Table Of Contents

    Key points

    There are busy weeks and then there are busy weeks. With all the news focused on the debate between Clinton and Trump, it’s kind of difficult to remember that the world doesn’t revolve around those two. Of course, those two are fighting it out to get attention (the good kind anyway) which is a fight […]

    There are busy weeks and then there are busy weeks. With all the news focused on the debate between Clinton and Trump, it’s kind of difficult to remember that the world doesn’t revolve around those two. Of course, those two are fighting it out to get attention (the good kind anyway) which is a fight all Canadian discount brokerages know about all-too-well.

    In this week’s roundup there’s a lot on the menu. A major spike in promotional activity this week signals that Canadian brokerages are upping their efforts to get attention in just about any way they can. We’ll take a look at three major releases from the week. From there we take a look at one brokerage’s victory lap with online brokerage rankings but also dive into the bigger story that seems to be lurking in the DIY investing space. From there it’s a brief trip through some very interesting tweets and conversation threads from the Canadian investor forums.

    Promotions, Promotions

    Halloween is about a month away, but that’s not stopping Canadian online brokerages from offering up lots of deals & promotions candy to generate new interest and new business.

    Virtual Deality

    While it took a little while to iron out their offers, Virtual Brokers is back in the deals race. This past week Virtual Brokers launched a promo offering a free 1-year subscription to Peter Hodson’s 5i Research when opening a new account at VB. Although this promotion was previously run as a “clients only” promo, the updated offer is actually now being offered to only to new clients.

    At a value of $150, this is an enticing offer especially since the minimum deposit to qualify for this is $1,000. It also may explain why Virtual Brokers appears to be trying to make a bigger splash with the promo by creating a commercial for it.

    For Virtual Brokers, there is clearly a win-win-win to be able to offer equity research from 5i as part of their offering to new clients. Without an army of in-house analysts that bigger bank-owned brokerages have, providing access to research and analysis of stocks means going to the “usual suspects” of services such as Morningstar, something that many other brokerages can offer.  Adding a research product from 5i, however, enables Virtual Brokers to differentiate themselves courtesy of the ‘star power’ of Peter Hodson, a familiar face to BNN viewers.

    With a focus on building value through equity research, it will be interesting to see how other brokerages, especially non-bank owned brokerages, respond. Good information is hard to come by but it is definitely what some DIY investors really seek out so we’ll be watching to see if additional research offers start to hit the marketplace quite soon.

    Qtrade Launching Commission-free ETF buying

    In another sign that competition between Canadian online brokerages is heating up, Qtrade Investor is about to launch a new commission-free ETF buying promotion starting October 1st and continuing for the rest of the month.

    As one of only a handful of online brokerages that offers commission-free ETFs to DIY investors (Qtrade Investor offers 60 commission-free ETFs), this latest move enables both new and existing clients access to purchase any ETFs (Canadian or US) commission-free. Upon selling any ETF (excluding those that are completely commission-free to buy or sell), the regular commission rates apply.

    This appears to be an interesting experiment on the part of Qtrade Investor and is not unlike the initial stages of how National Bank Direct Brokerage’s commission-free ETF promotion rolled out and eventually turned into National Bank Direct Brokerage offering completely commission-free ETF buying and selling of Canadian ETFs. Some noteworthy differences, however, include the fact that the minimum purchase amount is set much lower at $1,000 and that both US and Canadian ETFs are eligible.

    Qtrade Investor’s latest move also provides them with an opportunity to gain ground on non-bank-owned brokerages such as Questrade and Virtual Brokers, both of whom offer commission-free buying of ETFs as standard. Whether or not the promotion comes returns after October, it seems the door to this kind of offer has been opened.

    As we press forward into fall, there are more interesting announcements to come out of Qtrade Investor. More than likely, we’re not the only ones watching to see what they’ll get up to next.

    RBC Direct Investing’s Talking Points

    Shifting gears to the bank-owned brokerage arena, it looks like RBC Direct Investing is ramping up the marketing machinery around its latest promotional effort: trading using reward points. More precisely, paying for trading commissions using RBC’s reward points.

    As we’ve mentioned in a couple of previous roundups, Canadian bank-owned brokerages have the scale and partnerships to offer up promotions that combine features offered in one area in the bank (such as reward points) with another (in this case trading).

    This past week RBC officially put a spotlight on the program and also took the opportunity via press release to pitch readers on how they changed the pricing landscape by lowering commissions (in 2014) and on their ‘community’ program.

    It will be interesting to see how the points-for-trades scheme works out and whether it sees a response from DIY investors. After some detective work to find a page which looks like it was intended to be the information page for the Trade with Points program, it lists the conversion ratio as approximately 1200 points for a 9.95 trading commission. That page also contains a number of important details about the Trade with Points program that anyone interested in the program should read. Some important limitations of the program, for example, apply to which platform can be used to pay for trade commissions via points. At this time only the investing site can be used; neither the mobile trading app nor the trading dashboard can be used. Trades placed through an investment representative also can’t have those commissions paid for with points.

    What the Trade with Points option looks like. Source: RBC Direct Investing website screenshot

    Even though DIY investors are hungry for innovation, they are much more receptive to price. While RBC Direct Investing may have gotten the ball rolling in 2014 by lowering standard commissions to $9.95, the fact that almost everyone of RBC Direct Investing’s peers landed at $9.95 and have stayed there means that a lower number on commission pricing will get noticed.

    Of course, the online brokerage market is an increasingly tough space to make money, and banks being what they are, probably don’t want to give up the top line revenue anyway. Alternatively, if lowering commission prices isn’t an option, then there has to be much more emphasis on the technology and an upgrade to the trading experience. That is something that almost all bank-owned brokerages face an uphill battle with.

    As we reported in last week’s roundup, BMO InvestorLine is clearly pointing it’s cross-hairs to be a winner in the trading platform experience; TD Direct Investing is already well ahead with its ThinkorSwim platform but has had to deal with a number of issues with its flagship WebBroker. While trading with points might be convenient, for DIY investors, the points for being a bank-owned brokerage that is tech savvy and innovative are still up for grabs.

    Editor’s note: the section on RBC Direct Investing’s Trade with Points program has been updated since publication to provide additional details on the program as well as an image of the interface.

    Owning the Podium

    On the heels of a big victory by Team Canada at the World Hockey Championships, there was another story of national success that was only slightly less exciting. This past week, National Bank Direct Brokerage took home the top prize in the latest Canadian discount brokerage rankings by J.D. Power and Associates.

    With a top score of 774 out of 1000, National Bank Direct Brokerage was able to handily beat out the rest of the pack in terms of overall investor satisfaction, making this the 2nd consecutive year in which NBDB has managed to take the title. Coming at first runner up was BMO InvestorLine who ranked second with 762 and CIBC Investor’s Edge and RBC Direct Investing both tied for third each scoring 751.

    This year there appears to have been a number of changes, starting with the change in name of the study from the Canadian Direct Brokerage Investor Satisfaction Study to the “Canadian Self-Directed Investor Satisfaction Index Ranking” (try saying that three times fast).

    There also appears to have been a methodology change which unfortunately means that results from 2016 cannot be compared to previous years.

    The study itself was conducted across May and June of 2016 and polled 2800 self-directed investors on investor satisfaction, defined as a combination of: interaction, account information, trading charges, product offerings, information resources and problem resolution.

    Numerical scoring aside, it was interesting to see that it was a very close race at the bottom end of the pack with 7th and 10th place only being separated by 3 points.

    Starting at the bottom of the pack was a surprising appearance by Qtrade Investor (734) who fell three positions and has otherwise scored well on other rankings, especially from the Globe and Mail. Perhaps the biggest position move year over year was CIBC Investor’s Edge who went from 7th in 2015 to 3rd this year. In the opposite direction, it was interesting to see the drop of TD Direct Investing from 3rd last year to 6th.

    One of the biggest things that stood out from this year’s results wasn’t so much the online brokerages but rather the discussion about robo-advisors.

    It seems quite interesting that in a survey about DIY investing that the biggest talking points would not be about the direct brokerages themselves but rather about a possibly competing product – the robo-advisor. Clearly there is an industry interest in finding out what “millennial” investors’ preferences are and what role robo-advisors are playing with DIY investors’ purchase behaviour for financial services.

    The flurry of interest, most recently from DALBAR Canada, have shone a spotlight on the emerging robo-advisor industry to show that there is still lots of room to grow and many lessons to be learned by fintech firms. Nevertheless, the observation that the JD Power survey has now evolved to include and discuss robo-advisors means that online brokerages – and especially those without a robo-advisory relationship – are going to have a tougher time standing out (in a good way) from other brokerages who do.

    Discount Brokerage Tweets of the Week

    What an interesting week on Twitter. Lots of chatter on new features, features that aren’t working and an interactive tweet session. Mentioned this week were BMO InvestorLine, Questrade, RBC Direct Investing, Scotia iTRADE and TD Direct Investing.

    From the Forums

    Factor in a Name

    What started out as a reference to an ETF deal launching quickly spun into a fascinating discussion of security at Canadian online brokerages and also highlighted the perennial confusion that exists between Qtrade Investor and Questrade (they are separate companies that happen to start with the letter Q). Check out this post on reddit if you’re a fan of security and online trading.

    Into the Close

    If you made it this far, congratulations! At least it’s great to enter the weekend on a high note with Team Canada winning gold and TV talking about something other than Hillary and the Donald. Enjoy it while it lasts. Have a great weekend!