Rob Carrick is the author of The Globe and Mail's annual ranking of online brokers. He took your questions on this year's results (see full coverage here) and how to choose the right online brokerage in a live discussion Wednesday.
Competition in the industry is fierce. Never has it been cheaper or easier for do-it-yourself investors to use online brokerage accounts. Whether you've never tried direct investing or you're an old pro, Rob will offer tips and advice on how you can become a better online investor.
A full transcript follows:
Darcy Keith - Good morning everyone, and welcome to this live discussion on online brokers with Rob Carrick. I'm Darcy Keith, an editor with Globe Investor.
Darcy Keith - We're doing this chat after revealing earlier this week our 13th annual online broker rankings. You can read the main story at this link
Darcy Keith - And check out the entire package of stories here
Darcy Keith - We'll be starting is just a few minutes. But feel free to start submitting your questions now. We'll be happy to take questions on this year's ranking, as well as more general questions on using online brokers
[Comment From Dave Hook]
Presently with Questrade because of such holdings, and checking TD Waterhouse, who say they have a no-echange commission scheme involving US money market to handle such trades, but no mention I could find on website of how this works. Do you know?
Rob Carrick - Hi Dave. I take it you're talking here about US$ RRSPs, where a broker lets you keep U.S. dollars in an RRSP account instead of automatic forced conversions into C$. Questrade was one of the first to offer this, and now Qtrade, Virtual Brokers, BMO InvestorLine and RBC Direct Investing do, too. TDW has a work-around for this that I would classify as a so-so solution. Investors who have significant holdings of US stocks or ETFs in their RRSPs would be better served with US$ RRSPs.
[Comment From bob]
For active traders ...TD would be the best...not Qtrade?
Rob Carrick - Hey, Bob. The focus in my online brokerage ranking has always been on mainstream investors rather than active investors, but I can tell you that all brokers offer commission cuts and enhanced trading platforms for heavy traders. A short list of brokers I'd check out if I was an active trader includes: Questrade, Virtual Brokers, TDW and Scotia iTrade. If you're investing outside a registered account, you should also take a look at Interactive Brokers. I don't include them in my ranking because they strictly cater to active traders, not mainstream investors. But the word of mouth I get on IB is terrific.
[Comment From YUP-Investor]
I'm in financial services industry and therefore I'd classify myself as a rather sophisticated investor. I have access to a lot of information and resources (in terms of research & analysis). I guess my main selection criteria are execution speed, simplicity of use, and costs (including tax efficiency & transaction cost). I was wondering if you guys can make some recommendations. Thanks!
Rob Carrick - YUP, Questrade and Virtual Brokers are two choices that immediately come to mind because they easily let you choose the electronic network through which to route your equity orders. Sophisticated traders like this option because a better trade execution can be a money saver. Questrade and VB also have very low commissions that don't require you to reach a certain trading quote every quarter or have a set dollar value in your account.
[Comment From Bruce]
Hi Rob, I have your "Good Bad..." book in front of me right now. Two questions:
Rob Carrick - Hey Bruce, looks like your question got filed in takes, so let me recap for viewers. The first question is when will I update my 2009 book, Rob Carrick's Guide to What's Good, Bad and Downright Awful in Canadian Investments Today. Answer: Not sure. I'm just finishing off my next book, which is a personal finance guide for adults that -- if you'll permit me a moment of self-promotion - will be available in March. It's called HOW NOT TO MOVE BACK IN WITH YOUR PARENTS, The Young Person's Complete Guide to Financial Empowerment.
Second question: Is it easier to change brokers to save on fees, or bug your existing broker to lower its fees? Answer: Switch, man, switch.
[Comment From Rob]
Mr. Carrick: Regarding the online broker survey, which online broker offers the best MARGIN RATES, for balances 25-250 K.
Rob Carrick - I did not survey margin rates specifically, but this information should be easily found on the public website of any broker. Note that a large size account might just be eligible for better rates.
[Comment From Ronald (Surrey)]
What are the difficulties in moving all your investments from one broker to another? Is there a broker more suitable for those with less than 50K to invest?
Rob Carrick - Ronald, it couldn't be easier to switch brokers. Just find a new firm and download some account transfer documents. Fill them out, send them in along with a copy of a statement from your existing account and then wait a few weeks. That's about it. Have less than 50K to invest? At Virtual Brokers you pay 1 cent per share, minimum 99 cents. It doesn't get cheaper than that. Questrade charges a minimum of $4.95. After that, your cheapest options for stock trading are Scotia iTrade, Qtrade and Credential Direct at around $20 a trade. If you have a registered account with less than $15K to $25K, then consider VB, Questrade and iTrade because they have no annual admin fees.
Rob Carrick - Sebastian, I think you're right on the money in looking at buying the TD e-series of index funds through TDW. These are ultra-low cost index funds that are great for building a sound, long-term portfolio. Couch Potato strategies -- basically buy and hold portfolios of index funds or exchange-traded funds -- are very sensible both for newbies and experienced investors.
[Comment From Guest]
I'm interested in beginner "learn the fundamentals" courses, I know it's off topic, but can you recommend?
Rob Carrick - Many online brokers offer seminars where clients can gather in person to hear talks on all kinds of investing topics, while others are making webinars available online. Check with your broker to find a session near you.
[Comment From scott]
My banking accounts are all with TD. What are your biggest gripes about TDW? (I wont be an active trader, just diy rrsp)
Rob Carrick - Hi Scott. TDW ranked 7th out of 12 brokers in my survey, which is to say I found them just fine but not top tier. It could be that I'm extra tough on TD, given that it's the online investing heavyweight. Most clients, longest history in the biz and such. Specifically, I'm a bit mystified as to why they haven't done like many of their competitors and inegrated tools to show clients how their accounts are performing. I'm talking about annualized returns, returns since inception etc. Second, TD hasn't yet introduced US$ RRSPs (see above for details. Also, TD's website for clients is kind of aged looking, and it's pricing is typical of bank-owned firms, which is to say it's not cheap. All of this said, TD runs a very solid shop and I don't think you'd end up kicking yourself if you kept your online brokerage trading in the TD family.
[Comment From walter]
which broker would be best for buying euro stocks and bonds?
Rob Carrick - TD Waterhouse a year or so ago introduced online trading of stocks listed in London, Sydney, Brussels, Paris, Frankfurt, Hong Kong, Milan, Amsterdam, Singapore and Madrid. That would be your best option.
[Comment From Jackie]
You indicated that ScotiaMcLeod Direct Investing will be merged with Scotia iTrade within months. I'm pretty sure you indicated something similar in last year's rankings, and I have stayed with Direct Investing rather than transferring my account to a new broker because of this. Is your source reliable? ScotiaMcLeod is giving customers no indication that it intends to merge the two brokers, and instead have been announcing new features and commissions for Direct Investing clients. I am interested in the no commission ETF option that iTrade offers, but I am wondering if the merger will ever happen, or will Direct Investing customers always be at a disadvantage for staying.
Rob Carrick - Jackie, it kind of stinks the way Scotiabank has been treating SMDI clients like second-class citizens. Suggest you call up SMDI and tell them your situation. Say you want the no-commission deal that Scotia iTrade offers and you want to know how long it's going to take until the two firms are merged. If you don't get a straight answer, call up iTrade and say you want to transfer your account. I can't see any reason to stay at SMDI, which at its best was never a top-tier broker.
[Comment From Johnathan]
Hi Rob - You always talk about discount brokers - what is your take on full service brokers and reviews on them
Rob Carrick - Great question, Johnathan. My comment on full-service brokers is that they work on a client-adviser basis, where costs and services very much depend on the arrangement struck. Bottom line, it's very tough to evaluate full-service firms in an apples-to-apples type of comparison.
[Comment From New Investor]
I'm interested in opening a trading account and would like to start trading soon. How long does it usually take to open an account before I can trade?
Rob Carrick - Yo, newbie. It takes as little as 24 hours to get an account up and running, depending on the broker. Many brokers now have account apps you complete and file online, and then follow up with paper sent through the mail. The big logistical issue will be how you fund your account. Things are much simpler if you use a broker that is part of the same family as your bank.
[Comment From Andy]
As a novice trader, I was thinking to sign-up with VB but am a little hesitant due to their small size and inexperience. Any further insight into VB?
Rob Carrick - Andy, that's shrewd. I ranked Virtual Brokers second, largely on the strength of its outstandingly low commissions and fees, but it is a new and very small firm that has not yet started being mentioned in customer satisfaction surveys. The top guy at VB is very ambitious and aggressive - he truly wants VB to be a much bigger player than it is now. Can I make a suggestion? How about starting small with VB and seeing how it goes. If you're not happy after six months, you can bail.
[Comment From Jim Roxburgh ]
I am an income investor using RBC Direct Investing. Find the research is well orgainized as is the investment availablity. The question I have is in today's environment, with high volatility, there are not the tools to limit downsides and capitalize on 1-3% capital gains at RBC DI. Specifically the BMO platform or other have better trading mechanisms. I consolidate all my accounts in one on line broker. On a larger scale, do you ever make money with rapid trading? My conclusion is this is not the place for income investor to be operating.
Rob Carrick - Jim, it sounds like you're referring here to RBC Direct Investing's lack of trailing stop orders, which trigger a sell order when your stocks fall by a pre-set percentage. BMO InvestorLine does in fact offer trailing stops, which I do see as a very good tool for managing the downside in a portfolio during volatile times. As for rapid trading, it see it as a means of rapid impoverishment unless you are good at it.
[Comment From chris]
Virtual broker 1 cent per share, minimum 99 cents does it include ecn fees
Rob Carrick - Best deal in online investing today, Chris. But, as I asked in my ranking, can Virtual Brokers make any money offering trades this cheap?
[Comment From Dan]
Other than iTrade, you don't seem high on the bank direct investing options. is price the biggest reason?
Rob Carrick - Hi Dan. I should add that BMO InvestorLine consistently scores well in my ranking, and that other bank owned firms have showed well in previous years. Price is a big reason why the bank firms sometimes lag, and so is complacency. I find the bank owned firms tend to make improvements in fits and starts, whereas #1-ranked Qtrade offers me a long list every year of improvements it has made.
[Comment From Jeremy]
@Ronald - re transferring accounts. Difficulties may lie in if you are attempting to transfer securities or positions that your new broker cannot hold (small businesses or specially licensed funds. for examples) Ideally take your statement to your new broker and confirm that they can accept hold those positions before initiating the transfer process. If they cannot, you can speed up the process by selling those beforehand
Rob Carrick - Good idea, Jeremy, thx.
[Comment From Ottawa Lad]
How difficult and how costly is it to set up a DRIP through the various online brokers? I'd prefer an actual company DRIP rather than the broker run variety.
Rob Carrick - OL, I actually covered DRIPs for online brokerage clients in a recent Portfolio Strategy column. Here's a link: http://www.theglobeandmail.com/globe-investor/investment-ideas/portfolio-strategy/building-wealth-a-drip-at-a-time/article2218024/
[Comment From bob]
Is the buck a bond at itrade a good deal ? or will the spreads make it a bad trade?
Rob Carrick - Bob, first let me explain to people what the buck a bond deal is at Scotia iTrade (and Qtrade). Basically, it eliminates the commission brokers lard into the prices they charge clients for bonds. Clients get the "wholeale" price for the bond plus a flat, fully disclosed commission of $1 per $1,000 worth of bonds purchased, with a $20 miminum. I did a comparison of bond prices just after iTrade intro'd this feature and I found it did make a difference. Frankly, online brokers take advantage of clients buying bonds with those invisible commissions.
[Comment From Genevieve]
I'm mostly a DRIP investor, and I currently take a huge hit (about $80 for commision and cost of issuing paper share) for the purchase of the first share that is required to be enrolled in the DRIP. The big bank brokerages charge a lot for this, and I'm wondering if there is a benefit to buying the initial share from a discounted broker, or better yet do any of these discounted brokers offer DRIPs for fractional shares?
Rob Carrick - Genevieve, let me refer you to the link I included above to a recent column on DRIP investing for online brokerage clients. You'd probably pay less than $80 to buy a share and have it delivered to you in paper form (this is needed to set up a direct DRIP with a company). If you do a DRIP with a broker, you cannot buy fractional shares.
[Comment From Lee]
Does any broker offers performance or rate of returns calculations?
Rob Carrick - Lee, BMO InvestorLine, RBC Direct Investing, Qtrade and National Bank Direct Brokerage all give you the means to find rates of return for your portfolio over varous timeframes. I consider this to be a huge benefit. How can you invest effectively for the long term if you don't know how your investments are performing?
[Comment From Guest]
I'm a recently retired, ex-CFP from the US. I now live in Toronto and am interested in moving my registered, US dollar accounts from the US to a Canadian on-line brokerage account that I would manage myself. Question is - does having US dollar accounts complicate things and do some brokers offer broader US based investment options? Thank you.
Rob Carrick - It's pretty much standard for Canadian online brokers to offer U.S. cash accounts, but you may run into issues trying to transfer the U.S. accounts to Canada. Don't do a thing before talking to a broker first.
[Comment From Lee]
Rob - Do you have market metrics on these brokers? i.e. market shares, number of online accounts, etc.
Rob Carrick - Lee, go to the version of the survey we published in the paper yesterdday and look at the customer satisfaction survey we included. The proportional breakdown of respondents for each firm will give you an indication of its market size.
[Comment From Norm]
I use RBC Direct Investing mainly because I feel its safer to deal with the big banks. A company like Qtrade how safe are my investments there, are they also the trustee?
Rob Carrick - Norm, i'm glad you asked this question. Each brokerage firm in my ranking is a member of the Canadian Investor Protection Fund, which insures client accounts for up to $1-million if a brokerage firm goes bust.
[Comment From Bruce]
Curious also about whether VB pays the transfer fees if you transfer from another broker.
Rob Carrick - Bruce, it never hurts to ask.
Darcy Keith - And with that, we'll have to wrap it up for today.
[Comment From Dale]
I'd like to comment on Andy's request. I don't know anything about VB but given the low commissions, its worth giving it a try. Learn from your mistakes at a low commission cost and then when your ready, move to another firm where you will undoubtedly run into higher commission costs. As a novice or beginner trader, trading small lots and low commissions is very very important.
Rob Carrick - Good advice, Dale, thx.
Darcy Keith - thanks for joining us everyone - we hope this has been useful. ...
Darcy Keith - Next week, we'll feature another live chat on online brokers, this one with Gail Bebee
Rob Carrick - Just wanted to say thanks to all for tuning in. I take questions 24-7 on my Facebook page, http://www.facebook.com/robcarrickfinance?sk=wall.
Stop by any time.
Darcy Keith - Here's the link to next week's chat: http://www.theglobeandmail.com/globe-investor/2011-online-broker-rankings/how-to-become-a-better-do-it-yourself-investor/article2235774/
Darcy Keith - thanks Rob!
Darcy Keith - Bye everyone
Send questions and feedback to OnlineBrokers@globeandmail.com