The on-line brokerage world has become decidedly less friendly to the smallest of small investors this RRSP season.
With less than $5,000 in your account, some brokers don't want you for a customer. With less than $15,000, you'll pay annual administration fees of as much as $100 at five of the 12 firms surveyed in this year's Globe and Mail ranking of on-line brokers for RRSP investing.
If you've got a larger-sized registered retirement savings plan and are looking for an on-line broker, the best all-round choice this year is the same as last year, BMO InvestorLine. Other good choices for larger accounts are TD Waterhouse, E*Trade Canada and ScotiaMcLeod Direct Investing.
Unfortunately, none of these brokers welcomes small accounts. If you fall into this group and you're not interested in paying onerous fees, then RBC Action Direct is a good all-round choice.
This year's rating is based on seven criteria: annual administration fees; commissions for trading stocks; mutual fund commissions; tools for helping investors design portfolios and select securities; the availability of bonds and guaranteed investment certificates on-line; special deals for RRSP season; and the availability of an expedited account-opening process.
InvestorLine is not perfect in all these areas, but it does deliver the best package of services for middle-of-the-road investors who want to intelligently manage their retirement savings plans.
Here's a look at the best and worst in each of the six categories:
Annual Administration Fees
The Background: An annual fee of $100 is the same as a loss of 0.69 per cent if you have assets of $14,500. The stock markets being what they are today, it makes no sense to throw away money like this on fees.
Top Picks: Merrill Lynch HSBC has no annual fee for RRSPs, but it requires a $5,000 minimum. Action Direct charges just $25 for accounts of up to $25,000.
Also Noteworthy: Qtrade Investor charges $40 for accounts of less than $25,000, National Bank Discount Brokerage charges $50 for assets of less than $20,000, and Credential Direct charges $50 if you've got less than $25,000.
The Worst: As ever, TD Waterhouse rules here, thanks to a $100 fee that you can't shake until you have $25,000. TD does have a budget RRSP account for $25 a year (waived after you hit $25,000) that lets you hold only funds and fixed income.
Important Note: You may have noticed that some brokers now charge inactivity or maintenance fees in the case of clients who have small accounts or who rarely trade. Fortunately, the trend is for brokers not to charge these fees on RRSP accounts.
Commissions For Trading
The Background: Minimum stock commissions are as low as $24 and as high as $29.95. If you don't trade much, this differential won't be crucial.
Top Picks: The ultimate bargain broker is eNorthern, with its minimum charge of $24 to buy up to 1,200 shares. CIBC Investor's Edge is a good value thanks to its $25 minimum commission for both market and limit orders (market orders mean you'll pay or receive the going market price for a stock, while a limit order allows you to set a floor on your selling price and a ceiling on your buying price).
Also Noteworthy: E*Trade and Qtrade at $27. National Bank Discount Brokerage, BMO InvestorLine, Credential Direct and ScotiaMcLeod are in the $25 to $26 range for market orders and about $28 to $29 for limit orders.
The Worst: Action Direct's minimum commission is $29.95.
Commissions for Trading Funds
The Background: Virtually all brokers offer a good selection of funds with no purchase commission, including no-load and front-load funds, and in-house and third-party funds. A few brokers charge nothing when you sell funds, but most will ding you as much as $40.
Top Picks: BMO InvestorLine, E*Trade Canada and TD Waterhouse have no commissions for buying or selling many or all of their funds, as long as you hold them for 90 days. ML HSBC and eNorthern also have no fees, but you have to hold them for six months.
Also Noteworthy: Qtrade charges $27 to sell no-load and front-load funds, National Bank Discount Brokerage charges $28, and Credential Direct charges $29. National and Action Direct waive purchase commissions only if you have $15,000 in your account.
The Worst: ScotiaMcLeod and Investor's Edge charge as much as $40 to sell no-load and front-load funds, however there's no charge to buy.
The Background: On-line brokers can't advise you on what to buy, but many offer Web-based tools for designing a properly diversified portfolio that reflects your risk tolerance and other personal details. It's also standard for on-line brokers to offer tools for selecting stocks, funds and bonds, while a few also provide analyst research reports from related full-service brokerages (e.g. CIBC Investors Edge offers reports from CIBC World Markets).
The Best: TD Waterhouse offers a very deep collection of stock and fund research, plus portfolio planning tools. ScotiaMcLeod has some rudimentary planning tools, and its well-packaged stock, fund and bond research will really appeal to people seeking investing ideas. Scotia's sounding board feature offers an expert's take on how well-diversified your portfolio is.
Also Noteworthy: InvestorLine makes powerful asset allocation software available on-line, while ML HSBC offers full access to equity research from analysts at Merrill Lynch, HSBC and Standard & Poor's.
The Worst: eNorthern. At $24 a stock trade, there isn't a lot of money flowing in to buy fancy tools. Disnat and National Bank Discount Brokerage are also strictly no frills in this category.
On-line Bonds and GICs
The Background: Unless you enjoy having your portfolio eviscerated by a bear market, you need fixed income in your portfolio. Bond funds are an option, but actual bonds and, to an extent, GICs offer more flexibility and reliability of income. Most on-line brokers will sell bonds and GICs by phone, but only a few offer the convenience of allowing you to buy on-line.
The Best: InvestorLine and Action Direct offer on-line access to bonds of all types and GICs from a variety of issuers (some of whom offer better rates than banks).
Also Noteworthy: TD Waterhouse and National Bank Discount Brokerage have on-line bond trading. Scotia McLeod posts its bond inventory on-line, but requires you to call to place an order.
The Worst: Everyone else. (The others don't sell bonds and GICs on-line.)
The Background: A few brokers really throw around the cash to lure new customers. Most will at least cover up to about $100 in transfer fees if you bring your account over from another company. If you're tempted by a deal, be sure to read the fine print to confirm that your account particulars will enable you to qualify.
The Best: For new accounts of $25,000 or more, ever-aggressive E*Trade is offering 25 free trades plus various other bonuses. Investor's Edge offers 10 free on-line trades if you bring them $15,000 or more. Both will also help cover your transfer fees.
Also Noteworthy: ML HSBC offers new accounts a free one-year subscription to the GlobeinvestorGOLD investing Web site.
The Worst: eNorthern and Credential Direct are among those with nothing to offer new clients this RRSP season.
Speedy Account Opening
The Background: RRSP procrastinators will be interested to know that some brokers can get an account up and running in 24 hours or less. Just use their Web sites to submit an account application over the Internet (you still have to send written material), then either send a cheque or transfer money electronically.
The Best: TD Waterhouse and E*Trade get you going almost immediately.
Also Noteworthy: Action Direct says on its Web site that it can open accounts for clients of Royal Bank in 24 hours (non-clients may wait longer).
The Worst: Investor's Edge and ML HSBC are among the brokers that still require you to download a printed application, print it, fill it out and mail it in.
Canadian on-line brokers
Parent: Bank of Montreal
CIBC Investor's Edge
Parent: Cdn. Imp. Bank of Commerce
Parent: The credit union system
Parent: Mouvement Desjardins
Parent: Northern Financial Corp.
Parent: E*Trade Group Inc. of Menio Park, Calif.
Merrill Lynch HSBC
Parent: HSBC Group
National Bank Discount Brokerage
Parent: National Bank of Canada
Parent: Privately owned
Royal Bank Action Direct
Parent: Royal Bank of Canada
ScotiaMcLeod Direct Investing
Parent: Bank of Nova Scotia
Parent: Toronto-Dominion Bank
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