Table Of Contents

    Key points

    Every now and then, the real world throws an interesting case study in the uncertainty factor of markets. The air miles reversal on letting their points expire is a great example of why in markets, just as in life, the scenario of the ‘unknown’ needs to be priced into assumptions. Perhaps the best way to […]

    Every now and then, the real world throws an interesting case study in the uncertainty factor of markets. The air miles reversal on letting their points expire is a great example of why in markets, just as in life, the scenario of the ‘unknown’ needs to be priced into assumptions. Perhaps the best way to sum it up is that the future always has some degree of uncertainty to it. For DIY investors, this is now the territory they find themselves in with regards to the Canadian online brokerage space heading into 2017.

    In this week’s roundup, we take a look at the latest deals & promotions activity at Canadian discount brokerages to give our view on what the market is saying and what may be coming around the corner heading into 2017. Next we take a look at the latest online brokerage rankings to see what they can tell us about the landscape of Canadian discount brokerages and online investing in general. From there we’ll take a look at the latest tweets and close out with chatter from investor forums.

     ‘Tis the Season

    Deals have been a hot topic for the past few weeks. With Black Friday and Cyber Monday now behind us, the start of a new month provides the chance to take the pulse of the latest promotional offers from Canadian discount brokerages.

    In a market, ebbs and flows are natural. For the Canadian discount brokerage marketplace, deals and promotions fluctuate across the year but heading into the last month of 2016, there’s a noticeable pullback. The biggest contributor to the month over month decline in offers was from Scotia iTRADE, whose three promotional offers expired at the end of November and were not renewed.

    Of course, to make things more interesting, December also has three offers set to expire from three different brokerages. Should these offers not be renewed or replaced with other offers, this would reduce the number of cash back/commission-free trades from six down to four. Interestingly, BMO InvestorLine’s cash back offer is set to expire in early January 2017 meaning that it is possible that cash-back and free-trade promotions could make up the smallest segment of offer types at the outset of the new year. This would be a very different scenario than has been the case over the past three years in which cash-back or commission-free trades, in particular, have been a mainstay of the deals section.

    With RRSP season not that far away, however, odds favour a surge in the marketing efforts by Canadian online brokerages in the new year. Some interesting hiring patterns at several brokerages combined with an increase in advertising on social media sites, such as Twitter and Facebook mean that DIY investors can look forward to getting the message online when or if brokerages decide to push go.

    The bigger picture, however, seems to suggest that the industry as a whole is in a bit of a transition period. When it comes to incentives specifically, however, the online brokerage industry is no longer aggressively innovating or competing.

    Incentive offers are, arguably, a signal of market sentiment and confidence. The absence of new offers or the relatively slow velocity of offers getting to market suggests that while competition is present, many brokerages seem uncertain about their own direction at the moment. Ironically, for those Canadian online brokerages that do not appear excited about online investing, it will be hard to convince DIY investors to be excited too.

    Season’s Ratings

    Aside from Christmas displays and holiday cheer, the final few weeks of the year are when Canadian discount brokerage rankings get published. Earlier today, brokerage rankings from financial services research firm Surviscor were published online and broadcast on BNN.

    This year’s top rated Canadian online brokerage was Qtrade Investor, who scored 87% on the scorCard ratings which take into account nine different categories of a firm’s performance. While Qtrade Investor’s rating was significantly higher than its competitors, the second place through fifth place ratings were separated by only 2 percentage points signaling that in many ways, the majority of Canadian discount brokerages are neck in neck when it comes to features, pricing and accessibility.  In other words, nobody really stands out.

    Source: BNN Screenshot

    From the BNN broadcasts, however, it also seems like the online brokerage industry, at least in 2016, has been trying to figure out how or if robo-advisors will make a difference. In an in-depth study on robo-advisors by DALBAR Canada (full disclosure, we assisted with analysis in this study), there are very clear differences in the way Canadian robo-advisors attract and work with new clients.

    When compared side-by-side with Canadian discount brokerages, however, there are even more apparent differences that emerge about the way in which robo-advisors are handling bringing new clients aboard and about the sign up process in general.

    Like all discount brokerage rankings, we always suggest a measure of caution when looking at the results.

    Over the course of 2016, we have chronicled the changes taking place at Canadian brokerages and can certainly validate the claims that Qtrade Investor has gone to great lengths to improve many areas of their offering, from pricing and features to overall user experience.

    As for the rest of the field, however, the Surviscor ratings reflect the challenge in objectively assessing the changes that have been made. For example, when changes are made to a website or to a trading platform, the improvement in “user experience” is difficult to quantify. Canadian discount brokerages may have made improvements, however, the extent to which they are noticeable and quantifiable (such as changing pricing) impacts how drastically they can be distinguished from competitor firms.

    On an interesting to note, three of the top five Canadian online brokerages in the latest ratings were not bank-owned brokerages.

    One place in particular that the Surviscor ratings are able to shine is in the tracking and measurement of response times across channels, such as emails. The key takeaway from Glenn Lacoste, president of Surviscor, as well as from Dale Jackson in a segment broadcast earlier on BNN is that service response times have degraded at Canadian online brokerages.

    For Qtrade Investor, however, there are clearly a number of areas in which they’ve managed to make meaningful strides in 2016.  According to a comment in today’s press release, Catherine Wood, Senior VP and Head of Online Brokerage at Qtrade Financial Group stated:

    “The results of this assessment validate our commitment to improving and streamlining the client experience and to offering competitive pricing in order to provide the absolute best value among Canada’s online brokerages. The enhancements we made this year were inspired by client feedback and supported by client usage analytics, and thus far we’ve been very pleased by the positive reaction from our clients.”

    Encouragingly, there appears to be an increased reliance on client usage data in the decisions driving changes to features and user experience.

    Looking forward into 2017, many online brokerages will need to finally decide if and how they are going to be deploying a digital advice product and whichever direction they go in, start to work to innovate the online brokerage experience for DIY investors. If there’s one thing that these latest rankings have made clear, is that innovation and improvements need to happen often and visibly throughout the year. Standing still only lets other firms who are hungrier to win get ahead.

    Discount Brokerage Tweets of the Week

    This week marketing was pushing the envelope and getting people talking. But isn’t that the point? Mentioned this week, was BMO InvestorLine, CIBC Investor’s Edge, Questrade, Scotia iTRADE, TD Direct Investing and Virtual Brokers.

    From the Forums

    ‘Mo Money, ‘Mo Problems

    It’s definitely a nice problem to have but if your portfolio grows beyond the CIPF coverage, what then? In this post from’s investing section, one user tries to find out what their options are when it comes to getting more coverage for a bigger portfolio, especially in the event that a brokerage goes bankrupt.

    DIY another day

    Have we reached peak DIY investing? The growth in popularity of passive investing strategies coupled with the rise of robo-advisors means that those on the fence about DIY investing are getting mixed messages when it comes to the merits of stock picking versus having someone or something else do it. In this post from reddit’s personal finance Canada section, it was interesting to gauge the sentiment of would-be DIY investors stepping into the markets for the first time.

    Into the Close

    Another week in the books. With only a few weeks (or days) left until Christmas, good luck to the shoppers looking to make it through their shopping list. For those savvy investors who’ve gone long on online retailers, this is hopefully a great weekend to watch the transaction traffic pay off. Either way, have a great weekend!