Online discount brokerages were an answer to the prayers of do-it-yourself investors who got tired of the traditional wealth management framework and high fees. The easy way to picture traditional investing is when you go to your bank to purchase a high Management Expense Ratio (MER) mutual fund.
The old school version of DIY investing was done through full-service brokers who help you buy a mix if assets while charging ridiculous commissions. The new face of DIY investing is simpler and cheaper. From the comfort of your home, you can easily use your phone to access your discount brokerage app, buy your choice of ETF, stock or options, and pay little to no commissions per trade.
Trading commissions charged by online brokers have fallen further in recent times as competition has increased. Even better, many Canadian discount brokers now offer commission-free trades on ETFs – either only on the buy-side or in some cases, for both buy and sell transactions (e.g. Wealthsimple). Given that the purpose of self-directed investing is the lowering of fees and maximization of returns, this is a welcome development.
Online Brokers Offering Commission-Free ETFs
Some of the best online discount brokerages in Canada which are great for both beginner and experienced investors, and which offer some level of commission-free trading in ETFs are listed below.
1. Wealthsimple Trade
Wealtthsimple is Canada’s most popular robo-advisor with more than 150,000 clients and $4 billion in assets under management. They launched their brokerage service, Wealthsimple Trade, in 2019 and it is probably one of the best things to happen to Canadian do-it-yourself investors in a long while.
Wealthsimple Trade offers zero commissions to buy and sell thousands of stocks and ETFs on major Canadian and U.S. exchanges. You got that right! Zero fees! Nada!
ETF Trade Commission: $0 per trade whether buying or selling.
Stock Trade Commission: $0 per trade whether buying or selling.
Account minimum: None ($1)
Account Types Offered: Non-registered investment accounts. As per the company, TFSAs and RRSPs are coming soon.
Referral Program and Promotions: Sign up for a Wealthsimple Account here and pay $0 fees when you trade stocks and ETFs. If you choose to use their robo-advisor service, you can invest up to $10,000 free for 1 year using this link!
Robo-Advisor: Wealthsimple Invest.
Questrade is one of the most popular online brokerages in Canada and has one of the lowest fee schedules in the industry. Questrade was founded in 1999, and has been honoured as one of Canada’s Best Managed Companies seven times! They hold over $8 billion in assets under administration.
ETF Trade Commission: $0 when buying, and a minimum of $4.95 per trade when selling. This applies to all Canadian and U.S. listed ETFs.
Stock Trade Commission: 1 cent/share with a minimum of $4.95/trade and a max of $9.95.
Options Commissions: Same as for stocks + $1 per contract.
Account Minimum: $1,000
Account Types Offered: TFSA, RRSP, RESP, LIRA, LRSP, RIF, LIF, Margin accounts, FOREX, and CFDs.
Other Features: Inactivity fee of $24.95 charged per quarter – waived if your account balance exceeds $5,000 (very good!).
Referral Program: Earn $25 for every friend who opens an account in addition to a $50 bonus for every third referral.
Robo-Advisor: They offer a robo-advisor service known as Questwealth Portfolios. You can read my Questwealth Portfolios Review here.
Virtual Brokers is a division of BBS Securities, and has been ranked as one of the top online brokerages in Canada several times.
ETF Commissions: $0 when you buy, and a minimum of $4.99 when you sell. Applies to all U.S. and Canada-listed ETFs.
Stock Trade Commissions: $9.99 flat per trade and $4.99 per trade if you place over 150 trades/quarter.
Options Commissions: Same as stocks + $1.25 per contract.
Account Minimum: $1,000
Account Types Offered: TFSA, RESP, LIRA, RRSP, RRIF, LIF, DAP, and Margin accounts.
Other Features: An inactivity fee of $24.95 is charged per quarter if you do not place any trades and your account balance is $5,000 or more (very good!). When you sign up for their VB Wave platform that costs $150 per month, you get commission-free trading on equities and ETFs.
Robo-Advisor: They provide a robo-advisor service referred to as Virtual Brokers Wealth Management.
Qtrade is another online brokerage to look at if you desire to invest using ETFs. They received the best overall online brokerage award from Money Sense in 2017 and 2018.
ETF Commissions: They offer 100 commission-free ETFs ($0 when buying and selling). For ETFs not on the list, you pay $6.95 to $8.75 per trade.
Stock Trade Commissions: $8.75 per trade or $6.95 if you place 150+ trades/quarter or have a $500,000 account balance.
Options Commissions: Same as for stocks + $1.25 per contract.
Account Minimum: $1,000
Account Types Offered: Cash, TFSA, RRSP, Margin accounts, RESP, LIRA, LRSP, RRIF, and LIF.
Other Features: Young investor (18-30 years) pricing is available at $7.75/trade, no account minimum is required, and no quarterly admin fees apply if eligible. In general, an inactivity fee of $25 per quarter applies unless your account balance is up to $25,000 or you contribute to it regularly.
Robo-advisor: They are related to the robo-advisor Virtual Wealth.
As a subsidiary of National Bank, they offer all levels of DIY investors competitive fees for online trading.
ETF Commissions: $0 on all Canadian and U.S. ETFs trades – both when you buy and sell.
Stock Trade Commissions: $9.95 per trade or $6.95 if you make at least 30 trades per quarter.
Options Commissions: Same as for stocks + $1.25/contract.
Account Types Offered: RRSP, Cash, Margin accounts, LIRA, LRSP, RRIF, RESP, LIF, RDSP, and TFSA.
Other Features: An annual admin fee of $100 when your total assets are $20,000 or more, or if you trade at least 5 times a year.
Robo-advisor: They offer a robo-advisor service referred to as InvestCube.
Scotia iTrade is a subsidiary of the Bank of Nova Scotia.
ETF Commissions: $0 commission-free trading on about 50 Canadian ETFs (both buy and sell). $4.95 to $24.99 per trade for ETFs not on the commission-free list.
Stocks Commissions: $24.99 per trade; $9.99 per trade if your assets are over $50,000 or if you make 30 trades/quarter; $4.99 if you make over 150 trades/quarter.
Options Commissions: Same as for stocks + $1.75 per contract.
Account Types Offered: RRSP, TFSA, RRIF, RESP, Cash, LIF, LIRA, Margin accounts, and Cash Optimizer Account.
Other Features: Inactivity fee of $25 per quarter unless you have a $25,000 balance across accounts.
All the discount brokerages above have their pros and cons, and you should take a look at their small prints and other related fees before committing funds.
The Dilemma of Fees and Returns
It is no secret that the Management Expense Ratio (MER) levied on mutual funds eats into your long term returns. While DIY using a self-directed brokerage account can help to stave off the high fees and potentially boost your long term returns, this may not materialize if you trade too often. Even at $10/trade, trading fees add up!
If your online broker offers $0 commission round-trip, trading actively becomes very attractive and comes with its own potential problems. You may become tempted to start timing the market or fall prey to investor’s behavioural biases.
Other Low-Fee Investing Options in Canada
Other options to lower your investment fees include:
A. Robo-Advisors: They are online portfolio managers who are significantly cheaper than traditional wealth managers. They use low-cost ETFs (similar to the ones you buy on an online brokerage) and automatically rebalance your portfolio. The most popular robo-advisor in Canada is Wealthsimple.
Related Post: The Complete Guide To Robo-Advisors in Canada
B. Index Funds
You can also invest using index funds. Index funds are similar to mutual funds, however, they are passively managed and charge lower fees. They are a great way to generate market returns, which is often more than what actively-managed mutual funds can boast of.
Here’s a list of Index Funds new investors can use for their portfolios in Canada.
Here’s an article that breaks down how index investing works.
- Wealthsimple Review: Low-Fee Investing in Canada
- Comparison of Robo-Advisor Fees in Canada
- What You Need To Know About Investment Fees
- Understanding Stocks and Their Place in Your Portfolio
- What is a Bond
- ETF’s Explained
- The Major Investment Risks All Investors Face
- Mylo Review: How To Automate Your Savings and Investing