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Online broker survey: Qtrade wins again Add to ...

Investors have the online brokerage business right where they want it.

To start with, stock-trading commissions are plunging. After years of being stuck in the $24 to $29 range, more and more brokers are charging just under $10 as long as your accounts have at least $50,000 to $100,000 in total assets. At the same time, these firms are giving clients more for their money with better tools for finding investments and managing their accounts.

Pay less, get more. The brokers that best followed this line are the front-runners in the 2007-08 version of The Globe and Mail's annual ranking of online brokers. Qtrade Investor takes top honours for the second year in a row after chopping commissions and revamping its research offerings. E*Trade Canada, TD Waterhouse, BMO InvestorLine and Credential Direct filled out the other top spots.

A total of 14 brokers were included in this year's ranking, including a pair of newcomers called Questrade and TradeFreedom. As always in this ranking, the focus is strictly on online services and the target audience is the mainstream investor who has a registered retirement account and is interested in more than stocks.

A total of 14 brokers were included in this year's ranking, including a pair of newcomers. Questrade is a small independent firm, while TradeFreedom has just been acquired by Bank of Nova Scotia. As always in this ranking, the focus is strictly on online services and the target audience is the mainstream investor who has a registered retirement account and wants the option of using bonds and mutual funds as well as stocks.

Costs and fees are a key criterion in this year's ranking because investors rate it as their top concern when choosing a broker. That bit of intelligence comes from an online survey we ran on Globe and Mail websites last month in which participants were asked to choose what issue matters most to them in choosing an online broker. The other rating criteria are the following.

Customer satisfaction: Based on replies to three questions in our online survey about customer perceptions of their broker.

Tools and research: An evaluation of resources for choosing securities and also for broader financial planning matters such as asset allocation.

Website utility: Does a broker's website help you save time and effort in managing your money?

Website security: A guarantee that clients won't lose money if a hacker accesses their account gets a broker an easy five points in this survey.

Trading: Focuses mainly on how efficient a broker's stock-trading platform is; bonds and funds are also considered.

Trading scores were tweaked slightly to address one of the most contentious issues for online brokerage customers today: the treatment of U.S. cash in registered retirement accounts. The background here is that online brokers don't yet have computer systems capable of allowing clients to hold U.S. cash in registered accounts. Net result: investors can be repeatedly dinged on foreign exchange fees when they trade U.S. stocks.

To help alleviate this problem, a few brokers allow U.S. cash to be channelled in and out of U.S.-dollar money market funds without any currency conversion. Many brokers also offer wash trades, which reduce foreign exchange costs on U.S.-dollar buy and sell orders made in a single day.

Rank Broker Fees & Comm Trading Tools & Research Customer Sat. Website/ Acct. info Inv. Selection Security Total
    (/25) (/25) (/20) (/10) (/10) (/5) (/5) (/100)
1 Qtrade Investor 19.0 19.0 16.0 10.0 8.5 4.0 5 81.50
2 E*Trade Canada 23.5 20.0 14.5 6.4 6.5 3.0 5 78.90
3 TD Waterhouse 17.5 17.0 17.0 7.2 4.8 4.0 5 72.45
4 BMO InvestorLine 17.5 17.5 14.0 4.8 9.8 3.5 5 72.05
5 Credential Direct 16.0 14.0 15.0 8.8 8.8 2.5 5 70.05
6 RBC Direct Investing 17.5 14.5 17.0 2.8 5.3 3.0 5 65.05
7 ScotiaMcLeod Direct Investing 11.0 18.5 15.0 3.6 4.8 1.5 5 59.35
8 Questrade 23.5 13.0 8.0 10.0 2.8 1.0 0 58.25
9 TradeFreedom 22.0 15.0 6.0 6.4 5.0 1.5 0 55.90
10 Disnat 11.0 16.0 11.5 6.0 6.0 3.0 0 53.50
11 CIBC Investor's Edge 14.5 13.5 13.0 5.2 4.3 3.0 0 53.45
12 National Bank Direct Investing 10.5 13.0 13.0 2.4 4.3 3.0 5 51.15
13 HSBC InvestDirect 11.5 16.0 13.0 2.8 4.0 2.5 0 49.80
14 eNorthern 11.5 12.0 3.0 8.0 3.0 1.0 0 38.50
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