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Investors have the online brokerage business right where they want it.

To start with, stock-trading commissions are plunging. After years of being stuck in the $24 to $29 range, more and more brokers are charging just under $10 as long as your accounts have at least $50,000 to $100,000 in total assets. At the same time, these firms are giving clients more for their money with better tools for finding investments and managing their accounts.

Pay less, get more. The brokers that best followed this line are the front-runners in the 2007-08 version of The Globe and Mail's annual ranking of online brokers. Qtrade Investor takes top honours for the second year in a row after chopping commissions and revamping its research offerings. E*Trade Canada, TD Waterhouse, BMO InvestorLine and Credential Direct filled out the other top spots.

A total of 14 brokers were included in this year's ranking, including a pair of newcomers called Questrade and TradeFreedom. As always in this ranking, the focus is strictly on online services and the target audience is the mainstream investor who has a registered retirement account and is interested in more than stocks.

A total of 14 brokers were included in this year's ranking, including a pair of newcomers. Questrade is a small independent firm, while TradeFreedom has just been acquired by Bank of Nova Scotia. As always in this ranking, the focus is strictly on online services and the target audience is the mainstream investor who has a registered retirement account and wants the option of using bonds and mutual funds as well as stocks.

Costs and fees are a key criterion in this year's ranking because investors rate it as their top concern when choosing a broker. That bit of intelligence comes from an online survey we ran on Globe and Mail websites last month in which participants were asked to choose what issue matters most to them in choosing an online broker. The other rating criteria are the following.

Customer satisfaction: Based on replies to three questions in our online survey about customer perceptions of their broker.

Tools and research: An evaluation of resources for choosing securities and also for broader financial planning matters such as asset allocation.

Website utility: Does a broker's website help you save time and effort in managing your money?

Website security: A guarantee that clients won't lose money if a hacker accesses their account gets a broker an easy five points in this survey.

Trading: Focuses mainly on how efficient a broker's stock-trading platform is; bonds and funds are also considered.

Trading scores were tweaked slightly to address one of the most contentious issues for online brokerage customers today: the treatment of U.S. cash in registered retirement accounts. The background here is that online brokers don't yet have computer systems capable of allowing clients to hold U.S. cash in registered accounts. Net result: investors can be repeatedly dinged on foreign exchange fees when they trade U.S. stocks.

To help alleviate this problem, a few brokers allow U.S. cash to be channelled in and out of U.S.-dollar money market funds without any currency conversion. Many brokers also offer wash trades, which reduce foreign exchange costs on U.S.-dollar buy and sell orders made in a single day.

Rank Broker Fees & Comm Trading Tools & Research Customer Sat. Website/ Acct. info Inv. Selection Security Total
    (/25) (/25) (/20) (/10) (/10) (/5) (/5) (/100)
1 Qtrade Investor 19.0 19.0 16.0 10.0 8.5 4.0 5 81.50
2 E*Trade Canada 23.5 20.0 14.5 6.4 6.5 3.0 5 78.90
3 TD Waterhouse 17.5 17.0 17.0 7.2 4.8 4.0 5 72.45
4 BMO InvestorLine 17.5 17.5 14.0 4.8 9.8 3.5 5 72.05
5 Credential Direct 16.0 14.0 15.0 8.8 8.8 2.5 5 70.05
6 RBC Direct Investing 17.5 14.5 17.0 2.8 5.3 3.0 5 65.05
7 ScotiaMcLeod Direct Investing 11.0 18.5 15.0 3.6 4.8 1.5 5 59.35
8 Questrade 23.5 13.0 8.0 10.0 2.8 1.0 0 58.25
9 TradeFreedom 22.0 15.0 6.0 6.4 5.0 1.5 0 55.90
10 Disnat 11.0 16.0 11.5 6.0 6.0 3.0 0 53.50
11 CIBC Investor's Edge 14.5 13.5 13.0 5.2 4.3 3.0 0 53.45
12 National Bank Direct Investing 10.5 13.0 13.0 2.4 4.3 3.0 5 51.15
13 HSBC InvestDirect 11.5 16.0 13.0 2.8 4.0 2.5 0 49.80
14 eNorthern 11.5 12.0 3.0 8.0 3.0 1.0 0 38.50
  1. 1

    Qtrade Investor

    qtrade.ca

    Ownership

    Privately held

    Comments

    Qtrade is what you might end up with if you built an online brokerage by adopting the best features and practices of all the competitors in the sector. The net result is a low-cost broker that does things right on matters big and small. Qtrade has lots of stock research, it's much better than most at showing you how your portfolio is doing, it removes any worries about hackers getting into your account with a security guarantee and it allows clients trading U.S. stocks to stash their cash in U.S.-dollar money market funds. Last word: Qtrade's customers seem to love the service.

  2. 2

    E*Trade Canada

    canada.etrade.com

    Ownership

    E*Trade Financial Corp.

    Comments

    E*Trade used to fancy itself a service for aggressive traders, and it still puts a lot of importance in this market. But in many ways, E*Trade is the friend of the mainstream investor who only trades occasionally, and even beginners. You can trade for $9.99 flat if you have $50,000 in assets with the firm or make at least 30 trades per quarter; otherwise, the minimum charge is a reasonable $19.99. There are no fees of any kind for registered accounts and all funds are commission-free. Looking for a high-interest savings account to park some cash? E*Trade's Cash Optimizer Investment Account now pays an impressive 4.15 per cent.

  3. 3

    TD Waterhouse

    tdwaterhouse.ca

    Ownership

    Toronto-Dominion Bank

    Comments

    After years of clinging to its $29 minimum commission, TD became a cost-cutting leader among bank-owned firms last month by introducing stock trades for a flat $9.99 if you have $100,000 in any number of accounts with the firm (with less you pay, you guessed it, $29). Couple this price cut with TD's ever-solid trading platform and you have a pretty strong package. What would make it better is more attention to small things like showing clients how their portfolios are doing. Note: TD's in the minority of brokers that let clients direct cash from U.S. stock trades in into U.S.-dollar money market funds without conversion fees. In light of its dominant market position, TD's customer service score is notable.

  4. 4

    BMO InvestorLine

    bmoinvestorline.com

    Ownership

    Bank of Montreal

    Comments

    BMO has been among the top-ranked brokers since this survey began in 1999 and the reason is that it has a unique vision of helping clients invest successfully, even while not providing any advice. Just recently, a feature called MyLink has been introduced to send reminders to clients about developments they need to attend to in their portfolios. BMO is also a leader in account performance reporting and in helping clients build portfolios of mutual funds and exchange-traded funds to suit their needs. BMO is improving on costs now that it has announced it will emulate TD's commission cut starting Nov. 1.

  5. 5

    Credential Direct

    credentialdirect.com

    Ownership

    The credit union movement

    Comments

    The credit union bloodline is evident in Credential through its user-friendly website, reasonable fees and well-satisfied clients. It's also apparent in the sometimes bland look of Credential's website and its lack of resources and tools that would get sophisticated investors excited. So big deal. This is a broker that offers an unflashy but well-rounded service ideal for the masses. Much like credit unions.

  6. 6

    RBC Direct Investing

    rbcdirectinvesting.com

    Ownership

    Royal Bank of Canada

    Comments

    A broker on the rise, even if it's still in the middle of the pack. RBC is building a premier stock research centre, and it has introduced a new low-fee class of mutual fund in the RBC family for do-it-yourself investors. Some day, all brokers will sell funds this way. RBC's weak spot is corner-cutting in areas such as helping clients track their personal returns. On the other hand, RBC is addressing its high-cost status by matching TD's commission deal as of Dec. 22.

  7. 7

    ScotiaMcLeod Direct Investing

    Scotiamcleoddirect.com

    Ownership

    Bank of Nova Scotia

    Comments

    SMDI is out of step on stock-trading commissions, it still doesn't offer online bond trading (it says its clients aren't interested) and its website, long a sore spot in this ranking, remains as navigationally impaired as ever. The reason why you shouldn't write off SMDI is that it does as good a job as anyone at feeding clients a bracing diet of analyst research on stocks, bond and funds. If you're looking for guidance in selecting investments, SMDI delivers.

  8. 8

    Questrade

    Questrade.com

    Ownership

    Privately held

    Comments

    A service for active traders that is reaching out to mainstream investors with commissions as low as $4.95, no matter how often you trade or how big your account is. The website is as basic as they come, but a planned redesign should help.

  9. 9

    TradeFreedom

    Tradefreedom.com

    Ownership

    Bank of Nova Scotia

    Comments

    Another service for active traders, this one offering mainstream investors a deal where they can trade for $9.95 on orders of up to 1,000 shares. Low commissions are the main story here, and they undercut Scotiabank's SMDI by a big margin. How long will that last?

  10. 10

    Disnat

    disnat.com

    Ownership

    Groupe Desjardins

    Comments

    Canada's oldest discount broker - Disnat dates back to 1982, long before the Internet let brokers go online - may well be the most improved as well. Disnat used to be dismal - so neglected was this broker that using its website was like an archeological expedition back to the Internet's prehistoric days. Today, Disnat is revitalized with improved stock research tools, online bond trading and a much crisper website. Still missing are competitive stock-trading commissions and proper tools for monitoring your account. A security guarantee would be nice, too.

  11. 11

    CIBC Investor's Edge

    investorsedge.cibc.com

    Ownership

    Canadian Imperial Bank of Commerce

    Comments

    There's one flash of originality at this otherwise middling broker. Through a deal called Edge Advantage, clients can pay a flat $395 a year for 50 online trades of any type, which works out to $7.90 a crack. After that, you pay $6.95 for any additional trades. The question is whether an investor who trades enough to be interested in this deal would be happy with Investor's Edge. The answer is yes, if you plan to take advantage of CIBC's offering of online bonds and guaranteed investment certificates and its reservoir of stock research from CIBC World Markets.

  12. 12

    National Bank Direct Investing

    nbdb.ca

    Ownership

    National Bank of Canada

    Comments

    The quintessential "nothing special but still adequate" online broker. The rudiments are here - including plenty of stock market and mutual fund research, some good portfolio planning and monitoring tools and an online bond trading platform that differs from most other bank-owned firms in offering high-yield, speculative bonds. What would really help are lower commissions. Active traders get attractive rates, but regular clients pay a minimum of $28.95.

  13. 13

    HSBC InvestDirect

    investdirect.hsbc.ca

    Ownership

    HSBC Group

    Comments

    E*Trade's U.S. parent recently introduced online trading on six global stock markets. Given HSBC's status as one of the most global banks, this is exactly the kind of service that HSBC InvestDirect should be offering, but isn't. Oh, there's an attempt to play up the global angle, but when you look into it you find there's online access only to the Hong Kong Stock Exchange and telephone trades are required for other global markets. Blah is the word to describe InvestDirect's service for investors focusing on Canada and the U.S. market, although it is one of the better ones for helping clients avoid currency costs when trading American stocks.

  14. 14

    eNorthern

    enorthern.com

    Ownership

    Privately held

    Comments

    A skeletal service where the main attraction is a minimum stock-trading commission of $24. That used to be cheap.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
BMO-N
Bank of Montreal
+0.43%96.38
BMO-T
Bank of Montreal
+0.32%130.77
BNS-N
Bank of Nova Scotia
+1.51%51.16
BNS-T
Bank of Nova Scotia
+1.4%69.42
CM-N
Canadian Imperial Bank of Commerce
-0.46%50.07
CM-T
Canadian Imperial Bank of Commerce
-0.66%67.9
NA-T
National Bank of Canada
+0.74%114.57
RY-N
Royal Bank of Canada
-0.12%100.28
RY-T
Royal Bank of Canada
+1.12%136.23

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