One of the best things about DIY investing is how intense the competition is to cut fees.
Recent examples include a pair of fee reductions in late 2018, one by an online brokerage firm on its stock trading commissions and another by a robo-adviser on its portfolio management fee. Make it a priority in 2019 to compare these new deals against what you pay.
Virtual Brokers has ended a long period of fee stability in the online brokerage business by swapping its $9.99 flat stock-trading commission for a fee of one cent a share, with a minimum charge of $1.99 and a maximum of $7.99. The firm says most stock trades by retail investors are for less than 200 shares, which means $1.99 will be a typical cost.
Once the low-cost leader in online investing with a commission of a penny per share, VB raised the fee to $9.99 a couple of years ago as part of a strategy to move up-market. That left Questrade, with a minimum fee of $4.95, and CIBC Investor’s Edge, at $6.95 flat, at the low end of the commission scale.
VB is promising other improvements to its service, which suggests a heightened level of competition in the next Globe and Mail online brokerage ranking (to be published Feb. 12). VB’s fee schedule includes commission-free trading of mutual funds and bonds, and no commissions on purchases of exchange-traded funds. You pay regular commission to sell.
Competition on robo-adviser fees was stoked this fall, when Questrade Portfolios cut its portfolio management fee cent from as much as 0.7 per cent to 0.25 per cent, and 0.2 per cent for portfolios above $100,000. As shown in The Globe and Mail robo-adviser guide, fees at most firms start around 0.5 per cent.
Expect even more competition on fees in the new year when robo-adviser WealthSimple introduces a stock-trading app for mobile devices with zero commissions. Only non-registered accounts will be available at first, but Wealthsimple Trade bears watching if you simply want to trade stocks and don’t need tools and resources to plan your portfolio or choose investments.