Special Series: J.D. Power & Associates – Discount Brokerage Rankings Explained Part 2

JD-Power-Data-Ranking - Discount Brokerage Rankings

If you missed the first part of our J.D. Power & Associates Discount Brokerage Rankings series, read it here.

The two main objectives of this section are to provide readers with:

  1. A look at the overall discount brokerage marketplace to see what, if any trends in investor satisfaction there are that matter to consumers
  2. A detailed look at the company results in the survey to see how each company has performed  over time so that consumers get an idea of the responsiveness of a particular discount brokerage to the needs of investors

When choosing a discount brokerage, you can either “go it alone” and find out for yourself what a discount brokerage is like or you can turn to the opinions of other self-directed investors to help you decide.   Even though both approaches exist, surveys of Canadian investors have shown that many of them like to do research, turning to friends or family for recommendations, as well as third party reviews and research, before making a choice to go with a particular discount broker. While external opinions are valuable sources of information to help avoid potentially costly or unpleasant experiences they can also help to find a service provider that can hopefully keep you a satisfied customer.

Looking at what thousands of other self-directed investors have said about their experiences can certainly shed light on what you’re likely to encounter with a particular discount brokerage and at the very least help to provide some context around informal discussions with friends or family. There are some questions, however, you may want to consider when looking to these sources.  Questions such as:

  • How well does the source I’m looking at consider and describe my needs?
  • If they are a friend, family member or opinion in a forum, how long has this person been a client with the company and
  • What, if any, issues have they encountered with the service/experience along the way?

Also, because numbers and statistics often get presented to support marketing and sales, we thought it prudent to state several “qualifiers” readers need to consider about such numbers up front instead of at the end.  First, it’s worth stating that the range of data this section references covers four years of results of the investor satisfaction survey.  This four year time period is a small time frame, especially since the interval that the survey is conducted on is annual. Second, the number of companies in the ‘pool’ is fairly small so we must be cautious about inferring too much about the performance numbers and possible trends of the industry as a whole. Instead, looking at a particular company’s change in performance over time is probably more reliable an approach than comparing companies to one another. Lastly, not every year had the same number of discount brokerages covered.  In 2009 and 2010 for example, the number of discount brokerages covered by this survey was 6 and 8 respectively.  Smaller or newer discount brokerages, therefore, are less likely to appear on the survey and so the inferences made about “the industry” actually apply to the discount brokerages covered in this list.

Investor satisfaction with the overall discount brokerage industry in Canada

Over the four years the investor satisfaction survey has been conducted, more than eleven and a half thousand individuals have been consulted about discount brokerage services in Canada.

Canadian Discount Brokerage Industry - Investor Satisfaction Scores 2009-2012
Figure 1: Canadian Discount Brokerage Investor Satisfaction Scores from 2009-2012

When looking at the four year picture, the average industry satisfaction scores have fluctuated year over year, bouncing between a low of 679 in 2011 and a high of 707 in 2010. The four year average score for the industry is 696 (out of 1000) with an average standard deviation of 27.5 points. When graphed, it is clear that as a group no clear industry-wide trends in the satisfaction of Canadian discount brokerage investors are visible.

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