Best Online Brokerage Canada

October 24, 2020 | Editorial Team

Best Online Brokerage

Investing in the stock market is becoming increasingly accessible for the average Canadian. Trading and investments were once reserved for the rich or financially savvy. However, the introduction of online brokerages in Canada has made it easier than ever for the average person to invest their money. The number of online brokers is continually increasing, giving Canadians a plethora of options.

Online brokers are known for having extremely low fees. This makes investing in the stock market attainable for anyone, regardless of how little or how much money you are looking to invest. Once you have decided to invest, how do you find the best brokerage for you? To help make your decision easier, we will look at some of the best online brokerages in Canada.

What is an Online Brokerage?

An online brokerage is a system that allows you to open an investment account and buy and sell stocks, bonds and exchange-traded funds (ETFs). This trading is done independently, without the help or guidance of a trading advisor. The absence of an advisor or trading agent enables you to keep the fees to a minimum. Trading on the stock market using an online brokerage can be much more cost-effective.

To trade on the stock market, you must first open your investment account. Although investing in the stock market can be a higher risk than other investment options, the potential gain is also much higher. When you trade using an online brokerage platform, choosing which companies to invest your money into is 100% your decision. You are responsible for building your trading portfolio, managing your assets and knowing when to buy and sell stocks.

You can trade using your online account as frequently as you choose. You also have the option of downloading the mobile app connected to the brokerage you select, making trading even easier!

Best Online Brokerages Right Now

Questrade (BEST OVERALL)

Questrade is frequently voted as the best online brokerage in Canada. One of the reasons it is so highly regarded is because of the low fees it charges an investor to open and use a trading account. Questrade also scores highly for its customer service and mobile app experience. Questrade caters to both long term and short term investors. Their trading platforms are easy to use. They help you find new investment opportunities and monitor the stock market in real-time. They also allow you to easily track your investments.

Questrade has been helping investors to trade online for over 20 years. It is popular with both new investors and experienced traders. For those who are less confident trading independently or want someone to help them manage their account, Questrade also offers a Robo-advisor service. This involves answering a questionnaire about how you would like to trade and your investment goals. You also decide the level of risk you are willing to trade with. They will then choose a trading portfolio for you.

Questrade is a discount brokerage as they help you invest for a reduced commission rate. Using Questrade, you can trade stocks, bonds and ETFs. You can also trade mutual funds, initial public offerings (IPOs) and even precious metals such as gold and silver.

Pros

  • They charge no annual fees – regardless of how big or small your account is.
  • There is no fee for trading ETFs. Other trading fees can vary from $4.95-$9.95 per trade. Management expense ratios are only 0.2%.
  • There is no cost for opening or closing online brokerage accounts with Questrade.
  • You will be reimbursed $150 if you transfer your investment account from another brokerage.
  • Multiple trading platforms are available, including the mobile app.
  • You can trade in US$ and CA$, meaning that you do not pay currency conversion charges.
  • They are a member of the Canadian Investor Protection Fund (CIPF). This means investments are protected, up to $10,000,000 in the event of bankruptcy.
  • Investors can access various investing and market researching tools to help you make the right trading decisions for you.
  • You can create a watch list or set your investment goals. If there is any important activity, Questrade will send you a notification.
  • As they are a discount brokerage, you save money by not paying high commission fees.

Cons

  • You must have a minimum of $1,000 in your account before you are able to trade.
  • If you have less than $1,000 in investments, you will be charged $24.95 per quarter.
  • Bonds have a minimum purchase amount of $5,000.

Summary

For investors who are looking to pay the lowest possible fees, Questrade is frequently rated as the best online brokers in Canada. You still have access to advice and investment information to help you optimize your investments and use your account wisely. Questrade can accommodate all different kinds of investors. This can range from inexperienced, less frequent users to more knowledgeable and skilful traders.

Questrade is known for its excellent customer service. They are always on hand if you have any questions or concerns regarding your account or trades. If you are only looking to trade occasionally or are only looking to invest a very small amount of money, Questrade online brokerage may not be the best trading platform for you.

Wealthsimple (BEST FOR NEW INVESTORS)

Wealthsimple is the largest robo investing company in Canada. This means that you are provided with financial advice and investment management with minimal human interaction. A computer algorithm is used to design, organize and manage your investment account and portfolio. Use robo-investing is a passive, hands-off way to invest. Wealthsimple aims to make trading simpler while still maintaining a low cost.

Wealthsimple will ask questions about your trading style, risk level and stock interests. This helps them to create your portfolio. There is no minimum investment for you to open an account.

Robo-investing is not for everyone. For those who would like to have more control over their account, Wealthsimple has launched a new trading platform. This allows you to have a more hands-on approach to your investments.

Wealthsimple has three trading tiers to match your finances.

  1. Wealthsimple Basic – For those investing less than $100,000. There is a 0.5% management fee.
  2. Wealthsimple Black – For those investing $100,000 – $500,000. The management fees are 0.4%. You also have access to a financial planning session and tax information.
  3. Wealthsimple Generation – For investments over $500,000. The management fees are 0.4 %. You have access to a team of financial advisors, a more individualized portfolio and higher investment options.

Pros

  • Trading stocks on Weathsimple is entirely commission-free. This is great for those who want to trade more frequently for lower amounts as they will not have to pay fees each time they trade.
  • Your investments are protected by the Canadian Investor Protection Fund. Up to $1,000,000 is protected in your account.
  • There is no minimum investment amount. You also do not need a minimum amount in your account at any one time.
  • Transfer fees from other brokers are reimbursed as long as your transfer amount was above $5,000.
  • Although they are known for their robo advisors, Wealthsimple also has human customer service. You can contact them via phone, email or social media.
  • They are the largest robo advisor platform in Canada. This means they are experienced and knowledgeable web brokers.
  • There a wide range of investment options in both Canada and the US.
  • They provide access to free tax-loss harvesting information.
  • They are a discount brokerage, meaning you will not pay high commission fees.

Cons

  • There is no online trading platform. It is a mobile app only. This means that stock analysis tools are less detailed than other online platforms.
  • You are charged a 1.5% currency conversion fee per trade in the USA.

Summary

Wealthsimple is the online broker best for those who want to invest their money with minimal effort and involvement. It is great for those who do not feel that their trade knowledge is sufficient or are worried about their lack of experience in direct investing. It is particularly popular with first-time investors.

Weathsimple’s move into a trading platform with more independent investing makes them even more attractive than other online brokerages. Their low fees and minimum account requirements make them popular with a variety of Canadian investors. However, if you are an experienced trader who is looking for online brokerages that offer you more trading information and a less simplistic trading interface, Wealthsimple may not be the best option for you.

Frequently Asked Questions

How to Choose a Portfolio with an Online Brokerage

When using an online brokerage, stocks and bond options can seem endless. You are responsible for deciding what to invest in, how high your risk tolerance is and how much money you want to invest. You also need to decide whether to focus on individual stocks, ETFs, mutual funds, bonds or fixed-income products. Consider whether you are interested in indirect or direct investing. So how do you make the best decision for you? Below we will look at some tips for building your portfolio and making the best trading decision for you.

  1. Do your research – Research any companies you are interested in, look at their growth per quarter and their stock predictions.
  2. Consider your short-term and long-term aims – Some investments are long term, meaning that you may not expect to see growth within the first year or two. Decide when you plan to sell each stock before you begin to trade. Holding stocks (meaning not to sell them) can be difficult if you see the price begin to fall. However, by holding them, you could see significant financial growth in the long term.
  3. Diversify your portfolio – Rather than putting huge amounts of money into one or two investments, it can be beneficial to invest less per trade. Instead, invest in more companies and invest across the stock sectors. You could also look at investing in some dividend stocks, as well as those that invest their profits back into the company.

What to Look for in an Online Brokerage

When looking for the best online brokers, there are several factors you should consider.

  • Trade Fees – There are several fees and charges you should consider. Some brokers charge a fee per trade (usually between $4 and $10). Other charges include the Electronic Communication Network (ECN). This can be more expensive than traditional stock market fees. Some brokers also charge platform fees for access to more advanced features. Look at all the fees each broker charges and the services that you will get for this price before making a decision.
  • Platform Interface – Watch demo videos and test the platform before committing to a broker. Is the platform easy to use? Is it available in mobile and desktop forms? Is the information provided beneficial? Do they provide stock quotes in real-time?
  • Customer Service – This is an important factor that is often overlooked by many investors. Look at the level of help and support you could get. How do you contact customer service? Can they offer you trading advice or help with your account if you need it? Quite often, having exemplary customer service can be an indicator of a great company.
  • Account or Investment Minimum Amounts – Decide how much you are looking to invest initially and annually. Some brokers will charge you a fee for not meeting the minimum requirements. Others will not allow you to open an account unless you deposit a specific amount.
  • Sign-Up Incentives – Some brokers will offer incentives such as a sign-up bonus. Others may offer reimbursement of any transfer fees.

Financial Advisor vs Online Broker

Deciding between using a financial advisor or an online broker for your investments can be difficult. Which option is best for you will depend on how much money you are planning to invest. A financial advisor will recommend investments to you and can even trade on your behalf. You will pay them either a percentage of your portfolio worth or a per-trade fee (usually several hundred dollars).This may differ for non registered accounts.

An online broker is an online platform that allows you to open an account and invest in the stock market yourself. Fees for using online brokers are minimal. As you are not paying high fees to use the service, online brokerages do not usually provide much investment advice or support. You are expected to make trade decisions based on your own research and judgement.

A financial advisor may be best for wealthy individuals who are looking to invest substantial sums of money. This is because the service cost is higher, so it would not make financial sense for those with a small investment portfolio. Those investing less than $250,000 may be more suited to an online brokerage.

Online Broker vs Robo Advisor

When choosing between online brokerages and robo advisors, consider whether you want to be an active or passive investor. Choosing to invest with a robo advisor means that you do not have to do any extensive research. You also do not have to monitor your stocks regularly. Investing with a robo advisor is also popular with those who feel they do not have investment knowledge or experience.

For those who want to be an active investor, an online brokerage would be the best option. You are responsible for opening your account, doing your research and making your own investment decisions. You will also need to monitor your investments regularly to see when to buy and sell stocks.

Another popular online broker you could consider is RBC Investdirect. They charge $6.95 per trade for more than 150 trades per quarter. TD Direct is another brokerage to consider. TD Direct charges $7 for more than 150 trades per quarter. Both of these companies are popular for online investing and direct investing.

The Bottom Line

Taking the leap into online investing can seem daunting. However, it could be financially rewarding. To help you decide how to proceed, there are several things to consider. Do you want to be an active or passive investor? How much money are you looking to invest? What fee amount are you comfortable paying? What are your long term and short term goals?

Once you have answered these questions, you should find it easier to choose the right broker for you.