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Best for ETFs » *NEW*
For the fifth straight year we partnered with Glenn LaCoste who has over 15 years of experience ranking financial services providers and Surviscor, Toronto research analysis and business intelligence firm, to provide the definitive ranking of online brokerages. This year to make it even easier to compare the specs of each online brokerage. Now you can select the brokerages you are curious about and compare them side-by-side.
The default online brokerage option for many Canadians is simply go with the bank they’re already using. Let’s call this the Apple option. This is where you buy an iPhone without considering any of the other options on display. With this choice you may content with your pick, even though it isn’t the best by every measure and you pay a premium for it. While the bank offerings are fine, some don’t offer features that do-it-yourself investors might find enticing, like commission-free ETFs or robo-advisor services.
If the banks are the iPhones of the online brokerage world, smaller independent online brokerages are the LGs and Blackberrys. They’re still powerful, but they aren’t as slick as the premium offerings and run an interface you may not be as familiar with. But where these products may lack in the cool factor they make up in other ways. Not only are they often cheaper, some offer features that may be invaluable to you once you discover them.
For instance, many of the independent brokerages allow clients to buy and sell ETFs without having to pay a commission, at least on certain ETFs. It’s a big plus for smaller investors. But as you’ll see below, there are even significant differences between those online brokerages who offer commission-free ETFs.
How these services respond when you run into a problem is another important consideration. It doesn’t matter how many features an online brokerage offers if its customer service is lacking or, worse, there is a problem with your account when you need to make a trade. Unable to find help to resolve technical problems with a cell phone can be annoying, but problems with a brokerage account can be far more costly.
Here’s how Canada’s 13 online brokerages stack up in 27 key areas and which one we think is the best online brokerage in Canada.
Top pick: Questrade
Honourable mention: TD Direct Investing
First impressions set the tone for a relationship which is why we give so much attention to the steps investors go through to set up open an account. Investing is intimidating enough, prospective investors shouldn’t feel overwhelmed or frightened by the process. Similarly, transfers from one brokerage to another should be an equally simple and fluid process.
Questrade gets the nod here. While many online brokerages claim their sign-up process can be completed on your computer or mobile device, most still require you to print and sign a form that you have to drop off at a local branch or toss in the mail. Not Questrade, which has fully digitied the process right down your signature. That’s an important distinction, says LaCoste. “Now you don’t have to go into a branch and be upsold on anything.”
This independent brokerage also offers an app for your smartphone—not that you’ll need it because Questrade’s website is fully responsive, which makes it easy to execute trades on the go.
This year’s honourable mention goes to TD Direct Investing. While the application process is a little clunky, it makes up for this shortcoming in other ways. “TD’s biggest problem is they have all the things everyone has, it’s just the way they put things together,” says LaCoste. TD still requires you to go into a branch to complete the sign-up process, although the firm expects to overhaul this process next year.
TD also shines when it comes to providing educational material like videos, tutorials, demos, podcasts and webcasts. In addition to these resources, TD’s brokerage has a sharp and functional site. When it comes to its overall web presence TD has the best of the big bank offerings and second only to Questrade. TD’s app is also available in four languages, which is another benefit.
Top pick: Questrade
Honourable mention: Qtrade Investor
Investors want to pay more attention to making great trades and less attention to navigating around their discount brokerage’s website. In a sense, their online brokerage should be invisible. Trades should be effortless and it shouldn’t matter if you’re at your desk or sitting with your smartphone in a restaurant. You might expect the big banks would be the ones with the resources to polish up the best user experience, but it’s the plucky independent online brokerages who really excel here.
Questrade is a particular standout. The independent online brokerage scores top marks for the steps it’s put in place to protect its clients, its intuitive navigation, the ease of placing bond orders and a great mobile experience. In terms of security, Questrade keeps a running log of every time you access their site, giving users a simple way to spot any unusual activity.
The way Questrade handles bond orders is praiseworthy. Some online brokerages will restrict bonds you can trade on their system, but Questrade goes the extra mile to help users, says LaCoste. What is impressive is just how deep they go to help traders get exactly what they want, he adds.
As you gain more experience trading you find there are certain resources you rely on more. Some may want the fundamentals displayed front and centre, other investors may want to see more charts and technical analysis displayed more prominently. If that level of customization appeals to you then Qtrade should be high on your list.
Fees & Commissions
Top picks: CIBC Investor’s Edge/Questrade (Tie)
Honourable mentions: Qtrade/Virtual Brokers (Tie)
If you’ve spent any time with us you know how important it is to keep fees to a minimum. Most of our attention has been on the management expense ratios, but there are many more fees to be wary of. There are ECN fees (electronic communication networks fees), fees when you buy, fees to sell, inactivity fees, commissions, the list goes on. The last thing any investor wants is to see his or her returns eroded by unnecessary costs.
Uncovering all of those fees can be a daunting task to collect and compare on your own, but we make it easy. This year, CIBC and Questrade tie. For this category we consider several different factors but the one most investors fixate on is the trading commission. CIBC charges $6.95 per trade, while Questrade charges 1-cent per share (with a minimum charge of $4.95).
It might seem like there is a big difference between $6.95 and 1-cent trades, but there is another important factor to consider. For one, CIBC doesn’t charge ECN fees; Questrade does—and they add up. ECN fees are charged anytime you remove liquidity from the market. In simple terms, it means anytime you put in an order in anything other than a multiple of 100 shares, which is known as a board lot.
If you’re a small investor who doesn’t have the capital to place an order for a board lot, or if doing so would push your portfolio out of whack, then these costs can sting. “This is where they get killed,” says LaCoste, who thinks all ECN fees should be waved. The cost of high volume trades can also add up, particularly if you plan to buy stocks with low share prices. For example, if you bought 20,000 shares trading at 5-cents, the trade alone would cost $20—or more if it involved ECN fees.
Virtual Brokers and Qtrade Investor come in a close second. Both of these independent online brokerages offer low-cost equity commissions and offer an affordable platform for trading ETFs.
You don’t take our word for it. You can use our compare feature to see how the various brokerages stack up against each other. The information comes straight from the brokerages as is current as of July 14, 2017.
Top pick: Qtrade Investor
Honourable mention: Desjardins Online Brokerage
The conventional wisdom is that smaller brokerages have an advantage when it comes to customer service. Fewer clients means they get fewer questions. To a certain extent that’s true.
Our top pick in this area is Qtrade, one of the smaller independent brokerages. Qtrade made huge strides in this area stumbling last year. In Surviscor’s rigorous tests the online brokerage responds to e-mails in just under two hours, which is more than six hours faster than Desjardins Online Brokerage, Qtrade’s closest rival in this part of our assessment. To put these figures in context, the average online brokerage takes up to 50 hours—just over two days—to respond to emailed questions.
Our winners focus on the average response times over the past year, but as you can see from the charts below, these times can vary widely from year to year. Last year, Surviscor’s assessment put the average response time for Qtrade at close to 40 hours, although, that appears to be a bit of an anomaly given how it’s done in other years.
If we were to give an award for most improved, it would have to go to RBC Direct Investing. While this brokerage didn’t have the biggest drop in its response time, it’s one of the few brokerages to show steady gains in this area year after year. RBC scored third overall in this part of our ranking, with an average response time of nine hours.
Aside from these exceptions, LaCoste says the industry really needs to step up its game. “I really think they are doing a poor job,” he says. In some cases, the service trend for some of the biggest brokerages in Canada is down, not up (as you can see in the charts below). “It’s totally not acceptable.”
If you’re looking for better response time, consider reaching out to brokerages through their social media channels, where available. The questions can be answered in private and the response rate is often measured in minutes versus hours.
Reporting & Record Keeping
Top pick: BMO InvestorLine
Honourable mention: Qtrade Investor
It’s one thing to pack a site with bells and whistles, it’s another to make sure the site makes it easy to extract information when you really need it. This is particularly important around tax time. What investors want to do is locate slips and documents. Surviscor examines the quality and type of information available and how easy it is accessible.
BMO edges into our top spot this year for a number of reasons. First off, the brokerage gives investors several different ways to view their portfolio by providing detailed breakdowns of your assets, says LaCoste. BMO also offers a robust system of e-notifications that will allow investors to set up alerts on everything from their favourite stock to any major changes to their account balance.
Qtrade is strong in this area too, although it’s less powerful in the planning and analysis department. Still, they are a close second, says LaCoste. “One might be better than the other here or there but when you add it up they are pretty even.”
Top pick: TD Direct Investing
Honourable mention: Qtrade Investor
If you’ve ever visit a trading floor you’ll see rows of traders staring at as many as six screens to ensure they have everything the need to make a split-second decision on a trade. Few investors will ever be that hard-core, but the certainly want to feel like they have access to all of the same data to make smart trades.
Of all of the brokerages we looked at, TD comes the closest to approximating this environment. “They have rocked it forever,” says LaCoste. “This has been their claim to fame for 15 years.” TD does a good job of presenting their market data, and you don’t need to be an active trader to get it, says LaCoste. Their market quotes on options is particularly strong.
TD is also strong when it comes to accessing global quotes, adds LaCoste, which makes sense given TD and HSBC are the only Canadian brokerages to facilitate global trades (apart from the US). Still this global focus may also contribute to the one area TD comes up a little short. As LaCoste explains, TD shares a lot of features that were developed for its US trading platform and as a result its not quite as robust in some areas that are important to Canadian investors. For example. TD isn’t as robust as some of its competitors in terms of commodity prices. Its ETF data is also a tad weak, says LaCoste.
Still, these are minor quibbles for TD which is the hands-down winner here.
If you’re into technical analysis Qtrade has all of the features you need. The biggest drawback is the service doesn’t offer quite the same depth when it comes to research. You are still getting research reports, says LaCoste, but you are not going to get as many ‘buy’ and ‘sell’ recommendations as you might get somewhere else.
Best for ETFs
Top picks: Virtual Brokers/Questrade (Tie)
Honourable mention: National Bank Direct Brokerage
If you are a true Couch Potato investor there is an excellent chance you’ll open a discount brokerage account just to buy and hold a few ETFs and never trade a single stock. With the growing importance of ETFs we felt we were overdue to select the best online brokerage for ETFs.
If you expect ETF trades to account for the majority of the activity within your account then you may want to consider moving to one of our top picks. When it comes to holding ETFs, both Virtual Brokers and Questrade are safe bets. These independent discount brokerage gives investors the ability to buy any Canadian or US listed ETF commission free, although both charge a fee to sell.
Other brokerages also offer commission free-ETFs, but many of them limit the pool of available products that are free.
National Bank Direct Brokerage has raised the bar to allow eliminate commissions on all ETFs when buying or selling—but there is a catch. With National Bank the commission is only waived on ETF orders of 100 units more. That little caveat can be a hurdle for small investors who don’t have as much to investor or for ETFs that have a high unit price. (The SPDR S&P MidCap 400 ETF (MDY) trades at more than US$300 a unit, meaning you’d need to invest US$30,000 to qualify for the free commission.)
Nevertheless, National Bank is still worth an honourable mention here. Also noteworthy about National Bank is the fact it also has an edge when it comes to ETF research. National Bank has its own research team offering strategy advice and ETF analysis to help clients make smarter trading decisions.
Top brokerage: Qtrade Investor
Honourable mention: Questrade
Top bank-owned brokerages: BMO InvestorLine/Scotia iTrade (Tie)
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If you pour over the results above you’ll find Qtrade Investor is our top pick in a single category—customer service—but it’s a close second in almost every other category. Every other brokerage seems to have a hole in their service somewhere, but Qtrade excels in every area—especially in customer service. “When you look at Qtrade it is one to top five pretty much everywhere,” says LaCoste. “It’s not bad at anything.”
LaCoste describes Qtrade as being a progressive firm that’s always looking to improve.
Questrade is another brokerage that deserves high praise overall. While it may not score top five in every category we look at, it performs well in user experience as well as the all important fees and commissions area. Customer service, particularly when it comes to responding to emailed questions, is the one area where LaCoste would like to see some improvement.
If you’re intent on sticking with one of the big bank online brokerages then you can’t go wrong with either BMO or Scotia. Higher fees and commissions is the primary differentiator between these two bank run brokerages and the two independents atop our report.