The Globe and Mail, Rob Carrick, 16 September 2006
There's a simmering price war in the on-line brokerage business, but only some firms have bothered to show up.
To find out which ones, just look to the top names in the 2006-07 Globe and Mail ranking of on-line brokers. In first place is Qtrade Investor, an independent Vancouver-based operation that is, so far, the only broker to respond to the sub-$20 minimum stock-trading commissions that E*Trade Canada introduced earlier this year.
In second place is E*Trade, which polished its reputation as the price leader this week by announcing that clients with at least $50,000 in assets will pay just $9.99 to trade stocks as of Oct. 3. In third place is Credential Direct, which has among the lowest commissions around for people who place large-value trades.
Costs are the most important factor in this eighth edition of the Globe's broker ranking, and the reason is that they're uppermost in the mind of do-it-yourself investors. In a survey conducted recently on the Globeinvestor.com website, a little more than one in three of the 1,641 participants ranked cheap commissions and fees as the top attribute of an on-line broker. No other attribute was even close.
There's more to a good on-line broker than low commissions, of course. Accordingly, this ranking emphasizes these five other factors that participants in our survey thought were important:
1. Tools for researching stocks and mutual funds, and for financial planning and portfolio building.
2. Trading, a category that includes the variety of stock orders you can place on-line and also considers bonds and mutual funds.
3. Investment selection, which refers to the availability of a wide variety of bonds and guaranteed investment certificates on-line, and guided portfolios, which are blends of mutual funds and exchange-traded funds that are calibrated for varying investment objectives.
4. Information to show how your investments are doing, with personalized rates of return and real-time account updating being the gold standard.
5. Website utility, which includes such things as the kinds of account maintenance matters you can attend to on-line and the availability of on-line statements and trade confirmations.
Finally, we gave some weight to the answers our survey participants gave to a question that asked them how happy they were with the service they received from their broker. As usual, this year's brokerage rating looks strictly at on-line services, and not those offered through live representatives. It also focuses strictly on those on-line brokers that target a mainstream audience as opposed to aggressive stock traders.
• No. 1 / Qtrade Investor / qtrade.ca / Parent: Privately held
Lowdown: If you've never heard of Qtrade, it's probably because it has quietly built its business by forging relationships with credit unions and other financial players. Qtrade is no trendsetter, but it's a shrewd imitator. The net result is a broker that has risen to the top by adopting the best practices of its competitors. Examples: Qtrade has just cut its minimum commission for market orders (where you pay or receive the going market rate) to $19.95, nominally undercutting E*Trade's $19.99 fee for all types of trades, and it has partly emulated BMO InvestorLine's excellent reporting of client investment returns.
More good stuff: Qtrade has eliminated all mutual fund commissions and its annual administration fee for small registered retirement savings plans is low at $40.
Bottom Line: Take that, bank-owned brokers.
Report Card
Fees and commissions 21/25
Tools and research 12/20
Trading 16/20
Customer satisfaction 9.5/10
Account information 9/10
Investment selection 8/10
Website 4.5/5
Total 80/100
Grade A
• No. 2 / E*Trade Canada / canada.etrade.com / Parent: E*Trade Financial Corp.
Lowdown: Investors, meet the champion of low-cost investing for mainstream investors. Whereas most brokers charge a minimum $25 to $29 to trade stocks on-line, you'll shortly be able to trade for a flat $9.99 at E*Trade if you have a combined $50,000 in your accounts at the firm. There are also no administration fees for registered retirement savings plans here, and mutual funds are commission-free. Low fees are a false economy if a broker scrimps on the services it provides, but E*Trade comes through with enough to satisfy most clients.
Bottom Line: If you trade stocks a lot and want to cut costs, you'd be remiss if you didn't check out E*Trade.
Report Card
Fees and commissions 24.5/25
Tools and research 12/20
Trading 15/20
Customer satisfaction 7.5/10
Account information 6/10
Investment selection 8/10
Website 4.5/5
Total 77.5/100
Grade A-
• No. 3 / Credential Direct / credentialdirect.com / Parent: The credit union movement
Lowdown: This low-profile but formidable outfit has clearly put some thought into providing a well-rounded service. Stock trading commissions are reasonable thanks in part to a $250 cap for on-line stock commissions, there are no charges to buy or sell funds, and fees for registered accounts are low. Credential also does a great job of documenting how your portfolio is performing, and it has some pretty good tools for researching stocks (more analyst reports would be welcome).
Bottom Line: Another stealth competitor to challenge the banks.
Report Card
Fees and commissions 19.5/25
Tools and research 13/20
Trading 14/20
Customer satisfaction 9.5/10
Account information 9/10
Investment selection 8/10
Website 4/5
Total 77/100
Grade A-
• No. 4 / BMO InvestorLine / bmoinvestorline.com / Parent: Bank of Montreal
Lowdown: BMO InvestorLine, the top-ranked broker in the past four Globe rankings, never stops improving. Last year, one of its chief weaknesses was a lack of analyst research for clients to peruse. Lately, InvestorLine has begun adding reports by analysts at Standard & Poor's and BMO Nesbitt Burns Inc. InvestorLine has long been a leader in showing clients how their investments are performing, and this year it has introduced a feature that compares individual returns to a collection of financial market benchmarks. It's also a leader in providing guided portfolios to investors who need direction.
Bottom Line: Strong execution of a "guided investing" theme, which means providing investors with the means to succeed.
Report Card
Fees and commissions 14.5/25
Tools and research 17/20
Trading 16/20
Customer satisfaction 7.5/10
Account information 9/10
Investment selection 8/10
Website 4/5
Total 76/100
Grade A-
• No. 5 / TD Waterhouse / tdwaterhouse.ca / Parent: Toronto-Dominion Bank
Lowdown: These guys are top dog by far in the on-line brokerage business, if you measure by number of clients and the strength of the brand name. Otherwise, TD is edging toward mid-pack status. Oh, sure, it offers a sturdy trading platform with enough research and analysis tools to keep stock market fanatics busy for ages. But costs are high for mainstream investors and active traders alike, and there's a lack of extra-value features like personalized return reporting for account holders.
Bottom Line: A high-cost broker needs to deliver more.
Report Card
Fees and commissions 12/25
Tools and research 18/20
Trading 17/20
Customer satisfaction 6.5/10
Account information 6/10
Investment selection 6.5/10
Website 4/5
Total 70/100
Grade B
• No. 6 / ScotiaMcLeod Direct Investing / scotiamcleoddirect.com / Parent: Bank of Nova Scotia
Lowdown: This is the broker that best deploys its library of analyst reports on stocks. There are lists of top stock picks at sister firm Scotia Capital, individual stock reports, daily updates and weekly musings, all of them laid out in an on-line research centre that's a model of its kind. If this turns your crank, then you won't mind putting up with the clunky navigation on the rest of the website, the lack of on-line bond trading and nothing much at all to show how your account is performing.
Bottom Line: A little rough, but likeable.
Report Card
Fees and commissions 15/25
Tools and research 14/20
Trading 15/20
Customer satisfaction 8/10
Account information 6/10
Investment selection 5/10
Website 3/5
Total 66/100
Grade C+
• No. 7 / CIBC Investor's Edge / investorsedge.cibc.com / Parent: Canadian Imperial Bank of Commerce
Lowdown: Investor's Edge is the typical mid-tier on-line broker -- it does most things reasonably well, but stands out in none. Key benefits include a commission schedule that allows you to trade stocks for as little as $25 for market orders, on-line bond and GIC trading, and lots of stock research from CIBC World Markets Inc.
Bottom Line: Not the best, but far from the worst.
Report Card
Fees and commissions 13/25
Tools and research 13/20
Trading 15/20
Customer satisfaction 6/10
Account information 6/10
Investment selection 6/10
Website 3.5/5
Total 62.5/100
Grade C
• No. 8 / RBC Direct Investing / actiondirect.com / Parent: Royal Bank of Canada
Lowdown: The former RBC Action Direct (the name changes officially next month) is a work in progress. Commissions have been cosmetically cut to $28.95 from a sector-leading $29.95, real-time account updates are coming imminently and the selection of research tools is much improved. A highlight is access to reams of equity research from RBC Dominion Securities Inc. and S&P.
Still to do: Add features like personalized account performance reporting that justify the comparatively high commissions.
Bottom Line: On the upswing.
Report Card
Fees and commissions 14/25
Tools and research 16/20
Trading 13/20
Customer satisfaction 4.5/10
Account information 5/10
Investment selection 6/10
Website 3/5
Total 61.5/100
Grade C
• No. 9 / National Bank Direct Brokerage / nbdb.ca / Parent: National Bank of Canada
Lowdown: A somewhat lean but still adequate service for mainstream investors. Research tools are nothing special over all, but NBDB is strong, oddly enough, in the sort of toys that active stock traders might like. For example, it offers a lot of technical analysis through its use of material from a data provider called StockScores. Also, there's a nifty streaming quote and charting tool called Market Matrix.
Bottom Line: Lags the other bank-owned brokers, but not by much.
Report Card
Fees and commissions 14/25
Tools and research 12/20
Trading 11/20
Customer satisfaction 6/10
Account information 6/10
Investment selection 6/10
Website 2.5/5
Total 57.5/100
Grade C-
• No. 10 / Disnat / disnat.com / Parent: Mouvement des caisses Desjardins
Lowdown: Desjardins appears to be lavishing more attention on DisnatDirect, an on-line broker for serious traders, than on the more mainstream Disnat. Still, Disnat is being upgraded to the point where it offers the rudiments of a decent package, including on-line bond trading (coming shortly) and stock research from analysts at Desjardins Securities.
Bottom Line: Like driving a strippo car.
Report Card
Fees and commissions 13/25
Tools and research 11/20
Trading 11/20
Customer satisfaction 8.5/10
Account information 6/10
Investment selection 4/10
Website 2/5
Total 55.5/100
Grade D+
• No. 11 / HSBC InvestDirect / investdirect.hsbc.ca / Parent: HSBC Holdings PLC
Lowdown: HSBC is an international bank, and HSBC InvestDirect offers both global equity research and on-line access to the Hong Kong stock market. So why isn't this broker playing up its international edge instead of trying and failing to be all things to all investors? Just asking.
Bottom Line: It's time to rethink this operation because the status quo is weak.
Report Card
Fees and commissions 13/25
Tools and research 11.5/20
Trading 13/20
Customer satisfaction 3.5/10
Account information 2/10
Investment selection 6/10
Website 1/5
Total 50/100
Grade D-
• No. 12 / eNorthern / enorthern.com / Parent: Northern Securities Inc.
Lowdown: With its $24 minimum commission, eNorthern used to be the on-line brokerage sector's cheap date. Now that E*Trade and Qtrade have lowered commissions below $20, eNorthern's suddenly a mid-price player with a no-frills service.
Bottom Line: Stop by if you want to see what on-line brokers were like in the days when it was enough just to take stock-trading orders from clients.
Report Card
Fees and commissions 15/25
Tools and research 3/20
Trading 7/20
Customer satisfaction 8/10
Account information 2/10
Investment selection 0/10
Website 3/5
Total 38/100
Grade F
;
There's a simmering price war in the on-line brokerage business, but only some firms have bothered to show up.
To find out which ones, just look to the top names in the 2006-07 Globe and Mail ranking of on-line brokers. In first place is Qtrade Investor, an independent Vancouver-based operation that is, so far, the only broker to respond to the sub-$20 minimum stock-trading commissions that E*Trade Canada introduced earlier this year.
In second place is E*Trade, which polished its reputation as the price leader this week by announcing that clients with at least $50,000 in assets will pay just $9.99 to trade stocks as of Oct. 3. In third place is Credential Direct, which has among the lowest commissions around for people who place large-value trades.
Costs are the most important factor in this eighth edition of the Globe's broker ranking, and the reason is that they're uppermost in the mind of do-it-yourself investors. In a survey conducted recently on the Globeinvestor.com website, a little more than one in three of the 1,641 participants ranked cheap commissions and fees as the top attribute of an on-line broker. No other attribute was even close.
There's more to a good on-line broker than low commissions, of course. Accordingly, this ranking emphasizes these five other factors that participants in our survey thought were important:
1. Tools for researching stocks and mutual funds, and for financial planning and portfolio building.
2. Trading, a category that includes the variety of stock orders you can place on-line and also considers bonds and mutual funds.
3. Investment selection, which refers to the availability of a wide variety of bonds and guaranteed investment certificates on-line, and guided portfolios, which are blends of mutual funds and exchange-traded funds that are calibrated for varying investment objectives.
4. Information to show how your investments are doing, with personalized rates of return and real-time account updating being the gold standard.
5. Website utility, which includes such things as the kinds of account maintenance matters you can attend to on-line and the availability of on-line statements and trade confirmations.
Finally, we gave some weight to the answers our survey participants gave to a question that asked them how happy they were with the service they received from their broker. As usual, this year's brokerage rating looks strictly at on-line services, and not those offered through live representatives. It also focuses strictly on those on-line brokers that target a mainstream audience as opposed to aggressive stock traders.
• No. 1 / Qtrade Investor / qtrade.ca / Parent: Privately held
Lowdown: If you've never heard of Qtrade, it's probably because it has quietly built its business by forging relationships with credit unions and other financial players. Qtrade is no trendsetter, but it's a shrewd imitator. The net result is a broker that has risen to the top by adopting the best practices of its competitors. Examples: Qtrade has just cut its minimum commission for market orders (where you pay or receive the going market rate) to $19.95, nominally undercutting E*Trade's $19.99 fee for all types of trades, and it has partly emulated BMO InvestorLine's excellent reporting of client investment returns.
More good stuff: Qtrade has eliminated all mutual fund commissions and its annual administration fee for small registered retirement savings plans is low at $40.
Bottom Line: Take that, bank-owned brokers.
Report Card
Fees and commissions 21/25
Tools and research 12/20
Trading 16/20
Customer satisfaction 9.5/10
Account information 9/10
Investment selection 8/10
Website 4.5/5
Total 80/100
Grade A
• No. 2 / E*Trade Canada / canada.etrade.com / Parent: E*Trade Financial Corp.
Lowdown: Investors, meet the champion of low-cost investing for mainstream investors. Whereas most brokers charge a minimum $25 to $29 to trade stocks on-line, you'll shortly be able to trade for a flat $9.99 at E*Trade if you have a combined $50,000 in your accounts at the firm. There are also no administration fees for registered retirement savings plans here, and mutual funds are commission-free. Low fees are a false economy if a broker scrimps on the services it provides, but E*Trade comes through with enough to satisfy most clients.
Bottom Line: If you trade stocks a lot and want to cut costs, you'd be remiss if you didn't check out E*Trade.
Report Card
Fees and commissions 24.5/25
Tools and research 12/20
Trading 15/20
Customer satisfaction 7.5/10
Account information 6/10
Investment selection 8/10
Website 4.5/5
Total 77.5/100
Grade A-
• No. 3 / Credential Direct / credentialdirect.com / Parent: The credit union movement
Lowdown: This low-profile but formidable outfit has clearly put some thought into providing a well-rounded service. Stock trading commissions are reasonable thanks in part to a $250 cap for on-line stock commissions, there are no charges to buy or sell funds, and fees for registered accounts are low. Credential also does a great job of documenting how your portfolio is performing, and it has some pretty good tools for researching stocks (more analyst reports would be welcome).
Bottom Line: Another stealth competitor to challenge the banks.
Report Card
Fees and commissions 19.5/25
Tools and research 13/20
Trading 14/20
Customer satisfaction 9.5/10
Account information 9/10
Investment selection 8/10
Website 4/5
Total 77/100
Grade A-
• No. 4 / BMO InvestorLine / bmoinvestorline.com / Parent: Bank of Montreal
Lowdown: BMO InvestorLine, the top-ranked broker in the past four Globe rankings, never stops improving. Last year, one of its chief weaknesses was a lack of analyst research for clients to peruse. Lately, InvestorLine has begun adding reports by analysts at Standard & Poor's and BMO Nesbitt Burns Inc. InvestorLine has long been a leader in showing clients how their investments are performing, and this year it has introduced a feature that compares individual returns to a collection of financial market benchmarks. It's also a leader in providing guided portfolios to investors who need direction.
Bottom Line: Strong execution of a "guided investing" theme, which means providing investors with the means to succeed.
Report Card
Fees and commissions 14.5/25
Tools and research 17/20
Trading 16/20
Customer satisfaction 7.5/10
Account information 9/10
Investment selection 8/10
Website 4/5
Total 76/100
Grade A-
• No. 5 / TD Waterhouse / tdwaterhouse.ca / Parent: Toronto-Dominion Bank
Lowdown: These guys are top dog by far in the on-line brokerage business, if you measure by number of clients and the strength of the brand name. Otherwise, TD is edging toward mid-pack status. Oh, sure, it offers a sturdy trading platform with enough research and analysis tools to keep stock market fanatics busy for ages. But costs are high for mainstream investors and active traders alike, and there's a lack of extra-value features like personalized return reporting for account holders.
Bottom Line: A high-cost broker needs to deliver more.
Report Card
Fees and commissions 12/25
Tools and research 18/20
Trading 17/20
Customer satisfaction 6.5/10
Account information 6/10
Investment selection 6.5/10
Website 4/5
Total 70/100
Grade B
• No. 6 / ScotiaMcLeod Direct Investing / scotiamcleoddirect.com / Parent: Bank of Nova Scotia
Lowdown: This is the broker that best deploys its library of analyst reports on stocks. There are lists of top stock picks at sister firm Scotia Capital, individual stock reports, daily updates and weekly musings, all of them laid out in an on-line research centre that's a model of its kind. If this turns your crank, then you won't mind putting up with the clunky navigation on the rest of the website, the lack of on-line bond trading and nothing much at all to show how your account is performing.
Bottom Line: A little rough, but likeable.
Report Card
Fees and commissions 15/25
Tools and research 14/20
Trading 15/20
Customer satisfaction 8/10
Account information 6/10
Investment selection 5/10
Website 3/5
Total 66/100
Grade C+
• No. 7 / CIBC Investor's Edge / investorsedge.cibc.com / Parent: Canadian Imperial Bank of Commerce
Lowdown: Investor's Edge is the typical mid-tier on-line broker -- it does most things reasonably well, but stands out in none. Key benefits include a commission schedule that allows you to trade stocks for as little as $25 for market orders, on-line bond and GIC trading, and lots of stock research from CIBC World Markets Inc.
Bottom Line: Not the best, but far from the worst.
Report Card
Fees and commissions 13/25
Tools and research 13/20
Trading 15/20
Customer satisfaction 6/10
Account information 6/10
Investment selection 6/10
Website 3.5/5
Total 62.5/100
Grade C
• No. 8 / RBC Direct Investing / actiondirect.com / Parent: Royal Bank of Canada
Lowdown: The former RBC Action Direct (the name changes officially next month) is a work in progress. Commissions have been cosmetically cut to $28.95 from a sector-leading $29.95, real-time account updates are coming imminently and the selection of research tools is much improved. A highlight is access to reams of equity research from RBC Dominion Securities Inc. and S&P.
Still to do: Add features like personalized account performance reporting that justify the comparatively high commissions.
Bottom Line: On the upswing.
Report Card
Fees and commissions 14/25
Tools and research 16/20
Trading 13/20
Customer satisfaction 4.5/10
Account information 5/10
Investment selection 6/10
Website 3/5
Total 61.5/100
Grade C
• No. 9 / National Bank Direct Brokerage / nbdb.ca / Parent: National Bank of Canada
Lowdown: A somewhat lean but still adequate service for mainstream investors. Research tools are nothing special over all, but NBDB is strong, oddly enough, in the sort of toys that active stock traders might like. For example, it offers a lot of technical analysis through its use of material from a data provider called StockScores. Also, there's a nifty streaming quote and charting tool called Market Matrix.
Bottom Line: Lags the other bank-owned brokers, but not by much.
Report Card
Fees and commissions 14/25
Tools and research 12/20
Trading 11/20
Customer satisfaction 6/10
Account information 6/10
Investment selection 6/10
Website 2.5/5
Total 57.5/100
Grade C-
• No. 10 / Disnat / disnat.com / Parent: Mouvement des caisses Desjardins
Lowdown: Desjardins appears to be lavishing more attention on DisnatDirect, an on-line broker for serious traders, than on the more mainstream Disnat. Still, Disnat is being upgraded to the point where it offers the rudiments of a decent package, including on-line bond trading (coming shortly) and stock research from analysts at Desjardins Securities.
Bottom Line: Like driving a strippo car.
Report Card
Fees and commissions 13/25
Tools and research 11/20
Trading 11/20
Customer satisfaction 8.5/10
Account information 6/10
Investment selection 4/10
Website 2/5
Total 55.5/100
Grade D+
• No. 11 / HSBC InvestDirect / investdirect.hsbc.ca / Parent: HSBC Holdings PLC
Lowdown: HSBC is an international bank, and HSBC InvestDirect offers both global equity research and on-line access to the Hong Kong stock market. So why isn't this broker playing up its international edge instead of trying and failing to be all things to all investors? Just asking.
Bottom Line: It's time to rethink this operation because the status quo is weak.
Report Card
Fees and commissions 13/25
Tools and research 11.5/20
Trading 13/20
Customer satisfaction 3.5/10
Account information 2/10
Investment selection 6/10
Website 1/5
Total 50/100
Grade D-
• No. 12 / eNorthern / enorthern.com / Parent: Northern Securities Inc.
Lowdown: With its $24 minimum commission, eNorthern used to be the on-line brokerage sector's cheap date. Now that E*Trade and Qtrade have lowered commissions below $20, eNorthern's suddenly a mid-price player with a no-frills service.
Bottom Line: Stop by if you want to see what on-line brokers were like in the days when it was enough just to take stock-trading orders from clients.
Report Card
Fees and commissions 15/25
Tools and research 3/20
Trading 7/20
Customer satisfaction 8/10
Account information 2/10
Investment selection 0/10
Website 3/5
Total 38/100
Grade F
