The State of Online Brokerage Self-Directed Investor Fees in Canada

The State of Online Brokerage Self-Directed Investor Fees in Canada

Commission fees have long been, and continue to be 30 years later, why many Canadian investors chose to take on their own investing decisions and avoid costly advice-based full-service offerings by turning to a discount brokerage to facilitate their efforts. Today's new self-directed DIY investors do not relate to the discount brokerage label as the firms have successfully used the media, new branding, and their own marketing efforts to promote value through the term direct access instead of low-cost services with the term discount. So, call them direct access, self-directed, online, do-it-yourself, digital or whatever you like but the bottom line is that these offering provide a substantial discount from full-service, advice-based offerings with the key differentiation that the investor is making all the decisions. #DiscountBrokerage

The markets have been highly active during the pandemic and active stock markets translate to revenue for most financial service providers as trade volumes increase with market uncertainty, good or bad. As mentioned earlier this year in our Best Online Brokerage Experience Rankings, COVID uncertainties around the world, government loss of income subsidies, and increased time at home, has led to many new entrants. Despite many cost and services factors to consider, the newest discount brokerage customer, not unlike the original 1980's client, typically focus on commission prices and seek out the lowest available offering with a disregard to features and functionality, stock availability, access to all markets and especially, quote services which start the whole investing process. #FeesCount

The question becomes is a $0, or $1 cheaper, commission worth not receiving a real-time quote, and potentially investing with less knowledge than the investor who paid a few dollars more? Believe us, there are an abundant of individual non-quote examples where we could pick on the lowest cost firms but that is for the investor to decide and we put all those items to test in our Cost of Services review. #KnowTheMath


See the Top Insights

See the Key Facts

See How We Navigate the Information

See the Bottom-Line Conclusions


The BEST and WORST Firms and The * ELEPHANT in The Room

It is challenging to produce an industry ranking when not all firms offer the same breadth of products and service, but thankfully it easy to produce an informative review and ranking based on facts and the real truths. For this review we looked at both equity/stock and ETF commissions, option trading commissions, data costs, account interest rates and general account fees.

To follow an historical professional baseball lead, the 2021 results come with a big asterisk that is necessary to identify one firm, who many deem the industry disruptor, to directly compare its pricing versus a traditional firm with no product or services restrictions. In this case the asterisk is used to acknowledge the obvious that $0 is $0 and indicates that the results are prepared to ensure a Canadian investor is not swayed by a marketing message. but rather, better understand the differences amongst all industry firms, no matter the marketed price, or lack there of, is.

#1 - NATIONAL BANK DIRECT BROKERAGE

National Bank Direct Brokerage is our 2021 overall winner, providing the best overall pricing experience across stocks, ETFs, and options trading over our 5 investor profiles. National Bank Direct Brokerage continues to be the only Canadian firm to offer $0 commissions and unlimited access to all traditional North American ETFs when buying or selling. A recent initiative to simplify the commission message for its existing and future customers was to introduce a $6.95 flat fee trade for all investors, a young investor fee of $4.95 with 10 free trades per year, and a flat $0.75 trade for active investors who trade more than 100 trades per quarter.

#2* - WEALTHSIMPLE TRADE - The ASTERISK ELEPHANT

At first glance $0 commissions win as it means zero dollars and free trading. The issue is the word zero also applies to the unavailability, or restrictive, content, services, and product. There is no doubt that Wealthsimple Trade provides the lowest marketed commissions per trade in Canada and would be #1 in other reviews, but we have penalized them for missing too many parts that Canadian investors can receive at other self-directed discount brokerage firms. The penalty is due to, but not limited to, restrictive availability to some Canadian and US markets and some major US stocks like Disney, a restrictive number of available ETFs, no access to CDN or US options, and the inexistence of margin trading.

For example, buying or selling GameStop over the past few months with delayed pricing (on average 15 minutes delayed) could have meant hundreds of dollars in price changes all because $0 was more attracted than $5, or $10. Consider the math, even 1 share and a price movement of $50 in a delayed period when an investor flies blindly would have easily cost more than an average industry commission fee. In our opinion, platform, and the cost savings of dollars per trade, is not worth the lack of guidance, education, and market depth, to name a few, required by a novice or average DIY investor. If anything, the platform better serves an active trader.

#3 - DESJARDINS ONLINE BROKERAGE

Last year's winner Desjardins Online Brokerage is this years' pure runner up if we use the asterisk theory to deal with Wealthsimple Trade's limitation. Regardless of falling in second or third, DOB offers well-rounded fees for investors, including a $6.95 trade for less active investors and a range of $0.75 to $6.95 for more active investors through either its Disnat Classic platform or Disnat Direct platform.

The WORST Firms for Fees

CANACCORD GENUITY DIRECT (#14) and INTERACTIVE BROKERS CANADA (#15) are the worst overall firms to consider, especially if an investor trades stocks, despite both having strong showings in the Options Commissions category.


See where All 15 Firms Ranked


Top Insights

Trade Activity drives lower commissions - Assets drive better fees and service

Our biggest change in 2021 is we dropped to 5 investor profiles, from 10 in 2020, to focus in on the real differentiation between firms which is activity-based pricing. The removal of equity-based investor profiles was due to only a few examples remaining after a real push in the past decade and the fact that the concept was about reducing annual and inactivity fees.

Today we are focusing on 5 investor profiles that are based on monthly trading activity. The levels are 0-4 trades; 5-9 trades; 10-33 trades; 34-49 trades and 50+ trades per month. These groupings allow each firm's marketing 'one-up' to be accounted for. The larger percentage of focus is on the first two profiles that account for the majority of Investors in Canada, but the others play a key role as well as cheap commissions typically drive more trading activity. #AssetsDon'tMakeYouAnInvestor

Marketing is used to differentiate - Beware of the message

We do our best to cover every aspect of an investor experience coupled with every permutation and combination each firm tries to throw at an investor. Is it hard to cover every possible trade scenario and benchmark them across all firms? It sure is. Each firm incorporates slight variations into their pricing schemes to 'one-up' or differentiate but they really should be studied for the pure impact on an investor.

For example, having a base price 5 cents below another firm to market the lowest commission is true but has no real impact if the give up to that 5 cents per trade means less availability of product, tools, and resources to help a DIY investment decision. Or then there is the $0 stock and ETF trading which has the same issues but most importantly the fact that an investor cannot gain access to all available securities, like Disney and only selected ETFs in the case of WEALTHSIMPLE TRADE. #BewareOfTheMessage

Timing is crucial to investing - Know the type of quote you receive

Timing is crucial when it comes to investment decisions. It typically starts with an adaptive when to buy decision and ends with a much harder when to sell decision, whether you are making or losing money. No matter where we go on the internet, we can find a free quote for almost any stock on the planet. The question becomes, how valid is the quote and its relevance to your immediate stock or ETF purchase. Did you receive a snap quote to simply see the last trade? Did you get a delayed quote, and if so, did you know to refresh your screen for the most recent price on some order screens? Or can you see the order lineups to make a more informed decision? Market data is always worth the cost of acquiring pure knowledge but in today's world, it may be better from a third-party source then the brokerage firm. #MakeInformedDecisions


Ranking the 15 Firms

Fees Experience RankOnline Brokerage FirmExperience ScoreRead Company Review
1National Bank Direct Brokerage93 %View Company Review
2*Wealthsimple Trade86 %View Company Review
3Desjardins Online Brokerage83 %View Company Review
4HSBC InvestDirect77 %View Company Review
5CIBC Investor's Edge76 %View Company Review
6Qtrade Investor61 %View Company Review
T-7RBC Direct Investing54 %View Company Review
T-7Scotia iTRADE54 %View Company Review
T-7Laurentian Bank Discount Brokerage54 %View Company Review
T-10TD Direct Investing53 %View Company Review
T-10BMO InvestorLine53 %View Company Review
12Virtual Brokers50 %View Company Review
13Questrade45 %View Company Review
14Canaccord Genuity Direct42 %View Company Review
15Interactive Brokers Canada22 %View Company Review




Key Facts

The Cost of Services, unlike any other North American review, is a unique and in-depth dive into the ins and outs of commissions and fees paid by Canadian passive to active Investors. Some key facts from the review:

  • Firms are willing to reduce commissions for trading loyalty.
  • There are a good number of trading levels offered throughout the industry for an investor to be able to carve-out an ideal customized experience.
  • Data fees are real and can cause an increased cost for an investor. The good news is that in many cases, the fees can be avoided. In the event they cannot, the cost of more up-to-date knowledge is worth a look.
  • ECN fees are real and should always be considered as they could double or triple the stated base fee. They must be understood and despite the fact we are tough on QUESTRADE for charging them, they are the only firm that tries to explain them. How to Avoid ECN fees
  • It appears CANACCORD GENUITY DIRECT is attempting to take advantage of an active marketplace without any real differentiators and imposing minimum account sizes which are not seen at leading industry firms.
  • WEALTHSIMPLE TRADE promotes an idea that it differentiates itself from its industry peers using transparency as the differentiator, but we would highly caution that notion. Not fully providing access to a list of its restrictive ETF inventory or a list of stocks that are non-CDS eligible and unavailable prior to opening an account for an investor to see the actual differences through restrictive items, is far from being transparent.

An Extract from the WEALTHSIMPLE CULTURE MANUAL



While we would agree with the ideal concept of a perfect financial services world of full transparency and no fine or small print for relevant information, the truth is we would rather see the disclosure then hiding it all together. For example, SCOTIA ITRADE's fine print indicates that an investor will be charged Electronic Communication Network (ECN) fees for applicable transactions placed and executed during pre-market and after-market sessions. While its not where we would like to find the information, it is available in a relatively easy area to find, and acceptable, area. In contrast, we have been tough on WEALTHSIMPLE TRADE for its delayed quotes, but we did find out through our digging around that real-time quotes are available but for a fee. Why would this information not be right up-front and instead somewhere between hidden and the small print? Our guess is that it is hard to promote $0 commissions and be transparent about receiving less then you would at other firms if you show any additional costs over $0. #RuiningTheMarketingHook


Navigating the Maze of Information to Expose the Real Stories

In a tightly contested discount brokerage environment, the smallest differentiation can prove to be the reason for an investor to choose a firm. Our goal is to go Between the Lines and provide guidance at each level of the marketing campaigns and shed light on the merits and truths within each firm. For example, a firm markets 1 cent per share with a minimum commission of $5. Sounds great, but that really means that a transaction for 500 shares costs $5 so the advantage is really for a tight window of 500 and 700 shares and becomes more expensive north of 700 700 shares. #DoTheMath

The Categories and The Process

The Cost of Services categories explore various trades by instruments and account fees associated with the typical DIY investing experience, focusing on 5 different and unique profiles for each transaction type and account-related fee. The categories are:

STOCK / EQUITY COMMISSIONS

The category explores over 12,600 equity orders, including over 6300 CDN and 6300 US buy and sell orders, at various price and volume levels. ECN fees are applied where applicable.

OPTIONS COMMISSIONS

The sub-category audits 340 option orders, including 170 CDN and 170 US buy and sell orders, at various price and contract levels.

ETF COMMISSIONS

The category explores over 350 ETF orders, including over 175 CDN and 175 US buy and sell orders, assuming 700 shares per order.

DATE COSTS

The category explores the various market data fees that are charged by firms to provide enhanced market data like real-time quotes, streaming quotes, trading dashboards and enhanced research and tools.

ACCOUNT INTEREST

The category audits both non-registered and registered accounts to gauge both debit and credit interest on $Canadian and $US accounts.

GENERAL ACCOUNT FEES

The category explores the various account fees including inactivity fees, non-registered and registered annual fees, money movements fees, confirmation and statement fees, investigation fees and closure fees.


The Bottom-Line

The Truth behind $0 Asterisk Commissions - No FREE LUNCH in life

Free transactions begs the question Why is this firm, who clearly is in the marketplace to make money, willing to pay for all my costs? Simply put, there is no free lunch in life and if there is no commission cost, then there are fees being made somewhere else or the account is a lost leader to sell a more profitable product. Perhaps its through over-inflated foreign exchange rates. Maybe limited or delayed market data. Maybe orders being routed to order-flow partners who may not provide the best execution price. No matter what the answer is, and one can be assured there is a meaningful answer/angle, it will make you wish you had paid the extra $1-$10 for a better fill price. #NoFreeLunch

Develop a plan and know what you need to execute it

Once an investor has made the decision to try and go at investing on their own, it is a logical to have a checklist of what is required of a discount broker. The problem is, typically, a new DIY investor doesn't know what it doesn't know so making a checklist becomes difficult. Becoming a DIY investor is a process like anything else, it all starts with an idea which grows into an exploratory phase and ends with a decision to open an account. Then the fun begins, and the continuous learning cycle is in motion but never forget to understand what you are willing to pay for, and not willing to pay for, to execute your DIY investing plan including quotes and market research. #PlanForDIYSuccess


Learn More about Canadian Self-Directed DIY Investing Digital Experiences

Online Experience Ranking: Canada's Best DIY Online Brokerage Experience

Mobile Experience Rankings: Canada's Best DIY Mobile Brokerage Experience

Service Experience Rankings: Canada's Best DIY Brokerage Service Experience



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