If you want to cut your investing fees to the absolute bone, then a Canadian discount brokerage is the road you must travel!
Gone are the days of calling and asking someone to buy or sell stocks/bonds/other on your behalf – the internet has allowed YOU to take control of your investing destiny. No longer do you have to settle for having an advisor choose overpriced Canadian mutual funds on your behalf – online retail brokerages now allow everyday retail investors to put themselves in the driver’s seat, and save considerable money in the process.
The term “discount brokerage” refers to the fact that buying and trading stocks online, within your own trading account, can be done much cheaper than (or at a discount to) the traditional brokerage model. The old school way of doing things included picking up a phone and telling someone you wanted to buy or sell a number of shares of a stock or units of an ETF. Obviously this way of doing things would require substantially more manpower and is consequently much more expensive.
Who Can Benefit From Discount Brokerages
For “couch potato investors” like myself, the popularization of the discount brokerage has been a godsend. When most people think of buying and selling stocks on the internet they think of some guy with his nose pressed up against six monitors on his desk, madly scrolling through layers upon layer of numbers and weird ticker symbols like APPL.
I don’t know about you, but that’s not my idea of fun way to spend my leisure time.
I use my discount broker account about four times a year to simply re-balance and update my portfolio. You definitely do NOT have to be a “day trader” or have a thorough understanding of how to read a 400-page investor report in order to make use of the super cheap fee & commission structure that Canada’s online stock brokerages offer.
The Online Trading Broker We Use
If you want to skip the rest of this article and just get right to the discount brokerage that I recommend and trust my own hard-earned money with, the zero-hesitation answer is Questrade. There is also a promo code a1b9d1d9 that you can use to get $50 in free traders.
Now, that doesn’t necessarily mean that Questrade will be the answer for you. As a couch potato investor (aka “index investor”) my preferred method of investing is to simply determine my preferred asset allocation, and then just re-balance quarterly. It’s kind of bland, kind of boring, and award-winningly effective over the long-term. If you want more information about just what index investing is, check out my FREE eBook on how to index invest as cheaply as possible with ETFs.
For simple investors like myself, the combination of features that allow you to buy ETFs at Questrade for $0, pay only $4.95 per trade when you sell them, and pay no annual account fees, simply can’t be beat. When you throw in the fact that they will pay any fees that your old bank/brokerage tries to hit you with when you transfer your account over, that makes their lead insurmountable. Finally, when you consider that they’re willing to start you off with $50 in free trades just by clicking here or using the promo code: – that’s just the cherry on top of my low-cost investing sundae.
Comparing Canada’s Online Brokerage Options
Find Your Best Stock / ETF Broker for Your Needs
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Top Online Brokers In Canada 2017: Comparison
Table 1 / 3
|Questrade||Qtrade||RBC Direct Investing||TD Direct Investing|
|Annual RRSP Fees||$0||$100 – Free if more than $25K in combined accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts, or have a pre-authorized contribution plan.|
|Annual TFSA Fees||$0||$100 – Free if more than $25K in combined accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts, or have a pre-authorized contribution plan.|
|Annual RESP Fees||-$0 if more than $15K in combined Questrade accounts|
-Less than $15K in combined Questrade accounts = $50
|$100 – Free if more than $25K in combined accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts, or have a pre-authorized contribution plan.|
|Annual Non-Registered Account Fees||$0||$100 – Free if more than $25K in combined accounts.||$100 – Free if more than $15K or 3+ trades every 3 months across all accounts.|
|Free ETF Transactions||Purchases||Limited Selection||No||No|
|Basic Trading Fees||1 cent per share, minimum of $4.95 – maximum of $9.95||$8.75||$9.95||$9.99|
|Possible ECN Fees||Yes||No||Yes||Yes|
|Cell Phone – Friendly (App?)||Yes||Yes||Yes||Yes|
|Online Live Chat?||Yes||Yes||Yes||Yes|
|Will They Pay Your Transfer Fees to Them?||Yes||Up to $150||Up to $135||No|
Table 2 / 3
|CIBC Investor’s Edge||Virtual Brokers||Interactive Brokers||BMO InvestorLine|
|Annual RRSP Fees||$100 – Free with $25,000+ Balance||$0||$10 USD Commission Minimum||$100 – Free with $25,000+ Balance|
|Annual TFSA Fees||$0||$0||$10 USD Commission Minimum||$100 – Free with $10,000+ Balance|
|Annual RESP Fees||$0||$25||NOT offered||$50 – Free with $25,000+ Balance|
|Annual Non-Registered Account Fees||$100 – Free with $10,000 Balance||$0||$10 USD Commission Minimum||$100 – Free with $10,000+ Balance|
|Free ETF Transactions||No||Purchases||Limited – Still Subject to Account Minimums||No|
|Basic Trading Fees||$6.95||$9.99||1 cent per share, Minimum of $1 or $10 per month||$9.95|
|Possible ECN Fees||No||Yes||Yes||No|
|Cell Phone – Friendly (App?)||Yes||Yes||Yes||Yes|
|Online Live Chat?||Yes||Yes||No||Yes|
|Will They Pay Your Transfer Fees to Them?||No||No||No||No|
Table 3 / 3
|National Bank Direct||HSBC Invest Direct||Credential Direct||Scotia iTrade|
|Annual RRSP Fees||$100 – Free with $20,000+ Balance||$100 – Free with $25,000+ Balance||$25 – Free with $15,000 Cumulative Balance Between Accounts or 2 Trades Per Quarter||$100 – Free with $25,000+ Balance|
|Annual TFSA Fees||$100 – Free with $20,000+ Balance||$25 – Free with $10,000 Balance||$25 – Free with $15,000 Cumulative Balance Between Accounts or 2 Trades Per Quarter||$0|
|Annual RESP Fees||$100 – Free with $20,000+ Balance||$50||$25 – Free with $15,000 Cumulative Balance Between Accounts or 2 Trades Per Quarter||$25 – Free with $15,000+ Balance|
|Annual Non-Registered Fees||$100 – Free with $20,000+ Balance||$25 – Free with $10,000 Balance||$25 – Free with $15,000 Cumulative Balance Between Accounts or 2 Trades Per Quarter||$100 – Free with 12+ Annual Trades|
|Free ETF Transactions||Yes – If More than 100 Units are a Time are Traded||No||No||Limited|
|Basic Trading Fees||$9.95||$9.88||$8.88||$24.99 – $9.99 With a Balance Above $50,000|
|Possible ECN Fees||No||No||No||No|
|Cell Phone – Friendly (App?)||Yes||Yes||Yes||Yes|
|Online Live Chat?||No||No||No||Yes|
|Will They Pay Your Transfer Fees to Them?||No||No||No||No|
My Two Cents: How I Created This Brokerage Comparison
While I think Questrade is a solid choice for almost any Canadian investor, it’s entirely possible that your needs and wants will be different than mine. That’s why I decided to throw together this handy reference guide and compare the best Canadian stock brokers.
Now, the table above was actually much more difficult to accurately fill out than I would have guessed before beginning the project.
For one thing, these companies all have different ways of charging fees and commissions – making an apples-to-apples comparison very difficult. For example, some brokerages have almost no account maintenance fees, while others charge quarterly or annual fees – but these can be erased with a minimum balance in the accounts.
Still others will erase these account maintenance fees if a certain number of trades per quarter are met. (A quick hack for these “minimum trades” rules is that no company specifies what size of trades these have to be. You can log in, buy one unit of an ETF, and log out again, and cancel any non-activity charges to your account.)
There are other tables out there on the Net that compare discount brokerages, however my chart below does so from the perspective of a low-cost index investor. I believe this is the first approach for 95%+ of Canadians that are handling their own investments. What this means is that a lot of the sales talk that you might read on ad copy is just extraneous fluff that doesn’t really apply to you.
For example, why does the average Canadian care about a break in per-trade fees after they make 100+ trades per month? There is no way the average investor – or almost any investor – should be making that many trades per month (if you believe the mounds of academic research, that is). Similarly, I don’t really care if I can buy mutual funds for free – why would I ever want to invest in the terrible overall performance of mutual funds – especially Canada-based ones?
Holding US Dollar-denominated accounts used to be a big deal for index investors because it let us have easy access to the great ETFs that were only listed on the New York Stock Exchange. The Canadian ETFs listed on the Toronto Stock Exchange are now so good, that there is very little difference. Unless you get paid in US Dollars, there is really no reason you need to worry about this feature.
Access to “elite research” and exotic investment routes such as options trading are also omitted from my research because as an index investor I don’t believe these bells and whistles add any value. I truly question how “elite” much of this research is (If the person doing the researching was that elite wouldn’t they be running their own hedge fund and not sharing their information with you?). Using options is beyond the pale for the vast majority of Canadian investors that I ever talk to, and the point here is to keep life simple!
Here’s what most Canadians should care about when they look at which discount brokerage should fit them best (ranked in order of priority from the perspective of an index investor):
1) Per-Account Fees: Nothing can kill a small nest egg faster than $100-per year fees on your TFSA or RRSP account. The first step to keeping your fees in check is keeping these account costs as low as possible.
2) Free ETF trades: The one advantage that mutual funds used to have is that they could say, “Well sure, ETFs are ok, but handling your own investments is scary, and those transaction costs every single time you buy and sell an ETF add up in hurry – especially for small accounts.” Those days are now behind us. Being able to purchase ETFs for free and control your own index investing for almost no cost is a real game changer. Some discount brokerages will only allow certain ETFs to be traded for free, while others will only allow you to buy ETFs for free – and charge their regular per-trade fee when you sell. For most most index investors, you won’t need to sell ETFs until your portfolio gets to the $50,000+ range because you can re-balance just by adding more to one ETF and less to another. I personally rarely have more than 2-3 times a year when I have to sell any ETFs. This might change for some people as they hit retirement and begin to withdraw more often.
3) Per-Trade Fees: How much does it cost to buy or sell a share of a company or a unit of an ETF? Keeping these fees low so that you can keep more of your hard earned investment dollars working for you is imperative over the long term.
4) Account Minimums: The best time to plant a tree was fifty years ago. The second best time is today. If your preferred discount brokerage has account minimums that are so high that it discourages you from starting to invest, then it sort of defeats the whole purpose right?
5) Customer Service: What customer service options are available? I really, really hate waiting on a phone, so if I can use an online chat option, that’s a major winner for me. Others prefer to send emails, while still many like the safety of picking up the phone and talking to someone on the other end. The problem is that this feature is very difficult to quantify.
6) Reimbursed Transfer Fees: It often costs money to leave your financial institution if you have started a TFSA, RRSP, RESP, or other accounts there. These fees can add up in a hurry, but some discount brokerages will cover these costs up to a certain amount if you come on over to play ball in their park.
7) Compatability with Cell Phones: With more and more of us living on our cell phones, being able to interact with our investments via our “lifeline” is now a must-have for many.
8) Safety: You might be wondering why this feature isn’t higher on the list – after all, no one wants to lose sleep over worrying about if their investment can get stolen from them if a company goes bankrupt or a similar negative event occurs. The truth is that with all of the discount brokerages in this comparison being members of the Canadian Investor Protection Fund (CIPF), your investments are guaranteed a very solid elite level of protection from fraud or problems with the actual discount brokerage company no matter which option you choose. Note: This does not mean your investments can’t go down in value – it simply means if a company goes belly up, or gets hacked, or some other negative scenario occurs, that your assets are protected up to one million dollars.
9) ECN Fees:
Canada’s Leading Discount Brokerages Reviews
Virtual Brokers recently pivoted away from their old $0.01-per share trading fee to a flat rate of $9.99. This coincided with a website upgrade that had many media outlets placing them near the top of their “Best of” lists – especially for investors who value in-depth research. Virtual Brokers certainly has a lot to recommend it, such as:
- No account fees (except for $25 on RESP accounts)
- Virtual Brokers pays your account transfer fees
- Free ETF purchases
- Great design and aesthetics
- Excellent stock research capability for active traders
While a worthy competitor to Questrade, Virtual Brokers falls just short in our books due to the $25 annual fee on RESPs, the $9.99 fee to sell ETFs, and a lack of Questrade’s excellent promotion for Young and Thrifty readers.
The Big 5 (TD Direct Investing, Scotia iTrade, CIBC Investor’s Edge, RBC Direct, BMO InvestorLine)
It should be no surprise that Canada’s major banks have very similar offerings to one another. Perhaps I’m not being fair in lumping these behemoths together, but the bottom line here is that these pillars of Canadian branding offer $9.99 trades (save for CIBC, which is slightly lower at $6.95), minimal account fees once you get above certain account balance thresholds, and offer the psychological safety that only 100+ years of service can provide.
Scotia iTrade offers a limited menu of ETFs for free transactions, while RBC is currently the only one listed that will pay your transfer fees to come over to their side of the fence.
All five of these major players also offer bright and shiny packages for high net worth and/or active traders. Elite trading platforms and increased research capacity are par for the course once you reach 100 trades per month territory.
Overall, unless you really value simplicity and want to keep all of your assets at the place you choose to do all of your banking, I don’t think there is a good argument for basic couch potato investors to consider these brokerages. Their websites and investing platforms look great, having branch locations remains a priority for some people, and there are some cool bells and whistles, but the value just isn’t there for what most Canadians need in a discount brokerage.
Sometimes referred to as the +1 relative to Canada’s Big Five banks, National Bank offers up a very similar version of what online investing should look like. National Bank’s weaknesses includes the lack of an online chat support option, and no covering of transfer fees; however, they do make up for this in part with:
- $0 Account fees for TFSAs and RESPs (RRSPs have a similar threshold setup as NB’s Big Bank brethren)
- Commission Free ETFs – If trading more than 100 units
- Convenient branch locations.
Overall, there just isn’t enough here to seriously challenge what top contenders are bringing to the table. While they claim they offer commission-free ETFs, I’m not a fan of how they burry “if trading more than 100 units” in the fine print. Most average Canadians who are investing a little chunk of their paycheque every 1-3 months won’t be purchasing more than 100 units of a single ETF at one time.
Credential Direct entered the Canadian scene back in 2000, and has found a bit of a niche in offering services to credit union customers across Canada. While they are very comparable in terms of account balance thresholds when it comes to account fees, I’m not sure they’re in the running for our recommendation. Here’s a quick overview of what they’re offering:
- $8.88 Trades
- No online chat support
- No free ETF trades
- No fee transfer reimbursement
I couldn’t find many reviews about Credential Direct online, but I would assume from looking at their platform that it will accomplish the basic tasks that any discount brokerage can accomplish for you. That being said, it just looks like an imitation of the big banks with slightly lower trading costs and fewer bells and whistles.
QTrade has evolved to become one of Canada’s leading discount brokerages and is often mentioned near the top of any recent “best of” lists. Customers rave about its customer service standards and slick platform. Overall, I’d place it just behind Questrade on the strength of:
- $8.75 Trades
- $0 Account fees after you clear the $25,000 threshold
- Strong customer support including online chat
- Paying your transfer fees
- A limited selection of fee-free ETFs
Unfortunately Qtrade’s free ETF selection does not include my preferred options. This lack of selection combined with $8.75 trading costs means that for basic index investors, no matter how good the platform is, I can’t rank the overall package above Questrade.
HSBC Invest Direct
Another large bank, another ho-hum discount brokerage offering. RRSPs, TFSAs, and non-registered accounts get the same $0 account thresholds as at other banks – but interestingly RESPs are $50 no matter what. (Not cool – if you open an account for Little Johnny as a baby gift, hold onto it until he finishes taking money out at 24 – that’s $1,200 in fees over the lifetime of the account!) There are no free ETF trades, and the per trade price of $9.88 is par for the course. Overall, I’d recommend looking elsewhere.
The absolute low-cost leader when it comes to Canada’s per-trade costs, IB is a slimmed down platform built for serious international traders. It’s penny-per-share trading cost (minimum of $1) stands alone at the top of the low-cost mountain. However, the fact that this price slasher doesn’t offer RESP accounts, has $10,000 account minimums, limited fee-free ETFs, and very few other perks, means that it slips down substantially in our rankings based on the value to the average investor. If you want to open a non-registered account and trade penny stocks, you have to give this global brokerage a serious look, but it’s a square hole relative to the round peg that is the bread-and-butter couch potato investor.
Finding the Best Fit for You
If you want to learn how to trade options and short currency markets this probably isn’t the website for you – nor the most relevant comparison of Canada’s discount brokerages. If you are looking to keep things simple and cut your costs to the absolute barest of minimums, then figure out what your priorities are and how they match up to our above chart. If you’re like me and looking to invest primarily through a few basic Canadian ETFs, then Questrade is pretty tough to beat. If this whole “choosing your own stocks and ETFs” thing still seems a bit intimidating to you, perhaps robo advisors are more your style.