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Canada’s big banks have held the line on service improvements while competition heated up, says Glenn LaCoste, founder and president of the online financial-services analyst Surviscor.Glenn Lowson/The Globe and Mail

Remember when Toronto-Dominion Bank, the Bank of Montreal and their ilk dominated the online discount brokerage game? Those days are long gone.

A new survey from the online financial-services analyst Surviscor finds the smaller independent brokers are dominating the business, and the old stalwarts are stepping aside.

In a field of 13 players, TD Direct Investing (formerly TD Waterhouse) – once the undisputed online brokerage leader – has come in a distant sixth just ahead of RBC Direct Investing.

CIBC Investor's Edge, National Bank Direct and Laurentian Bank Direct all dwell at the bottom.

Surviscor founder and president Glenn LaCoste says the big banks have held the line on service improvements while competition heated up.

"Those smaller firms – the new up-and-comers – have to do a lot, and have to impress a lot of people to get them to change. The banks are very set in their ways and are not too worried about losing clients."

Mr. LaCoste says the banks' strategy has been to focus on long-time brokerage customers who also use their traditional banking services. "I think the banks are meeting people's expectations. I don't think those bank clients expect a lot," he says.

That strategy has resulted in a big payoff for one of the banks: Bank of Nova Scotia. Its Scotia iTRADE ranked second in the survey by effectively integrating its online services. "It's a one-stop shop. You can pay bills and see your credit cards from your brokerage account," says Mr. Lacoste.

He points out Scotia iTRADE's biggest weakness was costs, but he says that doesn't seem to matter for a typical bank customer who doesn't make a lot of trades. "Their pricing is not aggressive for the person who doesn't trade, because their costs are the highest," he says.

The survey ranks online discount brokers on aspects such as usability, mobile accessibility, research tools, customer service and – of course – costs. Mobile and up-to-the-second data are musts among the growing ranks of millennial investors.

The top spot went to Qtrade Investor, which moved up two positions from last year's survey. It replaced BMO InvestorLine, which previously ranked No. 1 for three consecutive years.

Mr. LaCoste says having a smaller customer base allowed Qtrade to be more flexible and aggressive in making service upgrades. "Their service levels are through the roof," he says.

Service was the only individual category where Qtrade ranked first, but it managed to rank high in every other category as well. "They just do about everything right, almost up to that top bar," he says.

Questrade ranked third, its highest showing in the survey's 11-year history.

Virtual Brokers ranked fifth over all but was the biggest mover from last year's survey, advancing four positions.

The discount brokerage battles were most intense when it came to fees. The $30 trade has given way to a standard $10 trade, and just a few dollars in some cases. Mr. LaCoste warns that many of those low fees have strings attached in the form of monthly trading minimums or data packages.

"If you're going to pay that low trading fee, you're probably going to have a monthly fee for data," he says. "You're going to pay for that 'trader look,' like those four screens all moving fast. They all charge for them."

Another step forward for online discount brokerages, Mr. LaCoste says, has come in the way the trading experience has been customized to the individual user. Instead of forcing clients to use a standard template, many of the independent brokerages tailor their platforms to suit needs.

"You get the best of both worlds. You have the ability to have the product somewhat managed and you get a sense of security when you sign in and see your name and your profile," he says.

The survey isn't all positive. It found overall service levels to be the worst in five years.

For the first time since 2006, for instance, the discount brokerage industry response time to customer inquiries lagged the banking industry, at a time when the banks made no improvements to response times. The survey found the average response time was 40 hours, compared with 26 hours in 2015 and 18 hours in 2012.

In terms of trends, the survey singles out the growing popularity of automated investing, or robo-advisories, as computer-savvy millennials try to save on costs by trusting their investment decisions to algorithms. Investors provide personal information relating to savings goals, lifestyle expectations and risk tolerance, and the system directs them to corresponding exchange-traded funds (ETFs).

Robo-advisers don't provide much beyond basic account management. Mr. LaCoste doesn't see robo-advisers as much of a threat to full-service discount brokers because investors will always be willing to pay for the personal touch.

"I would stack up any of these managed portfolios against any one of them for a personal, customer experience."

The rankings

Customer satisfaction rankings of Canadian online brokerages in 2016 from analysis firm Surviscor:

  • Qtrade Investor – 87%
  • Scotia iTRADE – 78%
  • Questrade – 77%
  • BMO InvestorLine – 76%
  • Virtual Brokers – 76%
  • TD Direct Investing – 72%
  • RBC Direct Investing – 71%
  • Credential Direct – 69%
  • Desjardins Online – 68%
  • CIBC Investor’s Edge – 63%
  • National Bank Direct – 60%
  • HSBC InvestDirect – 53%
  • Laurentian Bank Direct – 37%