Discount Brokerage Weekly Roundup – January 6, 2017

Welcome to the first roundup of new year! It’s good to be back at the helm in what will likely be one of the most exciting and unpredictable years for DIY investors in recent memory. Given all of the uncertainty, the theme of this year seems to be strategy – the traditional playbook is out and the ability to improvise and rapidly adapt is in. For Canadian online brokerages, this year more than any other will test their resourcefulness as well as their talent for getting creative.

In this week’s roundup we take a look at how the deals and promotions from Canadian discount brokerages started the year and what incentives might be in store for DIY investors heading into 2017. From there we take a look at the preparations brokerages are making for the final stretch of CRM2 and then recap the tweets to and from Canadian brokerages this past week. Finally, we close out with some topics of interest from DIY investor forums.

Deal updates

At the start of 2017, Canadian DIY investors looking to open a new brokerage account (or to switch brokerages) have lots to look forward to in the way of deals and promotions. This month’s deals action has already been swift, with new offers from HSBC InvesDirect and BMO InvestorLine to start the year.

Screenshots of offers from HSBC InvestDirect (top) and BMO InvestorLine (bottom) at the beginning of January 2017.

In total, we’ve spotted 25 public promotions that are now active that DIY investors can look to when shopping around online for a new trading account. Part of the reason this number is at this level was because two bank-owned brokerages, TD Direct Investing and National Bank Direct Brokerage, each launched deals ahead of the holiday season. Also sources at several other brokerages have indicated that January is likely to see additional deals activity so there is even more in the works for online investors.

As far as deals and promotions from Canadian online brokerages are concerned, the lead up to the RRSP contribution deadline will be a busy time.

With markets flirting with new all-time highs in both the US and Canada, an IPO for Snapchat on the horizon and whispers of a potentially frothy year for IPOs in general, the roll out of the final phase of CRM2 and added competition from robo-advisors looking to win over prized millennial investors, Canadian online brokerages will be pulling out all the stops this year to get attention from DIY investors thinking about investing online.

We will continue to monitor the deals and promotions activity but bullish signals such as the long expiry dates for most offers, healthy participation from multiple brokerages as well as renewed enthusiasm in the equity markets will likely translate into Canadian discount brokerages stepping up their efforts to gain market share, and more importantly to them, share of wallet.

Making a statement

For a very long time, investors have had to face unclear and sometimes incomprehensible investment statements. Over the past few years, however, things have gotten better and in 2017, investors are about to see more detail on how their investments are being managed and exactly where the costs for managing their money are coming from.

To better assist Canadian investors with understanding exactly where and how fees are generated on their investment accounts, financial market regulators required financial service providers, including Canadian online brokerages, to disclose fees more clearly to their clients. A great primer on the upcoming changes done by the Globe and Mail can be found here and a good explanation is also provided by FAIR Canada in the video below.

Heading into 2017 Canadian discount brokerages have begun alerting clients on their respective websites and via email that newer, easier to understand, investment statements are now available. Some of the more visible notifications have come from firms such as BMO InvestorLine, National Bank Direct Brokerage and CIBC Investor’s Edge. Interestingly, BMO InvestorLine and CIBC Investor’s Edge went a step further by also including a video that explains the changes to their statements.

Interestingly, and certainly not by accident, Questrade has been anticipating this transition with a popular and widespread campaign on asking tough questions to financial advisors.

The reasoning is that once investors, especially those with mutual funds, begin to see what they’re paying for the service with these new statements, they may start to look around for better value. Curiously, other brokerages have been less visible or have yet to launch campaigns directed at capitalizing on the ‘sticker shock’ of finding out how much in fees is being eaten up.  In this regard, Questrade has managed to get out in front of their competitors and will stand to benefit from having timed their campaign so well.

It is difficult to imagine a scenario in which the new statements being sent to investors would not provoke investors into considering a lower fee alternative. For the larger institutions, there has been a noticeable effort to become more ‘friendly’ and also more service focused, in hopes of being able to demonstrate value for the fees that are being charged.

Perhaps the biggest upshot for investors year end summaries of activity will be able to show how much is being spent on trading commissions. For active traders, this will really hit home to see whether or not trade execution could be more economical at another brokerage. This would certainly be an interesting and opportune moment for a savvy online brokerage to drop standard commission fees or for those with low commission rates to speak up. We suspect either of these may already be in the works.

Discount Brokerage Tweets of the Week

Fees, speed, service – this week had a little bit of everything to kick off 2017. Mentioned this week were BMO InvestorLine, CIBC Investor’s Edge, Questrade, Scotia iTRADE and TD Direct Investing.

From the Forums

Dating issues

In this post from the reddit personal finance Canada thread, one user wanted to get what seems like a simple answer to what date the deadline is for contributing to an RRSP in 2017. Interestingly, there is clearly still quite a bit of confusion as to when an individual investor can make a contribution to their RRSP and which year it “counts” towards when making it.

TFSA and Daytrading

This post from reddit’s personal finance Canada thread is a perennial favourite for those who seek clarity on whether or not ‘trading’ in a TFSA is allowed. Definitely interesting to see the variety of interpretations on what is a very grey area to begin with.

Into the Close

That’s a wrap on the first week of 2017. While this year is going to be full of surprises, perhaps one of the most curious sights was the clamoring of individuals for ‘free salt’ in Vancouver. Not sure what the lesson is here (or even if there’s just one) but something about supply and demand springs to mind. Whatever you happen to get up to this weekend, hopefully you’re staying warm (and you have enough salt)!

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