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Which discount brokers are best for ETF investors?
As more and more investors look to both passively and actively managed ETFs rather than individual securities, there’s a need to identify which online brokers best cater to ETF investors. If you can keep your ETF costs down you may even be able to undercut the typical Canadian robo-adviser firm, which generally provide packages of various ETFs but charge on the order of 0.5% a year on top of the underlying ETF MERs.
So even if you don’t intend to trade a single stock or bond, some Canadian discount brokerages are ideally suited for a so-called “Couch Potato” portfolio, buying and holding a select group of low-cost, tax-efficient ETFs. In this case, the ability to buy the ETFs commission-free is a definite plus for the firm in question (less so on the sales front, since you’re planning to buy and hold for the long run, right?).
Still, there is much more than buy commissions to choosing an ETF-friendly discount brokerage. Surviscor assessed product availability, watch lists, market activity, ETF research, the order experience, screening tools and commissions on ETFs.
Perhaps because the ETF industry is growing at a frenetic pace, this category has experienced some ranking changes. Last year, the category was led by two independents that tied for top spot: Questrade and Virtual Brokers. Both slipped out of the top three this time, with two bank firms in the top three, led by National Bank Direct Brokerage. which narrowly edged out Qtrade Investor. BMO InvestorLine was third.
We still like Questrade and Virtual Brokers, both of which do not charge commissions to buy any Canadian- or US-listed ETF. Keep in mind they may still charge you when it’s time to sell an ETF. Investors should also be aware that firms that offer a limited number of free ETFs tend to offer the least active ones, (such as Qtrade and iTRADE.) So it’s important that investors research their needs first.
National Bank was the runnerup in the 2017 edition but continues to make great strides on ETFs. It also has its own research team of ETF analysts, some of whom are often quoted in the national press. As was the case last year, National Bank has eliminated commissions both for buying and selling ETFs, but only on orders of 100 units or more. Keep in mind that on an ETF trading for $300, 100 units means a whopping $30,000 trade, which may be beyond the reach of small investors wishing to avoid the commission.
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