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.

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

This article has 24 comments

  1. CC, thanks for the links! Much appreciated. I’ll include yours in my larger discount brokerage review.

  2. 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. 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

    Road to Harvard: Thanks for the clarification.

    Jon: The 2 for 1 commission rebate is a nice feature with Scotia.

  5. 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. 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. 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. 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.

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  12. Margin traders! There is one more RBC Direct Investing feature everyone should consider, specially when market is down, like now, in the second half of 2008. If you have banking account with RBC and you are facing margin call from Direct Investing – be quick withtransferring money to them! RBC allows Direct Investing to grab money directly from your RBC account up to your overdraft protection limit. And they do it without any warning. This practice absolutelly ruins your daily financing. You transfer money from e.g. line of credit – and the next day they dissapear. Your bills are not paid – this is a disaster! I know that we are responsible for our margin calls, but described practice is, in my opinion, unacceptable. I am moving my investments out of RBC Direct Investing.

  13. I have been with Royal Bank my entire life. (47 years) RBCDI is the worst arm of the inst. Go anywhere but here, unless you want the system to shut down on you. Unless you want your market buys to be the highest price payed. And your market price sells to be the lowest 100% of the time. I have spoke with many friends and family and none of us have anything good to say about them. RBCDI are criminal. I do not use the term loosely. RBCDI will cost you a fortune. Stay away. In Canada we are limited to decent brokers. Anyone who has anything good to say about RBCDI either has not used them or works for them covert.

  14. RBC Invest by phone is the worst discount brokerage services I have ever dealt with. The phone representatives have no skills to solve problems and the escalation process is extremely slow, so slow it has cost me thousands of dollars.
    I will have trouble trusting the RBC Direct Investing people, they were not able to retrieve crucial information from their records…that’s right after 3 days, data from the history in your accounts can not be retrieved. This certainly goes against any Records Management practices, including auditing. You get for what you pay…$10.00 dollars per trade and no accounting for their errors.

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  16. I recently moved to CIBC’s Edge package, it’s $400 for 50 trades and then it gets even cheaper. I used to have RBC Action Direct but it’s very expensive. Their $29/trade is decieving because it depends on number of shares you buy. I have paid over $200 per single trade and could be even higher. Their active trade statuse is almost impossible to acheive and maintain without doing lot of useless trades. I would not recommend RBC Action Direct to any one. I complained to them and they told me to get lost.


  18. joke of a broker…my god

    and their new training account commercials make me laugh…

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  22. I am not comfortable with the new platform RBC Direct investing has implemented recently. The indicatior charts lag several minutes behind the quote in some cases. I have contacted the customercare line by phone and by email several times. No one at Direct Investing has come forward with a desicive answer. All I wanted to know is “Is the way the chart are supposed to work? Can I expect a modification to see them sycronized in the future?”
    One glaring problem is that the quote referenced on the real time overview page is not in sync with the quote referenced on the all the various charts (daily to 10 years inclusive) showing all the transactions even though the volume had not changed (indicating there were no subsequent transations) Lag was noted in some cases as much as 15 minutes and as little as 1 minute.
    For the day trader this could cause disasterous implications .
    I would like to know if that is the status quo for all discount brokerages.
    Anybody know??

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  24. If you are trading options, this is one of the worse platforms you can use to trade. I recently joined RBC DI, stock trading is OK. Not great. It still feels like I am using a 1998 web page. My biggest problem with this platform is that you cannot place a stop loss order on options. Add to that the 20 minute delay and the slow order processing and what you have is a perfect formula to loose all your money. It is impossible to keep up with the options price (up or down) and it seems I am always pricing myself out of the market. I had to modify my order at least 15 times before I finally got my order filled. When that happened the price had fallen more than 50% when I could have stopped my loses at 20%. THIS IS UNFORGIVABLE for a company that claims to be conservative.

    RBC please do the right thing and correct this immediately.

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