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  (Jori Bolton for The Globe and Mail)

 

(Jori Bolton for The Globe and Mail)

The best, and cheapest, online brokers in Canada Add to ...

The best reason to be a do-it-yourself investor is to cut costs, and the online broker that helps you do that best is Virtual Brokers.

Cost is a huge category in the 15th annual Globe and Mail ranking of online brokers, and VB aces it. Now you understand why this tiny firm that hardly anyone knows about has, for the second year in a row, taken top spot in the annual Globe and Mail ranking of online brokers.

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VB is no one-trick broker. It ticks off several other key boxes in this ranking, including personalized account reporting to show clients how their portfolios are performing and the availability of U.S.-dollar registered accounts.

As a relatively new player in the online brokerage business, VB is still a bit rough around the edges. But over all, it emerges ahead of Qtrade Investor, long a dominant player in this ranking, and other strong options like BMO InvestorLine, RBC Direct Investing and Scotia iTrade. For the first time, the independent firm Questrade has been included with the higher-scoring brokers.

This ranking is designed for mainstream investors, not active traders, so firms are only considered if they offer all types of registered accounts, and a wide variety of investment choices and tools for research, planning and screening. All brokers included here are members of the Canadian Investor Protection Fund (CPIF), which protects account assets of up to $1-million if a broker goes under.

Brokers are evaluated on their online services, not those available by telephone.



Here’s an outline of how brokers are scored

Cost:

Brokers who do well in this category have a low hurdle for clients to qualify for sub-$10 stock trades. Commissions on bonds and mutual funds are also considered, as are administration fees for registered accounts and the availability of commission-free exchange-traded funds.

Account information:

In this category, brokers live or die by the job they do in helping clients gauge how their portfolios are performing over time.

Trading:

Brokers are graded here on the availability of registered accounts that can hold U.S. dollars (many brokers force a conversion into Canadian dollars when clients sell U.S. stocks or receive dividends from such stocks), as well as the trading experience for clients when buying or selling stocks, the range of investment products available online and the number of stocks available for dividend reinvestment plans.

Tools:

This category covers the variety and exclusivity of a broker’s research, financial planning and stock/ETF/mutual fund screening tools.

Innovation:

Shows which firms are leaders in terms of cutting prices and introducing new services, and which are followers.



BMO InvestorLine

Overall letter grade: B

  • Costs: Not a strength, C
  • Account info:Among the best B+
  • Trading: U.S.-dollar RRSPs are available B
  • Tools: Good B
  • Innovation: A strong record in this area B

The best of the bank-owned firms right now over all, InvestorLine subtly tries to raise itself above the small-account riffraff with a $5,000 account minimum (TFSAs and RESPs excepted), the highest of any firm in this ranking. Administration fees for registered accounts are also on the high side for small accounts. Aside from costs, InvestorLine does pretty much everything well. Through its AdviceDirect channel, InvestorLine even offers an advice option. Clients pay 1 per cent of their account assets annually (less for large accounts) in exchange for investing guidance delivered online and through a staff of eight investment specialists. That’s pricey, but possibly a value for DIY investors who would flounder without assistance.

CIBC Investor’s Edge

Overall letter grade: C

  • Costs: Not bad C+
  • Account info: Nobody home D
  • Trading: U.S.-dollar registered accounts unavailable C+
  • Tools: Tons of research from CIBC World Markets and other sources A
  • Innovation: Not a strong suit D

If you have $100,000 in total household business with Canadian Imperial Bank of Commerce (mortgages included), you qualify for a flat rate of $6.95 for online stock trades. For a bank-owned firm, that’s a pretty nifty value. Not a CIBC client? Then there’s little here of interest beyond the excellent library of stock research and one of the few fee-free registered education savings plan accounts in the online brokerage world.

Credential Direct

Overall letter grade: C

  • Costs: Not a leader C+
  • Account info: Good job B+
  • Trading: U.S.-dollar registered accounts unavailable C
  • Tools: A good package B
  • Innovation: None to speak of D

Welcome to Credential Direct’s bizarro world. Credential charges a minimum $19 per stock trade for small accounts, compared with $29 at the bank-owned firms. But while the banks cut your commissions to a flat $10 or so if you have at least $50,000 in your account, Credential gets you down to that price level only if you trade actively. What’s weird here is that Credential is part of a credit union movement that is supposed to represent the interests of Main Street, not Bay Street. So why does it promote the sort of active trading that generates wealth for brokers at the expense of clients? At least Credential has lowered the qualifying threshold for $9.95 commissions to 10 trades within three months from 25 trades.

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Stock Trading Commission Comparison

Here are the online stock trading commissions that would apply in three different transactions. Where multiple prices appear, the first applies to clients with accounts big enough to qualify for commission discounts and the second applies to small accounts (see footnote for details on CIBC Investor’s Edge). Discounts for active trading are not included. Check with individual firms to see how big your account needs to be to qualify for lower commissions.
Firm200
shares
of a
$30 stock
1,200
shares
of a
$20 stock
10,000
shares
of a
$1.50 stock
BMO InvestorLine 9.95/29 9.95/36 9.95/225
CIBC Investor's Edge6.95/9.95/28.95 6.95/9.95/36 6.95/9.95/225
Credential Direct1924200
Disnat (Classic) 9.95/29 9.95/36 9.95/225
HSBC InvestDirect 9.88/28.88 9.88/28.88 9.88/225
Nat'l Bk Direct Brkrge9.95/28.95 9.95/36 9.95/225
Qtrade 9.95/19 9.95/30 9.95/200
Questrade4.959.959.95
RBC Direct Investing9.95/28.95 9.95/36 9.95/225
Scotia iTrade9.99/24.99 9.99/36 9.99/300
TD Waterhouse 9.99/29 9.99/36 9.99/225
Virtual Brokers29.999.99
Notes: Qtrade and Questrade may in some cases charge additional electronic network (ECN) fees; For limit orders placed by clients with less than $50,000, Qtrade charges an additional $4 per trade; Virtual Brokers has three commission plans - the one shown here is called "The Penny"; CIBC charges $6.95 to clients who have $100K in household business with the bank.

Forex Comparison

As part of this year's online brokerage ranking, firms were asked how much they would have charged a client to buy 100 and 1,000 shares of Microsoft at a price of $30 (U.S.) per share. Here's the price quoted by each broker, including foreign exchange charges, effective on the morning of Oct. 1. Stock-trading commissions are not included here.
Firm100 shrs
transaction
cost in C$
1,000 shrs
transaction
cost in C$
BMO InvestorLine3,096.0030,960.00
CIBC Investor's Edge3,144.9031,254.00
Credential Direct3,153.3031,218.00
Disnat3,150.3031,233.00
HSBC InvestDirect3,151.5031,545.34
Nat'l Bk Direct Brokerage3,139.5031,200.00
Qtrade3,117.9031,089.00
Questrade3,158.8231,588.20
RBC Direct Investing3,143.1031,191.00
Scotia iTrade3,148.5031,245.00
TD Waterhouse3,140.4031,194.00
Virtual Brokers3,120.3031,203.00

Interest rates on margin debt

In a margin account, an investor borrows money from his or her broker to buy securities. These are base rates that apply to Canadian-dollar balances; lower rates may apply on larger balances.
FirmRate
BMO InvestorLine4.25%
CIBC Investor's Edge4.25%
Credential Direct5%
Disnat4%
HSBC InvestDirect4.25%
Nat'l Bk Direct Brokerage4.25%
Qtrade4.50%
Questrade6%
RBC Direct Investing4.25%
Scotia iTrade4.25%
TD Waterhouse4.25%
Virtual Brokers4.50%
 

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