TD Waterhouse Offers International Trading - Partly Good, Partly Bad

The news that TD Waterhouse (hat tip to Wealthy Boomer Jonathan Chevreau's post today) is offering the ability to trade directly on major international stock exchanges is mostly good - international diversification becomes a little easier. Canada is catching up to the UK, where TDW has offered such a service for years now.

I guess the small matter of the financial crash of 2008 somewhat delayed the implementation of TDW's intention announced by the Globe and Mails's Rob Carrick as I posted about two years ago, almost to the day.

But TDW is charging too much. Why is TDW charging Canadians £29 commission per trade (see TDW Canada Online Commissions and Fees) for buying shares in the UK when TDW UK's commission is less than half at £12.50 (rate table here)? The same higher cost applies to the other foreign markets too. Give us a break TDW!

Update Sept.16: TDW says blandly in an email reply to my enquiry that the higher commission fees in Canada are "...reflective of the greater underlying costs..." and that they are "competitive". I guess the Canadian operation of TDW isn't as efficient as it is in the UK. TDW also says the online Global Trading capability cannot be used in registered accounts, another difference with the UK where it is possible to trade on international exchanges in the similar ISA account.

Source for Discount Broker Comparisons

Worth noting .... IndependentInvestor.info has published an article that pulls together various official media sources of recent discount broker comparisons and ratings. There is an especially useful link to a pdf table compiled by a finance student Charles Martineau which contains direct links to the specific sections of the broker websites to get the detail on such things as commissions, account charges, dividend reinvestment policies etc.

Missing from the Martineau pdf are some other comparison factors that are significant like the ability to hold USD foreign currency in registered accounts and/or the implicit commission rates charged by brokers who do not allow foreign currency in such accounts and; for ETF investors, the ability to DRIP, which may not work as easily as for ordinary shares, as I posted about in DRIPing ETFs in Canada.

The information makes clear that there may not be any single "best" broker for everyone since what is important to some, like low trading commissions, may not count for much to someone who needs good customer service or the best DRIP program. Or, as Independent Investor notes, it may that a broker like TDW has the best choice of fixed income. Indeed, the ratings surveys by the Globe and Mail, JD Power and Surviscor come up with quite pronounced differences in rankings.

Claymore PACC DRIP SWP - Beware of the Broker

One of the valuable features of Claymore Canada's ETFs is that the company offers investors three automatic programs, all on a voluntary basis without commissions or fees:

• PACC - Pre-Authorized Chequing Contributions - owners of ETFs can make regular monthly, quarterly or annual purchases of additional units
  
• DRIP - Dividend Re-Investment Plan - ETF distributions received are used to buy more units
• SWP - Systematic Withdrawal Plan - ETF units held may be sold on a regular monthly, quarterly or annual schedule

However, there is a catch. The broker at which the ETF units are held must cooperate with Claymore to make it happen. Not all brokers do and some only participate in one or two of the programs. The PACC is the one with the most brokers missing. Unfortunately, it is also the case that the major bank brokers are least on board - none supports all three programs. To check your own broker, here is the list posted by Claymore of which broker supports what.

Thanks to Larry MacDonald at Canadian Business for asking the question that prompted me to look into this. You learn something every day.

HSBC Lets You Trade Around the Clock

The title of my post is a bit of a teaser. HSBC InvestDirect Canada has actually just announced that it is adding direct online stock trading in the three major European markets - the London Stock Exchange, Euronext Paris and Frankfurt Stock Exchange. HSBC already offers direct online trading to the Hong Kong market as well as the usual Canadian and US market access. There's a market open somewhere to trade in 24 hours a day for you trading junkies.

The HSBC accounts offer the ability to settle trades and hold account cash in 10 different currencies. That is beneficial to avoid currency exchange costs and may be useful to Canadians like me in foreign lands who want to hold the local currency.

HSBC's action of enabling online DIY online access is a step in the right direction of making investing worldwide a level playing field. As I noted recently, the TSX is getting to be a thinner market all the time so diversifying internationally is necessary.

It is possible to diversify internationally using index ETFs through US markets but purchasing individual company shares is limited to a few ADRs. (It is interesting that the US ETF for the UK FTSE index, symbol EWU on NYSE seems to do as good a job tracking the index as the one in pounds sterling traded in London under symbol MIDD.)

HSBC needs to do one thing to make their offering more compelling and competitive - lower the trading fees. The minimum trade commission is £55, or about $100 for the London exchange. That is steep for a "no advice" service. I find it strange that their UK arm can offer trades for a flat price of £11.95. Why not in Canada too?

Questrade for my TFSA: the Sign-Up Experience

I've now signed up for my Tax Free Savings Account with discount broker Questrade and am happy to report so far almost everything is as good or better than I hoped.

Pluses

• Fully online account sign-up - For those who are out of the country a lot, as I am right now in the UK, it is a relief and a pleasure to be able to do online the whole sign-up, including form filling, "signing" agreements, providing ID by email (a scanned passport or driving license). No paper to send in Hooray!
• Electronic money transfer from my bank account to Questrade via the Pay Biller service to make the $5k TFSA contribution (or if I was to need it, to move money back)
  
• Rapid personal email confirmation from the the new account manager Emil Vojkollari, whose name and number I now have in case I need it!
• Quick human contact to a rep through the 1-888 number when I had a question about the only negative below

Minus

• Multiple named beneficiaries for the TFSA is not yet possible on the electronic form; you must post a letter in with instructions - names and proportions to each beneficiary. BTW, why is the province of Ontario lagging others like BC, AB, NS and PEI (according to accountant Dean Paley writing in Jonathan Chevreau's column on the Three Big TFSA Issues) in passing legislation allowing such named beneficiaries to be direct recipients of a TFSA proceeds upon death instead of having this pass through the will/estate and incurring probate taxes?

Why did I pick Questrade?
They are the only brokers who offer more or less complete ability to set up ETFs to automatically reinvest dividends/distributions and without extra commission as I wrote about in DRIPing ETFs in Canada. (Actually, Qtrade will also DRIP ETFs but they don't offer a TFSA) For me, the TFSA is not an emergency funds account, it is just another part of my investment portfolio which consists primarily of ETFs, and that's what I want to buy at Questrade. Given that the TFSA limit is only $5000, the distributions will be small and it would be too costly to buy a couple of shares at a time so the cash would just be sitting there idle without Questrade's unique free service.

Fees and Deals on TFSAs at Banks and Discount Brokerages

The TFSA starts January 1st, 2009 and it's time to pick one. But as usual, though the tax rules are the same for all the way each bank and broker implements and charges fees can vary. Rob Carrick warned about fees and provided some numbers in this Globe article. CanadianCapitalist summarized the range of options for TFSAs in this post.

Being the type of guy who always wants to compare options and find the best deal I have taken Rob's work a little further and done some browsing and phoning to make up a little spreadsheet that shows what I have found. Given the sorry state of information flow within large financial institutions to both customer service reps (a blogger does not have access to the insiders with the exact knowledge or authority so one gets the "real customer experience" in trying to dig up information) and websites, some of this info may not be correct.

The Best Deal in my opinion is .... Outlook Financial's 5% 5-year cashable GIC. When I phoned earlier today the rep assured me that one can lock in the rate today even though the money can only go into the account as of the legal start day of January 2nd. The astute will observe that Outlook has an ad on my website so you can be sceptical about my motives for recommending them but I invite you to try finding a higher GIC rate. Go to Canoe.ca Money Rates for GICs do the sort from high to low and Outlook's is the highest in Canada bar none. The only slight downside is that the guarantee for payment of principal and interest comes not from CDIC but from the Credit Union Deposit Guarantee Corporation of Manitoba. If the CDIC safety net is a requirement for you, then National Bank's 4.1% 19 month GIC looks attractive, as does Bank of Montreal's 4.3% 3-year promotional offer.

The bottom line for the discount brokers is that there is little to distinguish them with respect to TFSA alone. My own broker BMOIL is the only real outlier with a fee of $25 per withdrawal. The big drawback for all the brokers is the presence of hefty $125-135 fees for transferring an account to another institution. Among the things to consider:

• account opening hassle involved for each institution - e.g with BMOIL, even as an existing client, I would need to send them my ID info again (and I read similar comments about TD Waterhouse on the Financial Webring thread on TFSA Offerings), which is no easier than Questrade, where I don't have an account and which said I could simply mail them a blank cheque from my bank to comply with the money laundering regulations.
• trading commissions and fees - see discount broker Trading Commissions at StingyInvestor
• overall reputation - see the Globe and Mail's annual broker ratings

Some brokers are not even offering TFSA accounts, like QTrade rated #1 in the Globe ranking or E*Trade (that's why they aren't on my spreadsheet). CIBC Investor Edge's offering is coming "March-April" 2009 while ScotiaMcLeod Direct will only have application forms ready (and confirmation of fees) on Dec.22nd.


Whatever you do, go open a TFSA as soon as possible, especially before the unholy alliance of Libs/NDP/Bloq gets into power and starts reversing the "errors" of the Conservatives. Who knows how long the TFSA might last.

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.

TD Waterhouse to Offer Online Trading on Global Markets

Rob Carrick spilled the good news in his article Against the Tide in today's Globe and Mail that TD Waterhouse will begin offering online trading in European markets followed by the Far East this fall. Excellent!

This capability has already existed for some time in their UK service, while in Canada, so far as I know, only HSBC InvestDirect currently offers global trading. Hopefully, other discount brokers will follow suit, further enabling international diversification by DIY investors.

BMO Investorline to Introduce RESP Accounts

BMO Investorline is to fix the anomaly of not offering Registered Education Savings Plan (RESP) accounts for its discount brokerage customers according to a recent note to clients from Connie Stefankiewicz, President & CEO. Good on them, it's about time. I am hoping it will facilitate online contributions with direct transfers of cash (dare we hope even contributions in kind?) from bank accounts or a regular trading account. The RESPs are to begin in "early fall".

Expat Canadians Investing While Abroad

What happens to investment accounts at Canadian brokerages when a Canadian goes out of the country to work or live? Would you want to be forced to transfer your investment accounts to another country for a few years in order to manage them or be obliged to leave them inactive?

For self-directed, self-managed investors, such a prospect can be particularly frustrating since technology enables Internet or telephone access to accounts from virtually anywhere. Unfortunately, the WWB (World Wide Bureaucracy) has complex rules that may bring a full stop to such activities. If you are not leaving permanently with your money/investments and you wish to keep your accounts open and available for trading, you need to be careful.

The issue arises from this fact taken from the Ontario Securities Commission note on Cross Border Trading:

"As a fundamental principle in securities regulation, for a securities broker to deal with a client, the broker needs to be registered with the securities authority in the jurisdiction where the client is resident. This applies in the individual states in the U.S. and in the provinces and territories of Canada."

So where are you considered to be "resident"? It all hinges on the meaning of that word resident, which is defined in different ways by different authorities, or even not at all explicitly, leaving the matter to the varying interpretation of court cases, to the utter frustration and dismay of us poor schmucks who have to figure it out.

Here is part of the OSC's response to my enquiry on the issue:
"The term "residency" is not defined in Ontario securities law. Where questions of jurisdiction are to be determined, it must be done on the basis of specific facts and not hypothetically. The basis of jurisdiction may be differently interpreted and applied in different jurisdictions. We cannot give you an opinion or interpretation of Ontario securities law, nor of any other jurisdiction."

The oft-quoted principle that being 183 days or more (i.e. more than half the year) in a place makes you a resident may not apply. A few years ago, Canadian snowbirds with RRSPS and RRIFs found that Canadian brokers refused to allow them to trade in those accounts. As a result of many protests, the US federal regulator, the Securities and Exchange Commission, made a special ruling outlined in the note Canadian Tax-Deferred Retirement Savings Accounts that exempts those type of accounts and allows Canadians to continue trading in them while in the US. It also contains this ominous statement,
"... federal securities laws generally require that securities transactions made for U.S. residents-even those in the U.S. for only a brief period of time-and brokers who sell those securities be registered with the SEC". What the "brief period of time" might be I do not know.

The SEC exemption that removed the restriction on trading in RRSPs and RRIFs did so only for those type of accounts. Regular taxable trading accounts are being blocked. I'm not 100% sure but I believe the reason Canadian brokerages have not fixed the problem simply by registering in both Canada and the USA is that the securities being traded must also be registered in the proper jurisdictions. In the case of the USA, the individual States also have registration requirements as the afore-mentioned SEC note says. Our cherished OSC sums it up nicely: "Due to the complexity of regulations and the confusion as to which states have accepted or partially accepted the SEC process, many compliance departments of Ontario registered brokers have decided that their firms will NOT transact any business from those customers while they are on US soil." Welcome to the WWB!

All this is supposedly motivated by a desire to protect the investor from fraud as paragraph 1.1(a) of the Ontario Securities Act says and this document Investing and the Internet by the OSC suggests. In the case of the USA, there are evidently other motives too, namely to protect the business of US investment firms - see III - Cost Benefit Analysis in the explanation of the ruling where it says the ruling will not significantly harm US brokers by taking away the potential business of Canadians forced to move their accounts to the US.

The brokers are the ones we must deal with and it is their interpretation and application of the law and regulation that counts in the end. Part of the OSC's response to me included this: "Dealers and advisers in Ontario have developed compliance policies to ensure they do not risk breaching the laws of foreign jurisdictions. These policies are not specifically prescribed by Ontario securities law and may vary from firm to firm."

One should therefore not expect that they will all do it the same but I was puzzled and amused by the discussion by several Canadians living in Japan on a Financial Webring thread describing their investing activities despite living outside Canada for many years. One broker evidently is deducting taxes at the rate for non-residents while continuing to allow trading. I am not familiar with securities regulation in Japan but perhaps trading is allowed to continue because there are no restrictions in Japan that Canadian brokers would violate and the broker knows that the Canadian regulator will in fact do nothing about it (the OSC's response to my enquiry left me the strong impression that the OSC would not care - they only mention the foreign jurisdiction problems). Or maybe different parts of the brokerage business don't communicate well enough to catch it. Or maybe the brokerage applies what the OSC also said in their response to my enquiry: "The citizenship and tax status of the investor is generally not relevant in applying Ontario securities law."

In the UK, so far as I could determine from two separate calls to the regulator, the Financial Services Authority, there is no legal restriction for UK brokers to deal with non-residents ... though phone calls to a couple of UK brokers also revealed that they will not open an account unless you are a UK resident. Maybe it's only the US that is an issue because only the US will punish the brokers.

Out of curiosity, I called BMO Investorline to ask how they deal with this stuff. According to the telephone rep I spoke to (who knows if it could be different in practise or with a different person), they rely on the investor to inform them through an address change notice, though they also suspend an account if signs show a person is gone or mail is returned. When pressed about when a person becomes a non-resident, they said they use the 183 days+ absence rule but they have no way of knowing the length of absences.

What to Do to Keep A Canadian Brokerage Account Happily Active.
Let us call this the benign neglect or the "See No Evil, Hear No Evil" approach. Ultimately it doesn't economic make sense for brokers to stop their clients trading - that's how they make their profits. So don't provoke them or force the issue.

1) Decide for yourself whether you are a Canadian resident for brokerage purposes (which is not the same as for tax purposes). If your answer is yes, Keep a Canadian Street Address to receive mailed statements and have an official location within Canada, not just a post office box, and if you need to inform the broker about a new address prior to leaving, make sure it is a province where the broker is registered
2) Do your trading online; it's cheaper and faster anyway

DRIPing ETFs in Canada

One of the unfortunate characteristics of ETFs is that one does not have the option of having the cash distributions automatically reinvested by the ETF provider (iShares Canada explains why in this FAQ), unlike the case with mutual funds. That means an investor must receive cash and decide how long to accumulate before making a trade to buy extra ETF shares. It is an extra cost and extra effort. As Canadian Capitalist recently pointed out, the reinvestment cost, when calculated as a percentage of the total portfolio, may not be very large. However, for passive index investors especially, who just want to let the funds accumulate in the ETF, it is an irritant. Instead of making small purchases oneself, there is another possibility - the broker may offer the free and automatic service of purchasing extra units of the ETF, what is often called a synthetic DRIP (because it is not a genuine, original DRIP as offered by Canadian companies and funds - see the Canadian Dividend Reinvestment Plans blog for much detailed info and listings).

It seems that there is no comprehensive source of info on ETF DRIPing capabilities on the Web, so I offer the results of my researches into the services of Canadian discount brokers. It isn't a complete or comprehensive list - maybe folks could add their knowledge and everyone could convince the DRIP guy to add this info to his blog and maintain it?

Much of the story is pretty sad, and the info hard to extract from brokers, with one outstanding exception and one ok alternative.

#1 - Questrade - leader by the length of a traffic jam on the 401, no one is even close
If you want to DRIP a variety of ETFs, this is your broker. There is no list of ETFs they will DRIP because they will do them all, including all US ETFs. Oh, sorry there are a very few exclusions. Here is a quote from an email Lynn Suderman, Communications manager at Questrade:
"Questrade offers a free DRiP service to its clients. All details are on our site here: http://www.questrade.com/trading/stocks_dividend_plan.aspx. We don’t have a list of ETFs available for DRiPs because almost all Canadian and U.S. ETFs qualify.(note that foreign ETFs – non-U.S., non-Canadian – are not eligible). Here is our rule of thumb for exclusion:

· ETFs that hold stocks and bonds;

· ETF listed as an ADR

· It’s a short ETF.

At the moment, 16 ETFs are excluded due to the above criteria:

ABERDEEN ASIA-PACIFIC

ACS MEDIA INCOME FUNDS

ANGLO AMER PLC ADR

ATLANTIC POWER

ASSOCIATED BRANDS

CUSTOM DIRECT INCM

FMF CAP GRP LTD

FORT CHICAGO ENGY

HARDWOODS DIST INC

KEYSTONE NORTH AMER

MEDICAL FACILITIES

PRIMARY ENGY RECYCLNG-EIG

STUDENT TRANS OF AMER

TELESYSTEM INLT WIRLS-NEW

UNITS-TIMBERWEST FOREST

UNITS-TAIGA BLDGS PRODS

Add this to the recent announcement that Questrade now offers the ability to hold USD cash within a registered account, unique among Canadian brokers, the company begins to look pretty darn good. Now maybe it's because I am big shot blogger (har, har) but I liked the complete within-the-day responses to my email enquiry to Lynn. It's still not perfect though, because they will only buy whole shares with the distribution, so the remainder of the cash will still accumulate in your account. The higher the price of the ETF, the more cash will be left over; in a worst case, there may not even be enough to buy one share - e.g. AGG, a US bond index fund, has a market price of about US$100 per share; it pays out monthly distributions, which means you must have a holding of about $27,000 to buy one share each month.

#2 Canadian ShareOwner Investments Inc - a fair second place
This smaller broker has a fair selection of ETFs that it will DRIP, including all the Canadian iShares ETFs. The list is actually published here - quite an non-obvious place for it to be in the website but a rep guided me quickly and without hesitation to the right place when I phoned. It enables the reinvestment of every penny of distributions by buying fractional shares, something even Questrade doesn't do. Nevertheless, the list is constrained to more popular ETFs and only a few US ETFs (including the AGG example I used above) and none of those from Vanguard, for example. If they have the ETFs you want, this is your best DRIP broker.

#3-5 blank, as none of the other brokers I looked at deserve to be anywhere near the top for the pathetic coverage, the terrible lack of information on websites, the ignorance of front-line telephone customer service staff in knowing what an ETF is, let alone a DRIP, the slow and time-consuming method of looking it up (most seemed to need to look up from some sort of internal computerized list where it took minutes for each named ETF, some wanted CUSIP numbers not just the trading symbol and one even said I would have to buy the ETF first before they could tell whether it could be DRIPed). Below is a partial list I got of which can be done and which not.

#6 - TD Waterhouse - no on-line list, Yes = XIU, XIC, XSB, XBB, XTR, VTI; No = CPD, XSP, VEU

#7 - RBC Direct Investing - no list, Yes = XIU, XSP, XIN; No = CPD, VEU, VTI, EFA

#8 - E*Trade Canada - no list, Yes = XIU, XIC, XSP; email response a day after telephone contact included no further info as to which ETFs in general could be DRIPed

No Ranking (how can they deserve a ranking if they don't do any ETF DRIPing?)
BMOInvestorline - list at http://www.bmoinvestorline.com/FAQs/FAQ_DRIP.html# but it includes no ETFs; called them to check since the list is dated March 2007 but they said they don't do any US ETFs

CIBC Investor's Edge - no list; still waiting for an email answer four days later since rep could not find answer while I was waiting; a post of Jan.29, 2007 (is this still accurate?) on this Canadian Business.com forum by bindexit says CIBC will DRIP Canadian iShares but no US ETFs.

For others like ScotiaMcLeod, National Bank, QTrade etc listed on Rob Carrick's Globe review and ranking of discount brokers, I have no information.

Those interested can also read the informed discussion on this Financial Webring Forum thread "DRIP through RBC".

Update Jan.27 - I posted a note on the Financial Webring about the lack of info about ETF DRIPing and a certain Operabob has created a thread on the DRIP Investing Resource Center to collect any info people might have on what various brokers will do. So I invite you to contribute to that discussion with your info.

A Canadian Investor's Christmas Wish List

It's the time of year that Santa comes around and this year I'd like him to bring me these small gifts:

• the capability to hold foreign cash in registered accounts like RRSPs and LIRAs, starting with US dollars but why not other currencies like GBP, EUR and JPY, to avoid having to settle trades back into Canadian dollars and then to repurchase USD again to re-invest, which incurs foreign exchange commissions on each end and 2% extra trading costs. I had suggestions from one discount brokerage (not one of the big five banks) that it was finally about to launch such accounts this month - fingers still crossed.
  
• discount brokerage accounts, both registered and non-registered, that enable low cost trading ($10 per trade sounds reasonable) directly on other major world exchanges like London, Tokyo, Paris, Frankfurt; TD Waterhouse, this should be especially easy for you since it already exists in your UK service offering
• passive index tracking mutual funds with low MERs (0.3% or less is a good target) like those of Vanguard in the US as a competitive alternative to ETFs; this will enable small purchases, re-balancing and will simplify reinvesting and tax returns. Note to TD Canada Trust - start offering your e-Series index funds through other brokerages and not force people to open an account with you ... oh, and lower those fees a wee 0.10% please; at Christmas you will find that if you give something, you will receive too.
  
• combined account portfolio reports from my discount brokerage for all types of accounts, into one integrated portfolio, to save me the trouble of copying all the data from my regular trading account, my RRSP and my LIRAs into a spreadsheet; a very useful extra capability would be to enable me to add labels of my choosing for asset classes and to summarize that as well across all accounts; plus, capital gains tracking on the regular accounts, to make it easier to do my income tax return plus plan year-end tax-loss selling or gains lock-in.
  
• real tax-exempt savings accounts (wonder if Jim Flaherty reads this blog) from our federal government like the ISAs in the UK, in addition to the tax-deferred RRSPs; it's so much simpler and more flexible - no tax deduction since the funds come from after-tax income but growth is completely tax-sheltered and no tax is due on withdrawal, no matter what the type of investment, one's income or age.
• again from the federal government, an annual tax-exempt capital gains amount, say $10,000, like that of the UK

That's not a lot to ask is it, only six things? And I've been a good boy all year.

The Lowdown on the Most Popular Canadian Financial Comparison Websites

Oops sorry, this is going to be a short post, there seems to be only one, the http://www.moneytools.ca/ of the federal government's financial and consumer agency of Canada. (Thank you to fellow blogger Million Dollar Journey who posted about this site back in March) It is really a rather feeble attempt as it only compares actual products for bank accounts and credit cards, and even then the data is not real time up to date. The only hard fact comparison of discount brokers seems to be on a blog - Million Dollar Journey's post here.

Readers will note my post of yesterday on such websites in the UK, which has a wide range of very good sites. What is wrong with Canada that we don't better? One thing for sure is that the financial services and products market in Canada is pathetically thin and uncompetitive in comparison to that of the UK.

UK Portfolio - Part 5 - Broker Selection

The final step in the UK portfolio revamp required selection of an appropriate broker through which mutual funds or ETFs could be purchased.

Since I was not very familiar with the UK scene, initially my search for a broker involved Google searches. It would have been far quicker had I known about the GoodWebGuide of Share Dealing brokerages, which contains a brief synopsis and rating of most if not all the online brokerages available in the UK, though be sure to follow the links to each company website as I discovered several instances of inaccurate or incomplete information in the synopsis. The main criteria I used included:

• low cost - per trade costs, monthly/quarterly/annual account administration costs, account closure or transfer costs. Since the investment strategy will involve few trades (once annually amongst a maximum of eight holdings) slightly higher trading fees may be offset by account inactivity fees or other costs.
  
• PEP, ISA and regular accounts - being able to have all types of accounts at one brokerage simplifies life in many ways, such as doing summaries/portfolio views, transferring money from a regular account into an ISA, as is planned to be done for the next number of years
• customer service - ability to phone and readily get explanations or assistance from a human being, a capability that was tested informally as I collected information from websites; for instance, eTrade quoted the cheapest prices but I got into voice mail wilderness trying to contact them while SelfTrade posts their phone number everywhere on their website and polite knowledgeable staff answered the phone quickly, a very handy thing whenever a less than expert investor is involved, as in this case. Some low trading fee brokerages, such as iDealing don't even offer phone support, only email support.
• direct foreign market access - ability to trade directly on foreign markets, especially the US' NYSE and Amex for ETFs due to the paucity of ETFs in the UK. This was a secondary objective in this case since adequate diversification could be achieved within what is available on the London Stock Exchange (LSE).
  

Some criteria that had no real importance but might for others with different investment strategies include:

• research tools - availability, breadth and quality of such tools as stock or fund screeners and research reports, charting tools, market news and market activity streamers
  
• discounts for frequent trading

Here are comments on some of the main players and the reason that they got disqualified:

• HSBC - no ISA account admin charge, nor any account closure or transfer fees but requires the opening of an HSBC bank account
• Abbey Sharedealing - the GoodWebGuide has more information than the Abbey website itself - pathetic!
• Barclays - charges account inactivity fees
• iDealing - low trading costs but offers only email support and website has very skimpy info
• Royal Bank of Scotland - higher trading, account admin and transfer/closure costs
• Lloyds TSB - higher trading fees and higher account admin costs
• eTrade - low trading fees but trying to talk to them is voice support hell
• Halifax Sharedealing - reasonable trading fees but higher admin costs
• TDWaterhouse - offers direct access to US NYSE, Amex markets, which means access to the wider range of ETFs available there, but I wasn't initially aware of TDWaterhouse and had already begun the process of opening accounts and transferring funds into SelfTrade so decided not to back track; maybe next year it will be worth switching.

In the end, it was SelfTrade that came out on top. The company's fees are in the middle for trading and low for account administration. By happy coincidence, SelfTrade has been offering no trading fees on purchase of LSE-quoted ETFs till May 31st, which is exactly suited to the ETF orientation of this portfolio. Best of all, SelfTrade wins on customer service: the phone gets answered quickly by knowledgeable, polite people both before and after one becomes a customer.

UK Discount Brokers

The last task in the exercise to remodel the portfolio of a UK relative, described in yesterday's post, was to find an easy way and low cost way to purchase and administer the required new holdings of Exchange Traded Funds and OEICs. The list of factors I considered:

• account administration fees
• interest rate on cash balances as a minor factor due to the intended buy and hold strategy
  
• trading cost as a secondary factor since the intent is to buy and hold over the long term, and making purchases only to re-balance the portfolio once a year
• online trading and account access in a self-managed (no advice) relationship with the broker
  
• ability to hold ISAs, PEPs and regular with one company to simplify statements and facilitate transfers amongst accounts (since the move of investment funds into the tax-exempt ISA will take several years due to the annual £4000 contribution limit)
• account closure and transfer fees in case a change might be needed
• customer service - tested by phoning and asking for details; here there was a pronounced difference between the best and the worst (HSBC); another factor was the ease of finding info on their websites
  

In doing my investigation, all of it initiated through the Internet, one useful source for the traditional brokerage firms was the website of The Association of Private Client Investment Managers and Stockbrokers, which has a search / selection tool to narrow the list to brokers. However, it doesn't cover all possibilities - I discovered the Motley Fool and Etrade UK. Who knows there may be others.

The result came out in favour of Selftrade by a hair over E*trade and Motley Fool, which actually have lower trading fees of £8.95 and £10 per trade, respectively, vs Selftrade's £12.50. However, Selftrade has a single annual £25 account admin fee for any number of ISAs and PEPs, the lowest going and lower transfer out fees. Motley Fool pays nothing on cash balances and has higher transfer out fees while the killer for E*trade was poor customer service - being disconnected on one call, ring-no answer on another call and a long wait to finally get through on the third call. Selftrade phone answering was prompt, the phone triage menu tree short and the person who answered was knowledgable and patient. The big banks and brokerages like Barclays, Lloyds TSB and HSBC all were a bit more expensive on both trading and account admin fees.

If anyone has any experience, insights or other sources of info, your comments would be most welcome.

BMO Investorline Lowers Some Trading Fees

It's nice to read that discount BMO Investorline is lowering its equity trading fees to $9.95 per trade for all telephone or online automated trades as of March 31st on both Canadian and US exchanges. See http://www.bmoinvestorline.com/ProductsServices/5Star.html. That's a big drop from the existing $25 for market orders. Unfortunately, this applies only to what it calls Gold Star clients who have combined assets with BMO of $500k or more. Canada has for years lagged behind the US in low trading fees so maybe this is the start of a change that will extend to all clients. Anyone know if the other major discount brokers in Canada are following suit?