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Top Canadian Discount Brokerages with Commission Free ETFs

A young reader who is currently in University emailed me about investing possibilities.  The student’s financial situation is relatively stable where he has excess cash after paying tuition from a summer part time job.  Typically, I recommend paying down debt before starting the investing route, but in this case, he has no debt and no foreseeable future expenses (house etc).

In this case, the student has small amounts per month to invest and is interested in investing in the stock market.  In the past when investing small amounts per month, low cost mutual funds were the way to go because they avoid commissions with every purchase.  While ETFs are lower cost overall with lower management expense ratios (MERs), investing a small amount monthly would be quite expensive with the trading fees.

Fortunately the discount brokerage landscape has evolved and some of the more competitive brokerages are now offering commission free ETFs.  What does this mean?  Typically buying and selling an ETF is treated like an equity/stock so an investor would need to pay their $4.95-$29.99 per trade.  Now investors can purchase small amounts of ETFs per month without any added fees.  This is great news for investors who regularly contribute small amounts per month into an index based portfolio.

Canadian Discount Brokers that offer Commission Free ETFs

Currently, there are four discount brokers that offer commission free ETF trading but some with limitations.  In addition to commission free ETFs, a desirable discount broker for investors just starting out will have the following features:

  1. No annual fees;
  2. Low commission/trading costs even with smaller balances; and
  3. Ability to hold USD in an registered accounts (RRSP, TFSA etc).

Virtual Brokers

Virtual Brokers is known for their ultra low trading fees with not many stock brokerages out there that can  compete with $0.99 trades.  This company is very progressive with their offerings that include USD RRSP/TFSA (for $50/yr), and commission free ETFs on the buy side, and the regular trading commission on the sell side.  Read our Virtual Brokers Review here.

  • Annual Fees: $0 for regular accounts, $25/yr for RESP.
  • Commissions: $0.01 per share (min $0.99 and max $9.99/trade including ECN fees) or $6.49/trade not including ECN fees.
  • USD Reg Accounts:  RRSP and TFSA offered at $50/yr.
  • Commission Free ETFs: Free to purchase any ETF, but trading commissions apply when selling.

Scotia iTrade

iTrade was bought out by Scotia Bank not too long ago and fortunately, Scotia hasn’t changed too much of the platform.  While the trading commissions are fairly high for investors just starting out ($24.99/trade), it gets better once assets reach $50k ($9.99/trade).  Scotia offers a pseudo USD RRSP which gives you a favourable exchange rate at the cost of $30/quarter.  While the fees are high for a new investor, iTrade has eliminated the commission on a select group of ETFs.

  • Annual Fees: $100/yr for RRSP and non registered if less than $25k value, otherwise no fee.  No fees for TFSA.
  • Commissions: $24.99/trade (if $50k+ assets, $9.99/trade, 150+ trades/quarter gets $6.99/trade).
  • USD Reg Accounts:  US “Friendly” RRSP $30/quarter.
  • Commission Free ETFs: They offer a select list of ETFs that are eligible for free trades – buy and sell.

Qtrade

Qtrade is always popular with GlobeInvestor for their customer service.  Qtrade is in the middle of the pack with average commission fees and a selection of commission free ETFs.  For investors just starting out, they charge $19/trade, but decreases to $9.95 once the account reaches $50k.  For active traders making 30-149 trades/quarter, the fees are $9.95/trade and 150+ trades/quarter gets the preferred rate of $7/trade.  Qtrade offers a USD RRSP for $50/year and a select list of ETFs that can trade commission free.

  • Annual Fees: $50/yr for RRSP and non registered if less than $15k value, otherwise no fee.  No fees for TFSA.
  • Commissions: $19/trade (if $50k+ assets, $9.95/trade, 30-149 trades/quarter gets $9.95/trade, 150+ trades/quarter gets $7/trade).
  • USD Reg Accounts:  $50/year.
  • Commission Free ETFs: They offer a select list of ETFs that are eligible for free trades – buy and sell.

Questrade

Questrade is a popular discount broker with MDJ readers because of their low fees.  For the beginner investor (not using their advanced/expensive data packages) they charge $0.01/share with a min of $4.95/trade up to a max of $9.95/trade.  A big advantage of Questrade is that they offer all of their accounts without any annual fees, including their USD RRSP.  They are similar to Virtual Brokers in that users can purchase any ETF without paying commission, but will have to pay regular commission when selling the ETF.  Note though that if you don’t trade in a quarter and your account is under $5k, they will charge a $19.95/quarter inactivity fee.  You can find our full Questrade Review here.

  • Annual Fees: $0 for all accounts, but note the $19.95/quarter inactivity fee for accounts smaller than $5k.
  • Commissions: $0.01/share with min of $4.95/trade up to a max of $9.95/trade.
  • USD Reg Accounts:  No annual fee.
  • Commission Free ETFs: Free to purchase any ETF, but trading commissions apply when selling.

Final Thoughts

When it comes down to it, new investors should try to reduce their investment costs as much as possible.  For new investors who want to regularly invest small amounts per month, then buying index ETFs with a stock brokerage that allows commission free ETFs is a good bet.  Out of the four brokerages listed, Virtual Brokers and Questrade both have the lowest fees and a similar offering with their ETFs (free to buy, fee to sell).  iTrade comes in with the highest cost, but has the backing from Scotia Bank. Qtrade falls in the middle of the pack, but has been highly rated for their customer service.

What broker would you recommend for a beginner investor who’s looking to invest small amounts per month?







17 Comments, Comment or Ping

  1. 1. Robb

    I’ve never understood why customer service has been such an important criteria in the G&M survey, to the extent that Qtrade – which is mediocre in every other category – consistently claims top spot overall.

    That said, there have been a lot of complaints about Questrade’s customer service, so it must count for something.

  2. I’m with you Robb, it seems to be a high priority, but I’ve rarely used customer support at any of the discount brokers that I’m with. Both Questrade and VB both get negative comments in my review articles, VB more than Questrade lately.

  3. 3. Returns Reaper

    @Robb: I think VB took the crown away from QTrade in the 2013 G&M rankings. I didn’t think these rankings placed much emphasis on customer service. I believe the 5 categories are cost, trading, tools, account information, and innovation. For me the most important categories are cost, account information, and some aspects of innovation. Everyone is different though, so it is nice they provide separate scores for the categories.

    @FT: Should the “USD Non-Reg Accounts” under each brokerage actually be “USD Reg Accounts”?

  4. Thanks for that, fixed!

  5. 5. DMDave

    Actually with Qtrade, if the total asset is +$50k, the commission is $8.95 flat. The fee schedule you see on their homepage is different than the one I see once I logged in. I’m not sure why there is a discrepancy, but I like the discount!

  6. I know this is about discount brokerages, but does anyone know who is offering Ford Equity Research info with their accounts? TD used to and I heard maybe BMO? The dividend discount model is a great piece of info. Worth opening an account just to get the info at a discount haha

  7. 7. Dave

    We use Questrade for a spousal RRSP, and TFSA. Getting the accounts set up was a pain, as recent immigrants with no need for credit, the eSignature system is completely broken. There always seems to be one piece of paper they insist is mailed to them adding at least two weeks to the time it takes to open an account, even if you already have registered accounts with them.

    Customer service is also ineffective in shorting out issues, it took three attempts to get a RRSP contribution slip corrected.

    On the flip side, I like dealing with their software platform and their fees are excellent.

    My experience with Scotia bank and iTrade there where always unexpected fees tacked on and they always wanted me to visit a branch for some reason or other. Personally I prefer to do things online and would rather visit my dentist than my bank manager.

  8. 8. trent

    man, choose IB, thank me later.

  9. 9. KM

    fiscally fit, Ford Equity Research is offered available in BMOInvestorline

  10. @KM Thanks, I thought that is what I had heard.

  11. 11. Steve

    I have an account with Investorline and I’ve not been impressed with the Ford Equity Research.

    It seems very obvious to me that most if not all of the individual reports are auto-generated by computer, with all recommendations computer driven by technical data. No human analysis.

    The giant gaping hole is when it lists peer companies. If you look up a bank, sure, it will list the other banks as peers. If you look up a mid sized tech company, it’s laughable who it lists as peers/competitors even though any analyst with coverage in that sector could easily list the proper competitors.

    In other words, Ford Equity Research is free, and you get what you pay for!

  12. 12. Kylie

    Great post, I had heard that Virtual Brokers is the best for what you pay for.

  13. @ Steve

    If you are using it for what you mentioned, then yes… I agree with you. I am using the reports for part of my pricing models. I do not care if they compare to their peers as I don’t care about their peers for that metric haha. I simply am looking at utilizing their analysis regarding a discount dividend model valuation filter. Overall, depending on the metrics you use, the info can be useless or extremely accurate. I have found that the data I use from them is very accurate and has yielded fantastic results since including it in my process.

  14. 14. JMS

    It should be noted that the commission free ETFs with Qtrade are only free if traded in blocks of $1k or over. If the student is only adding a few hundred a month, then Qtrade may not be the best.

    I have two TFSAs open… one with Questrade for more-or-less buy and hold, and one with Qtrade which I use the free ETFs for slightly more active trading.

  15. 15. TipsByTopic

    Wow I didn’t realize almost every broker was selling ETFs for zero commission. I thought it was just Questrade!

  16. 16. RRSP newbie-

    How does the RRSP in a brokerage account work? Do i get a tax receipt equal to how much it is funded with? eg. I transfer $1000 in, I receive $1000 tax receipt

  17. @RRSP newbie – the amount you contribute will be the amount on your tax receipt. The contribution will be held as cash within your RRSP until you start to buy equities

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