Cash. Free trades. An iPad mini. On the surface, discount broker marketing promotions are enticing.
After reading the fine print and checking out the broker's account features, the appeal could fade away. This article looks at several recent broker promotions and the accounts behind them with a view to helping self-directed investors identify the best home for their investment dollars.
Questrade always seems to have one or more promotions on the go. One deal earlier this year offered 100 commission-free stock and option trades (valid for 60 days) and a rebate of transfer fees on new accounts of $10,000 or more maintained for at least six months. Another deal sets out a sliding scale of free trades based on the amount deposited in the account. Questrade offers the lowest commissions in Canada, ample learning to trade resources, an extensive lineup of trading platforms and commission-free ETF purchases. This is a firm that wants clients who trade actively. It also appeals to the cost-conscious average investor looking for low commissions and fee-free RRSPs and RESPs.
Bank of Nova Scotia
The promotional copy for a recent Scotia iTRADE special offer is enticing:
- “100 free trades + iTRADE FlightDesk.”
- “Up to $999 in waived commissions.”
With so many commission-free trades and 60-day free access to the broker's premium trading platform, Scotia iTRADE is clearly on the hunt for clients who are active traders. As with all promotions, there are conditions. In this case, only a new client who opens an account with $15,000 or more qualifies. The free trades must be placed within 60 days.
Alone among the bank-owned discount brokers, iTRADE offers free online trading for a limited selection of ETFs and buck-a-bond commissions, features tailored to cost-conscious investors. Yet, for investors who are not active traders, online equity commissions are an uncompetitive $24.99 per trade unless they entrust at least $50,000 in assets to the Bank of Nova Scotia. By contrast, all trades are less than $10 each at the discount brokerage divisions of the Bank of Montreal, Desjardins, National Bank, Royal Bank of Canada and the Toronto-Dominion Bank.
Cheap borrowing (prime rate minus 1 per cent) for three months for new Canadian margin accounts is yet another promotion targeting the active trader. This one is from National Bank Direct Brokerage, a firm which offers active traders numerous specialized trading platforms, special pricing and even daily swing trading webcasts. To assess the value of this promotion, investors will need to estimate the interest saved based on their trading habits.
Active traders are big profit makers for brokers, which is the reason so many promotions target this group. Still, some firms have their sights trained on other groups of retail investors.
Two recent National Bank special offers play on consumer desires:
- Open a new account and get an iPad mini. (iPad Offer ended on July 31)
- Exchange your MasterCard points for one or more $100 contributions to your brokerage account.
A first-rate account package, not these deals, is the best reason to open an account at National Bank. Besides the aforementioned competitive pricing, clients have access to decent research, educational resources and tools. U.S.-currency registered accounts are available. National Bank is one of the few discounters with the capability to track account return rates, critical for the do-it-yourself investor.
Bank of Montreal
BMO InvestorLine's $250 cashback and 25 free trades promotion applies when $100,000 or more is deposited and maintained in an existing or new account for at least six months. Trades are valid for a 50-day period. Another promotion targeting young investors waives account maintenance fees for new clients until age 36.
BMO's active trader offering is basic, but the broker checks off all the boxes on the list of important account features for the average investor: competitive trading fees, research and educational resources and tools, U.S.-currency registered accounts and individual account performance reports. BMO InvestorLine's strength is serving the mainstream investor.
Virtual Brokers, Qtrade Investor
For a limited time, Virtual Brokers will rebate transfer fees of up to $150 when a client opens a new account and transfers at least $25,000 from another institution. Qtrade Investor offers a similar deal. Refunding transfer fees is almost a cost of doing business. If you plan to move an account, ask the new broker to refund your transfer fees.
Virtual Brokers and Qtrade Investor both offer low administrative fees and commissions, U.S.-dollar RRSPs, respectable resources and tools, and commission-free ETFs. These brokers secured first and second place respectively in the 15th annual Globe and Mail ranking of online brokers. Either firm would be a good choice for a mainstream investor. Both brokers also court active traders with special commission structures and a choice of trading platforms.
Royal Bank of Canada
RBC Direct Investing focuses on the mainstream investor and the result is a very credible offering for this group. There is no time limit attached to its transfer rebate – up to $135 for transfers of $15,000 or more. It offers several ways to avoid paying those pesky RRSP maintenance fees. U.S.-currency registered accounts are standard. The extensive educational resources include personalized learning plans and practice accounts. RBC's account analysis and performance reporting tools are arguably the best of all Canadian direct brokerages.
Every discount broker promotes its business with time-limited special offers. The choice of deals is best early in the year when brokers vie for annual RRSP and TFSA contributions. You can check out the latest offers from all Canadian direct brokerages at Sparx Trading.
Consider any promotion as just the beginning of your quest for a new direct investing account. Finding the right home for your money requires research to confirm that the overall account offering meets your needs.
Ms. Bebee is Canada's independent voice on personal finance and author of No Hype – The Straight Goods on Investing Your Money, a popular book of investing basics for Canadians from a financial industry outsider viewpoint. Through her writing, speaking and teaching, Gail shows people how to take control of their money and achieve their financial goals. Her website is www.gailbebee.com