Happy New Year! Welcome to the first edition of the discount brokerage roundup for 2016. It’s hard to believe that we’re turning the page into another year already but when time flies this fast it must mean that we’re having fun.
With a number of market closures, a gearing down of activity with Canadian DIY investors over the final week of 2015,and probably because everyone is out watching Star Wars, it was an opportune time to look back at all of what’s happened with Canadian discount brokerages in the short span of just one year and muse about what it all means for 2016.
To make it a little easier to navigate all of what happened, we picked the stories that stood out each month and put them together into one super roundup of roundups for 2015.
While it is nowhere near as fun as a hot tub time machine, tardis or a delorian, here is a trip into the most interesting and standout stories from around the Canadian discount brokerage industry for 2015.
January 2015: Questrade Punches Heavier
Questrade stepped into the Canadian ETF provider arena signalling a big move for the small independent brokerage. Questrade would go on to make 2015 a year in which they diversified their business away from just an online brokerage to become a wealth management company offering robo-advisor, ETFs and other managed wealth services. Tack on platform updates and a tonne of promotions month in and month out and Questrade’s start in January was just the tip of iceberg.
February 2015: The Website Update Frenzy Begins
Desjardins Online Brokerage’s launch of their new website unlocked an avalanche of website refreshes from Canadian discount brokerages in 2015. The move from their old website to a more modern, user-focused design signalled a clear shift to the “less is more” model from Canadian brokerages. Five other brokerages would also go on to redesign their websites, and, even though Desjardins’ website did not receive high praise in the Globe and Mail online brokerage rankings, the design and user experience considerations that went into the Desjardins Online Brokerage site were thoughtful and trendsetting for 2015.
March 2015: #SocialMediaMatters
Although it had been a long time coming, one of the most interesting stories of the online brokerage world in Canada was watching TD Direct Investing change the social media game for discount brokerages on Twitter. Unlike every other Canadian discount brokerage (and even many financial services firms) on Twitter, TD Direct Investing undertook the bold move to allow multiple representatives the freedom to tweet instead of having just one solitary voice. Considering the number of people to coordinate, this was a huge risk to take on TD’s part however the gamble appeared to pay off in spades. The pivotal moment when things started to really take off, however, started with their webinar in March. With over 300 live attendees (a headline grabbing number on its own) and thousands more registered, TD Direct Investing’s team could now communicate directly and transparently with DIY investors and with each other all in real time. TD Direct Investing would later go on to have its own Twitter account however no other brokerage, except for maybe Questrade (who has had a 4 year head start over TD on Twitter) has had the kind of impact on social media that TD Direct Investing had in 2015.
April 2015: Keeping it in the Family
For a discount brokerage that built its brand on not charging DIY investors account or inactivity fees, the road to Questrade becoming one that does charge inactivity fees has been a bumpy one. This past April, Questrade made yet another bold move to enable clients the ability to avoid paying inactivity fee by enabling family members to pool resources and have inactivity fees waived.
While offers to clients in the same household are nothing new, what was interesting about this move was that it offered Questrade yet another feather in its cap of being able to compete with brokerages big and small when it came to client acquisition. Empowering family members with more than just referral bonuses means that the value to customer goes beyond a one time deposit or commission credit. Later through the year, Questrade would also raise its fees, but when the firm goes about making itself more personable online, it’s something that the former ‘no fee’ brokerage can pull off without the kind of backlash it has faced in the past. Well played Questrade, well played.
May 2015: We Sherwood Like Lower Commissions
It’s interesting that one of the biggest developments in the online brokerage space in 2015 came from a non-Canadian brokerage. The firm Robinhood, which many Canadian investors may not have even heard of, offers commission free trading to its clients. Yes, you read that right.
In May 2015, Robinhood announced they’d be going global to bring commission-free trading to countries outside of the US with a first stop to Australia.
Whether or not Canada is a place that Robinhood would consider coming to anytime soon is anyone’s guess however the next wave in commission price drops would almost certainly be triggered by news of Robinhood moving into Canada or of another firm here deciding that commission-free trading is possible.
June 2015: Kicking Assets, Taking Names
Yet again, it was another US-based brokerage that grabbed the spotlight for the most interesting development for the first summer month. In particular, Interactive Brokers (which has a Canadian subsidiary) released stats showing just how well they’ve been crushing it when it comes to asset and account growth. Interactive Brokers is almost a goto name amongst active traders – something that is the envy of online brokerages everywhere.
Their secret? Being better at technology and automation apparently. Regionally, however, Interactive Brokers continued to get frozen out of the brokerage rankings throughout the year so despite being a firm that now caters to less active investors and those seeking registered accounts, their “trader” reputation seems to be working against them. Numbers don’t lie and it seems like they’re anything but concerned about not being ranked by a Canadian ranking as they nailed top spot in Barrons’ 2015 online brokerage ranking.
July 2015: Big Screen Not Enough for the Small Screen
In a bid to spark some interest on social media, the folks at Scotia iTRADE decided to try getting investors into their new investor centre to take selfies. Looking back, it’s safe to say that the contest response was a little underwhelming.
It was, however, interesting to see that the lure of the promise of a free movie ticket wasn’t enough to generate the kind of buzz that a free giveaway normally would on social media. As the only brokerage that has not lowered its standard commission prices to compete with every other Canadian brokerage, Scotia iTRADE is clearly incentivizing clients with larger balances to pay attention. It was not entirely surprising, therefore, to see that the promise of a single movie ticket just couldn’t convince DIY investors to make the trek to the downtown Toronto investor centre during the Pan-Am game HOV restrictions.
August 2015: Solving Problems 140 Characters at a Time
One of the realities of the 2015 world is that when consumers have a problem with a company, social media can be a powerful medium to escalate the issue to a global audience. Until this year, many Canadian discount brokerages who were on Twitter were spared the very long back and forth exchanges that can arise between vocal clients and client service reps. In August, however, a rather interesting conversation took place between Scotia iTRADE and one of their apparent clients. While it started seemingly innocuously, the issue eventually gave way to a weeks long affair. The conversation ended up stretching over a couple of months and involved just one individual and multiple brokerages encouraging Scotia iTRADE’s unhappy client to give a different brokerage a try. It was clearly a standout moment as it signaled just how different the ‘customer service’ model has become and how brokerages have now rethink their approach to resolution. (skip to slide 16 in the tweets of the week for the first tweet in this conversation).
September 2015: The Nail in the High Commission Coffin
It’s hard to define an exact moment when the days of high trading commissions became numbered. When RBC Direct Investing lowered their standard pricing to 9.95 per trade in early 2014, it set off a shockwave that culminated in September of 2015 with HSBC InvestDirect finally conceding to lower their standard commission price to under $10 per trade. While RBC Direct Investing enjoyed the spotlight for ‘going first’ (even though the smaller independent brokerages were already charging less than $10/trade), the spotlight for being last now belongs exclusively to Scotia iTrade. Whether or not the two points are related is hard to say, however September was also the month in which the JD Power discount brokerage rankings were published. The data from those ratings clearly illustrate how tight the race is between Canadian discount brokerages and underscores the challenge facing Scotia iTrade to justify the higher price per trade for certain client segments.
October 2015: Raising the Bar on Investor Education
Providing DIY investors with educational resources and tools is something that only a handful of Canadian online brokerages have fully committed to. Among the Canadian brokerages who do provide investor education, however, TD Direct Investing is a juggernaut of seminars, webinars and content. One of the most interesting developments in 2015 for Canadian brokerages was the shift of TD Direct Investing away from doing lots of in person seminars to focusing on delivering educational content online (usually via webinars). What was particularly game-changing for the brokerage-provided education space, was the event TD Direct Investing held with Tastytrade founder and famous options trader Tom Sosnoff. Nothing quite like this event has been put together (in recent memory) for DIY investors and it illustrates just how much harder it will be for Canadian brokerages to deliver quality, entertaining investor education content now that TD Direct Investing is leveraging a powerful platform (ThinkOrSwim) and a very polished production in Tastytrade.
November 2015: Here Come the Droids
Robo-advisors continued to make big strides with investors in 2015. One of the standout stories from the Canadian brokerage world was the news that BMO may be stepping into the robo-advisor arena in the near future. Already Virtual Brokers and Questrade have either affiliations with or their own in house robo-advisory, however a major bank supporting the robo-advisor model could touch off a whole other layer of competition amongst brokerages. While the adoption and understanding of robo-advisors by Canadian investors is still relatively small, the fact that robo-advisors have gained so much traction within such a short amount of time means that this story is only bound to pick up speed going forward into 2016.
December 2015: A Very Good Year
With the 2015 edition of the Globe and Mail discount brokerage rankings published in December this year, it was interesting to see how all the major online brokerages fared over all the rankings. The focus of Rob Carrick’s review clearly shifted away from price and into the realm of user experience – in particular the websites of Canada’s discount brokerages. SparxTrading collected the results of the big three analyses that typically take place and saw that of all the brokerages, BMO InvestorLine appeared to have a banner year. Also of interest was the strong showing this year by Questrade and TD Direct Investing. Equally interesting was the consensus view that emerged on HSBC InvestDirect has a lot of ground to make up to compete with other online discount brokerages.
Looking back across the past year of news makers for the weekly roundups, there are certainly names that continuously come up and names who barely get mentioned. In that, there may be a method to the weekly roundup madness after all: Brokerages who are busy doing interesting things, will get typically get covered or mentioned in the weekly roundup. For Canadian discount brokerages heading into 2016, this year is one in which being interesting is going to be more important than ever before and we can’t wait to see what’s going to happen next.
Into the Close
That’s a wrap on the special roundup of roundups for 2015. Our regularly scheduled tweets and events will be back next week. From everyone here at SparxTrading.com, we wish you and your families a happy and prosperous New Year. And, for the traders and DIY investors out there a very profitable year too!