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rob carrick

Picking the wrong online broker is one of the more expensive mistakes rookie investors can make.

Like virtually all investment firms, online brokers will apply a fee when clients move their accounts to other company. The charge is typically deducted from the cash in the account before money is moved to the new firm. As part of my latest ranking of online brokers, I asked each firm to provide the transfer-out cost for cash and registered accounts. The charge ranged from as little as $125 to as much as $150.

In a large account, these fees can be absorbed without much impact. But in a small starter account with, say, $5,000 in it, a $150 transfer-out fee represents a hefty 3 per cent hit. Keep in mind that in this slow-growth era, diversified portfolios are only expected to make 5 to 6 per cent on an average annual basis. Paying this fee is worth it if moving your account to a new firm will put you on a better path to investing success. A better plan is to make sure you're ready to invest for yourself at an online broker, and then put some effort into choosing the right firm.

You need to have the time, the interest and the knowledge to run your account online. You need the confidence to put your money to work instead of letting it sit in cash, and you need to diversify and not depend on a few stocks you think are winners. Exchange-traded funds are a good portfolio-building tool for all ages because they're very cheap to own and transparent in what they hold. Most brokers will charge you a commission to buy and sell ETFs, typically a bit below $10.

In terms of picking a broker, rookie investors should look out for:

-Minimum account requirements: They range from zero to $5,000

-Account maintenance fees: Often $25 per quarter unless you meet certain qualifications like making regular investments or completing a set number of trades

-Inactivity fees: May apply if you leave money sitting in cash for extended periods

-The website and mobile app: Are they helpful in managing your account effectively?

Familiarize yourself with a broker before starting an account and you'll avoid paying up to $150 to extricate yourself from a bad choice.

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The cost of freedom

Online brokers charge these fees to clients who are moving accounts to other firms

BrokerAccount transfer-out fee
BMO InvestorLine$135
CIBC Investor's Edge$135
Credential Direct$125
Desjardins Online Brokerage$125
HSBC InvestDirect$135
National Bank Direct Brokerage$150
Qtrade$150
Questrade$150
RBC Direct Investing$135
Scotia iTrade$150
TD Direct Investing$135
Virtual Brokers$150