Discount brokers have abandoned their duty | Investing | Discussion forum

Bud, in this I agree with you. It's not just discount brokers, everybody's now unavailable in person, it's the new technique. People are going to be very surprised when it next hits the fan, we'll all be fuming at home with no-one available to talk to, not even a physical place to go, unable to get at our money, etc.

My home and vehicle insurer got taken over by TD insurance, virtually impossible to contact (though I admit the longest I waited before I hung up was only about 80 minutes), branch people tell me it's a separate operation with no person in my city I can even make just an appointment with.

Bud said

. . . I'm lowering my weighting in stocks due to their ongoing infrastructure problems.  

It's just as well, anyway.

Much of the market is Overbought now, and in 'Bubble Territory'. Like many others, I too am selling and taking my profits to the sidelines ... before it's too late.

Dean

.

Bill said

. . . My home and vehicle insurer got taken over by TD insurance, virtually impossible to contact (though I admit the longest I waited before I hung up was only about 80 minutes), branch people tell me it's a separate operation with no person in my city I can even make just an appointment with.  

I'm guessing you're talking about Monnex Insurance (I gave them 'The Boot' about 4 years ago). I'm with Intact Insurance now, through a local insurance agency.

It's time for you to go insurance shopping.

Good Hunting,

Dean

You're right, Dean, I've just been too lazy to get some quotes. Two of my residences have wood stoves, one in the woods doesn't have a fire station nearby, and those are two things that caused me a bunch of hoops to go through initially to get insurance decades ago, I hate to go through that again. Also Meloche Monnex was through a professional association membership so that discount is going to be hard to beat, I figure, though maybe that's not how it works these days. Maybe I'll try Intact. Trouble is I can't get through to TD so I can't cancel my current insurance anyway, they've got me for life!

Re discount brokers, some trading fees are almost zero, I wonder if their real revenue stream is from selling info about us to marketers.

Donald_Trump said

…

But you see here that the price has gotten so low and consumer here at least are looking for more service as am I

With a little luck maybe a company in the industry will raise their price and offer more service . it seems to be what we are all looking for here what consumers are looking for

better day may be coming !

Nothing new is coming. The brokerage industry knows that consumers whine but are not willing to pay 10X or 20X more to fund that kind of service.

Full service brokerages are still around. RBC Dominion Securities is one of them. Minimum commissions used to be $50 per trade decades ago. Not surprised if they are around $100 now.

But, you're not going to be charged just the minimum $100 to trade 200 shares of a $100 stock worth $20,000 through their registered rep assigned to handle your account. Used to be around 1% + 20¢/share or 1% x $20,000 + 200 x 20¢ = $240 commission! That's in stark contrast to $4.95 or $9.95 for the same trade through a discount broker.

Investment counselling firms are still around too. Minimum account size $500,000 to $1 million. Management fee 1% to 2%. Looking at paying $5,000+ per year! That's worlds away from the $9.95/trade and 0.10% per year (0.10% x $500,000 = $500/year) MER of an ETF.

Norman1 said

Donald_Trump said

…

But you see here that the price has gotten so low and consumer here at least are looking for more service as am I

With a little luck maybe a company in the industry will raise their price and offer more service . it seems to be what we are all looking for here what consumers are looking for

better day may be coming !

Nothing new is coming. The brokerage industry knows that consumers whine but are not willing to pay 10X or 20X more to fund that kind of service.

  

I would disagree that the problem is that customers weren't willing to pay.
What customers weren't willing to pay for was "service" that did not serve them well. You lose money just as thoroughly through a full service broker as you do through DIY, and even moreso, if the investments turn out to be poor choices
and the service fees were not justified.

What many customers learned was that there was often no added value for them to these costs, so they left.

It's a question of value for money.
if I buy a fancy $300 toaster and it fails after a year, I'm going to buy a $50 one next time - which may last a year or longer. I'll be looking for the toaster with the longest warranty. Two toasters at $50 with one year warranties are about the same value to me as one toaster at $100 with a 2 year warranty. In fact, with a credit card extended warranty, the two $50 toasters give me four years, whereas the $100 toaster only gives me 3 years.
Once upon a time I believed certain brands were better and shopped accordingly, but experience has taught me that this is not the case any more, so I buy according to warranty. If your product is as good as you say it is, show me the corresponding warranty. This is usually greeted by "we haven't had any of these returned yet for service" rather than a good warranty, and the product is usually less than a year into production.

But full service investment brokers offer no warranty whatsoever. Your tough luck; they're very sorry; they will hold your hand, bring you coffee, maybe even buy you lunch if you still have money to invest; the market is bound to perk up; the smoothest among them will then steer your remaining pennies to the next thing they are sure will succeed.

I'm sure there are still some out there who are worth it, but they are in short supply and I don't happen to know any.
If you'd be wiling to spend $5,000 on major appliances with no warranties, then step right up; I'm sure there's a full service broker out there waiting to help themselves... er... I mean help YOU!

I don't consider my view of full service brokers to be "extremely" negative, just average and reflects our experience.

And you should hear what I have to say about SOME doctors, dentists and lawyers!

The solution of "moving on" to yet another full service broker is costly, as you always leave a little something behind. At $5,000/yr plus the losses that led you to leave each of them in the first place, repeated annually... well, let's just say it adds up.
It could almost make GICs look like a bargain!

$5,000+ mentioned above by Norman with reference to wealth management fees on portfolio of only 500K. It's hard to imagine how those guys keep a straight face.

I'm glad you feel you came out ahead. Spouse's experience with a full service broker was negative, even after holding long time.

When I talk to happy investors who have used full service brokers and wealth managers, I find that their returns overall are generally in the same range as what the market would have given them with ETFs, but they are happy to attribute their success to their advisor/broker. As long as they are ahead, they don't really care what it is costing them in fees, etc, and often they don't even know the full costs. I suppose it provides employment anyway.

These people are not usually experts in their own right. They cite research done by in-house staff - likely the same research that goes to their mutual funds managers - and then they filter that through their own lens. What they have to do is balance the profit they will make from you with the likelihood that they can retain you as a client. This is called "service". I am told there is a lot of turnover in this business. I can't even remember the name of the guy who sold spouse the duds - maybe just as well for him although I suspect he moved on to something else. It was 30 years ago. The behaviour was shameful.

Each to their own.

The wealth management industry has something for everyone. From complete discretionary management (completely hands off leaving it in the hands of others) to simple platforms that do order execution only (discount brokerages). Fees vary from essentially zero in the case of discount brokerages to 1-2-3% depending on the range of services one contracts for.

All decisions in wealth management are ultimately made by a human, even the computer algorithms (robo-advisors and model portfolios) are designed by humans. None of them can assure anyone of 'beating the market'. If they could, those individuals would be tremendously wealthy in their own right and not be peddling themselves or their ideas to other mortals. It really is not more complicated than one choosing how much personal effort (0-100%) one wants to put into their financial management. None of those decisions are directly related to the degree of success.

There's a growing trend in USA for large brokers to offer free trades to compete against Robinhood, such as TD Ameritrade, Fidelity, Charles Schwabb. There's also new startups like Webull, TradeStation, Moomoo, and Public.

I wonder with so many free commission brokers in USA if any of them actually give their customers good service. Because, as we were discussing above, service in Canada at discount brokers is non existent. If I need to get hold of Scotia Itrade I try one phone call where I wait for a while, and if no luck I write to Office of the President to ask my question. They in turn will put me in touch with email support who would never have answered me otherwise. ( I know because I've tried emailing before with no response ).

AltaRed said
BUT I sincerely ask, why should a discount broker actually provide anything other than order execution? As long as you have an order execution window that you can use to buy/sell, why should they even provide a phone number?

 

I agree that, in theory, discount brokers really should not provide any extra services for free. The issue is that most of their platforms are deficient in one way or another and are not fully "self-serve". As you well know, Norbert's gambit can not be executed easily at all brokerages. Some do not allow users to buy GICs without calling in. Some allow a user to set up a drip whereas others require a phonecall. I am guessing that none will allow a user to make a withdrawal from an RRSP without calling in. The discount brokerage business is big business and there is a lot of money on the table. Even with low commissions, there is a lot of profit from the cash float just sitting in customer accounts. Surely customers of discount brokers deserve better than having to wait for 2 hours for someone to answer the phone.