As strange as the times are that we currently are living through, stranger still is the world of DIY investing.

Scores of online investors are shut in because of COVID-19, savings for many are up despite massive economic dislocation, interest rates are at near-record lows, and individuals turning to investing online, not only as a means of wealth creation but also as entertainment, have materially shaped the direction, sentiment, and performance of the stock market.

It’s precisely at times of immense change or volatility that the steady hand of experience offers its greatest benefits: important context and insight to help make sense of the current state of investing online. Cue the newest addition to the Look Back / Look Ahead series, the Influencer Edition.

This digital series is a companion to the recurring Look Back / Look Ahead feature of Canadian online brokerages that provide their perspectives on the past and future of the online investing industry. In the Influencer Edition, however, we have brought together the most experienced collection of voices and perspectives available in the Canadian online brokerage industry to weigh in on what they think is important to take away from last year as well as what online brokers and investors should pay attention to in the year ahead.

Rob Carrick, the well-known personal finance journalist at The Globe and Mail, has been covering and ranking Canadian online brokerages for more than two decades. Glenn LaCoste, President and Founder of Surviscor, a leading Canadian financial services analysis firm, has been evaluating and ranking financial services firms, including Canadian online brokerages, in detail for almost two decades. Mike Foy is Senior Director of the Wealth Management Practice for North America at J.D. Power and oversees the annual Self-Directed Investor Satisfaction Study, which has been tracking the pulse of online investor satisfaction in Canada. Finally, there’s yours truly, Hamish Khamisa, the voice behind Sparx Trading; I have been covering the world of Canadian online brokerages and running SparxTrading.com since 2011.

While the credentials and experience of each contributor certainly speak for themselves, the most exciting part of this project has been collecting and relaying the unfiltered perspectives of these influencers in one place. The responses to the questions that were asked are thought-provoking, insightful, and helpful to any Canadian DIY investor interested in investing online or any online brokerage committed to improving their service offering.

Against a backdrop of a historic year, it feels like something equally historic was needed to make sense of the new normal of investing online. Even in the short span of a month, what is considered “normal” activity for DIY investing has radically changed, so the themes identified in this issue around how online brokerages ought to be preparing for change are even more relevant heading into the new year.

On behalf of the Sparx Trading team, I want to thank the authors for their submissions and efforts in providing a voice for DIY investors and driving positive change in the Canadian online brokerage industry. I also want to extend a special thanks to our loyal readers for your continued support and hope you stay safe, well, and healthy in the year ahead.

Hamish Khamisa

Founder, SparxTrading.com

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Click below to read submissions from:

• Rob Carrick, The Globe and Mail
• Mike Foy, J.D. Power
• Glenn LaCoste, Surviscor
• Hamish Khamisa, SparxTrading.com

Q&A With Rob Carrick of The Globe and Mail

What is a big story for DIY investing in 2020 that caught your attention?

There were three big stories:

• The rise of investing apps like Wealthsimple Trade and TD GoalAssist.
• The tidal wave of retail investors who got into the market after the crash in March via online brokers and other channels.
• The terrible customer service at online brokers for clients who needed to speak to a live rep, notably seniors who wanted to take action in their RRIF accounts.

What are the trends that you noticed among Canadian online brokerages in 2020?

I’m noticing a quicker pace of improving websites and mobile apps. Firms that have done nothing to upgrade their websites in ages are finally introducing changes.

Many investors got into the markets for the first time (or came back after being on the sidelines) in 2020.

a. What features should they be looking out for from their online brokerage in 2021?

Tools that help them see how well-diversified their portfolios are and how their returns are tracking in comparison to appropriate stock and bond market benchmarks. Everyone was an investing genius in the second half of 2020. It’s going to get harder.

b. What can online brokerages do to improve the experience for this group of investors in 2021 and beyond?

Stop acting like they are simply an investing platform. Clients need support – not advice, but tools for self-evaluation.

User experience is a hot topic with online brokerages. What are Canadian online brokerages getting right and what are they missing the mark on when it comes to interacting with their services?

Most are failing at a simple thing – showing clients something helpful and empowering as soon as they log in to their accounts. I want to see a dashboard showing info on returns, asset allocation, pertinent news related to their holds, recent dividend and interest payments. A few firms are more or less doing this, and they stand above the rest.

You also hear from a lot of online investors. What are one or two important topics that came up often with that group (especially in 2020)?

Without doubt, and this is a function of The Globe and Mail’s reader base, the number one topic was the inability of brokers to handle the flow of telephone calls from clients. Many complaints as well about websites and apps getting bogged down at busy times.

You have covered online brokerages in Canada for a very long time. How would you characterize their pace of change and innovation in 2020? Do you think things will accelerate in 2021? What might contribute to them changing?

Lots of improvements in 2020 – some already apparent and some will only be visible to clients in 2021. Brokers are busier with upgrades than I have seen them in recent years. Not sure this is a response to demand in 2020. A lot of these changes will have been in the works for a while.

Your online brokerage review is one of the most influential for online investors to consult as part of their research. Can you provide a comment on the strengths and limitations?

Here’s a link to my latest ranking – the 2021 update is coming on Jan. 29. Strengths: I have been covering online brokers and covering investing since the late 1990s, so I have a long-term perspective on what’s important to investors. A limitation is time – I can’t get into as much detail as I’d like in areas like website downtime when trading volumes spike higher and response time for clients trying to call in.

About Rob Carrick

Not all journalists get to live their beat, but I do. My personal finance column in The Globe and Mail is one regular guy’s attempt to make sense of the world of money. I’m married with two 20-something kids and constantly figuring out ways to spend and invest intelligently. I ask the same questions you would and apply my experience and contacts to get answers. I got my start in financial writing back in the early 1990s when I covered the Bay Street business scene for The Canadian Press wire service. A few years later, I was transferred to CP’s parliamentary bureau in Ottawa to cover consumer affairs and, later, the federal Department of Finance. I left CP and joined The Globe and Mail as an investment reporter in 1996. I mentioned to my boss at the time that we didn’t do much personal finance coverage at The Globe. The paper’s Personal Finance column was launched shortly afterwards, with me at the wheel. What a trip it’s been covering personal finance over the years. I’ve seen three bull markets for stocks, a couple of recessions and stock market crashes, one global financial crisis, the incredible rise of the housing market, soaring personal debt loads, and an ever-present worry that Canadians aren’t saving enough for retirement. I know there’s infinite personal finance content available these days online, in print and on TV and radio. Come to me for my experience, my willingness to challenge stale consensus thinking, and, most of all, my ability to make you say after finishing one of my columns: “Now I understand.”

Q&A With Mike Foy of J.D. Power and Associates

What is a big story for DIY investing in 2020 that caught your attention?

The biggest story of 2020 has to be the influx of new Canadian self-directed investors entering the market for the first time in the aftermath of COVID. The combination of lower-cost or even free trading, a sharp market decline providing an ideal entry point, and the additional time and opportunity to trade as individuals either lost jobs or transitioned to a work-from-home model all contributed to this significant trend. A big question is, effectively, will firms convert these new investors into long-term, loyal, and profitable clients.

What can online brokerages do to improve the experience for this group of investors in 2021 and beyond?

There are numerous opportunities for firms to improve, but a few key areas stand out. One is around the mobile experience. Canadian online brokerages in general are real laggards relative to other industries when it comes to the mobile user experience; many don’t have native investment apps or have very limited capabilities. Firms like Wealthsimple and Robinhood in the US have been extremely successful attracting especially younger investors, in part because of a mobile-first approach to design and user experience, and other firms will need to improve quickly and significantly to appeal to mobile-centric younger consumers.

Additionally, firms will need to provide more robust and intuitive digital tools and educational content in order to justify continuing to charge investors trading fees in an environment where that service is increasingly available at no cost. One specific example of that would be around Socially Responsible Investing (SRI), which continues to become more important, especially to younger investors. Providers that can deliver to investors visibility into how to ensure alignment between their investments and their unique personal values will have a leg up

You also hear from online brokerages directly. What are one or two important topics that came up often with that group (especially in 2020)?

One concern is definitely about Robinhood and, more broadly, how free trading, which is virtually ubiquitous in the US now, is potentially shaping Canadian investor expectations and perceptions of trading fees. Some of the business models and revenue sources that allow many US firms to offer “free trading” don’t necessarily work in the Canadian legal and regulatory environment, but much of that is likely lost on the average investor.

You have covered online brokerages in Canada for a long time. How would you characterize their pace of change and innovation in 2020? Do you think things will accelerate in 2021? What might contribute to them changing?

The pace of change and innovation in the industry in the past has been fairly slow, but that will need to accelerate going forward, given increasing competition and evolving consumer expectations being driven by industry innovators (e.g. fintechs) as well as other industries that have embraced digital transformation more aggressively.

Your online brokerage ranking is an influential source for online investors to consult as part of their research. Can you provide a comment on the strengths and limitations?

Obviously I’m biased, but I think the biggest strength of our research and rankings is that, unlike many brand evaluations out there, ours is based not on “expert” subjective opinion but on feedback from actual clients who invest with the firms we rank. We also ask a robust battery of questions about all aspects of the experience to determine our scores, rather than relying on a single, top-of-mind reaction.

In terms of limitations, I would never suggest someone just choose the firm that scores highest in our rankings because they essentially reflect the average Canadian self-directed investor, but of course not all investors have the exact same needs and preferences. Digging deeper to understand how the strengths of various providers align with your own needs is a critical step in the selection process.

About Mike Foy

Mike Foy is Senior Director of the Wealth Management Practice for North America at J.D. Power.

He is responsible for the company’s research on both individual investors and financial advisors, as well as developing research-based client experience solutions that drive measurable results for wealth management firms.

Mike has worked in the wealth management industry for over 20 years. Prior to joining J.D. Power, he served as director of research and strategic sales at Penton Media, where he oversaw the advisor benchmarking research practice. Previously, he held senior product development and marketing positions at HNW, a boutique digital marketing agency focused on the wealth market, and at Dow Jones and Merrill Lynch.

Mike earned a bachelor’s degree in English literature and philosophy from Muhlenberg College in Allentown, Pennsylvania and an MBA from Rutgers Business School. He currently resides in central New Jersey with his wife and two children.

Q&A With Glenn LaCoste of Surviscor

What is a big story for DIY investing in 2020 that caught your attention?

COVID-19 would be too easy of a response, but it did impact the effectiveness of all DIY investing firms with new, current, and former investors all showing up ready to play. For me, the biggest DIY investing story was the narrative around zero-commission trading and the “fake news” surrounding Wealthsimple’s discount brokerage offering.

The message of zero commissions through Wealthsimple Trade is true, but the narrative that it is a leading DIY investor platform for all Canadians is not, as the narrative has been created through paid advertising, media coverage, and ghostwriting to heighten its awareness. My favourite examples involve publications that claim they are a top-tier online brokerage firm, when they only offered a mobile application until mid-2020. To this day, the platform offers basic quotes, charting, and order entry capabilities.

A new or returning DIY investor should look beyond the $0 and partner with firms where one can learn about investing. You get what you paid for with Wealthsimple Trade. I covered the subject on BNN Bloomberg most recently in July 2020, as the producers love the zero-commissions story, but less and less about the merits of firms. Visit our media file to view the clip and others at Surviscor U – TV Coverage.

What are the trends that you noticed among Canadian online brokerages in 2020?

I would narrow down the trends in 2020 to firm attitudes rather than any specific feature and/or functionality, as the reality is that most firms offer the same product and services, and that did not change in 2020. What did change in 2020 was the inability of firms to respond to service requests, platform downtimes during market hours, and a general lack of accountability. The new excuses all involve the word “COVID,” which is a debatable theory, as the mature industry has been running digitally for over 20 years.

Many investors got into the markets for the first time (or came back after being on the sidelines) in 2020.

a. What features should they be looking out for from their online brokerage in 2021?

The new and returning investors should focus on service results, educational resources, and mobile-platform compatibility with the online platform.

b. What can online brokerages do to improve the experience for this group of investors in 2021 and beyond?

The discount brokerage, or online brokerage, community has been given a new lease on investing, and the firms should focus on educational resources and providing “more” versus “less.”

User experience is a hot topic with online brokerages. What are Canadian online brokerages getting right and what are they missing the mark on when it comes to interacting with their services?

User experience (UX) comes in many shapes and sizes, and most firms are concentrating development efforts on using UX marketing experts, who have little to no knowledge on what a stock is, which scares me to no end. DIY investing is unique and is not the same as buying something on Amazon, searching on Google, or watching TikTok videos.

The goal of many firms is to analyze investor usage patterns and then remove rarely used features, calling that a better user experience, while really the issue is not about users choosing not to use something but rather about users avoiding a poorly developed area of a platform. Leading firms provide custom usage options rather than taking away features and functionality.

Market data, which is quotes and market information, and basic order entry are areas where most firms are doing okay.

You also hear from online brokerages directly. What are one or two important topics that came up often with that group (especially in 2020)?

The main topics of 2020 were record-level trades and account openings, which typically get presented as a direct linkage to the firm’s efforts and achievements. The secondary topics were outages and service issues, which were mainly attributed to COVID. The truth is that most of the success was due to COVID, and, one could argue, the outages and service issues were due to poor executive-level planning.

You have covered online brokerages in Canada for a long time. How would you characterize their pace of change and innovation in 2020? Do you think things will accelerate in 2021? What might contribute to them changing?

The simple answer is there has been little pace of change for years, and 2020 was no different. A few firms launched new platforms, but these were platforms that were long overdue and simply enhanced the look and feel, which was a necessary start, for sure.

I do not see any accelerated launches in 2021, but I do feel that the increased profits from 2020, and subsequent 2021 profits, will lead to technology spends and more-targeted investor platforms to try to satisfy everyone.

Your online brokerage review is one of the most influential for online investors to consult as part of their research. Can you provide a comment on the strengths and limitations?

Thank you for the validation of our work. We pride ourselves on our knowledge, our history, and our background, but the strength of our influence is the unbiased, objective, and deep-dive results that speak to the true investor journey and experience of a complete DIY investor relationship.

I would love to say that we do not have limitations in our reviews, but the depth of our reviews considers all levels and types of investor experiences, which can make it difficult for a specific reader to narrow in on their personal persona and general needs. To combat that limitation and allow a more customized drilldown for investors, we offer a free tool called scorChoice (Invest with the Right Broker for You) that allows investors to prioritize needs in each major Surviscor category, to produce its own rankings using our in-depth research.

About Glenn LaCoste

Glenn LaCoste is the President and CEO of the Surviscor Group of Companies. He is considered a leading spokesperson and analyst in both the online and mobile banking and brokerage industries in Canada. Mr. LaCoste is an occasional television guest on the Business News Network (BNN), providing professional insight on banking and brokerage segments, and is often quoted in Canadian financial services articles. Mr. LaCoste also provides research support for MoneySense magazine’s annual discount brokerage awards.

Mr. LaCoste has over 30 years of experience in financial services and has been actively involved in Canadian scorecarding reviews since 2003. Mr. LaCoste had an initial 10-year career in the online brokerage industry and has spent the remainder in online website development, design, and strategic operational consulting. Mr. LaCoste has held executive positions at CT Securities and Datek Canada (formerly Ameritrade Canada), after starting his career at TD GreenLine.

Q&A With Hamish Khamisa of SparxTrading.com

What is a big story for DIY investing in 2020 that caught your attention?

The flood of new investors jumping into stock market trading has been THE online investing story of 2020.

For Canadian online brokerages, the impact of such large numbers of individuals looking to open new accounts tested numerous technical and service delivery systems.

Some of those tests showed gaps, such as in customer service channels where wait times became incredulously long; other tests, such as online account opening for those brokerages offering that feature, demonstrated that digitization made a huge difference in satisfying online investors’ urgency to get started as quickly as possible.

What are the trends that you noticed among Canadian online brokerages in 2020?

It almost seems ironic to say so, but a significant portion of the trends that emerged in 2020 reflected the challenges online brokerages in Canada face with scaling as “digital” businesses.

With trading outages occurring multiple times throughout the year at various online brokerages, or customer service wait times regularly stretching into hours, many of these issues trace back their roots to underspending in scalability.

So, at a minimum, one of the biggest trends to emerge among online brokerages has (hopefully) been a discussion of the kinds of systems (in particular, technology) and processes that can support increased activity and rapid changes in capacity. It’s not something users would necessarily see on the front end, but it is clearly visible when trading systems fail during market hours. 

Many investors entered the markets for the first time (or came back after being on the sidelines) in 2020.

a. What features should they be looking out for from their online brokerage in 2021?

If 2020 was a mad dash to get into the markets, 2021 will likely bring with it the consequences of lots of trading activity.

DIY investors will be taking a closer look at the fees they have been paying for trading, potentially dealing with the realities of tax consequences and the user experience around managing an online investing account.

b. What can online brokerages do to improve the experience for this group of investors in 2021 and beyond?

Online brokerages, therefore, can and should be considering improving their educational resources to promote better understanding on how different features work and how best to make use of those features when investing online.

User experience is a hot topic with online brokerages. What are Canadian online brokerages getting right and what are they missing the mark on when it comes to interacting with their services?

With so many new investors now on board, ease of use should be a clear focal point for many online brokerages in their strategy and planning for their different touchpoints. Thinking about what “easy to use” means for different categories of clients will be an important determinant of success within each of these segments. There must be a better balance between the needs of newer investors and those of existing or older investors across the service experience.

You also hear from a lot of online investors. What are one or two important topics that came up often with that group (especially in 2020)?

One of the most consistent reasons that clients of online brokerages were up in arms in 2020 related to platform stability and outages, especially during market hours. Clearly, DIY investors have set their expectations very high when it comes to continuity of access, but even more so when commission pricing becomes part of what individuals believe they are paying a premium for.

You have covered online brokerages in Canada for a long time. How would you characterize their pace of change and innovation in 2020? Do you think things will accelerate in 2021? What might contribute to them changing?

Philosophically, most online brokerages in Canada are driven by “evolution” rather than “revolution,” so change and innovation are usually very measured. That said, newer entrants have adopted a more “fintech” approach of “move fast, break things,” where change and innovation are their very reason for being (e.g. democratizing finance).

It is unlikely, despite the macro picture around the online brokerage world, that Canadian online brokerages will shift their stance on measured change. They are, however, slowly becoming more comfortable with talking about the things they’re working on, which should provide greater visibility on innovations taking place at these firms.

SparxTrading.com is an influential resource for online investors to consult as part of their research. Can you provide a comment on the strengths and limitations?

We collect and report on the context of the landscape quite extensively. If it happens at an online brokerage in Canada, there’s a good chance we’ll cover it and be able to offer deep context. We compile data and research to make it convenient to assess an online brokerage before proceeding with a decision to select one.

That said, we offer a lot of information – which is also one limitation of our approach. Individuals who want to be told which brokerage to choose would likely start and end their research with rankings data.

About Hamish Khamisa

The founder and president at Sparx Publishing Group, Hamish has an eclectic background spanning artificial intelligence, biochemistry, financial markets and healthcare (to name a few). Fluent in the language of ideas, inspiration and insight, Hamish welcomes the challenge that every new content project brings. Currently Coquitlam, British Columbia is home, where Hamish enjoys his time as a boundless source of puns for his wife and son.