Just last month, TD Waterhouse announced that as of November 4, 2010, it will start charging clients who hold between $50,000 and $100,000 in household assets a flat trading commission of $9.99. Clients with less than $50,000 in assets will continue to pay $29 for most stocks. The previous threshold for the lower commissions was $100,000 in household assets.

It may be a coincidence but CIBC Investor’s Edge, which used to be one of the discount brokers that still charged $29 for all clients announced that it will begin charging just $6.95 per trade for clients that have $100,000 or more in business with CIBC. Clients with total balances between $50,000 and $100,000 will be charged $9.95 per trade. The total balance is calculated by adding deposits, investments, loans and mortgages held by all occupants of a household with CIBC or its affiliates. The new pricing plan goes into effect January 1, 2011.

Today, BMO InvestorLine joined the bandwagon and announced that beginning December 1, 2010 it will the threshold for qualifying for the flat rate commission of $9.95 from $100,000 to $50,000. Clients can combine assets in all BMO InvestorLine accounts over which they have trading authority.

It has been more than 3 years since the last round of discount broker price wars. At that time, TD Waterhouse first announced a low flat rate commission for clients with $100,000 or more in assets. RBC Direct Investing and BMO InvestorLine quickly followed suit.

The latest price war is encouraging because it will reduce the cost of buying and selling stocks for even more self-directed investors. Hopefully, retail investors will not fall into the trap of trading more simply because commissions are lower. It would also be interesting to see if we’ll see competition in other areas between discount brokers. For far too long, discount brokers have been getting away with pocketing trailer fees that are supposed to compensate for financial advice. Since self-directed investors receive no advice, it is only fair that most of the trailer fees be rebated back. We would also like to see more brokers follow RBC Direct Investing’s lead and offer US dollar RRSP accounts.

Update (Nov. 5, 2010): RBC Direct extends $9.95 pricing to clients who hold between $50,000 and $100,000 in household assets.

This article has 49 comments

  1. I’m happy for this price war as a TDW customer who falls in between $50k – $100k in total investments. I’m not a heavy trader, but this should save me at least $100/year when adding new positions within my TFSA and RRSP.

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  3. Now if only Canadians could have as many cheap trading options as there are in the U.S.
    Even TD Ameritrade provides cheaper trades to Americans than Canadians get with TD Waterhouse.
    Overall though, it is great to see the price/ceilings move in the right direction!

  4. Charles in Vancouver

    Qtrade has joined in this as well! Their $9.95 trade threshold has dropped to $50K. No word from my brokerage (Credential Direct).

    I still am a year or three away from that $50K threshold, so it looks like I’m moving to Questrade for now.

  5. I’d like to see some of the thresholds and admin fees for RESPs etc adjusted down

  6. Keep in mind at TDW the $50k in assets must be on the brokerage side (Waterhouse) and does not include amounts in the bank or at TD mutual funds. So it seems the CIBC threshold is a lot more achievable since it includes all assets with CIBC (including mortgage).

  7. It would be interesting to see a breakdown of where discount brokerages make their money. This price war involves the most visible part of their revenue, but maybe not the biggest part.

  8. Now if they only lowered trades commissions for >$100k portfolios… ;)

  9. Hopefully lower commissions will allow average Canadians to “fall into the trap” of not buying and holding/ignoring forever, which is at least as big a problem as excessive trading.

  10. That’s great. I hope the next price war will happen with exchange rates between CAD -> USD.

  11. Competition is a wonderful thing!

  12. @Echo, @MoneyEnergy: Yes, it is encouraging to see ceilings lower. But I bet the brokers are hoping that lower prices will increase volume. So, investors have to make sure they don’t trade more just because commissions are lower.

    @Charles: Do you know if QTrade lowered the ceiling recently? When I wrote about them, their ceilings remained at $100K but I see now that they’ve lowered it at some point. Not sure when because they don’t seem to have put out a newsrelease.

    http://www.canadiancapitalist.com/qtrade-review/

    @Michael: I agree. A lot more clients should qualify for lower commissions at CIBC because $50,000 in household balances is within reach of most investors. All other brokers only include assets in brokerage accounts in computing the ceiling.

    @Michael James: Off the top of my head, I can think of other profit centres: margin loans, cash balances, foreign exchange conversions, trailer fees etc. Not sure which among these has the biggest margins.

    @Larry: I think it is possible to get TD Waterhouse waive/refund admin fee for RESP accounts. I haven’t pursued it because I find TD e-Series Funds more than enough for my purposes so far.

    @Sampson: And if only a broker again offered a sweet 1% bribe to switch :)

    @Dr. Dale: There is plenty of evidence that the less you trade, on average, the better your returns are. BTW, passive investing is not just buying-and-holding forever, it also involves periodic rebalancing. So, even though they may not trade every second, passive investors also benefit from lower commissions.

  13. I just called CIBC about the new trade commissions. I have an RRSP and TFSA with them.

    Here is what I found out:
    If you have the Trade Advantage Package already ($395 for 50 trades a year), you are converted over automatically. Otherwise you HAVE to call in to request the change to $6.95 per trade deal being offered.

    I have the Trade Advantage Package on my RRSP, so it was automatically converted. My TFSA isn’t part of the Trade Advantage Package (and it can’t be shared among multiple accounts, which I found stupid to begin with) so it wasn’t automatically included in the $6.95 per trade deal. I had to specifically request it to be added.

    So if you trade with CIBC, be sure to call them to set it up.

  14. Ahhh, I would love to see another 1% bribe to switch brokerages!! Easiest $$ I ever made.

    Ellen Roseman also wrote about this today, and she interviewed me for the article which of course is why I mention it. ;)

    http://www.thestar.com/article/884857–roseman-price-war-cuts-online-trading-costs

  15. They make their money with trailer fees, hidden fixed income commissions, hidden forex charges, no interest on credit balances, lengthy “hold” periods beyond settlement date, high interest on debit balances, multiple admin fees that have no relation to costs (e.g. transfer fees), lending your securities to short sellers, forcing you to open 0% interest high fee bank accounts, etc, etc, etc

    Hey guys, come and get this candy. It’s only $9.95!!

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  17. @CC I believe that there is more compelling evidence that active investors who follow a discipline do better than passivity/buy-and-ignore-forever.

    (But we have had that debate several times already, and neither of us will declare defeat!)

    Know again, that even though I disagree with passivity; I like and respect your blog, and the good and useful advice proffered. Keep up the good work; many hard working Canadians have come to rely upon your safe-keeping of their nest-eggs.

  18. @Paul: Thanks for the clarification. I recall TD Waterhouse handled household assets in a similar manner. A client had to call to link accounts if any of the accounts on its own did not qualify for the lower commission.

    @Money Smarts Blog: Congratulations on the mention. Financial Post also ran a story on the price war:

    Banks kick off online trading fee fight

    @Sean: Agreed. I personally try and minimize as many of those costs as possible. I already get $9.99 commissions at TD and lower commissions is way down on my wish list.

    @Dale: Yep, I agree we’ve been over this ground already.

  19. What do TD Waterhouse, Scotia and the other big banks offer in their brokerages that Questrade doesn’t?
    I was looking at setting up an account and Questrade is offering $4.95 – 9.95 no matter what your balance is while the big banks charge 2-4x time as much for someone under the $50k mark.

  20. Yes, I would definitely like to see a war between discount brokers who will be the 2nd, 3rd etc and follow RBC Direct Investing’s lead and offer US dollar RRSP accounts. BMO Investorline has been promising it for at least a year…

  21. This is way overdue. Now, if Questrade would improve their service quality and reliability, I’d be pleased. Unfortunately, they continue to have difficulties including the past 24 hours when I attempted to log in and could not, on a couple different computers and networks. Once again, you get what you pay for sometimes. In the case of the major banks, you always get less than what you pay for…. but this move does get it closer!

  22. There is no war. $29 or even $9.95 per trade is way too expensive. I pay $1 for 200 shares of US stock at Interactive Brokers Canada.

    With financial services you definately don’t get what you pay for. Rather, you get what you don’t pay for!

  23. @Sid: I know many investors who are happy with Questrade. I also know many (including myself) who have been burned by various issues at Questrade. The big brokers are not perfect by any means but in my experience they are loads better than Questrade.

    @G: TD Waterhouse was also rumoured to introduce a USD RRSP account “soon”. We’re still waiting…

    @Doctor Stock: I agree. But $50K isn’t all that high a requirement, especially at CIBC which includes all kinds of products. And despite my frustrations with Questrade, part of the reasons commissions are coming down is because of brokers like them. So, having Questrade around benefits all investors, even those who don’t have an account with them.

    @DavidS: Unfortunately, the bulk of my portfolio is in a RRSP and IB doesn’t offer RRSP accounts. I suppose I could open investment accounts with IB but I like the convenience of having everything in one place. And I don’t trade all that much anyway.

  24. Scotia Bank with ScotiaITrade (previous e-trade Canada) has been offering the 9.99$ for 50K$ holding ever since they purchased e-trade Canada. ScotiaITrade offers DRIP with the DRIP discount. It’s a requirement for me from a discount broker.

    The only thing missing is a US account within TFSA and RRSP. It’s currently only CDN$.

  25. I am giving Credential Direct one month to harmonize their trading fees with the banks and told them so in writing. They were great when I was just starting out investing, with free mutual purchases and no inactivity fees and low regisistered account fees – but I can’t justify that additional trading expenses anymore.

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  27. Good news to share Ram, thanks!

    Yes, still waiting for the TDW USD RRSP account. Can’t you use some of your clout to get that moved up the TDW agenda Ram? :)

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  29. This is excellent news!
    This should pressure the remaining banks such as National Bank to follow suite. This pricing review is overdue especially with all the discount brokers out there.

  30. I just read that my current favourite broker, RBC Direct Investing has followed suit by lowering the threshold for the $9.95 commissions from $100,000 to $50,000 in assets, starting December 22nd.

    Like a lot of people here, the difference between $10 trades and $5 or $7 trades is not a big deal. I choose RBC for a lot of different reasons, including the US$ RSP account, and free swaps which I get as a Royal Circle member ($250k+ in assets). Royal Circle members also get free RSP withdrawals and access to a special phone line where the most experienced customer service reps answer the calls. I really like these privileges. Jeepers, I sound like a commercial.

    http://www.rbcdirectinvesting.com/royalcircle/

    • @gene: That’s excellent news. I’ll update the post.

      I like RBC Direct Investing as well. The only thing I found lacking with them was wash trading and now that they have USD accounts, it’s not an issue anymore. TD Waterhouse works very well for me. The only thing that I miss at TDW compared to RBCDI is the ability to search GICs online. At TDW, you have to phone in to ask for today’s GIC rates. Ridiculous!

  31. >the difference between $10 trades and $5 or $7 trades is not a big deal.

    Investors need small orders to get good prices and minimize risk. Commission at $10/trade for 200 shares is 5c/share. In addition, there is the cost of the spread, say 2c. For a $10 share that is a total round-turn cost of 120 basis points! Even over a long holding period, say 10 years, that is 12 basis points per year. And 12 basis points per year is more than the expenses of some ETFs!

  32. I work for TD Waterhouse.. to clear some things up:

    1)US dollar rsp accounts at Waterhouse are still going to be a couple years although we will wash your trades unlike some other brokers.

    2) We will be offering GIC rates online this spring

    3) You do have to call in to HH your accounts together to make sure your getting 9.99 trading. Also keep in mind that you have to receive your statements online if your assets are between 50-100k

    As for cheaper commissions at other brokers, go test your luck with Qtrade and Interactive and see what happens when your unable to place a trade online and loose thousands because of it. I can tell you at Waterhouse I have seen clients refunded thousands of dollars when something goes wrong on our end. I am quite curious to know if other brokers would be so generous.

    If you have questions I would love to answer.

  33. @TDW REP: Please justify charging 1.59% for every transaction involving foreign exchange. The round trip from CDN->USD->CDN is more than 3.19%.

  34. The spread we charge is about 1.5% on FX transactions you are correct. From what I have observed through my own research is that we are quite competitive in terms of exchanging money. You are free to exchange the funds either on the bank side or at another institution or even a specialized FX place like Accurate. From speaking with clients most of the times are rates are better.

    My advice to clients to avoid paying excessive FX charges is to:
    1) Do your US trading in a US denominated account so that you don’t pay each time you buy and sell
    2) If its in a RSP or TFSA, make sure you are washing your trades

    There is no conspiracy in terms of TDW trying to make clients exchange money. Management pushes the idea of the reps helping clients make smart decisions and informing them of ways in which they can minimize fees.

    It all comes down to the fact that we are a business and we do charges fees as every broker does. Whether it is justified is not? I am not aware of any institution that will exchange money at the spot price for their clients. If you find one let me know as I will use them and then deposit the US funds to my TDW account for my personal trading.

  35. @TDW REP:

    Interactive Brokers charge 0.01% for foreign exchange.

    Questrade charge 0.50% AND has USD RRSP and TFSA accounts.

    I was curious about how TDW justifies charging 3 to 150 times what its competitors charge.

    http://www.interactivebrokers.com/en/p.php?f=commission

  36. I can’t confirm that from their website as its hard to tell whether that is for Canada or US. As we know the Americans pay far less in Commissions and fees. Those rates do look tempting although I am still skeptical.

    Again, for most traders, once their funds are in US dollars their is no further conversion. I do agree that it can be time consuming to wash your trades if you are trading in US stocks within an RSP or TFSA.

    If you are choosing a broker stricktly on price…Questrade and Interactive will be the brokers to choose but there are many other factors that come into play. All I can say is “God be with you”. Give us a call when their trading links to the exchanges freeze up or their website is down.

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  38. @TDW Rep: Thanks for your input. It’s good to know that online GIC pricing is coming soon.

    @Slacker: Forex conversions are a huge profit centre to the big bank brokerages. They have a lot of incentive to keep it high. Fortunately, we can easily work around the high forex commissions at the banks by:

    1. Employing the Norbert Gambit for CAD < -> USD conversions.
    2. Wash trading whenever selling one US security and buying another.
    3. Washing US dividends in a RRSP into TDB166.

  39. >Interactive Brokers charge 0.01% for foreign exchange.

    Yes, approximately. Interactive Brokers charges .002% commission (US$2.50 minimum) plus interbank spread for orders greater than $25k. The CAD/USD interbank spread is usually .01c. So for a USD100,000 order the cost would be US$7.50 or .0075%.

    >… TDW justifies charging 3 to 150 times what its competitors charge.

    Yes, approximately. If TD charges 1.59%, then they are charging 212 times what IB charges.

    Remember, with financial services you get what you don’t pay for!

  40. So with IB, what’s the catch?

    IB targets hedge funds, professional investors and active retail investors. The minimum account size is US$10,000 equivalent. IB is a direct access broker, so investors trade directly with market. While other Canadian brokers cover the cost of exchange data or don’t provide true real-time data, IB passes these charges directly to customers. For Canadian exchanges, IB charges CA$6/month. For US exchanges, IB charges US$10/month unless US commissions exceed US$30 during that month. All customers must subscribe to at least the US exchange data. IB does not offer RRSPs. IB offers many investment products from many markets as well as many sophisticated software tools. This may seem intimidating. The most frequent criticism of IB has been their customer service.

  41. Canadian Capitalist: Thanks for the information on the Norbert Gambit. This is great advice! I have brought it up with some clients this week when inquiring about FX. I actually sent out a link around the office for other Reps to take a look. I find it humourous that people think this is a conspiracy by the banks to make more money. I don’t know how it is at other brokerages but I know at TDW management pushes us to inform clients of ways around our fees.

    We have an independant rating agency who rates our calls and a large part of our bonus is based upon these ratings. I can tell you that they give huge points for telling clients about things like this that can save them money.

    We realize that informing clients of this stuff will help retain business and bring us more market share. Its business 101.

    I can honestly tell you that I have had clients call me and ask to do a transaction that could be done in a similar manner saving them literally thousands of dollars. They sometimes ask me why I am telling them this information and my response is because I look out for the clients #1. It really makes no difference to me and if that call gets rated…I get rewarded.

  42. Note that the Norbert Gambit requires paying, at the very least, triple spreads plus triple commissions. That is not what I would consider smart money.

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  44. Note on the Norbert Gambit: TDW is not allowing journaling the trades before they settle (wait 3 bus days) and then 2 more days for journaling to take place. It looks like TDW Rep alerted about the mechanism and they now are reluctant to serve the customer in this type of request.

  45. Note on the Norbert Gambit: TDW is not allowing journalling the trades before they settle (wait 3 bus days) and then 2 more days for journaling to take place. It looks like TDW Rep alerted about the mechanism and they now are reluctant to serve the customer in this type of request.

  46. @TL: I was afraid this was going to happen. Thanks TDWH for making it easier to take my money elsewhere.

  47. It is true, I did Norbert Gambit at TDW and got caught up waiting for 3 days settlement. Maybe it depends what Rep you get.

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