Discount Broker Overview for Dividend Investors

Questrade Discount BrokerIt’s always a pleasure to be featured in the Globe & Mail by Rob Carrick and this week he highlighted my RBC Direct Investing Discount Broker review. Since I have been investing, I have used 5 different discount brokers (not so discounted back in the day though) and it’s a competitive market out there. One year broker A is ahead and the next it’s broker B. They catch up to each other and try to outdo each other until they have spent enough money 🙂

I realized after looking at the Globe & Mail Discount broker review Rob had done that I had done the review from my investing requirement perspective – fees were totally omitted because my investing accounts are large enough to have the lowest trading cost with all of them. Along the same line, the Globe & Mail review did not take into account the most important requirements for my dividend investing strategy.

The most recent review by the Globe & Mail on online discount brokers. The grades are good representations.

Dividend Investor Requirements

There are 2 main requirements that I must have with a discount broker for my dividend investing strategy. It must:

  1. Support DRIP (Dividend Re-Investment Plan)
  2. Provide the DRIP discount

DRIP is a powerful concept as it allows me to always have my money at work and to generate compound growth. Money at work is more important at this early stage for me than to pick my purchase price so I let it ride.

Discount Broker Comparison

This table is strictly setup to highlight what I need as a dividend investor. If you are an ETF investor, Scotia iTrade might work better for you since they have free ETF trading on certain ETFs. As you can, the spreadsheet presents quite a different view than the Globe & Mail review list.

Discount Brokers

As you can see, there are no non-bank affiliated discount brokers as I knew already that DRIPing wasn’t possible with Interactive Brokers from an email inquiry at the time. I am not excruciatingly picky either on all aspects of a discount broker. As it turns out, I am starting to move my banking over to RBC as well since Scotia is not willing to waive my bank account fees and with multiple products, RBC will. I know there are options for free banking since my wife is with Coast Capital Savings but it’s much easier to transfer money when you have an account with your discount broker.

Forex trading is probably the only feature I am missing now. It’s not something I need often but at least 2 times a year. If you do want to execute currency exchange, I recommend a broker with a true dual currency setup for your account management.

Related: DLR and DLR.U Currency Exchange

In the future, it might be interesting to turn the table into a grade since yes or no cannot always represent the extent of the feature. If you feel I am wrong in some cases, please bring it up as I have tried to get feedback from people who actually use them. For example, I heard that the customer service with Questrade is poor and I put no for it.

Readers: What’s making you stick to your discount broker?

45 Responses to "Discount Broker Overview for Dividend Investors"

  1. If your forex needs are simply USD/CDN, then Norbert’s gambit works quite well, assuming you’re using an account with dual currency.

  2. I am an RBC Royal Direct user because my banking is with RBC, but I have used BMO Investorline for 10 years for a church account that I manage. One thing that annoys me about RBC compared with BMO Invstorline is the almost total lack of options for investing cash short-term. BMO offers a wide selection of 30 and 90 day cashable GICs, and interest on investment account balances. RBC pays no interest and only offers RBC cashable GICs which pay less than is available from small trust companies at BMO Investorline.

    1. The Passive Income Earner · Edit

      Thanks for the comment! Short term investing is a good one to have. Especially if it pertains to one’s investing strategy.

    2. @Russ – I’m also with RBC and have a High Interest eSavings account – it’s a good spot to park cash and gives a relatively good rate – currently 1.20%

  3. The Passive Income Earner · Edit

    Thanks for commenting on Questrade’s customer service. It’s not always easy to rate without first hand experience. I will update it to yes. At some point I should really grade them instead of just yes or no.

  4. Very good info. I wish TD Waterhouse had BMO’s selection of cashable GIC’s. As of now you have to call and chat with a rep for the best rate and fill. Time consuming and so 1990’s.

  5. I recently reviewed the online brokers and chose Virtual Brokers. Lowest commission, good customers service so far and easy and quick to move money in and out. No hidden fees that I have found. I don’t use DRIP as yet as my investments are leveraged and I want the cash. Questrade won’t let me operate with a zero balance. I thought the bank affiliated brokers commissions were too high when purchasing only a few 100 shares.

  6. Great post as usual.

    I’m with Questrade, and have had no complaints with their customer service. I like the on-line chat, very quick with good agents that know what they’re doing (at least the ones I’ve dealt with).

    The only problem I have had was on a trade execution. I was trading a TSX listed security, and somehow it was routed to the TSXV incorrectly. When I noticed it, I called, spoke with the trading desk, and had the situation resolved in under an hour with all my money back. First time that’s ever happened to me – good reason to always check your statements!

  7. CIBC Investors Edge has all the features above minus the DRIP discount and Free ETF. If you have over 100K combined in all accounts, it’s commissions are $6.95 per trade. Biggest issue with it is the dated platform(they tried updating it but pulled it due to issues, coming back eventually), for instance expired covered calls don’t clear till Tuesday which is ridiculous.

    I keep my RRSP there but use Interactive Brokers for my non-RRSP account. Commissions are far cheaper($1 per 100 shares Can, $.50 per 100 shares US) and execution is far quicker/better than any of the banks. This is a professional trading platform that makes the banks look like amateur hour. Only recommeded if you are fairly active and trade US stocks/options.

    1. The Passive Income Earner · Edit

      Thanks for highlighting it. I will update my table this weekend.

      At the end of the day, I think they all do a decent job. Questrade is probably best for anyone starting and then it’s a matter of getting the features you need. The 6.95$ commission is nice but I don’t trade enough to really be bother for $3 🙂

      1. If Interactive Brokers supported RRSP and TFSAs I’d move everything there in heartbeat. Not only for commisions but the real performance reports they provide, something else the banks don’t do well(or at all). I’d personally save at least $400/yr + a few hundred due to execution issues(having to call them while about option problems while the stock price moves against you).

        But I agree Questrade is probably the best for the average investor.

      2. I agree. IB is great. I have been with TDW for years, but their obsolete and buggy platform is sad and they have no ETA to fix or replace it. I desperately need to get a dual currency account since the banks charge a crazy amount for FX every time you get a div. They “wash” the buy/sell using money market funds, but they still grab a bit every transaction.
        My non-registered account with IB, I trade the USD/CAD myself paying only 2.50 for 25k. That would cost closer to 400.00 through the bank.
        I’m trying to check out RBC & BMO, but it is like pulling teeth trying to get a look at their platform before opening an account!

    2. When i called CIBC Investors Edge they said you would receive the DRIP discount. I tried to find the info on their website but could not find it.

  8. Questrade has some issues. When you DRIP, the purchase price of the DRIP shares for stocks are different in Questraderweb then they are on your estatements and in account activity in Myquestrade. In Questraderweb, you click on detail for any position when viewing your positions and it tells you the price you paid of the shares.

    I was told Questraderweb platform shows the closing price as the purchase price as this is what Penson does. Penson suppose to keep track of this info for this. They told me that account activity and estatements is the correct DRIP purchase price.

    WHy would they allow this as it makes no sense to me that this error occurs.

    That is the only issue I have with Questrade.

  9. TraderDR

    When i called CIBC Investors Edge they said you would receive the DRIP discount. I tried to find the info on their website but could not find it.

    1. Free DRIPing is included, I’ve used it often before – there’s just no discount.

      Just call them and tell them what stocks you want DRIPed.

  10. Discount Brokers are becoming more and more popular as investors feel that their broker’s have failed them over the last couple of years. Discount broker’s are fully aware of this shift and we are seeing mass advisement campaigns by each to increase their market share.

  11. I use Sharebuilder for my dividend portfolio and it’s been great so far. It makes it very easy to keep track of everything. The free re-investment makes it very low maintenance as well. 😀


  12. I’m not sure what the No’s in your table mean about BMO InvestorLine? They do offer a synthetic DRIP on many Canadian stocks and securities. They do not offer a DRIP on any US securities. They do offer a discount on the reinvested dividends if the company does in its own DRIP. e.g. if FTS offers a DRIP through ComputerShare then InvestorLine does too.
    It is a synthetic DRIP, no fractional shares are purchased, the balance goes into the account as cash.

    1. The Passive Income Earner · Edit

      @Bet Crooks

      Thanks for your comment. From my inquiry at the time, that’s not what I was told but I am glad to review it now and keep it up to date! It looks like they are on par with the others when it comes to DRIP and discounts. I am disappointed that it doesn’t do it on US companies. I will have to split DRIP between CDN and US since it’s really important to be able to DRIP anything in my view.

      Cheers and thanks for stopping by!

  13. According to the information on the RBC Direct Investing website below, it looks that only Synthetic DRIP is available and there are also restrictions on the stocks.
    How does a Dividend Reinvestment Plan work and how do I enroll in one?
    With the Dividend Reinvestment Plan (DRIP), any dividends received from eligible companies listed on the S&P/TSX Composite indexes and the S&P 500 will automatically be reinvested into new shares at no cost. The reinvestment will only occur if the amount of the dividend received will cover the cost of at least one full share. The remaining cash will be added to the cash balance of the account.

    1. The Passive Income Earner · Edit

      Only synthetic DRIP is offered by discount brokers. You have to use Computershare or Can Stock to receive partial shares. The later are company provided services and the employee stocks plans are usually managed by that company as well.

  14. Hello,
    I’m also a dividend investor and have been thinking of switching out of TD Waterhouse. I had originally planned to be an active trader but I guess life doesn’t always go as planned. I’m currently satisfied being a dividend investor though.

    Here’s my situation. I’m still fairly new to investing in general and only have around $6000 or so to work with. Currently, 89% of my investments are in dividend investments (banks) and none of them make enough in dividends to be able to reinvest them for each pay date. I would like to keep adding onto my current investments until I can use the DRIP plan for them. I’m thinking of switching to either Qtrade or Questrade. Qtrade says there are no fees for DRIP and Questrade has DPP with no fees attached.

    My question is, would I be better off with DPP and lower commission fees (Questrade) or would it be better to switch to Qtrade which offers no DRIP fees?

    I’m able to set aside $200-300 a month to invest with. Do you suggest that I wait and buy the shares every few months or would it be better to buy as soon as I am able to?

  15. Can someone explain to me what a DRIP Discount is?

    I know with Questtrade you get up to 1% if the MER fee refunded back to your account which makes it very attractive when you are buying a mutual fund.

    1. @BlueChip

      DRIP discount is from the companies directly and they allow you to purchase the stock from dividends earned at a discount. The discount varies and can be from 1% to 5% or even more but I have rarely seen that on the closing day of the dividends being issued.

  16. I have been with ShareOwners Investment Inc for years and have been very pleased with their service. There fees may be higher than the other brokers($19.95 per trade, or $9.95 for co-op trade).

    For me their big advantage is that they automatically re-invest the dividends received, regardless the amount (even pennies) and buy fraction of shares to 4 decimals. Those small purchases and fractions of shares add up over time.

    As for DRIP I definetly agree that Computershare offers the best service. They also allow you to have direct debit for one time or automatic withdrawals.

  17. WRT Bluechip comment: On most mutual funds most online brokers have the A class or i believe B class which charges the trailer fees of 1% (that normally goes to pay the full commissioned advisor who is managing one’s investments) even tho the online broker is not earning same because they are not giving any advise they pocket that – so paid them for nothing the 1%. Bluechip’s comment about Questrade giving back the 1% (although if memory serves me when i phone them it might not be a full 1%). It would nice to find a list or names of online broker that do not charge this for mutual funds (a different class of MF other than A class).

    As to answer to Bluechip at first confused in saying a 1% to 5% savings on dividend reinvestment as does not seem like much but in thinking over even a 25cent saving if a monthly dividend over time over 20 dividend stocks could add up over the years if that is what Passive income earner means.

  18. I’ve read through this overview (the table comparing the discount brokerages as well as everyone’s comments/questions). There is definitely a lot of back/forth on what works best for any one individual, which is understandable. However, as someone who lacks experience in self-directing his investments but looking to start doing so, I am still finding it very difficult to determine what discount brokerage I should be using. Perhaps I’m over thinking it but I’m hoping for any advice you may be able to offer. Like I said, I would be new at this but I think I do have a (relatively) sizable portfolio to begin (RRSP > $100k, TFSA > $25k, Non-Reg > $55k, RESPs just starting out) so I’m wondering if that eliminates any of these discount brokerages (e.g. Questrade)? or based on these amounts, is there a discount brokerage that I should be considering first?

    Also, when is the last time the table comparison above was updated? For example, I understand that Questrade provides free ETFs now — but it says ‘no’ in your table.

    I appreciate your time. Thanks.

    1. @Kyle

      Prices are changing in some cases but usually for the better. For example, RBC has everyone at $9.95 now I believe. One of the benefit with large banks is that you may get access to research. For example, with RBC, I can get access to some research once I reach $250K in assets with them. The question is whether you want it and need it. Otherwise, if you plan on buying ETFs, I would recommend those with free ETFs.

      I will need to update the table for the ETF. Just double check since the competitive landscape has the discount broker adjusting regularly.

      If you are going to hold US in your account, you really need a dual currency discount broker.

  19. I currently have e-series with TD and a couple of stocks with TD, and a company managed account (under my name, but I don’t think I can purchase other stocks with it – I’d have to create my own and attach it to this account or have them just separate) with Computershare. I plan to either continue to add to my E-Series or maybe one day open up a Questrade account for index funds (ETFs) and make the switch (or just start some ETFs that further balance my portfolio ie. emerging markets). I’m wondering where to keep my dividend stocks. I currently have ZRE (probably not the best, but by no means the worst) and Enbridge, but neither is even close to being enough for a synthetic full share DRIP (both are enrolled with TD through TD to DRIP – not sure if TD can do credits towards a DRIP but pretty sure it just dumps it as cash back into my direct investing TFSA). I currently see the advantage of partial/fraction share buy backs (grows the stock faster).

    I’m just wondering where to go. I plan on making lump sum contributions and contributing over time to try and get the stock up so it can eventually buy full shares, but I’d love if there was somewhere that worked in terms of low fees, low commissions, etc and would be easy to transfer those funds 30 years down the road back to my bank accounts, also preferable easy to set up DRIP. I hear the names Computer Share, Can Stock and ShareOwner bandied about. Otherwise can just keep them in TD (although the 9.95 fees are okay, kind of sucks right now whenever purchasing that $10 is eaten away from your TFSA funds and space for every purchase – no disrespect to those that used to have to pay $25-30) or Questrade?

    1. @Greg

      If you already have stocks with Computershare, keep adding to them there unless you want them in a tax-free account such as TFSA or RRSP. You can usually add small amounts according to the company plan. ENB is with Can Stock though. Go on and look at the forums on how to get setup with the transfer agents to invest in some companies with fractional shares and no fees for adding to your holdings.

  20. My company pays for the computershare account, and it holds ESIP purchased stock, which the company does limited matching for. As far as I can tell, I cannot hold anything else in there, I would need to open up my own account ($125 annual fee for accounts, unless they recognized my company sponsored account as my first, and let me off with $75). At this time, with my limited portfolio size, I highly doubt the dividends if not re-invested would cover the fee cost. My ENB and ZRE are currently in TD. I guess if I were to keep them there, with ENB I might be able to register with them to add to my position, but a certificate with TD is $50 whereas each subsequent trade is $10 if I did it myself. I have enrolled it in the TD Drip program (over the phone), but the dividends are less than a share (so it just turns to cash). Seems all the transfer agents (Computershare, ShareOwner) for Canadians all have account fees (Shareowner seemed to only do $50 for a TFSA). My only thought with the TFSA was tax free growth, but it’s trying to do the math long term if fractional shares are worth it versus just allowing dividends to build and when you save enough just buying more shares. At this point, buying enough stock of any individual company to get to that point where it would be DRIPing a share, would unbalance my portfolio.

    I’ll probably just buy a stock or two ($1000 lump sums-ish or 25-50 shares, etc) and the rest into my E-Series for now. Have inquired with VirtualBrokers and Questrade if they’d cover my transfer costs (so I can save a few bucks in purchasing stocks), but the $5 savings per purchase and sale might not be worth the hassle and maybe I’ll just stay with TD.

  21. I am with HSBC InvestDirect and despite my requesting them to change they still will not allow USD stocks to be held in USD they are always converted to CAD. I would be interested in what the outcome of all the above discussion was as I am seriously considering getting out so i can place USD stocks in my RRSP in USD!

  22. Why have you not included Virtual Brokers in this review? It seems like the obvious choice for anyone looking to invest with a small account. They offer DRIP and a new SDRIP feature allowing you to distribute the dividends to multiple securities. It seems so obvious that I’m reluctant switch over, but lately with all the fees I pay with Itrade I’m considering.

    1. @MillenialInvestor
      Thanks for the suggestions and interest.
      I have not gone around to it. Back then when I did the full review, Virtual Brokers was targeting active traders.
      How does it compare to Questrade in your opinion?


Post Comment