February 20th, 2012 | 
Category: 
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
Low Fees
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.
Synthetic DRIP
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.
DRIP Discount
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.
A draw: both ScotiaITrade and RBC Direct Investing offer DRIP discount.
Spousal Account
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.
Research
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.
Portfolio Tools
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.
Customer Service
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.
Results
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?
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Great breakdown and comparison between the two brokerage firms. I’m with a big bank myself, TD, mostly for the convenience, because that’s whom I also bank with. It’s really fast and easy to transfer funds between my banking and brokerage accounts online. I haven’t used any other trading platforms, but Direct Investing sounds pretty cool too.
Liquid Independence recently posted..Stocks to Cash Giveaway (RIM)
I went with TD Waterhouse, mostly for simplicity of having all my accounts available on the same site, partly because I did not want to go through the application process with Questrade when I could just walk to the bank and have the TD advisor do everything for me. I do not have the money to make a lot of purchases so the very high fees don’t hurtme as much as some other people, but I still hate seeing $30 leave my account every time I make a transaction.
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@Poor Student @Liquid Independence
I still do my banking with ScotiaBank and that’s where my mortgage is. However, I am setup with a CAD & US bank account at RBC to easily transfer money and they have ways to keep it on the cheap as well.
TD Waterhouse currently holds my TFSA, unregistered accounts US/CDN, and banking accounts. I was with TD since it was Canada Trust and they used to give me $5 for every logbook I used when I was a child. It’s funny how a gimmick like that can keep a customer.
Now that I started working, I have a GRRSP account with ScotiaMcLeod.
I just contacted my advisor and he told me that I can DRIP US stocks but the base currency of my RRSP must be in CDN. Also, there is a commision fee of $125 for every buy and sell of a stock. $125 commissions fee is a little steep!!! You said that you were with Scotia McLeod before, was that the case with you?
@Bernard
For the time I was with ScotiaMcLeod, the trading fee was 29.99 for either CAD or US. The convenience wasn’t worth staying there though and I moved to ScotiaITrade where I had 19.99 trades until I reached $50K in asset. After that it was $9.99 per trade. At the time, I wasn’t really aware of many brokers and Questrade would have been best. Now I have enough assets to get a decent trading fee.
A quick correction. Scotia Mclead is the full service or advisory side of Scotia which explains the 135 comish. Scotia i-trade is the discount side or do it yourself side of the business where you pay the 9.99.
Majority of my holdings are with TD Waterhouse. Trades are lightning fast and I can call them 24/7 if I have any questions. They also allow you to set up your accounts for automatic wash trading when purchasing US stocks.
I also have trading accounts with RBC because my employer deposits my RRSP matching with them. The support for RBC is sub-par compared to TD and I pay the same amount for trades $9.95.
@Steve
Thanks for your comments! Much appreciated to hear actual experience on the different platforms. Unfortunately, I really want a US holding account to accumulate the dividends in the currencies it’s intended for and not just for doing wash trade. How long can you hold the wash trade for? Does it have to be an instant swap? (buy and sell the same day). What if you want to sit on your US funds for a month, can you do that? So far, I know many people are using TD and I never heard complaints from them.
I rarely need lighting fast trades as I usually have limits … what do you require lightning fast trades for? I don’t think you are talking about the settling period.
Your comments about service is interesting compared with all the reviews. It goes to show that until you really need customer service, you don’t really know …
I think you misunderstood the concept of wash. By washing a us trade in a registered account, Waterhouse will buy or sell corrsponding us$ money market fund and match the exchange rate. This is done automatically and there is no time limit. This will loow you to keep everything in us$ without the incursion of f/x in a registered account. The service is free.
I am really with my bank simply for the convenience of having everything centralized. But after reviewing the comparison you provided, my bank (NA)does provide many of these options.
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@BeatingTheIndex
Convenience is powerful. I did setup a bank account with RBC for convenience
but I have not moved my mortgage. I could if they could beat the rates I have though (and cover the costs).
TD Waterhouse’s workaround for holding USD in registered accounts is to automatically wash US trades with their USD Money Market fund. You have to call once to set up your account with that feature or you can call after each trade. It’s kludgy, but it does work. The downside is that it only applies to trades–USD dividends still get automatically converted to CAD. For that reason I may move my RSP somewhere else; RBC seems like a decent option.
@jd
Thanks for your comments. It’s too bad they are unable to keep up with the features because there is something to be said for convenience. On the other hand, I have not seen many banks that includes the discount broker in the review of your banking products. Just recently, ScotiaBank called me to ask me if I wanted a TFSA ?!? I said, I already do with your discount broker. The conversation script ended …
Simply the answer to your questions are technology. Waterhouse and i-trade use ISM which is IBM based technology and has limitations for offering strait us$ registered accounts, where as RBC and BMO use ADP and has more flexibity on offering various features in an account and is easier to manipulate with minimum cost. ISM on the otherhand is very costly to manipulate.
@Pete
Thanks for explaining. It makes sense. Very unfortunate that it’s a costly technology because I feel it’s disadvantage for them.
Sounds like a great move.
Going forward, RBC might be what I’m looking for as well, mainly because of the USD RRSP.
I don’t need lightning fast trades. I don’t trade much – I buy, like you!
As for the portfolio tools, I don’t use them much myself. I don’t think you need portfolio tools if you own broad-market ETFs. As for the dividend-paying stocks I own, I figure if they slowly creep up over time, and always pay dividends, that’s good enough for me
My Own Advisor recently posted..Closing your DRIPs and SPPs, transferring your shares to your brokerage
@MOA
I have nearly 70% of my self-directed RRSP with RBC in US investments at the moment. It’s the best place to own them from a tax perspective and I see the US as a much bigger economy than Canada with their international conglomerates. I also feel that the US dollar is going to strenghted over the coming years since the Canadian economy (exports) can’t be sustainable with a stronger Canadian dollars.
Anyways, there is enough for a post on this topic but a real US$ account was very important for me.
Am i the only one here with HSBC Investdirect? I was previously with RBC, with minimal amounts in my trading account. Unfortunately, was being charged ‘inactivity’ fees quarterly which i wasn’t happy with. A couple years ago, I decided to take my money out of my advisor to go self directed. I decided to go with HSBC Investdirect, as that is who i primarily bank with. I also sold everything in my RBC Direct Investing Account; so i have zero balance in it but was able to leave the account open so that i can take advantage of the RBC’s research information. If you have a HSBC Advance Account (Over $25,000 in assets); then trading is $9.88 per trade. HSBC Premier Clients (over $100,000) is $6.88 per trade.
@sleepydad
Thanks for your comments. I have to say that I wasn’t familiar with HSBC Investdirect. How do you think it stacks with resect to dividend investing with DRIP and discounts?
HSBC is great and would be a draw to most of the criterias you measured on.
Just thought I’d throw in the plug for HSBC in that it’s a very good blue chip international bank that happens to be a really good dividend income source. The big downside for 0005(HSI) would be the fact that we can’t take advantage of the dividend tax credit.
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I have qtrade as well as TDWaterhouse.
Washing trades is actually instructed by TD themselves. Their live workshops even show you how. In my experience, I’ve only done this in RRSP. I’m a bit different in terms of “wash trade”. I’m only holding one ETF in RRSP and the distributions I get don’t make enough for a DRIP. So I’ve left instructions (you have to call them) to have the distributions move to TD’s USD money market fund automatically. They also take and covert to CAD from that fund whenever the annual fee comes up. I don’t hold enough RSP in that account to qualify for no fee.
I’m curious on why would one *WANT* to hold US investments in TFSA? You’re taxed on the dividends since the US government don’t consider TFSA as a retirement account. The only advantage is mainly capital gains and dividend taxes on the Canadian side. Only makes sense if you want to hold investments that give mainly capital gains or ROC. Only then I would see why one would want a USD account for TFSA.
As for my other broker. I’ve had them before Questrade was available. They were relatively cheaper then, $27 whereas everyone else was competing with TD’s $35. E*trade wasn’t available yet, when it was, it had a $5k minimum. I was a student then and didn’t had $5k to invest. Trade wise, qtrade service is excellent I got to say. On the other hand TD’s bigger so trading action is a better. For example, if you wanted to trade something with odd lot, 113 shares, qtrade may only do a partial fill of a 100, whereas TD would more likely fill it.
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I’m an RBC and Scotia account holder. I prefer RBC. They have better performance tools, better research, and its easier to buy and sell stocks (for example: no trading pw required).
I also like RBC’s practice accounts. They allow you to create a virtual portfolio that has most of the aspects of a real portfolio including commissions, buying and selling in real time with the markets, and dividends accumulating over time. They are especially useful if you want to follow your portfolio as part of your blog but do not want to have to display actual portfolio data online.
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I’m with TD Waterhouse and have been for many years; before the canada trust merge. Been very happy with their service; albeit not perfect is pretty good. As others have said, easy to move money between banking and trading / retirement accounts online.
$US account for RRSP and TFSA would be a great improvement. I do understand the washing of trades / washing to MMF and that does work but not for dividends.
$US securities in TFSA; I have some only due to allocation problems / rebalancing timeframes and contribution amounts. Was much easier and cost effective at the time to purchase in TFSA than to sell and repurchase in RRSP. No taxes anyways on TFSA so no big deal except for the ding on foreign (in my case US) dividends.
Execution speed is great, especially on odd lots.
All around very happy with TD.
Only thing I need to look at now is ability to swap into RRSP or TFSA of $US securities that I buy in my $US trading account after performing the Norbert gambit to highly reduce the currency exchange fee of 1.5%.
Anyone know what TD allows?
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