Canada’s best discount brokerages

As one of Canada’s pioneering financial bloggers, Ram Balakrishnan is a seasoned Do-It-Yourself (DIY) investor. Since launching his Canadian Capitalist blog in 2004, he’s experimented with several discount brokerages, including Questrade, RBC Direct Investing and TD Direct Investing. He moved to BMO InvestorLine earlier this year. “Switching brokerages is no fun,” says the Ottawa software engineer, but he knows finding the right fit is important.

To help you find that fit, MoneySense has again partnered with Surviscor to present our second survey of Canada’s best discount brokerages. Surviscor, a business analysis firm based in Oakville, Ont., publishes comprehensive semi-annual reviews of online brokerages based on hundreds of measures. With 23 years experience in the brokerage industry, Surviscor president Glenn LaCoste knows the players like few others.

The year has already seen some big fee reductions by the bank-owned brokerages. While clients with $50,000 have long had access to low commissions, smaller investors were usually charged $29 per trade. But in the last six months RBC Direct, TD Direct, BMO InvestorLine, National Bank Direct, Laurentian Bank Discount Brokerage and Desjardins Online Brokerage (formerly Disnat) all unveiled under-$10 commissions to all clients, regardless of account size.

• For subscribers only: Best overall discount brokerages in Canada + discount brokerages at a glance

As Balakrishnan learned, however, low commissions are not the only factor to consider. Indeed, if you’re a buy-and-hold investor who seldom trades stocks or ETFs, the differences in trading costs can be trivial. “Most important is peace of mind,” he says. “You don’t want surprises. If there is a problem with the account you want it fixed quickly.”

In what follows, we identify the most important categories to consider when choosing an online brokerage. We used Surviscor’s proprietary research to identify the standout performers in each category. We’ve highlighted the two top picks in each category, listed in alphabetical order.

When it comes time to open an account, start by looking for a brokerage that allows online applications—we found BMO InvestorLine and Qtrade Investor have the most efficient process, while some (such as TD Direct Investing) make you visit a branch. Before applying, however, you’ll need to match your investing style with the following main features.

Top picks: BMO InvestorLine,  Scotia iTRADE

A well-designed site starts with an efficient login screen and is thoughtfully organized so you won’t waste time hunting for important links. When buying and selling securities, order screens should be intuitive to minimize trading errors. If you get confused, the help screen should be easily at hand.

Scotia iTRADE’s design is fresh and frequently updated, with smart use of icons for easy navigation. No brokerage matches it for the sheer number of ways settings and displays can be customized. BMO InvestorLine deserves a nod for its useful “situational links” that anticipate your next move, minimizing the number of clicks needed to navigate.

Top picks: RBC Direct Investing, Scotia iTRADE

Canada’s big banks dominate the discount brokerage business. It’s convenient to access your investments, chequing account, and even your mortgage all on the same web page, and make instantaneous transfers rather than waiting a day or two. But integration can create confusion if the site doesn’t adequately separate banking and investment functions.

RBC Direct Investing and Scotia iTRADE make this process especially seamless. Both let you set up practice accounts so you can see how the integrated features will look on your bank’s website. At iTRADE, you can use your nonregistered investment account to pay your bills, while BMO’s AccountLink program lets you write cheques and use your debit card.

CIBC Investor’s Edge offers an added perk for loyal clients: households with a combined $100,000 qualify for reduced trading commissions of just $6.95.

Top picks: Questrade, Scotia iTRADE

No matter what brokerage you use, sooner or later something will go wrong. Unfortunately, quality of service is hard to measure. Surviscor operates a Customer Email Responsiveness program and looks at hours of service and availability of features like live chat (which several brokerages have added in the last year) or “click to call” buttons.

Score one for Scotia iTRADE, which ranked very high for its prompt email responses and new live chat feature. Runner-up is Questrade, with responsive chat and call-back features. Just don’t email for help: average response time was 41 hours. Credential Direct, by contrast, often answers emails in under an hour, but its other contact options are limited. So decide which contact method you’re most likely to use and choose a brokerage that excels in that area.

Top picks: Varies with investor type

Except for deep discounters like Questrade and Virtual Brokers, commission structures at large brokerages look increasingly similar. Unless your account is tiny, most now offer equity commissions around $10 and waive annual fees.

Surviscor analyzes costs by creating investor profiles (ranging from passive to highly active) and calculating the total cost of 100 transactions. Except for highly active traders, these are often within a few dollars of each other. That doesn’t mean there are no cost differences, but the cheapest option depends entirely on the type of trading you do, and there’s no clear cost leader.

Questrade and Virtual Brokers offer the lowest stated commissions: both have various plans from which to choose, including a penny-per-share offering. They also offer free ETF purchases (regular commissions usually apply when selling). But read the fine print because commissions are not the only costs and pricing isn’t always transparent. Electronic Communication Network (ECN) fees, exchange fees that don’t apply at most other brokerages, can increase costs a lot. Both also offer free “snap quotes,” but to get Level 2 quotes—which show number of shares available at prices below the highest bid or above the lowest ask price—you’ll need to purchase data packages with monthly fees between $20 and $100. Other surprises to watch for: Questrade charges $9.95 for mutual fund purchases, which no one else does. And Qtrade charges an extra $4 on limit orders, as well as ECN fees.

For accounts of $25,000 or more, you won’t pay an annual fee at any brokerage. However, most charge $50 to $100 annually on small RRSPs and RESPs. Bargain hunters should read the fine print here, too: Questrade charges no annual account fees.

Top picks:  BMO InvestorLine, RBC Direct Investing

Managing multiple accounts is challenging for DIY investors, so it helps if your brokerage does the heavy lifting. Consider features like integrated account balances, detailed histories, portfolio analytics and performance reports. Surviscor looks for online availability of statements, trade confirmations and tax slips.

RBC Direct Investing stands out for calculating rate of return across all accounts. (National Bank Direct and Questrade offer a similar feature, but an alarming number of others don’t.) RBC scores high for reports that drill down into fund holdings to determine overall asset mix and offers suggestions for diversifying or rebalancing. You can even enter your investing goals and get progress reports. BMO InvestorLine is a close second with similar portfolio analytics and online access to wide range of documents.

Top picks: Qtrade, TD Direct Investing

Active investors value features like watch lists, stock screeners, market news, analyst reports and tools for fundamental and technical analysis. This research often comes from third parties like Morningstar, Lipper or Recognia, so the quality is often similar, but brokerages differ in the depth and variety of tools offered free.

TD Direct Investing excels here, with a comprehensive research section that includes news and commentary (from popular media and in-house experts), in-depth market outlook reports, industry and sector-specific data, and several screening tools, including one for ETFs. Qtrade has a rich store of research tools, including multiple screeners and analyst recommendations.

Tricks of the trade

If moving between brokers, you pay transfer fees of $125 to $150. With $15,000, ask them to reimburse you.

With $250,000, banks roll out the red carpet. RBC’s Royal Circle and BMO’s 5 Star Program give extra research, fee waivers and a special line.

RBC Direct, CIBC Investor’s Edge and BMO InvestorLine have GIC inventories that customers can purchase online. At iTRADE and TD, you must buy GICs by phone.

Except at a few select brokerages, you can’t hold U.S. cash in registered accounts. But TD Direct allows “wash trades” with U.S. money market funds. Scotia iTRADE has a U.S.-friendly RRSP for $30 a quarter.

TD Direct’s cheap TD e-Series index funds have no commission and allow automatic contributions.