Discount Brokers

TD Waterhouse Launches Mobile Trading

March 20, 2012

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[Screenshot of TD Mobile iPhone App]

TD Canada Trust has recently released an update to its mobile app that now allows clients to place trade orders from their smartphone. The TD Canada Mobile App previously provided features such as viewing bank and brokerage account balances, bill payment, Interac e-Transfer, fund transfer between TD accounts, stock quotes etc. TD Waterhouse has now added mobile trading to the feature list. The trading feature allows clients to place orders to buy or sell Canadian and US stocks and change or cancel orders. However, the TD Mobile app, which is available on the iPhone, Android and BlackBerry devices does not allow trading in mutual funds.

It appears that adequate security measures are in place to prevent unauthorized access if the mobile phone gets stolen or is lost. First, the app offers to store the access card number or connect id but the password is not stored. Second, the app does not allow adding a new payee for bill payment or adding a new recipient for email transfer. Third, TD Canada Trust extends its security guarantee that reimburses losses due to unauthorized or fraudulent transactions to mobile banking.

Though I tested out the TD Mobile App, I don’t think I will be using a smartphone to execute my stock trades. However, the app includes a couple of features that will come in quite handy in certain situations. For example, if you are visiting an unfamiliar place and would like to access the nearest bank machine, the app automatically detects your current location and displays the nearest TD Bank branches. Another example is an accident toolkit that will allow motorists to document the details of a collision they are involved in.

I’m told that RBC will also be bringing mobile trading to smartphones in the near future.

TD Waterhouse and US Dollar Dividends in RRSP Accounts

November 16, 2011

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TD Waterhouse used to be a leader at offering innovative features at least among bank-owned brokerages. They were the first to offer wash trading as a way around avoiding forced currency conversion charges in RRSP accounts. They were also the first to lower trading commissions to $9.99 for clients with accounts above a certain threshold. But recently, TD Waterhouse has gotten complacent. While RBC Direct and BMO InvestorLine have introduced the ability to separate US Dollar holdings in RRSP accounts, TD Waterhouse has not follow suit. As a result, TD Waterhouse has now slipped to the bottom half of the pack in the Globe and Mail’s Annual Discount Broker Rankings put together by Rob Carrick.

One could argue that separate US Dollar RRSP accounts are less of an issue at TD Waterhouse because a client can take advantage of automatic wash trading these days and completely avoid currency conversion from US dollars to Canadian dollars and back when selling and buying US dollar denominated securities. However, there still remains the issue of forced conversion of US dollar dividends received in RRSP accounts. For instance, an investor owning a US stock that pays a 4% dividend is losing 8 basis points or so (assuming currency conversion costs 2%). If the investor turns around and buys another US stock and converts currency at the retail rate, it will cost her another 8 basis points for a total of 16 basis points. The same investor could have avoided the currency conversions entirely if she had transferred her account to a competitor offering US Dollar RRSP accounts.

It is possible that TD Waterhouse is saddled with legacy systems that make it difficult to offer completely segregated US Dollar RRSP accounts. But they should try and offer clients a way to avoid forced conversions of US dollar dividends into Canadian dollars. They can do so by either waiving the retail markup on foreign exchange conversions for US dollar dividends or allowing clients to wash US dollar dividends into the TD US Money Market Account (TDB166). Otherwise, current TD Waterhouse clients might be tempted to take their business to more nimble competitors.

Scotia iTrade’s Commission-Free ETFs: A good deal for some investors

September 19, 2011

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Canadian Couch Potato broke the news last week that Scotia iTrade became the first discount broker in Canada to offer commission-free trading on some exchange-traded funds. Out of the 200 or so ETFs available on the TSX, Scotia iTrade will not charge commissions on forty-six ETFs: 31 from Claymore, 8 from iShares and 7 from Horizons. There is refreshingly little fine print on the deal: the trades must be placed online or via telephone and ETF must be held for a minimum of one business day.

The list of Claymore ETFs sans commissions is so extensive that an investor can assemble a portfolio composed of broadly-diversified asset classes from the ETFs in it. For example, one could assemble a portfolio similar to the Sleepy Portfolio out of the Claymore 1-5 Year Laddered Govt. Bond ETF (TSX: CLF), Horizons S&P/TSX 60 Index ETF (TSX: HXT), Claymore US Fundamental Index ETF (TSX: CLU.C), Claymore International Fundamental Index ETF (TSX: CIE), Claymore Broad Emerging Markets ETF (TSX: CWO) and perhaps a smidgen of Claymore Global Real Estate ETF(TSX: CGR).

Claymore and Scotia iTrade deserve a pat on the back for this innovation. However, investors should carefully calculate for themselves whether switching to iTrade (if necessary) and picking products from the commission-free ETF list will result in lower costs overall. Trading commissions, after all, are only one component of investing costs. Investors should also consider Mangement Expense Ratios, turnover, tracking errors, bid-ask spreads and the tax implications of switching investments in a taxable account.

For example, John, a passive investor with $10,000 in the iShares S&P TSX ETF (TSX: XIU) and making 6 transactions per year in a RRSP account can lower overall investment costs by switching to Claymore Canadian Fundamental Index ETF (TSX: CRQ) in a Scotia iTrade account (I admit that this example is a bit contrived because the investor will be better off investing in the TD Canadian Index e-Series instead). The investor was earlier paying $17 in XIU MER and $180 in trading commissions at $30 per trade for a total of $197. After switching to iTrade and CRQ, John will be paying almost $100 less in total costs. The commissions are free and CRQ’s charges 0.71% in MERs, so the total cost after switching to iTrade drops to $71.

The experience of Jane, another investor with $100,000 allocated to XIU and making the same six transactions per year is much different. Jane is paying $170 in XIU’s MER but just $60 in trading commissions for a total of $230. Moving accounts to Scotia iTrade and switching to CRQ is more expensive for Jane because she will now be paying $710 in CRQ fees.

Personally, I find one very interesting ETF in the list — the Horizons US Dollar Currency ETF (DLR). With trading commissions eliminated on this ETF, converting currency from CAD to USD or vice-versa should become even cheaper at Scotia iTrade. Eliminating commissions on a trade an investor is going to make anyway is obviously a good thing. For all other trades, the analysis gets a lot more complicated and the benefits a lot murkier.