If you’re a Canadian investor who is looking to DIY their way to a respectable nest egg, then deciding which of Canada’s online brokerages you use is one of your first (and most impactful) decisions.
After many years of trying to convince Canadians that they need to cut costs to the bone and drop their mutual funds so that they can take control of their own investment portfolios, I found that people generally saw the light when the raw numbers were presented. After all, it’s difficult to ignore when someone shows you that due to the drastic effects of compounding investment returns, mutual funds could sap 40%+ of your potential gains over your lifetime when compared to low-cost Canadian discount brokerages.
For my money, the quest to find Canada’s best discount brokerage boils down to Qtrade vs Questrade. Both of these brokerages offer very low fees and long track records of excellence. And while fees tend to dominate the brokerage comparisons out there, there are a few other key factors worth considering before making your broker selection.
Comparing online brokers in Canada
The more complicated your investing strategy, the more relevant comparison points there will be for you to consider when looking at various Canadian discount brokerages. For the vast majority of Canadian investors, the three main considerations should be fees, customer services, and overall platform quality.
If you are 100% confident that you can navigate any online investing platform and won’t require questions answered, then it really all boils down to cost. Most of Canada’s brokerages will charge a per-trade fee (a trade being any time you buy or sell a stock or ETF). There are often two tiers of per-trade fees: one for “elite” traders who make more than fifty trades per month and one for everyone else. The other main fee to look at when breaking down the numbers for your personal situation is the account fees for various types of accounts (RESP, RRSP, TFSA, Non-registered, corporate, etc). Finally, take a look at ECN fees and how those might impact your trades as well. More advanced investors might want to look at margin costs and options fees, but most Canadians will never need to use those features.
No one needs customer service… until they do. I have found that over the last eighteen months customer service has been by far the characteristic most commented on by our readers when talking about Canadian discount brokerages. With some brokers taking 3+ hours to answer their online chat queues – and even longer to get through their phone list. It has become readily apparent that there is a major gap opening up in this area between some of the leading brokers. If an error was made in one of your accounts or you need help figuring out something for tax purposes, customer service can be a lifesaver. Knowing which brokerages have a long-term reputation for prompt customer service before you choose a broker to commit to, can pay off down the road when you might need a little help with something.
At the end of the day, if an online broker’s platform is too complicated or intimidating to use, then it doesn’t matter how low the fees are! If you delay getting started with investing, or put off shifting over your mutual fund investments due to the fact you don’t really want to use your brokerage account – then you’re going to miss out on far more than a few dollars in fees here or there. Ideally, you should find your platform not only easy to use on your preferred device (tablet, phone, or desktop) but also find the education and analysis tools easy to access as well. Whether that means using a tool that looks at your portfolio and assigns a “score” based on your risk tolerance or simply reading analyst reports, you should be satisfied that you’re getting the most bang for your buck.
Canadian Brokerage Free ETF Trades
One area where Qtrade really shines is that it allows both the free purchasing and the free selling of popular Canadian ETFs. While you’re in the accumulating or “building” phase of investing this might not make a huge difference, but if you’re an index investor (aka couch potato investor) in the drawdown phase of your portfolio, ETF sales can be a pesky little withdrawal tax!
The small catch is that Qtrade’s attractive ETF trading rate only applies to 100 or so ETFs, whereas Questrade’s free ETF purchases apply to all ETFs traded on the Toronto Stock Exchange. That said, there are some super popular ETFs on this Qtrade ETF list including:
- Horizons S&P/TSX 60 Index ETF (HXT)
- Horizons S&P 500 Index ETF (HXS)
- iShares MSCI Emerging Markets Index ETF (XEM)
- iShares Global Real Estate Index ETF (CGR)
- iShares Canadian Government Bond Index ETF (XGB)
- iShares Core Growth ETF Portfolio (XGRO)
You’ve got tax-efficient Canadian and US-market ETFs, bond ETFs, real estate exposure, emerging markets, and even an all-in-one portfolio ETF option.
If you want to get really fun and weird (not my thing when it comes to investment portfolios) you can even invest in “COW”. COW is of course the ticker symbol for the iShares Global Agriculture Index ETF.
Ultimately, the most important aspect of choosing between Canadian discount brokerages is that you feel that it creates the least amount of friction between you and consistent investing behaviours. If low per-trade fees are motivating to you, then Questrade is certainly a great bet. If the sheer convenience of having all of your banking and investment needs taken care of under one roof is what makes the most sense to you, then you can likely overlook some of the higher fees that big bank brokerages charge in order to make it work for you.
For me personally, the best discount brokerage is the one that allows free buying and selling of ETFs, combined with achieving the top customer services and platform usability ratings (as judged by leading Canadian financial publications and confirmed by our readers). Check out the Million Dollar Journey Qtrade Review for more details.