Million Dollar Journey has written a series of posts reviewing discount brokers and I thought it would be useful to complement his reviews with brokers I am familiar with but he is not planning to cover. I’ll kick off this two post series with a review of RBC Direct Investing and conclude by reviewing TD Waterhouse next week.
I have been a customer of RBC Direct Investing, which used to be called Action Direct for more than 6 years now. I still have our taxable accounts with them (thinking of switching to Questrade) but have moved our RRSP accounts to TD Waterhouse for reasons outlined in this post.
Fees and Commissions
RBC Direct charges a commission of $28.95 (inclusive of all fees) on trades of up to 1000 shares for market and limit orders. Self-directed RRSPs are charged an annual administration fee of $75 if the value of the account is less than $25,000.A quarterly fee of $15 is charged on investment accounts with a market value of less than $5,000. You can refer to the full fee schedule here.
Mutual Funds, GICs and Money Market Funds
RBC Direct offers a wide selection of in-house and third party mutual funds and GICs. You can park cash temporarily in Royal Bank’s money market fund (Fund code: RBF 271) without paying any penalties for early withdrawal.
Foreign Exchange Rates
RBC does not explicitly reveal the spread on foreign exchange transactions. However, last week I converted 1 USD into CAD and vice-versa and found that USD were converted into CAD at a rate of $1.0368 and CAD was converted into USD at a rate of $1.0568, which would suggest that the spread is roughly 1% on each conversion.
Trading Features
RBC Direct’s offers a very basic web-based trading platform with real-time quotes for all the major exchanges but does not offer real-time charts. I am not a trader and hardly make 10 transactions in an average year, so this is hardly an issue for me.
Conclusion
Even though RBC has made some improvements of late by offering stock research from Standard & Poor’s and cutting the trailer fees on in-house mutual funds for DIY investors, there is no compelling reason to choose RBC Direct Investing over its competition. Questrade is the market leader in low commissions and TD Waterhouse offers innovative features like wash trades on US equities within RRSP accounts and access to the TD’s low-cost index funds.
Reviews of the competition: Questrade, CIBC Investors Edge, Interactive Brokers, BMO InvestorLine, Credential Direct, Qtrade, Questrade, Scotia Direct and TD Waterhouse
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11 responses so far ↓
1 MillionDollarJourney.com // Jul 17, 2007 at 7:25 am
CC, thanks for the links! Much appreciated. I’ll include yours in my larger discount brokerage review.
2 Road to Harvard // Jul 17, 2007 at 8:23 am
The $15 quarterly fee is waived on non-registered accounts when you hold another product of theirs. From their website:
Your account will be exempt from this fee if:
* You also hold a RBC Direct Investing registered account (RRSP, LIRA, RIF, LIF, LRIF, PRIF or RESP)
* Your account has been open for less than 90 days
Anyway, as a customer of RBC Direct investing I can say the description you gave is accurate. I don’t really have a problem with it due to the fact that I don’t trade too often.
3 Jon D. // Jul 17, 2007 at 9:23 am
RBC direct investing looks alot like Scotiabank’s ScotiaMcleod Direct Investing. The commissions, the account fees, the services and account types. Although once a year in May they will offer a 2 for 1 trading commission rebate to help “rebalance”.
4 Canadian Capitalist // Jul 17, 2007 at 10:22 am
Road to Harvard: Thanks for the clarification.
Jon: The 2 for 1 commission rebate is a nice feature with Scotia.
5 Phil S // Jul 17, 2007 at 12:27 pm
Before I started self-directed investing many many years ago, I compared the discount brokerages offered by the Big 5 banks and they were virtually identical as far as their fee structures and offerings. I think more recently, the Big 5 have been forced to make changes due to competition from the likes of E*Trade and others.
Many years ago I ended up choosing BMO Investorline. With them, it’s basically $30 per trade (for 1000 shares). Due to competition, they offer reduced trading fees if you have a balance over 1/2 million. If your balance is over $500K, then they offer $10 a trade flat rate.
If your balance is above $250K, then they offer you “5-star service”. The most useful aspect of “5-star service” offers you to see a summary of all of the bid & ask orders when you’re ready to trade (as opposed to only seeing the high bid and low ask). 5-star also offers investment advice which I have never used.
With all of that being said, I am considering switching to E*Trade. I find that 100 free trades right off the bat to be very tempting. And if you combine that with only $50K minimum balance to qualify for a $10 flat fee trading commission, it seems too good to pass up.
By the way, in case you didn’t know (I didn’t know until a friend pointed it out)… Most brokerage accounts are not CDIC insured. As a result, if a brokerage firm goes bankrupt, they are permitted to use money from your account to pay back creditors. In Ontario, most of us are safe since the first million is “protected” by the government regulators (not “insured”, but “protected” - meaning that they will declare a broker bankrupt and close them down and liquidate their holdings if they cannot honour the repayment of accounts). But if you have $2 mil in a brokerage account and the broker goes bankrupt, they can only give you your one million and the other million would go to pay back their creditors. But the money is not “guaranteed” or “insured” in any way shape or form. So, if the brokerage is headed by a bunch of Enron-like crooks, then you could potentially lose 100% of the cash and shares in your account. You can only get back whatever the bankruptcy courts can recover, which is usually zilch if they are crooks and squirreled all the money away to some foreign bank.
6 KS // Jul 17, 2007 at 1:27 pm
Phil S: If everything you say is true then wouldn’t it make sense to stay with BMO (+125yrs old bank) than with a smaller new player like E*Trade?
7 Phil S // Jul 17, 2007 at 3:46 pm
Hi KS. Well, just because they’re an older institution doesn’t necessary mean that the people at the top aren’t crooks. After all, BMO just recently went through a scandal where traders had lost half a billion dollars on gambling on natural gas and those trading losses were not disclosed until it was discovered many months later.
I suspect that if this actually becomes a real concern, the best advice is just like in investing - to “diversify” your holdings by having accounts at different institutions?
8 Phil S // Jul 17, 2007 at 3:54 pm
I forgot to mention that even if you have an account that is CDIC insured, it’s only insured up to $100K. So, even with CDIC insured accounts, you may want to consider splitting it between institutions if your balance is over $100K.
9 Carnivals and More - Million Dollar Journey // Jul 20, 2007 at 3:33 am
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10 TD Waterhouse Review // Jul 23, 2007 at 7:48 am
[...] week, I reviewed RBC Direct Investing to complement Million Dollar Journey’s series of posts covering discount brokers and in this [...]
11 BMO InvestorLine Review // Aug 6, 2007 at 10:39 pm
[...] of the competition: Questrade, CIBC Investors Edge, Interactive Brokers, RBC Direct Investing, TD [...]
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