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Discount brokers have abandoned their duty
February 19, 2021
9:59 am
Bud
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An error ur screwed. They no longer pick up the phone or answer emails for days. Kiss your money goodbye if the market crashes im sure their systems wont be able to handle the volume. They couldnt even handle Gamestop and can you believe it's been said that one little stock could have takin down the whole system. I'm lowering my weighting in stocks due to their ongoing infrastructure problems.

February 19, 2021
10:47 am
Bill
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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.

February 19, 2021
11:12 am
AltaRed
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Consumers are responsible for driving everything to the lowest common denominator because we want lowest cost. When discount brokerage commissions were $20 or even $30 per transaction, there was a lot more service. Now investors want $5 commissions, or $0.01/share commissions, or free purchases of ETFs. A business has to cut costs to stay profitable.

A discount brokerage cannot offer advice. All they have a responsibility for is to provide a mechanism for investors to place orders and to protect assets from malfeasance and hacking as best they can (and why CIPF exists as well). No human interface with the investor is required.

No difference in insurance. If a provider has to lower their $1000 quote to avoid losing customers to the $980 offering, they have to cut costs to remain profitable. Everything has become a commodity and the businesses can only remain profitable if the human element, and/or the brick and mortar branch, is eliminated as much as possible. It is now a call centre approach at best.

February 19, 2021
11:26 am
Dean
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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

sf-cool " Live Long And Prosper " sf-cool

February 19, 2021
12:15 pm
Donald_Trump
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AltaRed said
Consumers are responsible for driving everything to the lowest common denominator because we want lowest cost. When discount brokerage commissions were $20 or even $30 per transaction, there was a lot more service. Now investors want $5 commissions, or $0.01/share commissions, or free purchases of ETFs. A business has to cut costs to stay profitable.

A discount brokerage cannot offer advice. All they have a responsibility for is to provide a mechanism for investors to place orders and to protect assets from malfeasance and hacking as best they can (and why CIPF exists as well). No human interface with the investor is required.

No difference in insurance. If a provider has to lower their $1000 quote to avoid losing customers to the $980 offering, they have to cut costs to remain profitable. Everything has become a commodity and the businesses can only remain profitable if the human element, and/or the brick and mortar branch, is eliminated as much as possible. It is now a call centre approach at best.  

I agree as well. it right the consumer has driven down service by wanting a lower price .

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 !

February 19, 2021
12:54 pm
Bill
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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.

February 19, 2021
11:11 pm
RetirEd
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NOBODY will answer their phones now. Not the phone company, not the cable companies, not the banks, not the investment houses, not the stores. Just tell us all to go to the web and if we make a mistake, they're not getting us off the hook. That's why I keep using and insisting on phone service. You have to be firm and let them know that's why you're leaving.

Now we have to wait an hour for Telus to answer the phone if we want to report a payment to make sure it gets processed in time.

It's got nothing to do with COVID-19. This has been going on for several years.
RetirEd.

February 20, 2021
12:12 am
Norman1
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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.

February 20, 2021
2:21 am
Loonie
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Insurance companies, brokerages and related banks are highly profitable industries.

No need to treat their bread-and-butter, otherwise known as customers, like garbage in order to remain "profitable", only to remain excessively profitable in the race to the bottom of service.

If you think service is bad when asking about policies, just wait until you have a claim.

We deal with Cooperators and with an independent insurance broker. Both answer the phone quickly or call back promptly. Cooperators is slightly better in our 50 years of experience with them.

February 20, 2021
3:40 am
Loonie
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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!

February 20, 2021
8:37 am
canadian.100
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Loonie - I know a fair number of people who have the same extremely negative opinion of doctors, dentists and lawyers as you have of most full service brokers.
Those with some intelligence move on to another doctor or dentist or lawyer - and that should be the case if you are not satisfied with your broker. There is no commitment to stay with a broker you are not satisfied with. I have done it as I am sure others in this forum have as well.

February 20, 2021
7:47 pm
Loonie
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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! sf-wink

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!

February 21, 2021
5:33 am
canadian.100
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Loonie said

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!  

What is the $5000/yr? Annual admin fees? I did not pay annual admin fees but did pay fees on buy and sell - yes there were losses but overall ended up in the plus. I held while the account went into negative but things turned around.

February 21, 2021
3:18 pm
Loonie
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$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.

February 21, 2021
4:57 pm
Bill
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I'd agree that full-service brokers are not really for many folks these days. Aside from being naive if you think you can just go and hand over your money to a stranger assigned to you by the brokerage firm (and then they're going to make you a pile of money while others aren't doing as well!), anyone who has money to invest but is still working or otherwise living the settled, working life of the 99% these days has access to enough info, time and options (e.g. discount brokers are relatively new) to handle their own finances more cheaply.

There are many relatively wealthy people who are busy world travelling, or doing whatever it is that seems to keep many of the well-off very busy, who don't want to spend the constant, regular time that managing a portfolio requires (if you have a lot of money that can eat up a lot of time). For them a well-chosen full-service broker or wealth manager may be of value, worth the cost to free up their time for their passions/fun/etc.

February 21, 2021
6:09 pm
AltaRed
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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.

February 21, 2021
7:27 pm
Loonie
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AltaRed said
None of those decisions are directly related to the degree of success.  

Quite right, AltaRed.
The problem with all these options is found in your last sentence. One could be paying for everything under the sun, but success is, alas, not on the menu.
Nonetheless, it is the carrot of success that these folks dangle before their prospective clients, and it is in the hope of success that they sign up and fork over for. And this is true even at the no or low fee level.

February 21, 2021
7:49 pm
Briguy
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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 ).

February 21, 2021
8:15 pm
AltaRed
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Briguy said
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 ).  

I don't know if US discounters have been flooded with the number of new applications and accounts Canadian discounters have, or whether the level of service is better if that is the case, 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? Or a Research tab? Or Screeners? Or an annual summary of income and expenses? Or a host of other 'services'? Why should anyone have to talk to a human at a discount broker?

My view is a discount broker only has to provide an order execution platform for stocks, bonds, GICs and mutual funds, the regulatory requirements to service registered accounts (such as RRSP, TFSA, RDSP, RESP), and the annual provision of tax slips. Everything else is gratis to attract clients to their offering versus that of a competitor.

I am entirely grateful for all that BMO Investorline and Scotia iTrade offer me essentially gratis, including iTrade's real time Level 2 trading software. I should never have to talk to a human at either of those brokerages unless 'something breaks'.

February 21, 2021
9:25 pm
MG
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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. sf-frown

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