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Discount Brokerage Weekly Roundup – December 12, 2014

Discount Brokerage News

December 12, 2014

Published December 12, 2014 11:34 PM

Table Of Contents

    Key points

    If you thought the past week in the markets was big, wait until you hear about what happened with online brokerages.  Yes, news of oil prices dropping and markets with them dominated the headlines. Against that backdrop, however, there was a lot of great news for DIY investors on both sides of the border. In […]

    If you thought the past week in the markets was big, wait until you hear about what happened with online brokerages.  Yes, news of oil prices dropping and markets with them dominated the headlines. Against that backdrop, however, there was a lot of great news for DIY investors on both sides of the border.

    In this week’s roundup, we take a look at an exciting new content feature we released on SparxTrading.com followed by a huge announcement from one of Canada’s most popular online brokerages with active traders. Next we’ll take a look at the dawn of a new commission-free trading era in the US, cruise through the upcoming investor education events and finally end off with tour of the investor forums.

    Sparx Launches the first interview of our Executive Video Series

    This past week, SparxTrading launched the first installment of the Executive Video Series in which we sat down with the President of National Bank Direct Brokerage, Nancy Paquet.

    By all accounts we were thrilled to be able to have a fascinating interview with a fascinating individual.  We had a great time working with the National Bank Direct Brokerage team in putting this together and we’re pleased to be able to share this exclusively on SparxTrading.com.

    Here’s some context behind why we sought to put this series together.

    One of the first reasons involves communicating important context about Canadian online brokerages. With the drastic reduction of standard commission pricing in 2014, we believe attention will shift towards figuring out what makes particular brokerages ‘special’.  For consumers (i.e. DIY investors) we think that will mean doing more research and trying to figure out if a particular discount brokerage is a ‘good fit’.

    Our Executive Video Series is meant to capture a candid conversation with a senior decision maker at the brokerage in which we ask them to provide information about what they’ve worked on, where they’re headed and what sets them apart.  In addition, as the interview with Paquet shows, we also have the chance to learn about how the firm is run from the person responsible for running it.

    For our visitors and viewers, we think this approach offers a unique insight into the online brokerage world and provides them with context directly from the source.  For brokerages, there’s also the chance to articulate what makes them unique to an audience interested in finding that out.

    Check out the interview on the NBDB profile page here.

    Interactive Brokers Canada to Offer Registered Accounts

    Yes, that’s correct.  Interactive Brokers Canada quietly rolled out one of the most sought after features this past week by offering RRSP and TFSA accounts, and in doing so, tipped the discount brokerage landscape on its side once again this year.

    The move to provide registered accounts in Canada was widely speculated about ever since Interactive Brokers officially formed a separate Canadian entity (Interactive Brokers Canada).  For self-directed investors, however, this is a huge development as the cost structure and trading platform associated with Interactive Brokers can now be used for trading inside of an RRSP or TFSA.

    Before the party gets started too fast, there are some important limitations on the registered accounts.

    For starters, both of these account types will only be offered in Canadian dollars. Second, there are limits to the RRSP account that are a bit different than at other institutions.  For example, at Interactive Brokers Canada, there is no support for Home Buyers Plan withdrawals, Lifelong Learning Plan withdrawals or investments in a home mortgage. Third, RRSP accounts will be subject to a quarterly maintenance fee of $12.50 which is prorated from the time the account opens (e.g. if the account is opened halfway through the quarter the fee is $6.25 for the quarter in which the account was opened and $12.50 per quarter thereafter).

    Full details are available on their information page here.

    We will most certainly be tracking this development as it becomes more widely known.  Once there is greater awareness that Interactive Brokers now offers registered accounts, however, other brokerages are going to be scrambling to compete on a whole new field.

    Investors Sher-Wood Like to Trade for Free

    This past week, investors in the US took another step into the surreal new world of ‘no commission’ trading when discount brokerage Robinhood launched their mobile trading app.

    Even though Robinhood offering up commission-free trading is not a new story, the ramp up of their roll-out means that the nightmare scenario for other online brokerages in the US is slowly coming true.  Not only is a firm offering up zero commission trading, they are doing it on mobile and they have struck a chord amongst the highly prized ‘millenial’ segment.  Whether or not Robinhood can do so sustainably also seems to be less of a concern as they have some famous (as well as deep pocketed) financial backers.

    For Canadian investors, the lesson is that there is still substantial room for commission prices to fall. In addition to pricing, however, there is an attention to user experience (especially on mobile) that is relevant.

    Before banks and brokerages obliterate commissions (if they ever do), they will most likely start to overhaul and improve their website usability across more ‘modern’ devices like smartphones and tablets (which a handful already have started to do).

    The paradox, of course, is that innovation in financial services means that small providers might have an edge with new technology but they are not as experienced in providing great (or passable) service at scale.

    For DIY investors, this means while the bells and whistles may be cool, when things don’t quite work as they should, or when you need something extra or have a special request, the service element may not be able to keep up.  For Robinhood, and 20-somethings, those are ‘future problems’ which they are content to confront if or when they come up.

    Event Horizon

    Dec. 13 (Sat) TD Direct Investing – Technical Analysis – Advanced Indicators (Edmonton)

    Dec. 16 (Tues) TD Direct Investing – Building Wealth Through Registered Accounts (Toronto)

    NBDB -Stop Orders: A winning solution worth knowing- [Fr] (Montreal)

    TD Direct Investing – Building Wealth Through Registered Accounts (Vancouver)

    Dec. 17 (Wed) Scotia iTRADE – Taking A Minimum Volatility Approach with iShares (Online)

    Dec. 18 (Thur) Scotia iTRADE – The Role Reversal Pattern with AJ Monte (Online)

    From the Forums

    With the markets in sell mode this past week, investors came off the sidelines to commiserate as well as speculate about potential entry points into the energy sector. Being the end of the calendar year, there were also a higher number of tax and registered account questions.

    Barrels of Fun

    In this post from the PersonalFinanceCanada subreddit, one reader was interested in finding out how to purchase oil via their online broker Qtrade.  After providing some cautionary words, the answers provided were quite interesting.

    Remember that Glitch?

    In last week’s roundup we reported a trading outage that hit Questrade’s platform.  As a follow up to that incident, Questrade posted the following message on their community forum to help explain what happened. While it doesn’t name the software provider specifically, apparently they are in for a sternly worded conversation.

    That’s it for this week’s roundup.  There are 12 more shopping days left until Christmas (13 for the real procrastinators).  Good luck out there in the parking lots, malls and stalls for those brave enough to venture through them!

    Online Brokerages Mentioned In This Article

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