers towards providers – both big and small. To quote a current US presidential candidate, trust is ‘Yuge’.

The fact that trust ‘trumps’ other factors like low commissions means that online brokerages that don’t have a physical storefront (the way that banks do) are at a strategic disadvantage when clients are doing their homework to figure if these online brokerages are, in fact, trustworthy. Typically, most consumer audiences turn to offline sources, like friends and family as well as the online sources such as traditional media or third party rankings/ratings when trying to figure out whether to go with one brokerage versus another.

Of course, in a world where the line between online and offline are increasingly fusing, the online world has made investors more readily accessible to other investors, which is why social media and investor forums, including the SparxTrading.com forums, are where individuals go to access feedback from other investors.

Screenshot of Questrade’s Group of Refer-a-Friend Program Header Image (source: Questrade.com)

While there are many interesting dimensions to the referral program strategy, what is by far the most interesting angle to this is that companies that create a product or service experience worth bragging about will earn the attention and the business of other clients.

For Canadian discount brokerages, the real marker of whether or not a referral program will actually succeed is the degree to which people stand up and advocate on behalf of a brokerage – especially in the face the naysayers and in the moments where an online investor expresses frustration. Of course, the incentive amount also helps.

Virtual Brokers’ incentive structure is somewhat similar to Questrade’s in that referrers get a $25 cash bonus for each account they successfully refer and a bonus of $50 (on top of the $25) for every third account. A key difference, however, is the amount that the referee receives at either firm. Under Virtual Brokers’ plan, the payout amounts to either $25 or $50 whereas under Questrade, a referee may receive between $25 and $250 depending on the deposit amount.

Screenshot of Virtual Brokers’ Refer-a-Friend Program (source: VirtualBrokers.com)

In an upcoming piece we will be looking at these two programs in much closer detail, however at this point it is worth noting that referral programs are an efficient way to lower the cost of acquiring a new client but they will only really work if the service makes existing clients happy.

Unlike the Questrade affiliate program (which is distinct from their refer-a-friend program), for example, in which anyone can receive a bonus for referring a client to Questrade, the friends and family referral plan from Virtual Brokers explicitly defines that friends and/or family of account holders are the only individuals eligible to take advantage of this offer.

For Virtual Brokers and indeed all online brokerages who are considering referral programs, in order for existing clients to have the enthusiasm to put their own endorsement behind the product experience, there also has to be an extra investment in service levels to make the product worth advocating for as well as time spent to improve public perception. In comparing Questrade to Virtual Brokers in this regard, Questrade has a definite head start.

This latest move will be an interesting test to see whether or not Virtual Brokers can capitalize on its service record to date and if existing clients will be more inclined to step forward to advocate on their own Virtual Brokers experience.

Discount Brokerage Tweets of the Week

This week, the technology gremlins seemed to be all over TD Direct Investing’s WebBroker platform showing that regardless of size, technology can make or break an online trader’s day. Mentioned this week are BMO InvestorLine, Questrade, Scotia iTrade and TD Direct Investing.

Event Horizon

Details for this section were not available at time of publication and will be added when available.

From the Forums

Fee-TFs

What is considered a normal amount for brokerage fees? That was one question asked in this post from Canadian Money Forum by a user curious about whether what they would pay in commissions for ETFs may be too much.

Not So Simple Addition

When setting up an RESP, who should the caregiver be on an account? That was the question asked on reddit by a new parent setting up a new account with Questrade. Read what the community volunteered in terms of their experience with RESP rules & regulations.

Into the Close

That’s a wrap on this week’s roundup. It seems with each passing day there’s more and more coverage of the US presidential candidate Donald Trump. For some entertaining food for thought, here’s this past week’s latest crazy twist in the race. Stay warm and enjoy the rally while it lasts!

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Discount Brokerage Weekly Roundup – February 26, 2016

Time flies when you’re up against a deadline. That seems to be the theme for many Canadians looking to take advantage of the RRSP contribution deadline for 2015 coming up this Monday. For Canadian discount brokerages, however, it seems that at the end of RRSP season may be signaling the start of an even stormier season ahead.

In this week’s roundup, we take a look at what’s around the corner for deals and promotions as we head into a new month and how we might be seeing the first signs of troubled waters for Canadian brokerages as they try to keep pace with one another. Next we take a look at a recent BNN interview with one ranking agency that highlights how tricky it can be to pick an online brokerage without doing some homework first. From there we take a look at the latest discount brokerage tweets and close out the roundup with a look at what investors were talking about on the forums this week.

Peak Deal?

As the RRSP deadline is fast approaching, Canadian investors will be busy trying to calculate their contributions and limits to ensure they can qualify for the 2015 tax year – at least those who intend to make a contribution. This recent survey from H&R Block stated that only 18% of Canadians surveyed intend to contribute to an RRSP this year. Whether it’s the volatile markets or because of other factors, it is against this backdrop that Canadian discount brokerages have had to figure out how best to encourage DIY investors to sign up for an online brokerage account. Clearly they’ve had their work cut out for them.

For Canadian discount brokerages, the RRSP season is typically among the busiest all year and so it is interesting to reflect on who did (or didn’t) post a promotion this year and what that could mean for deals landscape looks as the next big season i.e. tax return season takes effect.

Looking back at last year, there were 24 deals and promotions being advertised in February with that number shrinking slightly to 20 or so by the time March rolled around. This year, however, there are only 18 offers that have been advertised for February and four of those are set to expire within the first week of March.

So, could this be a signal of firms playing defense because of the DIY investing climate or could this be the first real hint that the Canadian online brokerage landscape may soon be thinning out?

Consider the following. Two big bank-owned brokerages, CIBC Investor’s Edge and RBC Direct Investing, opted to sit out the promotional race RRSP season this year despite having run promotions around the same time last year. While it is not clear if other means they’ve used to fuel the interest in their DIY investing products and services have worked the fact remains that this year, they’ve yielded what little market share there is to be had to big bank-owned competitors as well as independent brokerages who have been running promotions.

Another interesting observations between last year and this year is that some brokerages are running promotions that offer lower value incentives year (or higher barriers to qualify) despite the increased competition.

Virtual Brokers, for example, had an offer last year of 50 commission-free trades which required deposits of $5,000 whereas in 2016 that same number of commission-free trades requires a deposit of $25,000.

All is not doom and gloom, however.

Desjardins Online Brokerage upped their commission-credit offer for new clients to $500 from $300 and Credential Direct entered the deals race earlier this year than they did in 2015. Also, encouragingly for investors, Questrade has continued to put forward more incentives and promotions than other Canadian brokerages which implies that they’re committed to providing incentives to get DIY investors’ attention and ultimately business.

Looking at the big picture, with online brokerage margins being squeezed, a turbulent economic situation and now an added factor of robo-advisors competing for client assets, getting more clients or more assets per client will likely be as important as improving operating efficiency. In either case, offering a promotion or incentive enables them to do both.

There are already whispers from several brokerage sources that making deals and promotions a bigger part of their planning in 2016 is in the cards. Of course, just like in any market, when the value becomes compelling enough, the buyers step back in so for Canadian discount brokerages, the next two months will be their chance to make their case.

Know Thyself

As seasoned or new DIY investors continue to kick the tires on their online brokerage options, what it takes to make a good choice still remains somewhat tricky. After all, almost all brokerages are willing to accept a client’s money however finding out what makes a great ‘fit’ is not something brokerages look at the same way as clients do. What is clear about DIY investing and perhaps about wealth management in general is that nobody will care for your money more than you do.

For DIY investors, the reality of choosing the right online brokerage comes back down to knowing what kinds of services and costs are appropriate for their particular needs. This past week, the president of financial services research firm Surviscor Glenn LaCoste was on BNN offering viewers tips on what to look out for when choosing a brokerage.

Three questions that were highlighted as important for DIY investors looking for an online brokerage to ask were:

  • Do I know what I am getting myself into?
  • What kind of account am I looking for?
  • Do I need the firm to offer both online & mobile options?

Of course, the online brokerage industry is constantly evolving and the differences between firms are narrowing which highlights why DIY investors need to know more about what they want and need since relying on rankings and ratings may cause some confusion.

A good case in point of just how fluid the results of a top online brokerage ranking may be was also illustrated in that same interview.

Of the five brokerages listed as “top picks” (BMO InvestorLine, Scotia iTrade, Questrade, RBC Direct Investing and Qtrade Investor) there were other brokerages that seemed to score higher on Surviscor’s recent rankings that were left off the list. So, for example, RBC Direct Investing was ranked 6th (along with TD Direct Investing) in Surviscor’s 2015 Online Discount Brokerage Review and behind Credential Direct who ranked 5th. Further, in Surviscor’s most recent Service Level Assessment analysis RBC Direct Investing and Questrade ranked 13th and 14th (out of 14) respectively. As such, it was interesting to note that despite scoring higher than RBC Direct Investing on various Surviscor rankings, these top picks did not include Credential Direct (who placed 4th on the service level assessment) and underscores the point that measuring and recommending discount brokerages is always a moving target.

A brokerage that does well or poorly on a ranking or rating in one period may do worse or better on a relative basis when measured at another time frame. Further, even rankings that might measure similar components (such as customer service)will do so in different ways and thus yield different results. In fact, this was the focus of an article published in 2013 that still holds true today: when looking at a rating, ranking or recommendation for a brokerage it is important to understand how and what’s being measured to get a clear picture of what the ranking means. For those shopping around for a brokerage account, the lesson appears to increasingly point to knowing what you want and need before making any decisions on a provider.

Discount Brokerage Tweets of the Week

This week technology strikes again as brokerages big and small work their way through some digital hiccups. Mentioned this week were BMO InvestorLine, Questrade, RBC Direct Investing, Scotia iTrade, TD Direct Investing & Virtual Brokers.

From the Forums

A DRIP of this, a dash of that

The power of compounding is an essential ingredient for the long term dividend investor. In this post from RedFlagDeals’ Investing thread, one user was curious how to get up and going with setting up a DRIP at RBC Direct Investing.

Adjust Cause

Tax time is here and with it come the flood of questions from investors trying to make heads and tails of the proper method of tracking their buys and sells. In this post on reddit’s personal finance Canada section, one user has a question about the adjusted cost base calculation for shares purchased in US dollars.

Into the Close

That’s a wrap for this week’s roundup. For the movie buffs, this is the big screen equivalent of the super bowl as some of hollywood’s best and brightest will be walking down the red carpet for the Oscars. Of course, in 2016 in addition to the glitz and glamour, there’ll also be many entertaining (and sometimes NSFW) tweets to go along with it all. Here’s a highlight (or lowlight) reel heading into the big show. Have a great weekend!

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Discount Brokerage Weekly Roundup – February 19, 2016

Having had such a terrible start to the trading year, this past week offered a reprieve from the bad news. Of course the recent stock market performance has many skeptics shouting from the rooftops but, as it always is, it will be the market that has the last word.

For Canadian discount brokerages, the market they need to be paying attention to is DIY investors. Specifically listening to what they’re asking for and finding a way to deliver it. While many brokerages are looking for ways to innovate, it’s clear that what investors want will ultimately drive popularity and this past week we saw some interesting developments take shape.

In this week’s roundup we take a look at the latest promotional offer from an online brokerage getting creative with ETFs. Next we take a look at a recent review and ranking of online brokerage service and why Canadian online brokerages received a failing grade. As usual, we’ll take a look at what DIY investors were chatting about online and showcase upcoming investor education events.

Canadian ETFs go commission-free at National Bank Direct Brokerage

ETFs continue to make headlines and waves with retail investors and several Canadian online brokerages are looking to leverage this attention.

National Bank Direct Brokerage has once again opened up commission-free ETF trading, making them, at least until the end of June, the fifth Canadian online brokerage to offer up some form of commission-free ETF offering. The offer is open to both new and existing clients and no promotional code is required to take advantage of the commission-free ETF trading program however there are some important conditions.

One of the important distinctions between National Bank Direct Brokerage’s offer and that of the other brokerages is that NBDB’s promotion is limited to Canadian ETFs only. Given the rise in popularity of ETFs, the list of Canadian ETFs numbers somewhere close to 510 (as of December 2015), which technically speaking, would be the highest number of completely commission-free ETFs (i.e. buying and selling are commission-free) being offered by any Canadian brokerage (see table below). So, even though investors may be missing out on trading some of the approximately 1600 US ETFs commission-free, there’s definitely lots for investors to choose from. With the Canadian dollar also being where it is relative to the US dollar, not having to worry about the currency factor is also another bonus of having access to such a wide range of commission-free ETFS, a few of which are US currency hedged.

Online Brokerage commission-free ETF buying only commission-free ETF buying AND selling # of fully commission-free ETFs Notes
National Bank Direct Brokerage No Yes* 511** *Canadian ETFs only; minimum purchase 100 units;
**estimated as of Feb. 2016
Qtrade Investor No Yes 60
Questrade Yes No n/a
Scotia iTRADE No Yes 50
Virtual Brokers Yes Yes 150

Another important detail for investors considering this offer to take note of is that there is a minimum quantity of 100 units to be purchased in order for this offer to qualify as commission-free. Thus, the offer may be less appealing for investors who fine tune and rebalance their portfolio with small (or odd lot) quantities of purchases and sales.

Finally, the list of ETFs eligible for this promotion is the one published by the Canadian ETF Association found here. The most recent list (at the time of publishing this piece) was from December 2015 however it appears that the list is generally updated monthly (for the previous month’s total) around the middle of each month.

For Canadian DIY investors, having another online brokerage offer up commission-free ETFs is certainly a big plus. If there is a limitation to this offer, however, it is that it is only offered up for a short amount of time.

This is not the first time NBDB has run a promotion offering commission-free ETFs nor are they the only Canadian online brokerage to offer the same kind of promotion (CIBC Investor’s Edge also ran a similar promo last year). Given how fiercely competitive the online brokerage space is, and factoring in the rise in popularity of robo-advisors, if this offer proves to have traction with DIY investors, it seems fair to assume that this won’t be the last time we see National Bank Direct Brokerage (or one of their competitors) roll out an ETF-based program such as this.

Service Shuffle

At a time when client service is starting to become a bigger focus at Canada’s financial services firms, it seems that providing speedy resolution via email is out of focus at Canadian discount brokerages according to the latest assessment by financial services firm Surviscor. Ironically, while email has been the de facto method to communicate online since the internet turned mainstream, today’s investors have so much access to so many digital touch points that it has become a challenge for brokerages, big and small, to keep pace with where there clients are. As a result, the notion of what constitutes ‘service’ has become a much more fluid concept for investors, rankings agencies and brokerages to agree on.

Earlier this month Surviscor announced the results of their latest Service Level Index (SLI) ranking, formerly known as the Customer Email Responsiveness program. This analysis program measures the speed with which different online brokerages respond to online requests for support (via ‘mystery shop’ requests) and uses that as a measure of how strong (or weak) a firm’s service response levels are.

To help provide additional context, Surviscor also applies a tiered rating system according to how quickly a response is received from a brokerage. The rating system ranges from Platinum, which is awarded to firms with a response time of under 2 hours to Bronze which is awarded to those with response times of 8 to 12 hours.

In Surviscor’s latest assessment, which took place over the full year (2015), Qtrade Investor earned the best “Service Level Index” score whereas Desjardins Online Brokerage had the best response time of the brokerages listed. Both firms were close in score, separated only by 2 percentage points however Qtrade Investor scored highest with 88%.

Unfortunately, there were no online brokerages that achieved either a ‘platinum’ or ‘gold’ standard ranking this year meaning that none of the firms assessed had a consistent response time of faster than five hours via email.

What was particularly interesting, however, was just how poorly most brokerages ranked on this assessment. The average ranking for the group worked out to be a meagre 45% with 9 out of the 14 brokerages studied falling beneath that average, with RBC Direct Investing earning a grade of 10%.

In short, according to the Surviscor assessment, “2015 was not a banner year for self-direct brokerage firms….” It seems that according to the numbers shown above, that might be an understatement.

Of course with most of the rankings, ratings and reviews of Canadian online brokerages, these numbers don’t tell the whole story. Specifically, the method used to gauge these service levels may not be the only nor the best way to reach an online brokerage representative for support.

For example, Questrade, who ranked 13th (out of 14) on Surviscor’s SLI assessment, has both live chat support during business hours and also has a Twitter handle which is well monitored (as shown on numerous occasions in our weekly roundups). They also have their own forum on which individuals can submit questions and support requests and they are the only online brokerage to be actively responding and covering popular investor forums, including Reddit.

No other Canadian brokerage, including firms that ranked above Questrade assessment have so far shown the same kind of breadth of coverage.

Another example of alternative support channels can be seen with TD Direct Investing. Unlike most of their bank-owned brokerage peers, TD Direct Investing has dedicated coverage on its support forum TD Helps, it also has its own Twitter feed (although this is a recent development) and both of these appear to be relatively quick methods to get resolution or a proper response to an inquiry, as shown just this past week in the following Twitter interaction:

Recent Twitter interaction between TD Direct Invest and online user.

Interestingly the parent bank of TD Direct Investing placed second in Surviscor’s assessment of the banking services levels showing that the customer service experience in one channel (i.e. banking) might create high expectations for other areas that the bank may be involved with, making it all the more important for bank-owned brokerages to create a consistent brand experience.

The take home message for DIY investors is simply this: that with any ranking or rating it is important to know what is being measured.

In the case of “service” it is even more important to be clear on exactly what that term means since different interpretations of what comprises “service” are (quite evidently) possible, especially in a world where online investors turn to multiple online sources for support.

It would be fair to say that based on Surviscor’s latest ranking of service levels, overall email response times could stand to improve at most Canadian brokerages.

Unfortunately for consumers, with so many brokerages ranking so poorly, it seems that email-related service experience would not be something DIY investors could really expect a strong positive experience with. That said, for those brokerages that have done well, their commitment to providing quick turnaround times via email stands out even more this year and may continue to be an investment that pays off with existing and prospective clients.

Discount Brokerage Tweets of the Week

This week there was a good cross section of responses from DIY investors on Twitter. Mentioned this week were Questrade, RBC Direct Investing, Scotia iTRADE and TD Direct Investing, Virtual Brokers. Interestingly, the Twitter push from CIBC Investor’s Edge seen last week was surprisingly silent.

Event Horizon

The days are getting longer, and it’s an illuminating week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts and yield hounds. Short selling, trading strategies, and a market outlook round out this week’s selection.

February 20

TD Direct Investing – Market Outlook

February 23

TD Direct Investing – Introduction to Fixed Income

Scotia iTRADE – Strategies for Bear Markets – What Goes Up When the Market Goes Down with Pro Market Advisors

February 25

TD Direct Investing – Options Fundamentals

NBDB – Short Selling – [Fr]

From the Forums

Too late to say sorry?

Saying good-bye to a brokerage is a common occurrence for many DIY investors. Regardless of the reason, sometimes the exit is not nearly as seamless as investors like. In this post on Reddit, one Questrade user submitted their frustration with the process. Interestingly (especially given the story above) Questrade replied. Worth a read for those considering a switch.

Next stop…the world

Which brokerages will let DIY investors trade internationally? It’s a question that more and more investors are asking yet surprisingly fewer brokerages are answering the call for. In this post, also from Reddit, one user was curious about online brokerages that offered international trading. Of course there were also some alternatives provided which were interesting approaches to international exposure.

Into the Close

Even though the trading week was short, it seems that markets favoured the long trade. But, all may not be as it seems as the bears still have quite a bit of support heading into next week. And, don’t forget, bears are resilient bunch. This story of the ‘water bear’ (tardigrade) coming back to life after surviving being frozen for 30 years might offer some food for thought – especially to all of those in parts of Canada that feel more like Antarctica and of course, those holding onto losing positions in their portfolio. Have a great weekend, keep warm but stay frosty into the week ahead!

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Discount Brokerage Weekly Roundup – February 12, 2016

This week there was some serious talk about gravity. From the astrophysicists cheering the official confirmation of Einstein’s predicted gravitational waves to the basketball fans in ‘the six’ hoping to observe the NBA’s best and brightest defy gravity at the upcoming All-Star game, this has been an exciting week. Unfortunately for most investors, watching the markets succumb to the pull of gravity has been a tough lesson in the physics of how markets react to uncertainty. For Canadian discount brokerages, there also appear to be distant forces at work which could cause commission prices to feel the gravitational pull on pricing.

While the news around the Canadian discount brokerage industry this past week did not prove or disprove any of Einstein’s theories, there appear to be interesting forces at work for the discount brokerage industry on the horizon. In this edition of the roundup, we take a look at the growing trend of commission-free trading and how it might be poised to take the world by storm. Next, we take a look what DIY investors were talking about both on Twitter and in the investor forums. Finally, we close out the roundup with a look at the upcoming investor education events.

From Zero to Hero

Somewhat akin to the running of the 4-minute mile or the existence of ‘gravitational waves’ the idea that online discount brokerages could offer “zero commission” stock trading seemed impossible until somebody went ahead and showed it could be done.

With firms like Robinhood, in the US, not only has commission-free trading gone from unthinkable to reality, much like the 4-minute mile, there are now multiple firms offering up zero commission trading and potentially many more looking at the model with some notion that they too can do the same.

Earlier this month, a piece in the Investors Chronicle, profiled the rise of the ‘uber discount broker’ in Europe, with the firm iDealing becoming the first online brokerage in Europe to offer commission-free trading as of December 2015. While limited in scope to a handful of smaller markets, it looks like zero commission trading has officially spread to and landed in Europe.

Interestingly, even though ‘commission-free trading’ is being met with mixed reactions in the US, it seems that Europe could be shaping up to be a bit of a battleground for commission-free trading.

We recently noted a hiring post on Robinhood’s career website signaling they too are eagerly looking to bring their commission-free trading model into Europe and perhaps the UK, which would put them in direct competition with iDealing. While there appears to be a number of regulatory challenges for both iDealing and Robinhood to overcome before being cleared to launch in the UK, it seems like a matter of time before either one or both are cleared to enter and massively disrupt the DIY investor market in Europe.

screenshot of Robinhood job posting

So what does all of this mean for Canadian discount brokerages?

One of the common threads amongst these new “uber discount brokerages” is the use of technology to drive down the operational costs of being a brokerage. They are often small in size and agile in the use of technology to do the heavy lifting. Interestingly, these firms are increasingly being viewed as tech or ‘fintech’ companies first and financial services companies second. In fact, looking at the continued success of Interactive Brokers and the extent to which technology has helped keep operational costs low, there is clearly a case to be made for focusing on IT development.

For the larger bank-owned online brokerages, this poses a significant challenge as they not only have to deploy a competitive trading experience, but they also have to ensure they live up to client expectations of a seamless experience between the banking and the investing touchpoints. A failure in one element of the business is enough to send many Canadians looking to a provider who can get these pieces to work.

With many of Canada’s largest discount brokerages still struggling to create user friendly, intuitive and convenient online experiences, it would be a significant disruption to the Canadian online brokerage landscape should a firm, such as Robinhood, decide to launch within Canada.

Yes, there would be barriers to overcome and trust to be built. What firms like Wealthsimple and other robo-advisors, as well as the relatively young Virtual Brokers have shown is that sometimes it doesn’t take that much time for a lower cost alternative to get noticed.

Another reason for the disruptive nature of zero-commission trading is that not only would ‘commission-free trading’ brokerages have a head start on operating within a no-commission framework, but they are also able to leverage their technological agility and talent pool to have a significant “technology edge” over their counterparts.

While it seems inconceivable that yet another discount brokerage could enter and succeed in the already crowded Canadian DIY investor market, the fact that the wave of zero-commission trading is already starting to spread globally means that it is likely a matter of time before the idea takes root here in Canada. And, just like the four-minute mile barrier being broken, it is now possible for investors and providers alike to envision a world in which zero-commission trading is possible.

Event Horizon

Love is in the air, and it’s an enticing week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to options enthusiasts, those who are interested in trading strategies and new to investing. ETFs, technical analysis and risk management round out this week’s selection.

February 16

NBDB – Introduction to Call Options – [Fr]

TD Direct Investing – Understanding Margin & Short Selling

RBC Direct Investing – The ETF Selection Process: Navigating the ETF Landscape – RBC Global Asset Management

Scotia iTRADE – Building a Better Portfolio Using ETFs: How to Build a Low-Cost and Efficient Portfolio using ETFs with Horizons ETFs

TD Direct Investing – Introduction to Canadian ETFs and ETF Options

NBDB – Tools and Technical Analysis with Michel Carignan – [Fr]

February 17

TD Direct Investing – Options as an Income Strategy

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

February 18

TD Direct Investing – Technical Analysis – Candlestick Charting

NBDB – Introduction to Put Options – [Fr]

RBC Direct Investing – The ETF Selection Process: Navigating the ETF Landscape – RBC Global Asset Management

Discount Brokerage Tweets of the Week

There were cheers and jeers this week on Twitter. On a positive note, it looks like changes to user interfaces are paying off at a couple of brokerages while outages during trading hours took their toll on others. Mentioned this week were BMO InvestorLine, CIBC Investor's Edge, Credential Direct, Questrade, Scotia iTrade and TD Direct Investing.

From the Forums

Tailored Switch

In this post from the Personal Finance Canada thread on reddit, one user requested the community’s input on transferring from Tangerine to Questrade and whether or not this was the ‘smart move’ to make. Worth a read for those interested in the passive investing/CCP strategies.

Seeking Clari-fee-cation

In this post from the RedFlagDeals.com investing forum, one user has a question about stepping into the world of investing within a TFSA at Questrade. There’s some good information for those considering Questrade and the explanation of how ECN fees are incurred

Into the Close

That’s a wrap on this lighter-than-usual roundup. As a reminder to all the traders out there, the Canadian stock markets will be closed on Monday in observance of Family Day in Ontario. Markets will reopen for trading again on Tuesday. In addition to Family Day, it’s also Valentine’s Day and the NBA All-Star game this weekend so whatever your reason to celebrate, you’ve got a great setup to make this weekend a slam dunk!

 

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Discount Brokerage Weekly Roundup – February 5, 2016

It seems like Fox Mulder and Goldman Sachs share at least one more thing in common: they both want to believe. When the poster child for capitalism questions out loud whether or not capitalism actually is working as it should, there is definitely something paranormal happening. Canadian and US discount brokerages alike also want to believe that the recent downturn in stocks won’t spook investors.

In this week’s roundup we take a look at two sides of the race for dominance in online trading. Starting first with the most recent discount brokerage deals and promotions to emerge in the race to the RSP contribution deadline. From there, we take a look at the recent performance of the US online brokerages to gauge whether investors are trading more or less as a result of the recent market volatility. Next we’ll review the upcoming investor education events and then take a look at what DIY investors were talking about on Twitter and in the investor forums.

New Month, New Deals

A big story at Canadian discount brokerages this year continues to be the fierce competition to provide incentives and promotions to DIY investors.

In the initial week of February, Virtual Brokers stepped into an already crowded deals and promotions arena bringing the number of advertised promotions to 18 with an offer that pitted it clearly against Questrade’s recent success with the Apple watch (i.e. Apple store gift card) promo.

Although Virtual Brokers’ promotion is not exactly the same, it has many popular elements as their cross-town rival.

First, it has a tiered deposit structure so that the more a client deposits, the greater the reward. In this case, the reward is commission-free trades ranging from 25 (minimum deposit required: $15,000) through to 200 (minimum deposit required: $250,000).

Under their new “classic” commission pricing structure of $9.99 per trade (flat) this equates roughly to just under $250 to and $1998 in value (depending on the deposit).

In addition to the tiered offer, Virtual Brokers has also paired the tiered offer with an entry to a contest to win a $500 Apple gift card (which can be used towards an Apple watch for example). Previously, Questrade was the only Canadian discount brokerage leveraging the Apple watch as part of its promotional mix.

What is interesting about Virtual Brokers’ latest promotion is that it sets the deposit bar far higher than Questrade does in order to qualify for a modest incentive (VB’s deal requires $15,000 minimum whereas Questrade has 6 offers requiring $5,000 or less). That means the barrier to qualify for a promotion is much higher than with Virtual Brokers than with Questrade.

Another interesting observation is that with Virtual Brokers now in the deals arena there are only 4 online brokerages without some kind of publicized deal for DIY investors: CIBC Investor’s Edge, Interactive Brokers, Qtrade Investor and RBC Direct Investing.

Distribution of current discount brokerage deals & promotions (as of February 5, 2016)

That said, Interactive Brokers does offer a referral bonus (that benefits the referrer not so much the referee) and Qtrade Investor is running an RSP contest, however unlike in previous years, CIBC Investor’s Edge and RBC Direct Investing have yet to step forward with any major offers.

As the month progresses, competition should continue to heat up. As most of these offers show, however, many of the deadlines for these promotions fall after the RSP contribution deadline of February 29th which means that while there are some limited-time offers, there’s still plenty of selection for those that are looking to see what else pops up.

A Volatile Combination

Volatility may bring opportunity, but many DIY investors in the US pulled back on their trading in the most recent quarter. With the exception of one brokerage, most of the publicly traded US online brokerages saw less activity in the face of global equity volatility and crude oil in freefall.

One of the key indicators of that trading activity, known as “daily average revenue trades” (DARTs), saw quarter over quarter (QoQ) and year over year (YoY) declines across the board. DARTs specifically measure the total number of trades over trading days in a given period.

According to recent earnings releases from key players in the DIY brokerage space, including TD Ameritrade, Charles Schwab, and E*trade, retail traders were marginally less involved in recent swings. Out of all the discount brokerages researched, E*Trade showed the worst performance DART wise (displayed below) and on the new accounts front. New accounts for E*Trade tumbled 34% YoY, the firm is leading in alternative measures of client engagement however.

A key trend in two of the biggest discount brokerages was the client utilization of mobile apps for trading.

E*Trade indicated 14% of their 2015 DART volume was done on a mobile device. Similarly, TD Ameritrade set an internal record of 18% DART volume from mobile. Mobile trading will be a key variable for all online brokers going forward, as it represents a new age of engagement and functionality.

Ideally, the optimal combination for an online brokerage would be increasing DART volume while seeing increasing client account equity. This would indicate clients are engaged with the firm’s services and keen on putting capital to work. Fortunately, this was the case for Interactive Brokers, where customer equity was up 19% YoY with 4% DART growth vs 2014.

Interactive Brokers was also the clear winner new assets wise, while E*trade, TD Ameritrade and Charles Schwab found it harder to grow assets. Interactive Brokers Group stood out as their clients embraced their cutting edge technology and ramped up their activity (and equity) in the face of volatility. Of course, Interactive Brokers is certainly smaller than their peers so percentage growth can mask the difference that scale and size have on the ability to show positive growth.

Nonetheless, the trading habits at these particular firms show that the active traders are drawn to the volatility whereas many of the less or moderately active investors tend to step back and let the dust settle. For many DIY investors currently watching the Canadian markets, as well as several Canadian online brokerages there seems to be a growing hope that the dust settles sooner rather than later.

Event Horizon

What better way to beat the cold this month than to huddle up for an investor education seminar or webinar. Coming up this week are sessions on Technical Analysis, Registered Accounts, ETFs, Options and avoiding common trader pitfalls – and that’s all before Wednesday!

February 9th

NBDB – Introduction to Technical Analysis – Oscillators – [Fr]

TD Direct Investing – Building Wealth Through Registered Accounts

Scotia iTRADE – Top Mistakes Made by Investors with Pro Market Advisors

Desjardins Online Brokerage (Disnat) – Meet the 18-30 Broker@ge Team at 360d

February 10th

TD Direct Investing – Building Wealth Through Registered Accounts

Desjardins Online Brokerage (Disnat) – Discover the Benefits of the TFSA

NBDB – Equities and ETFs – [Fr]

RBC Direct Investing – The ETF Selection Process: Navigating the ETF Landscape – RBC Global Asset Management

February 11th

Scotia iTRADE – Options Trading: Myths versus Reality with Montreal Exchange

TD Direct Investing – Advanced Options

Discount Brokerage Tweets of the Week

DIY investors on Twitter paused to take a breath after a wild start to this year’s trading activity. Mentioned this week are CIBC Investor’s Edge, Credential Direct, Questrade, Scotia iTRADE and TD Direct Investing.

From the Forums

Asset A Location?

One of Canada’s largest online brokerages, TD Direct Investing, was the focus of this post on the Reddit personal finance Canada section. In particular, one user was curious to know why there was so much ‘in person’ activity required for an online investment.

Year Right

In this post from Canadian Money Forum, Interactive Brokers’ RSP contribution feature was a cause for confusion because it required individuals to select the tax year for the contribution to apply to. Read on to find out more about how this issue was finally resolved.

Into the Close

That does if for this edition of the roundup. Whether you’re gearing up for the “big game” this weekend or simply looking to take advantage of the ‘bad break’ in the markets – have a super weekend! For all the readers in BC, happy Family Day long weekend!

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Discount Brokerage Weekly Roundup – January 29, 2016

If there was one comeback greater than the DeLorean this past week, it had to be in the stock markets. Ok, maybe the comeback wasn’t as great, but at least investors can finally breathe a sigh of relief. The latest rally (or dead cat bounce) left most markets in the green for the week – a rarity so far this year. The markets weren’t alone in being in the giving spirit, however. Canadian discount brokerages are gearing up for their busiest time of year and it looks like they’ll be pulling out all the stops to win the hearts, minds and portfolios of DIY investors.

This week, we take a look at two moves by one of Canada’s most popular bank-owned online brokerages and why investors and other online brokerages will be paying attention. Next, we take a look at another independent online brokerage who is banking on technology being the big disruptor to the traditional online brokerage model. From there we’ll take a look at what DIY investors were talking about on Twitter and round out with what was on Canadian investors’ minds in the investor forums.

TD Direct Investing Steps Up

In addition to markets ending the week on an uptick, DIY investors got another reason to smile heading into the weekend. This past week one of the largest online brokerages in Canada, TD Direct Investing, launched a commission-free trade promotion that is sure to get the attention of investors and other brokerages alike.

The deal itself is one that TD Direct Investing has launched in the past. It is a tiered offer where individuals opening a new account and depositing between $25,000 and $100,000 or more can receive between 50 and 200 commission-free trades. In addition to the free trades, TD Direct Investing is also bundling in 90 days free access to their advanced trader dashboard. More details are available in our deals & promotions section here.

With the introduction of TD Direct Investing into the mix, the total active promotions from Canadian discount brokerages now stands at 17, with 7 of those coming this past month alone. Despite TD’s size and popularity, however, their latest promotion is going to have an uphill battle to stand out from the crowd.

Scotia iTrade’s current promotion, for example, has similar deposit tiers, but offer more commission-free trades at those levels and the trades are also available for use for 90 days as opposed to TD’s 60 days. In addition, there’s the fact that by being the biggest player in the market, other brokerages big and small are likely to step up the offer ante, at least throughout February and possibly into March.

Knowing this, TD Direct Investing isn’t relying solely on the incentive of a promotional offer to appeal to DIY investors – especially those who may not have a minimum deposit large enough to qualify for free trades.

In addition to their latest promotional offer, TD Direct Investing is also updating their fee schedule as of March 1st. Most notably, TD Direct Investing will now count the total account size of individuals within the same household against the minimum funding criteria required to determine account management fees. In other words, if individuals within the same household are clients of TD Direct Investing, the total of the value of their accounts can be used to waive the quarterly administration fee if that total exceeds $15,000.

As Canadian online brokerages continuously try to evolve in the sub $10 per trade world, they are becoming more and more creative. For their part, TD Direct Investing is clearly stepping up their game across the board. From incentives, to administration fees, platforms and educational events it seems like 2016 will be a year that other brokerages are going to have to work much harder and smarter to get take the spotlight away from TD.

Mass App-eal

If there’s one thing that individual traders like to do, it’s to look over at other traders to see what they’re up to or to share with anyone who’ll listen the cheers or jeers about a trading idea. This past week, Questrade gave its clients one more avenue to do that by offering up an integration with popular stock market community Profit.ly.

Trading communities are great places for DIY investors to compare notes and to break the loneliness of DIY investing. Unfortunately for most Canadian DIY investors, there aren’t a whole lot of trading community interfaces built into the trading platforms directly. Usually places like Twitter, StockTwits, or the myriad of investor forums are places where traders go interact with other online traders. Occasionally there are even private chat rooms and trader hangouts that individuals can pay for to shadow or follow along with other traders.

The latest integration that Questrade has provided to its clients by enabling the Profit.Ly in the app centre means that Questrade’s platform can now directly populate the Profit.Ly stream of user generated trading content with a Questrade clients trading activity (or at least the activity a user wishes to share).

While having the Profit.Ly bolt-on solution is great, what is even more intriguing is that, unlike most other Canadian online brokerages, Questrade offers DIY investors the ability to interface directly with Questrade’s trading platform via an API. In addition to being able to connect directly to the API themselves, DIY investors can also use 3rd party apps to interact with Questrade’s platform opening up a world of possible extra functionality onto Questrade’s already robust trading platform.

As mentioned earlier, Canadian discount brokerages are having to get very creative in order to compete. Questrade, however, is taking this creativity to a whole other level by opening up their trading platform to 3rd party developers and apps.

In a landscape where being cutting edge is becoming harder and harder to do, Questrade’s investment in developing its trading platform is starting to pay off because of this ability to partner with 3rd party developers. Features such as trading journals, access to advanced charting integration, stock screeners and now trading communities all from within the trading platform mean that the tools and user experience available to DIY investors is hard to compete with – at least for those who are willing to pay for the extra bells and whistles.

As time goes by and these apps gain in popularity and sophistication, the Questrade partner centre will be a feature that will definitely distinguish this online brokerage from almost all of the other Canadian brokerages. While Questrade may have built their brand around being a low-cost brokerage, their next chapter is definitely being crafted with creativity in mind.

Discount Brokerage Tweets of the Week

This week it looks like frustrations got the better of most of the DIY investors tweeting to Canadian discount brokerages. Mentioned this week were Credential Direct, Questrade, Scotia iTRADE, TD Direct Investing and Virtual Brokers.

From the Forums

Unrefreshing Experience

Up to date information is key to making a good trading decision. In this post from RedFlagDeals investing thread, however, one RBC Direct Investing user was frustrated with the delay in quotes coming their way. Find out what other users had to say about the delayed market quotes.

Poll Position

This post, also from RedFlagDeals, took a poll of users on ‘which online brokerage is best for ETFs?’ While it is not entirely surprising as to who the community of users selected as a standout (by a large margin) but it was actually more interesting to see who didn’t get much endorsement. Of course, take the results with a grain of salt because of the low number of participants.

Into the Close

That does it for this week’s roundup. For those that have had their share of bumps and bruises in the markets, the weekend is a welcome reprieve. Hockey fans will no doubt also be tuning in to watch the games best, brightest and maybe even the least likely of All-stars take the ice. Of course, all eyes will be on John Scott and for those who’ve read his journey to get there, it might be fair to say he’s a Great Scott.

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Discount Brokerage Weekly Roundup – January 22, 2016

From national squirrel day to discovering a whole other planet to the end of week bounce in the markets, there’s been no shortage of interesting events this week. Of course, this strange string of events may have something to do with the X-files officially returning to TV this upcoming weekend. Or so some might want to believe.

While everything from squirrels to celestial events might be used to explain the wild swings in the markets, it’s no coincidence that heading into RSP season banks & discount brokerages alike are ramping up their efforts to win over DIY investors.

In this week’s roundup we take a look at the recent moves by two brokerages to win over investors with chances to win big money. Next we take a look at highlights from a few news stories that emerged this week – from brokerages winning awards for client service to one brokerage’s attempt at a celebrity endorsement Canadian style to one bank’s potential disruption in the wealth management space. As usual we’ve also got a great selection of investor education events and reactions from DIY investors on Twitter and in forums on our menu. Hope you’re hungry!

Winning at the Ballot

As commission pricing among most of Canada’s discount brokerages is now roughly around the same $10 per trade level, brokerages are working hard to make themselves standout from one another. We’ve already seen that deals and promotional offers are a popular strategy among Canadian brokerages with 16 deals currently being advertised. Another category of promotional offer that brokerages appear to be increasingly turning to, however, is the tried-and-true “contest”.

This past week both Qtrade Investor and Scotia iTrade got into the promotional offer mix by launching two contests for DIY investors.

Qtrade Investor’s latest promotion is definitely geared to catch the attention of investors as they are out shopping during the “RRSP” season. Specifically their “love your RSP” contest offers up two grand prizes of $5,000 (to new clients and existing clients). In order to qualify, new or existing clients have to contribute at least $2,000 to their Qtrade RSP account.

Scotia iTrade, on the other hand, is taking a targeted approach to Toronto-based (or those brave enough to visit Toronto from January through March) clientele. In a specific bid to boost traffic through their investor centre, the Scotia iTrade contest is offering up a top prize of $10,000 and one of five prizes of $1,000 to individuals who either attend a seminar (in person); attend a 20 minute session with a relationship manager; open a new account or fund an existing iTrade account all exclusively at the investor centre.

In addition to these brokerages, Questrade is still advertising a pair of contests offering prizes of $5,000 or $1,000 to generate more interest in their managed wealth business line and RBC Direct Investing recently concluded their $1,000 contest for participating in their community feature.

As online brokerages are forced to come up with creative ways to connect with new and existing clients, contests offer a way to generate interest among the DIY investor community. Unlike many other contests, where simply submitting your name is enough for entry, these latest contests from Qtrade Investor and Scotia iTrade can require individuals make a deposit in order to qualify (or to enhance their odds of winning).

Awareness alone isn’t the only value discount brokerages derive from the contest strategy, however. These contests also help to discount brokerages to establish a way of directly contacting new potential clients – through some form of direct marketing effort. As more and more brokerages ramp up their advertising and marketing efforts through the busy RSP season, getting new clients is something they’re not leaving up to chance.

Sharing the Winners Circle

Earlier this week, the results from Dalbar Canada’s 2015Direct Brokerage Service Award were announced.

HSBC InvestDirect and RBC Direct Investing both landed in the winner’s circle yet again and were recognized by Dalbar for their respective performance on a number of client service metrics.

As mentioned in a previous piece on the Dalbar award, this is one of the only major discount brokerage assessments/rankings to take into account the quality of client service. While what defines a “quality” client service team or interaction is certainly up for debate, according to Dalbar’s methodology one of the key elements to receiving this recognition is the completeness of the answer and anticipation of other needs the client may have.

For many DIY investors, the interaction with client service may be minimal and thus not a driver in the decision to go with one brokerage over another. To those for whom service does matter, however, the Dalbar awards offer at least some idea of the service experience without actually having to try out a brokerage directly. Unfortunately for DIY investors, there were no additional details about the rest of the field that were disclosed and as such, the Dalbar award is of limited value when trying to decide on a brokerage’s client service relative to other brokerages.

Hammering Home the Message

If there’s one investment that’s got most of the financial community and media fixated it’s real estate. In an interesting twist to capitalize on the fervor, CIBC Investor’s Edge has recruited home reno personality, real estate investor and author Scott McGillivray to put together a series of 30ish second video clips on DIY investing.

While it is yet another in a series of small changes that CIBC Investor’s Edge has made over the last year, this move in the direction of getting the star factor will definitely get people to pay more attention than some of the other imagery and video being produced by other brokerages. Though it’s not quite the same caliber as TD Ameritrade teaming up with Matt Damon as spokesperson, it is stepping up the game for getting the attention of DIY investors in distinctively Canadian fashion. And as Justin Trudeau has shown, good hair can certainly go places.

Robo Roll Out

This past week offered up another big announcement from the wealth management space. BMO officially rolled out its robo-advisor “SmartFolio” for full release.

As with most products rolled out by a major financial institution, the planning and implementation of the robo-advisory has taken quite a bit of time and effort. Still, even though other upstart services have had a considerable head start, it’s a big deal when a major player such as BMO decides to play in the same sandbox.

Given how closely Canada’s big five banks mirror one another, it should be interesting to watch the response (if any) from the other players. On the one hand, when RBC Direct Investing lowered their standard commission pricing to $9.95 in 2014, almost all of the other major bank-owned brokerages responded within a few months by doing the same. Conversely, when BMO InvestorLine launched the hybrid DIY-advice product called AdviceDirect in 2012, no other large or small brokerage put forward a comparable product.

Roboadvisors are clearly reaping rewards as shown by the monolithic Charles Schwab in the US. Whether or not the same results can be expected in Canada, however, is debatable.

Despite the fierce competition, there are still 15 Canadian online brokerages battling for market share – with some clearly battling harder for new business than others. Whether the wealth management space in Canada is big enough to withstand yet another product remains to be seen. For BMO, however, the spotlight on the robo-advisor space is clearly on them, which is not something that happened with the adviceDirect rollout and yet another reason the other big banks will have to seriously consider the robo-advisor approach as part of their offering.

Event Horizon

Winter’s slowly winding down, 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 and technical analysis enthusiasts. ETFs, registered accounts, and an international resource investment conference round out this week’s selection.

January 23

TD Direct Investing – Introduction to Technical Analysis

January 24

Cambridge House International Vancouver Resource Investment Conference (VRIC) – 2016

January 25

Cambridge House International Vancouver Resource Investment Conference (VRIC) – 2016

TD Direct Investing – Stock Talk

January 26

TD Direct Investing – Alternatives to Mutual Funds: Learn What Else Is Out There

January 27

TD Direct Investing – Introduction to Technical Analysis

RBC Direct Investing – Getting Started with ETFs – iShares by Blackrock

RBC Direct Investing – Getting Started with ETFs – iShares by Blackrock

RBC Direct Investing – Getting Started with ETFs – iShares by Blackrock

Scotia iTRADE – Options Strategies for RRSP & TFSA with Montreal Exchange

Discount Brokerage Tweets of the Week

This week there was definitely more chatter about brokerages on Twitter. From mishaps and hiccups with accounts and trading platforms, brokerages big and small were in the spotlight for tech issues demonstrating that size alone will prevent outages during the trading day.

From the Forums

Reaction to Robo-Advisor Rollout

Given the attention that robo-advisors have garnered from the investor community, the recent move by BMO to widely roll out their smartfolio robo-advisor service has got people talking. Here are two posts – the first from reddit’s personal finance Canada section with some interesting perspectives on rates and value and a second post at Financial wisdom forum with a view from more seasoned investors.

Banking on Change

Making the switch between brokerages is something many DIY investors contemplate. But, is the grass really greener on the other side of the fence? In this post from redflagdeals.com, one user’s question touched off an interesting comparison between TD Direct Investing and RBC Direct Investing.

Into the Close

That’s a wrap on what has been an incredibly busy week. For those suffering through the wrath of Old Man Winter, this may be the best weekend yet to start training hard for the TV marathon. Shovel responsibly!

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Discount Brokerage Weekly Roundup – January 15, 2016

Sooo this week happened. For the bulls it was definitely a rough week all around but for the bears it has been a fantastic 2016. Unlike the question people were asking about the powerball lottery or real estate prices in Vancouver and Toronto (which was how high can this thing go?), Canadian DIY investors are looking at the loonie and oil prices and wondering how low can these possibly go?

Canadian discount brokerages are now also a part of each of these two different conversations. On the one hand, there are deals and promotions that have started to heat up again and we find ourselves wondering how high they’ll go this year to win new clients. Interestingly, there was also an industry shaking headline put out by one discount brokerage that had us (and other DIY investors) wondering how low can commission prices really go?

In this edition of the roundup we cover the latest commission price drop that is bound to make waves through the year. Next we take a look at the two latest deals to show up in the growing deals and promotions race. From there we’ll take a look at the discount brokerage tweets from the past week and preview the investor education opportunities coming up in the next week. Finally we close out with a look at what investors were chatting about in the forums.

Virtual Brokers First Canadian Discount Brokerage to Offer Commission Free Trading

This past week Virtual Brokers boldly went where no Canadian online brokerage has gone by announcing completely commission-free trading on equities. You read that right, there is now a Canadian discount brokerage that is offering commission-free trading.

It seems like unfortunate timing that what should have been one of the biggest news events in the DIY investing space since the commission drop by RBC Direct Investing in January of 2014 actually got eclipsed by the major market meltdowns.

Make no mistake, however, the latest move by Virtual Brokers is definitely going to make waves.

Virtual Brokers’ latest pricing plan is actually a part of a much more transformational move by Virtual Brokers to streamline their commission-pricing schedule away from the multiple commission plan model and narrow their offering down to two choices.

Gone are the “penny plan”, the “per trade” plan and the “per share” plan. Instead there is now the “commission-free” trading plan or the “classic plan”.

First, let’s examine the rather mind-blowing move to offer completely commission-free trading on equities.

While many DIY investors are all for paying the least amount possible for commissions, the first question for the skeptics that arises is how exactly anyone can offer commission-free trading?

The simple answer is that even though commissions have been eliminated, other fees and costs haven’t.

In other words, this is not the ‘no strings attached’ commission-free trading offered by US online brokerage Robinhood. Virtual Brokers’ commission-free trading plan has many strings and they are important to know about before considering this plan.

One of the most important pieces of Virtual Brokers’ new commission-free trading structure is the requirement to use one of their application-based trading platforms to place the trades. These platforms include Edge Trader Pro, PowerTrader Pro, RealTick EMS, ITS TraderLite and IRESS. The latter three platforms are typically geared towards and used by professional traders however this commission plan is only offered to non-institutional margin accounts and not for algorithmic trading.

The consequence of using the application-based trading platforms (rather than the web-based ones) is that the application based trading platforms are associated with monthly platform fees starting at $150 USD (for Edge Trader Pro) and going as high as $1344 USD per month (for IRESS and factoring in the 20% markup charged by Virtual Brokers for this platform).

Thus, DIY investors considering the “commission free” plan need to be prepared to pay at least $1800 USD/year in platform and data fees. At current USD/CAD conversion rates (1 USD = 1.45415 CAD) this works out to about $2618 CAD/year. Under the $9.99 flat commission structure which is their new standard offer, this works out to about 262 trades per year (or about 22 trades per month).

Of course, there are a few other important strings to factor in as well as the data/platform costs.

Under the new commission-free plan, ECN fees are charged on the trade and the interest rate associated with trades in this account are 1.5% points higher than the standard margin rates. Add to that the condition that the minimum account balance has to be greater than $2,000 at the time of placing a trade and it starts to become clear that the cost of commission-free equity trading can start to add up.

Finally, unlike the mobile-trading oriented Robinhood platform in the US, Virtual Brokers’ commission-free trading plan only works on the application based platform. Mobile trades are charged at the classic commission rates of 9.99 per trade. Similar to the Robinhood model, however, Virtual Brokers will likely be compensated for routing orders through various exchanges (i.e. they will be paid for the order flow). Exactly how much they earn and whether or not this impacts the ability to clear trades at the best-available market price for the quantity may be a source of controversy (as it has been in the US for brokerages doing the same thing).

The bottom line for DIY investors is that the economics and the conditions of the commission-free trading plan need some careful consideration.

In particular, the fact that the monthly price of the platforms is priced in USD instead of CAD is a very interesting and perhaps necessary move on Virtual Brokers’ part to keep their costs in check. The consequence of the huge difference between the US and Canadian currency means that the cost for this commission free plan will fluctuate in CAD – an extra piece of math that DIY investors may not want to do. Also active traders looking to exit or enter fast moving trades will have to factor in execution costs associated with ECN fees and potential fill issues based on order routing.

With all of the caveats above, however, Virtual Brokers has become the first Canadian online brokerage to offer a very different model for equity trading. They are the first Canadian discount brokerage to take equity commissions all the way to zero and that alone makes for headline grabbing marketing.

It will be a challenge for other Canadian online brokerages to compete with the “headline” factor of no commission trading and while there is still a ways to go before Canadian investors can take advantage of zero-commission trading a la Robinhood, the cracks in the 9.99 per trade pricing are starting to form.

All this in the first two weeks of January means that there’s still a lot that can happen across the board yet.

Markets Drop, Deals Jump

Deals activity continued to pick up even though the markets continued struggle this past week. Two online brokerages added an offer apiece into the deals pool bringing the total number of openly advertised discount brokerage promotional offers to 16.

Starting first with Scotia iTrade who launched a commission-free trading offer which is good until the end of March. The promotional offer, which is open to new clients only, consists of at least 75 commission-free trades which are good for up to 90 days for a minimum deposit of $25,000. Deposit tiers go up to $250,000+ and the maximum number of commission-free trades weighs in at an impressive 500.

Interestingly, while Scotia iTrade has typically been the online brokerage that has pushed the large number trade or cash back offers (often associated with equally large deposits to qualify), they are not the brokerage with the highest deposit number offer this time around.

Credential Direct, not typically known for participating in deals and promotions, and certainly not at the very high ($250,000+) deposit tiers stepped into the deals action this month with a cash back offer of their own.

The offer itself is interesting because not only is there a cash-back component but also because they are donating to a good cause (Kids Life Line) for all new or existing clients that take advantage of the offer. In order to qualify, new or existing clients can deposit anywhere from $15,000 to upwards of $1,000,000+ and receive cash back offers ranging from $75 (for the $15,000 deposit) to $1,000 (for the $1M+ deposit).

The multi-tiered approach taken by both Scotia iTrade and Credential Direct is interesting because it is a way of competing with multiple brokerages’ offers with one umbrella offer instead of having to offer specific offers for different deposit levels.

That said, it is interesting to see Credential Direct being the only brokerage having an offer targeting deposits of at least $500,000 or $1M+. While unchallenged at these deposit levels, the cash back offerings are not necessarily as competitive as other brokerages’ offers based on the amount of deposit required.

For example, Questrade is offering a $500 Apple gift card for a $100,000 minimum deposit. And, while technically not an ‘apples to apples’ comparison to a cash back offer, the value gap is significant. When looking at cash back offers, however, BMO InvestorLine’s $600 cash back offer for a minimum deposit of $250,000 dwarfs Credential Direct’s offering at the same deposit amount level as well as at their next tier.

Where Credential Direct’s offer does stand out is at the low end of the minimum deposit spectrum. The cash back of $75 on a deposit of $15,000 is one of the more competitive cash back offers currently available at this deposit level.

History suggests that more deals are likely to emerge as we head into the storm of RRSP season. Add in the recent market turmoil and Canadian discount brokerages are likely going to have to ante up the offers significantly to provide some measure of confidence to rattled DIY investors.

That said, for investors in the market for an online brokerage, the lesson from the current range offers is clear – be sure to shop around and do some homework on the deals being offered. High deposit requirements don’t always offer the best return however since brokerages are clearly looking to pull in assets, don’t be afraid to ask brokerages to match a more competitive offer.

Event Horizon

It’s full speed ahead, and an interesting week ahead for discount brokerage-sponsored investor education events. Questrade looks to join in the educational event mix this week with a webinar on ETFs. Here are some upcoming sessions that may be of interest to options enthusiasts, and those who are new to investing. Technical analysis, strategy-based ETFs, and risk management round out this week’s selection.

January 18

TD Direct Investing – Understanding Margin & Short Selling

January 19

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

Questrade – ETF Investing: why all ETFs are not created equal

Scotia iTRADE – Strategy Based ETFs with Pro Market Advisors

January 21

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

TD Direct Investing – Introduction to Investing

TD Direct Investing – Introduction to Investing in Options

January 22

Scotia iTRADE – The Rubber Band Effect with AJ Monte

Tweets of the Week

The big news out of Virtual Brokers went mostly unnoticed by investors against the backdrop of a market meltdown. Other brokerages were in the spotlight for platforms going down during trading hours and for minor quirks.

From the Forums

Commission-free sizzle turns to fizzle

If there was one place that a commission-free trading offer was bound to get attention it was on RedFlagDeals’ investing forum. In this thread, it was interesting to watch how the reactions of excited investors changed as the finer details became apparent.

To HTML in a handbasket

2015 was a big year for web redesigns and even though RBC Direct Investing’s site is not directly referenced, it was interesting to read this post from Reddit about the RBC website front end change. One of the most interesting pieces had to do with communicating the site changing so that people don’t think they’ve been hijacked.

Into the Close

With a Bank of Canada rate announcement scheduled for next week, the drama for Canadian DIY investors could continue. For those that enjoy the volatility, however, this is prime time. On a sadder note, the world also bid farewell to an iconic artist in the passing of David Bowie this past week. Here’s a tip of the astronaut helmet to an innovator in his own right. Enjoy the weekend and hang on tight, next week could be bumpy.

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Discount Brokerage Weekly Roundup – January 8, 2016

source: giphy

The start of the 2016 trading year has been more than a bit loonie. Circuit breakers tripping and then being pulled in China, RBC raising mortgage rates in Canada and the price of oil continuing to plunge have made for quite an opening act to 2016. For Canadian discount brokerages, planning for their busiest season in 2016 just seems to have gotten much more interesting as they are now tasked with enticing DIY investors into opening online trading accounts.

In this week’s roundup, we take a look at the best bet Canadian discount brokerages have to woo investors in our recap of the new promotions that appeared in week one. Next we take a look at one brokerage’s strategy to appeal to the younger generation of investors and potentially encroach on turf well defended by low-cost brokerages. From there we’ll recap the upcoming investor education events and the activity of DIY investors on Twitter. Lastly we’ll close out with some interesting conversations on the Canadian investor forums.

Discount brokerage deals tick up

The discount brokerage deals and promotions activity showed signs of coming back to life this past week. Heading into January, the number of advertised promotional offers fell to 11 however unlike the major stock market indices, there was a modest uptick with a total of three additional offers joining the list.

The promotional offers were a mix of extensions and revivals of deals we had seen earlier in 2015. It was interesting to note, however, that most of these offers had expiry dates that fell just after the RRSP contribution deadline of February 29th.

Both BMO InvestorLine and Questrade tossed in a pair of offers this past week. For BMO InvestorLine, it was a case of repackaging offers that had officially expired at the beginning of January.

The first offer, which is their refer-a-friend promotion, actually changed quite substantially. BMO InvestorLine is now offering to give $50 cash back to both a referrer and referee if the referee deposits at least $50,000. Previously BMO InvestorLine was offering up to $300 cash back to individuals for referring new clients and $100 to new clients that opened accounts with at least $250,000.

BMO InvestorLine’s other offer to launch this month provided individuals with either $200 (on deposits of at least $100,000) or $600 (of at least $250,000) cash back plus 100 commission-free equity trades (commissions to be rebated later in the year). This offer is substantially larger than the commission-free trade offer that expired early January. In the case of that promotion, individuals were being offered 20 commission-free trades which were good for a year and $200 cash back for deposits of at least $100,000.

The battle for the $100,000+ deposit threshold seems to be a two-horse race at this point between Questrade, who is offering up a $500 Apple gift card and BMO InvestorLine with their $200 cash back + 100 trade promo.

At the other end of the deposit spectrum, Questrade put forward two nearly identical commission-free trading offers. The offers consist of either one, two or three months of commission-free trading depending on the deposit levels. Interestingly, the major difference between the offers is the lowest deposit tier of one offer is $1,000 and the other is $2,000. These two offers give Questrade the clear lead in terms of the number of promotions (7) being offered by a brokerage to self-directed investors with 6 of those offers having a minimum deposit of either $1,000 or $2,000.

Another interesting observation in the deals arena is that Scotia iTrade has yet to replace its major offer that expired at the end of December. They did step back into the deals race by extending their refer-a-friend offer but it remains to be seen if they are launching something bigger and bolder heading into the RRSP deadline.

Be sure to check the deals and promotions section regularly through January and February as there are likely to be more announcements of offers in the coming weeks.

Fountain of youth

One of the major buzzwords around the financial services and wealth management space in 2014 and 2015 was ‘millenials’. Specifically, many Canadian online brokerages were trying to figure out ways to make their products and platforms more appealing to the ‘up and coming’ generation of investors.

This past week, it was interesting to note that Desjardins Online Brokerage is now offering a program specifically geared towards individuals between the ages of 18 to 30 years of age.

At first blush, the new program known as ‘Broker@ge 18 – 30’ seems to tick the most relevant boxes for younger investors. Specifically, there are no inactivity fees and no asset minimums to maintain free registered accounts. To sweeten the deal, Desjardins Online Brokerage is also including $50 in commission credits. This program applies specifically to Disnat Classic which is generally geared towards less active investors. On an interesting note, Desjardins also managed to snap a picture of a very “millennial” group of individuals huddled in the Desjardins investor centre.

Looking across the Canadian discount brokerage space, there are only a handful (currently) of incentive programs offered to ‘young’ investors. Virtual Brokers, for example, has their Kickstarter program aimed at students and recent post-secondary graduates; Interactive Brokers has a lower minimum deposit requirement ($3,000 vs $10,000) for individuals 25 years old and younger; and Questrade offers to waive account inactivity fees for clients 25 years and under . While BMO InvestorLine did have a youth-oriented offer for a good portion of last year, there is a lack of bank-owned Canadian discount brokerage that offer up a youth-focused program along with similar incentives.

As was the case at the outset of 2015, Desjardins Online Brokerage is launching 2016 with a new program and it is likely that this move into the younger investor segment will not go unnoticed by their cross-town rivals National Bank Direct Brokerage, but also by the independent brokerages Questrade and Virtual Brokers who actively market to the younger investor segments.

Tweets of the week

With all the activity in markets this past week, there was definitely an uptick in chatter on Twitter. Interestingly many of the tweets provided user feedback to the latest platform rollouts from TD Direct Investing and also Questrade.

Event Horizon

It’s a New Year, and a busy week ahead for discount brokerage-sponsored investor education events. Here are some upcoming sessions that may be of interest to yield hounds, those who are interested in trading strategies, and new to investing. Primers on options, technical analysis, and tax free savings accounts (TFSAs) round out this week’s selection.

January 11

Scotia iTRADE – Generating Income Using iShares ETFs

January 13

TD Direct Investing – The Power of Tax-Free Savings Accounts

Scotia iTRADE – After Your First 10 Trades with Sarah Potter

January 14

Scotia iTRADE – The Ten Most Frequent Mistakes Traders or Investors Make with AJ Monte

NBDB – Introduction to Technical Analysis: Trends – [Fr]

TD Direct Investing – The Power of Tax-Free Savings Accounts

TD Direct Investing – Introduction to Investing in Options

TD Direct Investing – The Power of Tax-Free Savings Accounts

From the Forums

Best brokerage for TFSA?

With TFSA’s on the minds of many DIY investors, this post from RedFlagDeals.com investor thread asks if there is a brokerage that may be better than others when it comes to TFSAs. While we’re a little hesitant to crown a single brokerage as the best brokerage for TFSAs, there are some interesting points made by the posts in the thread.

Questrade vs. Tangerine

While not an apples to apples (or oranges to oranges) comparison, the slow and steady DIY investor crowd tends to ask about the value of going with one or the other of these low-cost providers. In this post from the reddit PersonalFinanceCanada thread, there are some interesting perspectives offered to a recently debt-free DIY investor.

Into the Close

That’s a wrap for the first week of 2016. For those watching the NFL playoffs, it might just be a more volatile weekend than the week that just finished. Nonetheless, it should be a great way to think about something other than rattled markets for a few days. See you next week!