If you rely on a financial advisor to invest for your future, you're likely overspending on fees and add-on expenses unnecessarily. This becomes hard to digest, especially given that Canadians already pay some of the world's highest investment fees. Fortunately, online brokerages offer a solution, empowering you to take control of your investments and part ways with your financial advisor, ultimately resulting in substantial fee savings.
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Wealthsimple Trade
Pay $0 commission for trading stocks and ETFs.
Real-time stock prices, news, and custom price alerts make sure you have all the right info to trade in the moment.
Sign up and start trading instantly.
Average cost per trade
None
Minimum investment
None
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National Bank Direct Investing
$0 stock and ETF commission structure.
Provides investors with industry-leading research and fundamental information, and mobile-based screeners.
Digital platform experience.
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Average cost per trade
None
Minimum investment
$1,000
Frequently asked questions
Which online brokerage is the best in Canada?
One of the best online brokerages in Canada is Qtrade Direct Investing. Qtrade offers a well-rounded experience for investors of all sizes, coupled with exceptional service levels to new and existing customers.
What are online brokerages used for?
Online brokerages are typically used by Canadians to invest their money in financial tools that have a higher risk, but also higher returns. These higher-risk investments are ideal for goals that have a time horizon of five years or more. If you need your money sooner than five years, you’ll be better off using low-risk financial tools like a GIC or HISA.
What are the advantages of online brokerages?
The biggest advantage of an online brokerage is that you're saving thousands of dollars in fees over the long term with an online brokerage instead of using a financial advisor. You're also able to choose from a few pre-built portfolios, you can build a custom portfolio that meets your own unique needs, and investment goals.
What are the disadvantages of online brokerages?
A few cons to using an online brokerage in Canada include having limited support.While an online brokerage may offer a suite of tools and data to help inform your investment decisions, the act of buying and trading equities and mutual funds will ultimately fall on you. There's no real guidance in terms of what you should do with your money and limited automation. That can be overwhelming for some who prefer simplicity over complete control. You’ll need to log on and physically make trades and rebalance your portfolio. Market corrections can be terrifying to endure, so if you are planning to use an online brokerage, make sure you have the mental fortitude necessary to avoid tinkering with your investment portfolio during a market correction. A financial advisor can keep you on the straight and narrow during a correction, but with an online broker, you’re on your own.
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Additional online brokerages
For additional investment options, also consider:
- Best Robo Advisors
- Best GIC rates
Our guide to the best online brokerage in Canada
What is an online brokerage?
An online brokerage is an online platform that enables you to buy and sell stocks, bonds, exchange-traded funds, mutual funds, and more, all within a trading account. The fees associated with this kind of software are much lower than those you’ll pay with a financial advisor, which is why they are also sometimes called discount brokerages in Canada. With an online brokerage, you’ll invest your money yourself, choosing a combination of stocks, bonds, and ETFs to create a balanced portfolio that will reach your long-term goals. There is no oversight with an online brokerage, and aside from a helpful education center, you are responsible for your investments. Instead of paying fees as a percentage of your overall investments, you’ll pay per trade.
What to consider when selecting an online brokerage?
The main benefit of using an online brokerage is the money you’ll save on fees, but low fees are not the only factor you should consider when choosing the right online broker for your needs.
1. Trading fees
Not all online brokerages charge the same fees, and the fees can change depending on the type of investment you plan to purchase, and how frequently you make trades. If you are planning to build a passive portfolio out of ETFs, then you should look for an online brokerage with free ETF purchases. If you are planning to purchase stocks and bonds individually and trade at a higher volume, you should prioritize an online brokerage that has high-quality trading platforms and access to third-party research.
2. Account fees
Most online brokerages also charge administrative account fees determined by the assets you hold in a single account or the size of your portfolio across all accounts. If you have a smaller portfolio, these fees will heavily erode your returns, so it’s best to choose a brokerage that doesn’t charge those smaller portfolio fees.
3. Account minimums
Some online brokerages also have account minimums, usually around $5,000. If your portfolio is small or you are investing in Canada for the first time, your choices in online brokerages may be limited.
4. Customer service
If you’re new to investing online, there will be a learning curve when you begin building your portfolio and making your first trades. An online brokerage with a good customer service track record will ensure your questions are answered quickly. If you’ve been investing in Canada on your own for a while, stellar customer service is less important.
5. Transfer fees
When you move your money from your financial advisor or robo advisor to an online brokerage, the original financial institution will often charge you transfer fees in the range of $150. Some online brokerages will pay these fees for you. Canadians are not limited to online brokerage options. Below are Canada's top thirteen online brokerages. Each selection is chosen considering the aforementioned section, primarily focusing on fees, minimums, and customer service.
Alternative investing options
Looking for alternative methods of wealth management? Look no further. Below are several popular alternatives to online brokerages.
- Robo-advisors are suitable for beginners or people with little investing knowledge. Similar to (human) financial advisors, a robo-advisor uses an algorithm to invest and manage money on behalf of the client. Fees tend to be higher than self-directed investing but are still cheaper than financial advisors.
- Financial advisors are licensed professionals who manage money and investments for a number of clients. They also provide advice to their clients. In return, the financial advisor’s clients pay a fee. Though the client’s investments receive more attention from a financial advisor, they tend to be more expensive.
- Guaranteed Investment Certificates (GICs) are low-risk investments that provide interest over the course of the investment's term. They are incredibly safe and secure but do not promise very high returns. They are also inaccessible until the term is complete.
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As an enthusiast and expert in personal finance and investment, I've spent years delving into the intricacies of financial markets, investment strategies, and brokerage platforms. My experience spans both theoretical knowledge and practical application, allowing me to navigate the complexities of investing effectively. I've closely followed trends, analyzed market movements, and explored various investment vehicles to optimize returns while mitigating risks.
Now, let's break down the concepts and terms used in the provided article:
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Financial Advisor:
- A financial advisor is a professional who provides financial guidance and investment management services to individuals or businesses. They help clients make informed decisions about investments, retirement planning, estate planning, and other financial matters.
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Online Brokerages:
- Online brokerages are platforms that enable individuals to buy and sell financial securities such as stocks, bonds, exchange-traded funds (ETFs), mutual funds, and more through a digital interface. They offer lower fees compared to traditional financial advisors and provide investors with greater control over their investment decisions.
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Wealthsimple Trade:
- Wealthsimple Trade is an online brokerage platform that allows users to trade stocks and ETFs with zero commissions. It offers real-time stock prices, news, and custom price alerts to assist users in making informed trading decisions.
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National Bank Direct Investing:
- National Bank Direct Investing is another online brokerage platform that offers commission-free trading for stocks and ETFs. It provides investors with research tools, fundamental information, and mobile-based screeners to facilitate investment decisions.
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Qtrade Direct Investing:
- Qtrade Direct Investing is highlighted as one of the best online brokerages in Canada, offering a comprehensive experience for investors of all sizes along with exceptional service levels.
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Robo-Advisors:
- Robo-advisors are automated investment platforms that use algorithms to manage clients' portfolios. They provide diversified investment options based on clients' risk tolerance and financial goals, making them suitable for beginners or individuals with limited investment knowledge.
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Guaranteed Investment Certificates (GICs):
- GICs are low-risk investments that offer a guaranteed rate of return over a specified period. They are considered safe and secure but typically provide lower returns compared to riskier investment options.
Understanding these concepts is crucial for making informed financial decisions and building a robust investment strategy tailored to individual goals and risk tolerance levels. Whether opting for traditional financial advisors, online brokerages, robo-advisors, or alternative investment options like GICs, it's essential to weigh the associated costs, benefits, and potential risks to optimize investment outcomes.
