The key to happy clients in digital investing is low fees.
Wealthsimple, with no commissions to trade stocks and exchange-traded funds, tops the 2024 Canada Self-Directed Investor Satisfaction Survey from J.D. Power. Next comes Desjardins Online Brokerage, which also has no trading commissions. Then comes Questrade, where the minimum $4.95 commission is roughly half what the online brokerage divisions of the big banks charge and ETFs can be purchased for free.
Zero-commission stock and ETF trading has been around for a few years in Canada. Wealthsimple introduced it, followed by National Bank Direct Brokerage and Desjardins. But the 2024 J.D. Power survey suggests it’s only recently that fees have become a deciding factor in customer satisfaction.
Zero- or low-fee brokers dominate the upper tier of the survey results, with four of the Big Five banks ranking below average. J.D. Power notes fees were the top reason cited by new self-directed investors for choosing a broker in 2024. The top reason in previous years was previous experience/relationship with the firm.
Wealthsimple scored 718 out of 1,000, Desjardins 714 and Questrade 661, while the average for the eight brokers in the ranking was 631. One bank-owned broker was a bit above average – CIBC Investor’s Edge. The rest ranged in score from 606 to 592.
The win for Wealthsimple is noteworthy because the company has been experiencing massive growth. In 2021, the pandemic year when stocks shot higher, a surge in new account applications and trading swamped many brokerages and left clients unhappy.
Even brokers with no trading commissions have fees of one sort or another. For example, the costs associated with converting Canadian dollars into U.S. currency when buying stocks listed on U.S. exchanges. Wealthsimple charges a $10 per month subscription fee for a service where you get access to U.S.-dollar accounts. A U.S.-dollar account lets you receive U.S.- dollar dividends and the proceeds from a sale of a U.S. stock without having it automatically converted into Canadian dollars. Wealthsimple clients with $100,000 or more in assets get U.S.-dollar accounts at no cost.
Still, the idea of zero commissions clearly resonates, particularly with young investors. J.D. Power said 66 per cent of clients for upstarts like Wealthsimple are millennials or younger, while the big bank client base skews 66 per cent to Gen X or older.
National Bank of Canada and Qtrade Direct Investing, highly ranked in the 2024 Globe and Mail Digital Brokerage Ranking, were not included in the customer satisfaction survey because J.D. Power didn’t get enough responses from clients of those firms.
Rob Carrick