Offering an online brokerage for hands-on investors, as well as robo-advisor services that manage strategy and trades for you, and low fees all around, Questrade is popular with newbie and seasoned investors alike. But is it right for you?
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Questrade has been providing Canadians with rock-bottom fees on a full range of investments—including stock trades, mutual funds, no-commission ETFs, bonds, and even the ability to invest directly in gold and silver—for the past 20 years.So, it’s confounding that the trading platform has not become more of a household name, especially since Questrade is competitive with, or better than, the country’s other online brokerages, as is its robo-advisor service, Questwealth Portfolios*, which is a direct competitor to Wealthsimple.
It’s possible that Questrade’s vast range of products and services has made the brand difficult to market to any one group. Questwealth Portfolios caters to first-time investors or those with limited experience, while the brokerage service is ideal for non-experts with some investing knowledge and confidence. Whatever the reason, if you’re not yet familiar with this financial services provider, you should be. Here’s the 411 on Questrade and how you can decide whether it’s a good fit for you.
What’s the backstory on Questrade?
In 1999, at the dawn of online stock trading, entrepreneur Edward Kholodenko co-founded Questrade with three partners. Based in Toronto, their aim was, and remains, to offer DIY investors a low-cost alternative to Canada’s large banks and brokerages. Weathering the dot-com crash that soon followed, Questrade emerged to become the country’s fastest growing online brokerage.
In 2014, the platform entered the robo-advisor market by adding pre-fab portfolios of low-fee investments to its product line for those who lack the skill or inclination to go the self-directed route. Today, Kholodenko (who immigrated to Canada from the Ukraine with his family when he was five) still heads up the company, which has $9 billion in assets under management and sees 50 thousand new accounts opened each year.
Who is its target market?
Because Questrade has offerings for self-directed investors (those who are comfortable choosing and buying their own stocks, bonds and other investment assets) as well as hands-off investors who prefer to leave those decisions to a team of experts, it is popular with newbie and seasoned investors alike. The common thread among clients is cost-consciousness, as Questrade’s investment fees* are among the lowest in Canada.
What can I do with my money at Questrade?
Questrade’s user-friendly platform allows DIY investors to open almost any type of investment account online, including tax-sheltered registered accounts (RRSPs, TFSAs, RESPs, LIRAs, RIFs, LIFs) and taxable non-registered accounts (such as margin accounts and foreign exchange market accounts). Once you have at least $1,000 in your account, you can start buying, selling and trading investments. These include stocks, bonds; exchange traded funds (ETFs), including all North American ETFs; mutual funds; GICs; options; initial public offerings (IPOs); and other equities such as precious metals.
If DIY is not your thing, Questrade has you covered with its robo-advisor, Questwealth Portfolios*. You still begin by setting up an account online, but instead of choosing your own investments, you’ll be asked a series of questions about your risk tolerance, investment goals and overall approach to money. Based on your answers, Questwealth’s algorithm will choose a portfolio for you—Aggressive, Growth, Balanced, Income or Conservative—which is made up of a diversified mix of low-fee ETFs. (If you’re into socially responsible investing (SRI), you can also get SRI versions of these Questwealth Portfolios, which support companies that prioritize environmental and social concerns, and have a positive record on human rights and corruption.)
The difference between each portfolio is the ratio between higher-risk investments, such as Canadian, US and international equity ETFs, and lower-risk fixed-income ETFs, such as bonds and GICs. An aggressive portfolio would be weighted toward riskier investments (which also offer the possibility of greater returns), while a conservative one will include more low-risk investments.
Unlike typical Canadian robo-advisors, which rely 100% on algorithms and automation to monitor and rebalance your portfolio when necessary, Questwealth has actual human experts who manage your portfolio for you, without the high fees that most portfolio managers charge for this service.
How much does it cost?
Questrade’s fees depend on the type of service—DIY or pre-fab Questwealth Portfolios—as well as the specific investments that you choose. Regardless of which option you go with, there are no fees for opening or closing an account, and no transfer fees. What’s more, Questrade’s commissions and management fees undercut most of the competition. Below is a more detailed breakdown of costs. Note clients can avoid the inactivity fee by making one trade in any of their accounts, or by depositing $150 or more during that quarter.
ETFs: no commission fees on purchases; trades cost $4.95 to $9.95 per transaction; management expense ratios (MERs, which are collected by the funds themselves) are about 0.2%
Stocks: purchase and trading commissions are $4.95 to $9.95 per transaction
Bonds/GICs: minimum purchase $5,000; fees may apply if withdrawn early
International equities: 1% of the trade value; $195 minimum
Precious metals: US$19.95 per trade
Inactivity fee: clients whose total account balance drops below $1,000 in total across all their Questrade accounts are subject to a quarterly fee of $24.95 if they have not performed any transactions during the preceding three-month period; fee is waived for clients age 25 or younger.
Management fees: This charge is calculated as a percentage of the total amount of money you have invested. Clients with balances less than $100,000 in total pay 0.25% annually; those with balances of $100,000 or more pay 0.20% annually.
ETF fees: Each individual ETF in a Questwealth Portfolio has its own embedded fee, referred to as the MER, or management expense ratio. These fees range between 0.17% and 0.22% (and 0.21% to 0.35% for socially responsible investments, or SRIs). Questrade does not add fees on top of these MERs.
In real terms, that would work out to about $185 to $235 in annual fees for a $50,000 portfolio (or $205 to $300 for a similar-sized portfolio of socially responsible investments).
What research tools are provided?
To help you make smart investment decisions, Questrade provides self-directed clients with access to a variety of online investing and market research tools. Many of the tools are free, and some can be upgraded at an added cost. Here’s a basic rundown of the offerings.
Market Intelligence, powered by Morningstar
This research tool, available for free under the “Research” tab of Questrade’s trading software, allows you to search for news about specific securities or markets (it covers all the major North American exchanges) and filter the results by symbol, sector or industry. Similarly, you can enter a security name or symbol and scan results by financials, valuation, filings or other key metrics. You can also choose to get customized email alerts.
This tool providesinformation on (and lets you buy) the latest IPOs, secondary offerings and structured products.
Intraday Trader, powered by Recognia
Intraday Trader uses pattern recognition to keep an eye on opportunities in Canadian and U.S. equities markets. Then, it cross-references them with your specific investment goals, through custom or pre-set watchlists that you create. When one of your target trades is triggered, Intraday Trader will send you notifications with annotated charts and a description of what’s happening and why. A basic version of the tool is free, but a live-streaming version is available with a subscription to a market data plan (as explained below).
This tool provides free “snap quotes” that show real-time bid and ask prices for securities in all major North American exchanges. (The data is displayed in the level 1 quote area of the stock or option quote tab, watch list and level 1 gadget.)
For an added monthly fee of $19.99 or $89.95, you can choose from three packages that provide extra level 1 & 2 data and feature live streaming (meaning, you don’t have to keep clicking to refresh the real-time info; it will do so automatically) on trading volumes, prices and more. You can also choose a la carte live streaming data add-ons.
It’s worth noting that the paid market data subscriptions are refundable; if your total commissions for the month total $48.95 or more, you’ll receive a $19.95 rebate. Similarly, if you are on the pricier plan (which also provides access to “active trader pricing” that could save you on commission fees) the full $89.95 fee will be waived once you generate commissions of $399.95 or more.
Clients can also access the latest market information for free, thanks to a news feed Powered by Bezinga.
Are there any drawbacks to Questrade?
As previously mentioned, DIYers with small portfolios (under $1,000) could get dinged with a hefty fee each quarter if they aren’t making transactions regularly. (For its part, Questrade argues this fee is meant to encourage investors to stay on top of their accounts, which isn’t a bad idea in terms of the reduced risks that come from purchasing investments on a regular schedule instead of all at once, a strategy known as dollar cost averaging.)
Questwealth Portfolio clients should be aware that there are other robo-advisor services that do not charge any management fee on the first $5,000 or $10,000 invested; however, their fees are substantially higher than Questrade’s once that introductory threshold is crossed.
Also, some investors may not like that the Questwealth Portfolios are managed by people rather than algorithms, as there is some evidence that actively managed portfolios do not fare as well as those that are automated. S&P Indices Versus Active (SPIVA), for example, which measures the performance of actively managed funds against their relevant S&P index benchmarks, found that more than 75% of Canadian active equity managers underperformed their benchmarks across all categories in 2018. Having said that, the past performance of Questwealth Portfolios has been at least as good or better than benchmark targets or other robo-advisors’ portfolios.
Bottom line: Should you use Questrade?
Novice investors looking to pay the lowest fees over the long term need look no further than Questrade. The pre-fab portfolio options cater to a variety of investor types, from conservative to aggressive to socially conscious, and are rebalanced automatically to make the entire investing process super simple.
Similarly, investors with more know-how who would like to purchase their own ETFs or other assets will enjoy some of the lowest fees around—so long as they have balances of at least $1,000 or perform at least one transaction per quarter.
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