As the title says, I am moving all my investment accounts away from ScotiaITrade to RBC Direct Investing. Interestingly enough, I wasn’t with ScotiaITrade by choice since I previously was with e*trade Canada due to my employer’s stock purchase plan and I just stuck around after ScotiaBank purchased the unit from e*trade. It was working fine at the time but the discount broker world is very competitive and ScotiaITrade wasn’t matching my needs anymore.
Know What Matters To You
I read a number of reviews about discount brokers and what I found interesting is that most never compared what actually matters for a dividend investor which is the ability to DRIP and benefit from the discounts. Of course, they all talk about the cost of trading and other fees but I also think there are many other factors that are important. The reality is that prices tend to be similar once you reach $50,000 in assets so build a plan based on how you will grow your assets. I don’t believe you have to pick one and stay the course forever. Some discount brokers are better to start with and others to follow through later in life. It might even be worth it to have more than one discount broker when you can have more than $100K in each.
What Matters To Me – A Dividend Investor
Fees do matter. It’s plain and simple. I am not going to do a review of all discount brokers about fees since the best in fees really is Questrade with $4.95 and everyone else (i.e. banks) compete with each other in terms of fees and once you have more than $50,000 or $100,000 you have fees of $9.99. If you really trade a lot or have more assets, they will reduce your fees to $6.99. For details, there are reviews of discount brokers out there. My fees with ScotiaITrade were $9.99 and with RBC Direct Investing they will be $9.95.
A draw: both ScotiaITrade and RBC Direct Investing are similar for my account size.
RRSP & TFSA Dual Currency
A very important requirement for my portfolio. If you think about it, Canada represents a small percentage in the world economy so it’s important to diversify. Not only that but the U.S. has an economy based on similar principles as us, we heavily depend on them and they have massive world wide conglomerates. My diversification is focused on those massive conglomerates such as Coca-Cola and Johnson & Johnson to name a few. This is where managing currency is important because holding U.S. investments that pay dividends in a Canadian account will go through an automatic conversion. You basically do not control when and how much you pay. not to mention that when you come to buy U.S. investments again, you go through another currency exchange. The banks win twice – it’s good if you own the banks.
RBC Direct Investing Wins. ScotiaITrade offers this feature for a quarterly fee whereas RBC offers it as a standard option.
DRIPing is a major part of my strategy so it’s an important factor to consider. ScotiaITrade requires you to reach out to them to enroll your securities in the plan. You can easily email them. RBC Direct Investing does it per account. It’s an option when you open the account.
A draw: both ScotiaITrade and RBC Direct Investing offer synthetic DRIP.
The discount on the DRIP plan is a very nice added bonus. I don’t think it would have been a deal breaker for me but when you can get a 3% or 5% discount on the weekly average price, you get a good start. If you are in for the long run, the DRIP discount can start to add up when you let the compounding growth machine work its magic. It’s the 8th wonder of the world according to Albert Einstein.
A draw: both ScotiaITrade and RBC Direct Investing offer DRIP discount.
This feature wasn’t all that important until recently. I am now ready to make effective use of my wife TFSA contribution. Since it has to be in her name, I wanted to make sure she could leverage my trading commission. It also makes it easier to manage everything at the same bank since I can use that as a negotiation option. Assets are what allows you to negotiate better terms. My fallback option was Questrade for my wife’s account. With ScotiaITrade, the spousal account doesn’t benefit from a family account. The benefits are only applied when I trade and it’s under my trading authority. It’s sounds like a cheap implementation in their trading platform.
RBC Direct Investing Wins. ScotiaITrade assess the fees based on the trader and not the account.
I like to read analysts research on different investments. I don’t necessarily based my decision on the research but analysts can highlight something that I may have missed. For that reason, I like to have a discount broker that provides me with good research.
A draw: both ScotiaITrade and RBC Direct Investing offer research. I was happy with the ScotiaMcLeod research so I’ll have to spend some time looking at the research RBC offers.
One important aspect I believe in investing is to measure your performance. If you don’t measure, how do you know what works and what doesn’t. How do you know you are actually making any money? RBC has some tools to assess your portfolio performance over time and it is a bonus that I am quite happy with. Especially when it comes to comparing the performance with an index. Who knows, I may just do what Andrew Hallam did and sell all my stocks one day and buy index funds
RBC Direct Investing Wins. ScotiaITrade has no such tools.
I don’t tend to need customer service much and you only miss it when you have a need for it. Rarely is it the crown jewel that makes you switch but nonetheless, it’s good to have. RBC has been ranked #1 in customer service as advertised on their site but I am comparing my experience through my email communication.
A draw: both ScotiaITrade and RBC Direct Investing offer good customer service. All my emails are answered within 24 hours.
As you can see, I favor RBC Direct investing at the moment. It doesn’t mean that down the line feature improvements aren’t going to make me go somewhere else based on my needs at the time. RBC Direct Investing is my fourth discount broker. I started with InvestNat in my early 20′s, then I used ScotiaMcLeod and then I moved to ScotiaITrade (e*trade) until now.
Before you ask, I eliminated the following for the reasons outlined.
- BMO InvestorLine only provides a limited list of companies for DRIP – I want all of them
- TD Waterhouse doesn’t provide a US account within an RRSP or TFSA account
- ScotiaITrade provides a US account within an RRSP or TFSA account with a quarterly fee – I pay enough fees
- Questrade doesn’t offer DRIP discounts and it lacks in the tools and research area – I admit that it was on my short list. A great discount broker for anyone starting with investing.
- Others are eliminated for not providing research from a wealth management firm
Readers: Who are you with? and what do you like about your discount broker?