Which Online Broker to Choose?

Online brokers vary quite a bit in their features and services, so choosing the one that is best for you out of the fourteen available may require some comparison shopping. Here's my suggested shopping list.

1) Does the broker offer all the Account types (RRSPs/RIFs, RESPs, LIRAs/LRIFs, Trust accounts) and choice of Securities (mutual funds, fixed income) you need?

2) Are Fees and Commissions competitive? Compare:

• trading fees / commissions - the cost per share or per trade for buy/sell transactions; the rate may be much lower with a larger account balance
  
• administration fees - for account balances below a minimum size, there is often a quarterly or annual charge
• bond commissions - you pay a commission buried in the price when buying and selling bonds as Rob Carrick of the Globe and Mail explains; it's hard to compare brokers for that reason but see some of the blogs below for discussion
• foreign exchange - when trading US stocks or bonds it is necessary to convert to/from Canadian dollars; the broker will do it for you but you pay an implicit commission through the exchange rate charged. Within registered accounts like RRSPs, a few brokers allow you to keep a US dollar cash balance, which is advantageous if you intend to sell a US stock and then buy another since you avoid a round trip through Canadian dollars with a commission on each leg of that round trip.

3) How much will you need Tools and Research like stock data, news feeds, analyst reports, sorting and ranking tools and personal financial planning aids such as investor education documents, retirement planners, asset allocation and portfolio design tools?

4) Have a look at each broker's website to see if the Website Interface and Usability will make it frustrating or easy to invest.

5) Happily, Online Security and Investor Protection are uniformly good enough all round in my opinion to remove those as make-or-break worries about brokers.

6) Is live telephone Customer Service there when you need to fix problems with minimum hassle or carry out special non-automated transactions? Opinions on the brokers vary, so read the blogs and newspaper reviews and take none as the ultimate answer.

7) Are you best with a Best-of-Breed broker or One-Stop-Shopping?
The independent brokers may have the lowest per share trading costs but the banks offer online integration with banking, simplifying tracking of investments and enabling quick movement of money among accounts.

Assessments and Ratings

• Stingy Investor has a list of Canadian discount brokerages with their trading commissions and links to the broker websites.
• Canadian DRIP Primer has a more up to date list of Canadian discount brokers.
  
• Canadian Capitalist briefly reviews many of the brokerages in linked posts
• Million Dollar Journey compares online brokers, focusing on the independents
• Rob Carrick of the Globe and Mail rated online brokerages back in Oct. 2007

I've been a client of BMO Investorline for over ten years and though they aren't perfect (US dollars in registered accounts please!), I've discovered that the others are not either. BMOIL does a very competent job for me and I can recommend them. I also have an RESP account with TD Waterhouse, where I've had a generally positive experience.

Finally, if you sign up with a broker and they don't serve you well, you can transfer to another broker.