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Discount brokers have abandoned their duty
February 22, 2021
12:20 am
Loonie
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There's a big difference between "extra" services and basic services that are part of their job. I don't think anyone is expecting their discount broker to help them rebalance their portfolio or provide informed recommendations. They are just asking for the basic service that should be provided.

The brokerages, discount or otherwise, wouldn't be in business if they depended solely on trading fees.
I am not up to date on the subject of fees as I decided against being one of their customers a while back. However, what I recall is that there were other kinds of fees and commission embedded in the portfolios. This may have changed somewhat, but I imagine it's still basically true or else they wouldn't be in business. As MG points out, it's a very big business - and a competitive one.

I don't know if they still use trailer fees, but that was one way the broker continued to get paid every year regardless, on your mutual funds. Even if you moved your account from a full service to discount broker, the current broker still kept getting the trailer fees, which were supposed to be for service, even though there was none. Many people did not know this because the trailer fees were hidden at that time.

I can't think of any company I would want to do any kind of business with which did not provide a functioning and available offline Help desk.

The ones that can tame their greed, and provide consistent good service are the ones that will remain intact in the decades to come, but it does take time for people to figure out who is best to deal with or how to get what they need. And each time you have to switch brokerages, it will cost you another $150, as if it were YOU who had not met expectations.

Good service is a must-have.

February 22, 2021
1:06 am
speedwagen
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The simple truth is that the Big Banks own everything in this country, government included. They're the government's greatest source of funding, hence, will cater to their every need, hence, why they've never blocked their ambitions to control everything worth controlling, including the stock mkts, which they all jointly own. The only competition per se is amongst themselves, which is why there isn't any real competition.

I've always gladly turfed anyone who provided poor service, except now, everyone provides poor service, ergo, moving isn't much of an option, since you'll likely get the same lousy service + the switch hassle to boot. As far as "full service" brokers, they're a joke & always have been - a more appropriate descriptor would be "self-serving" brokers. Their recommendations have always been to sell you what they're cashing out of.

I could provide you a list a mile long of of all the things currently wrong @ discount brokers, but the only real option once you've had enough is to opt out entirely. If EVERYONE did that, they'd all have to rethink their business model, but the likelihood of that ever happening is zero to none, hence, why they'll always turn everything in their favor, including pandemics.

February 22, 2021
7:36 am
Loonie
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As I recall, there was one exception. PM Jean Chretien denied the Big Banks permission to amalgamate further. I can't remember the details now but they wanted to reduce themselves from five to four or three, something like that, and the answer was "no". It was considered to be anti-competitive.
The only reason I remember this is because it seemed quite remarkable to me that someone had the guts to actually say "no" to them.

February 22, 2021
8:15 am
canadian.100
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Loonie said
As I recall, there was one exception. PM Jean Chretien denied the Big Banks permission to amalgamate further. I can't remember the details now but they wanted to reduce themselves from five to four or three, something like that, and the answer was "no". It was considered to be anti-competitive.
The only reason I remember this is because it seemed quite remarkable to me that someone had the guts to actually say "no" to them.  

John Manley who was Finance Minister at the time was supporting the amalgamation of Scotiabank and BMO - BMO was a bit piddly at that time and it was felt it might not survive and an amalgamation of these 2 banks would have some advantages for both the survival of BMO and a bank that would have some strength on the world stage. A committee had done a study.
Chretien overruled Manley and put a stop to it. As a Quebecer, he probably did not want the "Bank of Montreal" name to disappear.

February 22, 2021
9:24 am
AltaRed
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MG said

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  

NG is a technique used by customers to bypass forex commissions. It has nothing to do with order execution and thus is not a service. Whether it is easy or not at some brokerages is not relevant.

Whether it is easy to set up a DRIP or not is not order execution either. The fact there are humans available to turn those on or off gratis (without a fee) is gracious of a discount broker. For those that have systems for a customer to do it online is even more gracious of them. Repeat: This is not order execution.

I agree folks should be able to buy GICs online without phoning in since the brokerage makes a commission from the issuer on carrying GICs on their platform. Assuming the brokerage wants to provide that offering at all (some don't).

Some (all?) discount brokerages also provide an online bond buy/sell service. Again they should do so, since they make money on the Bid/Ask spread plus charge a commission to the customer. Scotia iTrade is one of the few that break out their commission separately from their Bid/Ask spread.

While it is true, discount brokerages do not pay interest on cash on deposit, that is entirely up to the customer whether they wish to do that or not. There is no requirement to have cash on deposit. The customer is free to have their cash elsewhere in an HISA and transfer it in when they make a purchase, or to transfer it out when they make a sale. Why should brokerages reward customers for holding cash on deposit?

The one area that needs cleaning up is the trailing commission on mutual funds. At least these days, it is a flat 25bp commission with D series mutual funds but that is not good enough. It needs to go to zero, albeit there will likely need to be a buy/sell commission such as $10 like with stocks to cover the administrative costs. Then again, there are all kinds of stock/ETF alternatives to mutual funds so why buy and hold a mutual fund at a discount brokerage in the first place?

Don't know where Loonie is coming from with respect to an existing discount brokerage continuing to receive trailing commissions even after the mutual fund has been transferred out to another institution. That simply is not the case. What might occur is that trailing commissions are paid quarterly by the fund provider, so the existing brokerage is entitled to some of that trailing commission of the fund has been transferred out mid-cycle. That issue is strictly between the two brokerages involved in the transfer. It has nothing to do with the customer.

Again, I repeat, a discount brokerage is simply an 'order execution' operation. They get paid relatively small commissions for this service, especially for stock exchanged traded securities. That is their primary business offering. They should be able to charge something for every other service they provide. The fact they provide a number of services for free should be graciously accepted by customers.

You all need to re-examine your expectations of discount brokerages. We have never had it so good. Be thankful.

Added: Blame the Ford government and the financial services industry for balking at eliminating the 25bp trailer fee (D series) mutual funds from discount brokerages. The CSC and OSC, along with customer advocates wanted to change that, but the ON gov't specifically blocked it. Financial advisors felt threatened that customers might be able to buy F class mutual funds (no trailer) from discount brokerages. The other provinces may well still go down this path to zero trailer fee despite the ON gov't but only time will tell.

February 22, 2021
10:02 am
christinad
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Correct me if i'm wrong but isn't part of the problem retirees have to phone in, something to do with rrif withdrawals. Sorry a 3 hour phone wait just isn't reasonable and i don't believe with tddi you can email. Certainly i agree you shouldn't expect a lot but at least have one of those call back services if you are going to make people wait.

I know i had to phone in to set up a drip on my tfsa so i know reasons to call do come up.

February 22, 2021
10:32 am
topgun
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A couple years ago I needed several RRSP withdrawals at Scotia iTRADE. The first one I called. I then found that I could do a withdrawal online. The fee for withdrawal was the same for each transaction. This year with a RRIF it is not possible to do online withdrawal. I filled in a form stating the details for RRIF withdrawals this year. Hopefully the details do not require changes in future.

Have a Great Day

February 22, 2021
10:38 am
pwr1019
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Yes I agree there are too many brokers with unacceptable wait times!
But....look at the 2021 Globe and Mail Online Brokers under average phone hold times..

Scotia iTrade average hold time 179 minutes (my former broker expect at least the 3 hour reported wait time)
Questrade 128 minutes
Desjardins 170 minutes

Qtrade 28 minutes (my new broker so I can attest)
Virtual Brokers 7 minutes (i have no experience with them)

If the service levels are unacceptable as they were for me at Scotia iTrade it's time to take action and move to another brokerage house. I can attest that my experience thus far at Qtrade has been ~15 minutes phone waits.

February 22, 2021
10:40 am
pwm
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I don't understand all this hate for the banks. I'm very happy with my TDDI and Qtrade accounts. WebBroker is great, and I never have any reason to contact them by phone, which is exactly the way I want it to be. I would never call anyone by phone if I can do what I want online. The only reason I ever had to phone TDDI was for my annual RRIF withdrawals, but that is done online now and no phone call is required anymore. I'm old enough to remember the bad old days of $49.00 trade commissions (probably over $100 now, adjusted for inflation), when I had a full service broker churning my account and wasting my money. I welcomed GLIS when it came to town and I've been with them ever since and appreciate the $9.99 commission.

Just out of curiosity, why are people finding it necessary to call their discount broker?

February 22, 2021
10:49 am
topgun
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I admit you may need to call a bank sometime. I have call back at my CU. It works well.

I use the secure email at iTRADE. Response time 18-20 days. Yes it is a very long time. The issues are not urgent that I need a live person. They claim there is high volume for RRSP season. All secure messaging resolved satisfactorily.

Have a Great Day

February 22, 2021
12:08 pm
AltaRed
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I have my Scotia iTrade RRIF withdrawal already scheduled for 2021 and all subsequent years. If I want to change the withdrawal date or schedule, I send in an email and whether that response takes 1 day or 10 days, it is not important. Nothing that can be planned in advance is time critical.

Most discount brokerages have ways to do most things online, and/or online forms to fill out and submit. Managements know that to the extent they can automate things digitally, the fewer front line staff they need to pay for. They clearly would be cost oriented where they can be.

De-registration of registered accounts (whether partial via recurring withdrawals, or in whole) must meet certain regulatory oversight, so I don't believe the brokerages are putting any more obstacles in the way of doing things than they can get away with. We customers need to think more clearly about what the bottlenecks are and why that might be. Some were stupid (such as TDDI requiring customers to phone in to buy GICs but they finally after a number of years, resolved that issue with a systems/software upgrade - it just took years too long).

It has been well communicated that the majority of the big discount brokers have backlogged phone/email/secure message response times because of the ~250% increase in new accounts since the pandemic started. Too many WFH and CERB newbies and neophytes clogging up the system with their new accounts needing hand holding on trading options. It is hardly the brokerage's fault if these newbies and neophytes are overwhelming them teaching them how to do things, most of which are readily explainable on site or via tutorials, or for which newbies have no business doing, e.g. the GameStop gong show.

Most of these discount brokerages are beefing up their front lines with newly trained and licensed staff but it takes time of course to get them licensed, and somehow the rest of us are going to end up paying for this with added fees pretty soon. I do hope this surge in account opening phenomena falls off soon to allow the system to return to normal, e.g. same day response to emails/secure messages, and phone wait times falling back to mere minutes.

February 22, 2021
12:35 pm
christinad
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That's good to know about rrif withdrawals. I wouldn't want to pay higher fees although if they charged me 1.00 or 2.00 for phone calls i wouldn't mind if it reduced wait times and acted as a deterrent to those making unecessary calls.

February 22, 2021
1:25 pm
AltaRed
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christinad said
That's good to know about rrif withdrawals. I wouldn't want to pay higher fees although if they charged me 1.00 or 2.00 for phone calls i wouldn't mind if it reduced wait times and acted as a deterrent to those making unecessary calls.  

I imagine it is likely brokerage dependent so what goes for one brokerage may be different at another.

February 22, 2021
3:03 pm
Londonguy
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Just to add to the discussion, up until lately I've had pretty good luck getting through to TDDI, usually in 10 minutes or less. Last week I had to call them to get a few of our RSPs split into US$ and CDN$ sub-accounts to dodge the forced US$ conversions on US trades. I hate calling in anytime for service, but there's no way to make the split yourself online or I surely would have.

Things at the inbound call center seem to have changed, because I had to wait 55 minutes for the first contact. Upon explaining what I wanted at least 3 times in different ways, the rep said he wasn't authorized to execute that kind of request (said he had to find a trader) so he put me back on hold. 10 minutes later the next person came on the line. This new person had been told nada about what I wanted so I had to re-explain my request, only to have him say he was a new hire and wasn't authorized to do that kind of stuff either. He apologized and politely asked if I'd mind waiting while he found me a real trader, which took another 8-10 minutes. I then had to start all over again from scratch explaining my request to this third person.

The good news is that the third person knew what I was talking about. He was therefore able to take care of it, or at least was able to put the proper requests in to back office to get it in motion (it takes a few days before the currency separation appears in your online account).

Anyway, I hope that waiting 1 hour+ to even be able to ask a question isn't the new normal. I remember pulling my hair out back in Y2K when you couldn't get though to any of these online brokers at all some times, and I sure don't want to go back to those dark days

February 22, 2021
3:27 pm
Bill
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Surprise, surprise, I tried TD Insurance today for the first time in a month or so and got through in about 3 minutes!

February 22, 2021
5:08 pm
Loonie
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canadian.100 said

John Manley who was Finance Minister at the time was supporting the amalgamation of Scotiabank and BMO - BMO was a bit piddly at that time and it was felt it might not survive and an amalgamation of these 2 banks would have some advantages for both the survival of BMO and a bank that would have some strength on the world stage. A committee had done a study.
Chretien overruled Manley and put a stop to it. As a Quebecer, he probably did not want the "Bank of Montreal" name to disappear.  

Perhaps, "as a Quebecer" (or, more likely, as someone who could figure out when smoke and mirrors were obstructing the view), he understood that BMO WOULD survive and thrive. If it were truly so moribund, which, obviously it was not, then the name would have disappeared regardless.

If BMO were in such dire circumstances, which it wasn't, we would have heard a lot more about it and CDIC would have been urging remedial measures. I didn't hear that BMO stopped paying dividends. It was all a ruse to get their way.

BMO was not a "piddly" bank. One of them will always be the smallest. So what? There are several more banks that are much smaller.

Chretien didn't fall for it. That's the point.

February 23, 2021
4:54 am
canadian.100
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I did not say that Bank of Montreal was in dire shape or moribund.
I remember Chretien very well and his involvement in the Sponsorship Scandal and Shawinigate Affair and interference in the BNS/BMO amalgamation. Sure Loonie- as you say - "Chretien did not fall for it".

February 23, 2021
6:40 am
Loonie
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Well, when you say that BMO "might not survive" and this is the excuse for reducing competitiveness in the banking industry, then I would say that is a dire situation. I can't think of anything more dire or moribund than that.

I'm not interested in turning this into a debate about Chretien's (or any other PM's) merits or lack thereof and I don't think anyone wants to hear about it.

There is no need to make this into a bigger issue than it is. The point, the only point, is that Chretien did not let the banks have it their way. It's one simple fact. The topic is not even whether he should have or shouldn't have, merely the fact that he did. This was in response to speedwagen's comments about excessive power held by banks, #22 above. That's ALL.

February 23, 2021
7:24 am
Bill
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This thread's topic about "duty", and some folks' ideas that discount brokers are somehow beholden to offer certain services, were funny to me to begin with. If I want to open a business and sell only yellow lollipops and be open only on Wednesdays for 2 hours and not answer the phone, well that's up to me, people can choose to patronize me or not. Just need to follow the laws and regulations governing me, otherwise zero requirement to do anything. Maybe some Canadians have so much public sector, non-profit in their lives they don't "get" the private sector anymore, I don't know.

I don't mind people discussing PM's merits, etc, so anyone who wants to cut-off or shape the conversation in that way is wrong to say I don't want to hear it. There is not one defined "point" that we need to stay on, lots of points get brought up in a thread. A political name was first mentioned in post #23, no-one else jumped in and said stop it. Peter alone will decide when we're offside, and he does a fantastic job here of allowing adults free discourse within limits IMO!

February 23, 2021
8:06 am
savemoresaveoften
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canadian.100 said

John Manley who was Finance Minister at the time was supporting the amalgamation of Scotiabank and BMO - BMO was a bit piddly at that time and it was felt it might not survive and an amalgamation of these 2 banks would have some advantages for both the survival of BMO and a bank that would have some strength on the world stage. A committee had done a study.
Chretien overruled Manley and put a stop to it. As a Quebecer, he probably did not want the "Bank of Montreal" name to disappear.  

Back then, the Cad banks want to merge to be bigger as the CEOs at the time claimed that was the only way they can compete globally. Scotia merging with BMO, TD with CIBC. Nothing to do with BMO might not survive....

Chretien blocked it which was a great move. Turned out Cad banks can compete effectively and financially healthier than most global banks after all. Merger was just an excuse for the CEOs and senior executivies to run a bigger bank to collect a bigger pay check.

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