Do-it-yourself investing industry in Canada is at its inflection point as commission-free trading becomes a reality, says JD Power

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TORONTO–(BUSINESS WIRE)–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 JD Power 2022 Canada Self-Directed Investor Satisfaction Study,SM published today. Among the Big 5 banks, customer satisfaction is declining across all factors, leading to a drop in overall satisfaction to 584 (on a 1,000 point scale) from 598 a year ago. Conversely, the two aforementioned financial institutions combined saw an increase in customer satisfaction across almost all metrics.

According to the study, the value of the fees paid is the factor that has increased the most (+69 points) among firms that have become commission-free, and it is also the factor that has fallen the most (-18 points) among the Big 5. banks, which continue to charge trading fees.

“Trading fees are something very visible and relatively easy to understand and compare between platforms,” said Michael Foy, Senior Director and Head of Wealth Intelligence at JD Power. “Until the industry aligns, we expect trading commissions – or lack thereof – to drive brand consideration and selection among do-it-yourself investors in Canada.”

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

“When Schwab announced commission-free trading for US clients in October 2019, the rest of the industry quickly followed,” Foy said. “We don’t see that happening that quickly in Canada, although it’s hard to imagine the industry not getting there. Once trading fees are no longer a way to differentiate yourself from competitors, it really raises the stakes of providing a superior customer experience as a key way to differentiate yourself.

Here are the key additional findings from the 2022 study:

  • Appetite for cryptocurrencies: Over a third (37%) of millennials1 self-directed investors in Canada have invested in cryptocurrencies and 11% have investments in fractional shares. While the proportion of investments in these new financial products is still lower than in the United States, 63% of American millennial investors have invested in cryptocurrencies.2—young investors are interested in newer products not yet offered by many financial institutions.
  • Pandemic-era problems persist: The strain on financial institutions’ infrastructure caused by an influx of investors in the pandemic era continues to persist, especially for new customers. According to the study, the number of new investors who encountered a problem in the past 12 months doubled to 28% from a pre-pandemic level of 14%.
  • Booming mobile trading: Self-directed investors who use both their wealth management company’s website and app for commerce and interaction are more satisfied and more likely to increase the amount they invest over the next year than those who do not use both channels. Mobile, as the preferred trading channel, continues to rise among all investors, particularly millennials and Gen Z, among whom transactions through the mobile app increased by 8 percentage points year on year on the other.

Ranking of studies

National Bank Direct Brokerage ranks first among standalone investment companies with a score of 662. questrade (656) takes second place and Gardens (631) ranks third.

The 2022 self-administered Canadian investor satisfaction survey, now in its 14and year, assesses key drivers of satisfaction and business performance among true self-directed investors (those who do not interact with professional advisors). The study measures satisfaction across seven factors (in order of importance): trust; numeric strings; ability to manage my assets as and when I want; products and services; fee value; people; and problem solving.

The 2022 study is based on responses from 2,099 investors who make all their investment decisions without the help of a financial advisor. The study was conducted from November 2021 to January 2022.

For more information on the Self-Administered Canadian Investor Satisfaction Study, to visit

https://canada.jdpower.com/financial-services/canada-self-director-investor-satisfaction-study.

To view the press release online, visit: http://www.jdpower.com/pr-id/2022060.

About JD Power

J.D. Power is a global leader in consumer insights, advisory services, data and analytics. A pioneer in using big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behavior, JD Power has been providing incisive industry insights into customer interactions with brands and brands for more than 50 years. products. The world’s leading companies in key industries trust JD Power to guide their customer-facing strategies.

JD Power has offices in North America, Europe and Asia-Pacific. To learn more about the company’s commercial offerings, visit JDPower.com/business.

About JD Power and Advertising/Promotional Rules: www.jdpower.com/business/about-us/press-release-info

1 JD Power defines generational groups as pre-boomers (born before 1946); Boomers (1946-1964); Generation X (1965-1976); Generation Y (1977-1994); and Generation Z (1995-2004). Generation Y (1982-1994) is a subset of Generation Y.

2 JD Power 2022 Self-Administered US Investor Satisfaction Survey

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