Do-it-Yourself Investment Industry in Canada at Inflection Point as Commission-Free Trading Becomes Reality

The introduction of commission-free trading by National Bank Direct Brokerage and Desjardins is pushing the self-directed investment industry in Canada to an inflection point, according to the J.D. Power 2022 Canada Self-Directed Investor Satisfaction Study,^SM released today. Among the Big 5 banks, customer satisfaction decreases across all factors, resulting in a decrease in overall satisfaction to 584 (on a 1,000-point scale) from 598 a year ago. Conversely, the two aforementioned financial institutions combined have experienced a lift in customer satisfaction across almost all metrics.

According to the study, value for fees paid is the factor that shows the greatest increase (+69 points) among firms that have become commission-free, and it also is the factor with the sharpest decline (-18 points) at the Big 5 banks, which continue to charge trading fees.

“Trading fees are something very visible and relatively easy to understand and compare across platforms,” said Michael Foy, senior director and head of wealth intelligence at J.D. Power. “Until the industry aligns, we expect trading commissions—or the lack thereof—to be a driver of brand consideration and selection among do-it-yourself investors in Canada.”

This represents both a threat and an opportunity in an industry with a large number of new investors who have yet to develop loyalty to their brand. Among clients who have been with their investment firm for fewer than three years, 72% say they are open to the possibility of switching providers. More than one-third (36%) of self-directed investors who intend to switch platform providers cite high costs as the primary reason for leaving.

“When Schwab announced commission-free trading for U.S. clients in October 2019, the rest of the industry followed quickly,” Foy said. “We are not seeing that play out as rapidly in Canada, though it is hard to imagine the industry won’t get there. Once trading fees are no longer a way to stand out from competitors, it really raises the stakes on providing a superior client experience as the critical way to differentiate.”

Read the full press release for additional key findings and brand rankings >