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Trading online has never been cheaper or easier, but with more choice comes more confusion. We'll help you find the one for you
If you’ve ever assembled a piece of furniture you’ve probably used one of those all-in-one screwdrivers. You know, the kind that comes with a dozen different bits to fit every kind of screw, bolt and fastener. Sure, this little tool seems convenient, and it will get the job done eventually, but it won’t be the best tool for every job. Chances are you’d be better off with a dedicated screwdriver for your specific fastener in some cases.
For many Canadians, their bank is that all-in-one tool: the place where they not only have a chequing account and maybe a mortgage, but also where they hold their investments. No wonder the Big Five banks also dominate the online brokerage space in Canada.
Like the multi-purpose screwdriver, your bank’s brokerage might be your default choice because it’s convenient, but we think it’s worth the effort to search for a brokerage that’s suited to your specific needs. The ideal fit depends on a number of factors, such as the size of your account, how often you trade, and the types of investments you tend to buy.
Cost is an important consideration, but it’s not the only factor. If you’re a buy-and-hold investor who seldom trades, for example, then a few bucks’ difference in commissions is trivial. If you’re a beginner, you’ll want a brokerage that is easy to use and quick to fix any problems that arise. And no matter your investment style, your online brokerage should provide detailed quotes, deliver top-notch customer service and arm you with the same research that portfolio managers use.
To help you find the right fit, MoneySense has again partnered with Surviscor to deliver our third annual report on the best discount brokerages in Canada. Surviscor, a business analysis firm based in Oakville, Ont., conducts detailed surveys of online brokerages and tracks their customer service semi-annually. Backed by hard data provided by Surviscor’s Glenn LaCoste, an industry veteran with more than 24 years of experience, this is the most comprehensive report you’ll find on discount brokerages in Canada.
In the following pages we walk you through the categories you should consider when choosing a discount brokerage, listing a winner and a runner-up for each. On page 32, we also provide a summary of the features, costs and overall customer experience for each discount brokerage to help you decide whether you can get by with an all-purpose tool—or if it’s time to look for something a little more specialized.
The markets can be intimidating, but your discount brokerage shouldn’t be. When buying and selling securities, you should have access to all the information you need to execute a trade, but you shouldn’t feel overwhelmed. Order screens must be intuitive, and help should be a simple click away. The best brokerage sites are clean and elegant in appearance, yet still assemble the data you’ll need to complete a transaction. That’s a difficult balance.
BMO InvestorLine and Scotia iTRADE outperform the competition in this area. Both brokerages have well-designed sites, and both offer investors the ability to customize their experience by choosing how much or how little information gets displayed. BMO has a neat “floating ticket” feature that keeps the trade window front and centre as you scroll up and down the screen. Scotia iTRADE also has many user-friendly features: Surviscor likes how investors can prepopulate their order tickets to make trades faster—a perk for active traders who tend to buy and sell in standard blocks.
There was a time when a simple smile was a hallmark of good customer service. With an online brokerage, however, it’s all about response time. Markets move fast, and as a do-it-yourself investor it can be tough to keep pace. The last thing you want is for your discount brokerage to cost you time and money with slow service.
When you have a question you expect a quick response, regardless of when you submit it. Unfortunately, while websites selling cheap clothes excel at this, brokerages that manage their clients’ life savings have room for improvement.
In recent years many discount brokerages have made click-to-call, live chat, and even screen-sharing features available to clients. The trouble is, many of these services are only available on specific pages (such as when you’re opening an account) or only during certain hours. Although the markets are closed on evenings and weekends, that’s often the only time investors actually have the time to look at their accounts.
You can always send a question via email, but if you do, be prepared to wait. Sadly almost every discount brokerage tracked by Surviscor slipped in email response times this year. Last year, several had average response times of an hour or less: now none do. In fact, only four of the 11 brokerages tracked by Surviscor had an email response time of five hours or less.
Despite these disappointments, there are still some standouts worth noting. Scotia iTRADE is not the fastest to respond to email, nor does it offer the most customer support features, but overall it delivers a good customer experience. It also stands out for providing support on evenings and weekends. And while it doesn’t offer its online chat feature on every page, it is available on key screens where you are most likely to have a question.
As an independent brokerage, Qtrade lacks the resources of the big banks, but it does a good job supporting its own platforms. Plus, if you email them a question you can expect an answer in a little more than three hours, which was the second-best response time collected by Surviscor.
If there’s one bit of really good news in the discount brokerage space, it’s that many of the major players now take the discount element to heart. Most have recently taken significant steps to lower their fees and commissions. Just five years ago, investors with limited assets could expect to pay as much as $29 per trade. Today most brokerages charge under $10, regardless of how much you have in your account, and a few will do it for less than $7.
Unfortunately, depending on which discount brokerage you choose, account size and trading frequency can still determine how much you’ll pay in fees and commissions. Some brokerages, like Scotia iTRADE, have even taken a step backwards, charging $24.99 per trade for clients whose combined accounts are below $50,000.
And while brokerages such as Questrade and Virtual Brokers advertise extremely low trading commissions, Surviscor’s analysis suggests these may not be the cheapest options overall once you factor in other costs—such as electronic communication network (ECN) fees and monthly charges for data that other brokerages provide for free. As a rule, the bank-owned brokerages don’t charge these fees, which is why they can be cheaper overall—or at least more transparent. That said, Questrade and Virtual Brokers do offer commission-free purchases of ETFs (the regular commission usually applies when you sell).
Brokerages offer several different fee and commission schedules, and none is the cheapest in every respect. To pick our winner, we blended several types of users, trade types and account sizes to see which brokerage stood out. We give the nod to CIBC Investor’s Edge: when it comes to pricing, CIBC is as straightforward as they come: $6.95, regardless of account size or trading activity.
Our runner-up is Credential Direct, which also deserves kudos for being cheap and transparent: $8.88 per equity trade, with no hidden ECN or platform fees.
Keeping tabs on the trades you’ve made and how your portfolio is performing are among the most basic roles a discount brokerage should play, but they actually vary a lot in this area. Only a few produce easy to follow reports of your order history and—even more surprising—fewer still provide concise performance reporting.
Your discount brokerage should also alert you if a stock you’re monitoring hits a certain price, or tell you if your account has fallen below a certain level. A lot of brokerages dress these pages up with pie charts and maps, but they don’t all provide you with the same level of detail.
BMO InvestorLine is the clear winner in this category, says Glenn LaCoste of Surviscor. The brokerage is especially good at parsing information in a clean and efficient way, allowing the user to sort through multiple accounts in a single table, which is particularly appealing to active traders. And if there’s news on one of your holdings, it appears automatically on your screen. “I see almost perfection in this category,” says LaCoste.
Questrade has made some significant strides in this category, too. About a year ago users had to deal with separate sign-ins and multiple platforms: now everything is collected in one place. It also recently added performance reporting so you can see if you’re keeping up with your benchmarks, and it earns high marks for providing granular data, right down to which exchange the transaction was routed through.
Do-it-yourself investors improve their chance of success when they have access to high-quality research and educational tools. There are two broad categories of resources: the first includes material geared towards teaching investors to use a particular trading platform, while the second aims to improve investors’ market knowledge. Both are important, but we give more credit to the latter.
Most online brokerages offer tutorials and seminars to help investors learn about the markets and gain confidence in their own decisions. But because of its combination of online resources, videos and seminars across the country, Desjardins is the leader in this category. The brokerage even has an interactive event planner that allows investors to sign up for nearby seminars.
If you’re a new investor looking to beef up your knowledge, then TD Direct Investing is another good place to start. The brokerage provides users with a good series of videos geared to raising investors’ general understanding of the markets.
Portfolio managers rely on quality research to support their investment decisions, and through the discount brokerages, DIYers can now get access to many of the same tools. At the most basic level your brokerage should offer screening tools that help you identify the companies, ETFs or mutual funds that meet your requirements. The good ones take this a step further by giving you access to the latest in-house and third-party research reports and market news.
TD Direct Investing excels here by offering more research from more vendors than the competition. They also offer a full suite of stock-screening tools and allow users to set up alerts so they can keep up with companies on their watch list. Scotia iTRADE may not have TD’s research depth, but it offers some excellent stock-screening tools, making it our runner-up.
While there is no one ideal discount brokerage for every type of trader, BMO InvestorLine comes close. Their service consistently earns high marks in just about every category we track, from customer support when opening a new account to the way the brokerage integrates information without overwhelming the user. BMO does its homework in the brokerage marketplace, and when InvestorLine launches new features they tend to be innovative. Pricing is the one area where BMO fails to lead, although its costs are in line with most of the competition.
Scotia iTRADE is another perennial top performer, and it does a good job again this year. The brokerage offers a good level of supporting information to help users make faster, more informed trades.
Still need more information to help you decide which discount brokerage is the right fit for you? This table summarizes the key features of the major players so you can zero in on the ones most important to you.
Opening a new account at an online brokerage should be straightforward, but many will discover it can be a long and frustrating process. Some brokerages limit which accounts can be created online (RESPs, for example, often need to be opened in person or by mail). The good ones provide a checklist of information you’ll need, an estimate of how long it will take, live online support, and the ability to save your info so you don’t have to start from scratch if you get distracted.
Canada’s biggest banks dominate the discount brokerage space and they’ve used that position to their advantage. There are several perks when using the brokerage associated with your bank. Transfers between accounts are quicker and more convenient, and having all of your accounts in one place will likely reduce or eliminate certain fees. While all of the major banks do this, the best ones clearly delineate your banking investment functions to avoid any confusion.
The markets don’t stop when you step away from your computer; you shouldn’t have to either. While just about every discount brokerage allows you to make trades via a smartphone, investors won’t bother if they have to zoom in on a screen or can’t access the same level of information they can from their PC. The top performers have apps for just about every smartphone or tablet, as well as responsive mobile websites that deliver a clean look and feel even if you haven’t downloaded their app.
BeginnerRBC Direct Investing: “They have excellent customer service for unorthodox inquiries. For instance, I opened up a spousal RRSP and inverted the contributor and annuitant names—they caught this and were super helpful in fixing it.”
Buy & HoldTD Direct Investing: “Recently I was trying to complete a trade on a U.S. exchange and got confused, so I called the TD Direct helpline. The rep walked me through it and helped me complete the transaction. She should have charged me $40 for doing the trade on the phone, but she only charged me $9.99 as if I’d completed it online by myself. I really appreciate this level of customer service.”
Mid-levelScotia iTRADE: “Help is available 24 hours a day and we have alway had a knowledgeable person to assist us during our trades.”
How to make your first trade »
How to research a stock »
How to buy an ETF »
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