Investment fees are notoriously high with traditional brokers. Since land-based brokers operate with higher fixed costs, it makes sense that they charge more in terms of fees, commissions and associated costs per annum. However, traders and investors needn’t succumb to these higher costs since there are alternative options available in the form of online trading platforms.
In Canada, a wide range of discount brokerages is available. These take the form of online trading brokers which are fully licensed and regulated by the authorities in their respective countries, territories or regions. There are many inherent benefits to switching from a traditional bricks and mortar brokerage to an online broker.
Nowadays, it does not make sense to entrust all of your investment affairs to a financial advisor if you can do a lot of the work on your own. Online trading platforms make it possible to buy or sell stocks, commodities, indices, or currency pairs quickly and easily. More importantly, the transactions costs are significantly lower, and traders need only purchase specific quantities that are tailored to their bankroll.
This differs markedly from the minimum account requirements set out by mutual funds and exchange traded funds. For starters, the middleman in the process is now the trading platform itself which also facilitates all trading and investment activity. Robo advisors can be used to automate certain routine activities, while traders use all available resources to make informed trading decisions.
Competition Drives Costs Lower
Since the global financial crisis, online trading platforms have blossomed. People realize the inherent value of low-cost brokerages, and they are not willing to surrender a large portion of their net worth to brokers. The advent of low-cost brokers has dramatically dropped costs for traders. Some traders use discount brokerages to periodically rebalance their financial portfolio to better reflect market realities, while others actively trade and invest.
Online trading brokerages have upended convention. The notion that brokers in ivory towers control how much of each financial asset you get to trade has been shattered. Now, anyone can trade stocks and bonds, indices and commodities, and more. Derivative trading instruments such as contracts for difference (CFDs) have rapidly gained ground across Canada and in other regulated trading jurisdictions. With these new financial instruments, investors do not need to take ownership of an asset – they can simply speculate on price movements.
Derivatives trading (CFD trading) is a contrarian investment strategy which relies on the trader’s understanding of market fundamentals. There are low fees, or no fees levied on individual trades with many online brokers. However, there will be account minimums that need to be met in terms of deposits and account balances.
The leading online brokers in Canada include companies like Questrade which does not charge an annual RRSP fee, RESP fees, Non-Registered account fees, or an annual TFSA fee. Other companies such as TD Direct Investing, RBC Direct Investing, and Qtrade levy high annual fees.
Plus, there are minimal basic trading fees with Questrade, for example a maximum of $9.95 per trade and a minimum of $4.95 per trade. Many of the online brokers in Canada offer a wealth of services on mobile. Live chat functionality is available, and traders can easily stay updated on market activity by way of automated trading apps, signals and the like.
Costs Are Important but so Is Credibility
It is important to compare brokers in terms of costs. Land-based brokers are always going to be more expensive, since they have fixed and variable costs to contend with. As such, you should be evaluating your trading activity based on your knowledge, your need for expert advice, and your trading preferences.
Some of the fees that you can save on when going with an online brokerage include per-account fees, ETF trade fees, per-trade fees, minimum account balances, reimburse transfer fees and the like. At all times, it’s important to work with a regulated brokerage – land-based or online, and to evaluate the professionalism and responsiveness of the customer service.