Discount brokerages are a popular topic on this blog especially where I have compared the major online brokers against each other. The truth is that I have a number of discount brokerage accounts, Questrade, CIBC Investors Edge, Scotia iTrade and Interactive Brokers. Not to forget a TD Mutual funds account for our family RESPs.
I am looking to simplify, but instead, I opened a new account with a different discount broker for my corporate trading account. As my small business account is with BMO, I decided to keep my corporate assets with the same bank so I opened a trading account with BMO InvestorLine. To my defense, I am in the process of closing my Interactive Brokers account as I don’t trade with that account anymore.
To focus on BMO InvestorLine, what has my experience been like thus far? How does it compare to other discount brokers out there for Canadians? Lets take a look under the hood.
The online brokerage space is very competitive when it comes to trading fees. Most of the big banks charge around $9-$10/trade and BMO is in that camp with $9.95 trading commissions. Brokerages that have lower than average trading fees include CIBC Investors Edge, Questrade, Virtual Brokers and Interactive Brokers.
- Non-registered accounts, the fee is $25/quarter if your account balance is under $10,000. This fee is waived if you make at least two trades every six months and/or you have a registered account with BMO.
- RRSP (assume TFSA as well?), the fee is $100/year for balances less than $25,000.
- RESP, the fee is $50/year for balances less than $25,000.
I’m not a fan of these fees. If you are just starting your investing journey, you may be better off starting off with a brokerage like Questrade (requires $5,000 to avoid fees), then switching over later as your balance grows.
This is where BMO shines if you are willing to perform Norberts Gambit. This strategy minimizes the cost to move money from one currency to another. Typically, foreign exchange with a discount broker can cost you 1% to 2.5% surcharge depending on the broker.
The issue is that not all discount brokers are Norbert Gambit friendly. This strategy involves buying an interlisted stock on one exchange and selling on the other. The trick is that when you buy the stock on one exchange, the stock needs to be “journalled” to the other exchange so that it can be sold in the local currency.
Most discount brokers require that you call the trading desk to journal shares from one currency to another, but BMO InvestorLine is an exception where it will automatically journal your shares once you sell in your desired currency.
I understand that this can be a little complicated, so here is a detailed article on the process.
One aspect of BMO InvestorLine that is head and shoulders above other accounts that I have is the research that they offer. They offer research from MorningStar, analyst ratings, and S&P top picks. I use this feature on occasion to get details on specific company risks. In addition, they offer news and reports for your specific holdings which is a feature that I appreciate.
Another strong suit of BMO InvestorLine is their reporting abilities. Within the trading platform, users have the ability to view portfolio performance from previous years, current year to date, and benchmarked against major indices. Activity reports and eStatements can go back multiple years with an intuitive interface.
Overall, I can see why BMO InvestorLine consistently ranks highly against other discount brokerages. They have competitive trading fees, the ability to auto journal your interlisted shares for cheap foreign exchange via Norbert’s Gambit, useful performance reporting, and relevant research.
The downside of this account is similar to other big bank brokerages, and that is the balance required to avoid annual fees. If you are just starting out, to minimize these fees, it may be best to start with a company like Questrade which have lower balance requirements. Then, if you must go with a big bank online broker, switch when your account size is larger.
If you are thinking about signing up, BMO usually offers sizable promotions, so wait until they offer a decent cash back incentive before taking the plunge.If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).