Never have more storylines been packed into an annual Globe and Mail ranking of online brokers.
Qtrade retakes the top spot after a two-year reign by Virtual Brokers, which dropped to the No. 2 spot by just a narrow margin. TD Direct Investing, a broker heavyweight gone to seed in recent years, is back in shape, and the ambitious independent broker Questrade has climbed still further up the rankings.
The changes at the top were driven by a welcome development in the pricing of stock trades. Most of the brokers owned by big financial institutions now charge a flat rate of just below $10 for all clients, narrowing the distance between themselves and low-cost leaders VB and Questrade. A broker needs to be good at all things to be No. 1 today, and that's why Qtrade has edged back into first place.
One last development is the appearance in Canada of robo-advisers, low-cost online advice firms that are a natural alternative to the entirely DIY experience of using an online broker. A few firms in this ranking have introduced advice options of their own, thereby adding a bit to their scores.
Now in its 16th year, this ranking is designed for mainstream investors requiring access to registered accounts, a wide variety of investments and tools for portfolio planning and researching investments. All brokers included here are members of the Canadian Investor Protection Fund (CIPF), which protects account assets of up to $1-million if a firm goes under.
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How the brokers are scored
Cost: Brokers who do well in this category have all clients paying less than $10 for stock trades. Commissions on bonds and mutual funds are also considered, as are the availability of commission-free exchange-traded funds and maintenance fees for small accounts. With stock trading costs converging across the industry, more emphasis was placed this year on other fees.
Account reporting and maintenance: In this survey, a big emphasis is placed on evaluating the job brokers do in helping clients gauge how their portfolios are performing over time. Also considered is how well brokers help you manage your account by, for example, asking questions via e-mail and providing a long-term database for your account transactions.
The investing experience: Brokers are graded on the availability of registered accounts that can hold U.S. dollars (some brokers still force a conversion into Canadian dollars when clients sell U.S. stocks or receive dividends from such stocks), as well as the trading experience when buying or selling stocks, the range of investment products available online (including an advice option) and the number of stocks available for dividend reinvestment plans.
Tools: This category covers the variety and exclusivity of a broker's research, financial planning and stock/ETF/mutual fund screening tools.
Innovation & design: Shows which firms are leaders in terms of cutting prices and introducing new services, and which are followers. Web design also counts here.
1) Qtrade Investor A
Comments: The good-at-everything broker returns to top spot, despite losing points for adding electronic communications network (ECN) fees to the cost of some stock trades. This is practice is out of synch with this firm's otherwise thoughtful approach of doing the little things right.
2) Virtual Brokers A-
Comments: When $29 stock trading commissions were still common, VB's penny-a-share commission offer was a stunner. Today, it's less of an offset to this firm's modest offering of research tools and lack of polish in other areas. VB is still by far the most aggressive brokers in adding new features and keeping costs low. This year, it added 50 new funds to its list of commission-free ETFs and removed some annoying account admin fees. Efforts are also being made to improve customer service.
3) BMO InvestorLine B+
Comments: BMO InvestorLine is a superior online broker that always contends for top spot in this ranking, but hasn't led since 2005. To potentially get over the hump, BMO should add commission-free trading of exchange-traded funds. It's a natural move for BMO, which happens to run a large and fast-growing family of ETFs.
4) Questrade B+
Comments: Another year, another move higher in the rankings for this aggressive independent broker. By adding personalized account reporting, Questrade addressed its biggest shortcoming. Now, it needs to add beef up its research offerings and take the kinks out of its website navigation. Note: ECN fees may be added to commissions for some trades.
5) RBC Direct Investing B
Comments: Kudos to the gang here for leading the trend to flat sub-$10 trades. Now, could that same generosity of spirit be directed toward adding commission-free ETFs and re-introducing Mawer mutual funds to the product shelf (these funds don't pay commissions to brokers that sell them)? Overall, RBCDI has been an upper-tier player in this ranking for years now.
6) Scotia iTrade B
Comments: One glaring deficiency fixed, one to go. As of Dec. 5, Scotia iTrade was to begin offering personalized reporting of account performance. U.S.-dollar RRSPs? Maybe in the second half of 2015. While you wait, enjoy a client website that contends for best of breed and a generously stuffed library of stock and ETF research.
6) TD Direct Investing B
Comments: TD returns to the upper echelon by addressing two flaws that really stood out for a broker of its size and influence. Excellent account reporting tools are now available, and U.S.-dollar RRSPs were to be in place by early December 2014. There's room for TD to move higher if it finishes the job of modernizing a website that still parties like it's 1999.
7) National Bank Direct Brokerage B-
Comments: At some point in the last couple of years, NBDB decided to stop going through the motions and get serious. It now offers a well-rounded service for DIY investors, and an online advice option called InvestCube. You get a portfolio of ETFs and automatic rebalancing for an all-in cost in the area of 1 per cent. Not cheap, but beats owning a portfolio invested in do-nothing cash.
8) CIBC Investor’s Edge C
Comments: CIBC showed some spunk by undercutting the other bank-owned brokers on stock commissions with a flat charge of $6.95, but the lack of proper account reporting and U.S.-dollar RRSPs mean serious demerits. Strong on stock research, though.
9) Credential Direct C
Comments: Long resistant to joining the trend to cheaper stock-trading commissions, Credential has buckled and introduced a flat charge of $8.88 for all customers. Bravo on that. Now, it's time to introduce U.S.-dollar RRSPs and jazz up the painfully bland website.
10) Disnat Classic C-
Comments: Covers all the bases, but other firms shine brighter in most areas.
11) HSBC InvestDirect F
Comments: Falling further and further behind on costs and features.
As part of his annual ranking of online brokers, Globe and Mail personal finance columnist Rob Carrick asks each brokerage firm to fill out a questionnaire covering all aspects of its service for clients. This year, Globe Unlimited subscribers are invited to look at the responses that each broker sent back.
(These are excel files, best viewed on desktop or through your mobile browser. Globe app users click here and follow the links to the spreadsheets)
2014 Online Broker Rankings
Editor's note: The cost of buying $15,000 (U.S.) at online broker Credential Direct on the morning of Oct. 6 was $17,050. Incorrect information supplied by the firm appeared in the forex comparison table originally published Nov. 26.