Commission-free trading is finally here, and it’s not exclusive to one specific broker. Canadian fintech company Mogo announced a partnership with CI Investment Services Inc. to offer commission-free transactions to Canadians. This is the second app and fourth financial service in Canada to take such a step. Why did they do it? To make investing more accessible to Canadians.
Hi! It affects you, so be careful; it’s time to stop saving money. If you want to increase your wealth and achieve financial independence, you must invest it. However, until recently, high trading fees prevented too many Canadians from entering the market.
Canadian fintechs, and now some of Canada’s big-name banks and credit unions, are filling the void with creative and elegant financial solutions that will help you get the most out of and keep more of your bacon. Let’s take a look at who offers commission-free trading in Canada and what you should consider before you hit the buy button.
The simple trade of wealth
Wealthsimple Trade was the first investment platform in Canada to offer commission-free trading on stocks and ETFs when it launched its trading app in 2019. It quickly took root in the hearts of Canadian self-directed investors and remains the #1 trading app in Canada. They continue to offer unlimited, commission-free trading on stocks and ETFs, and there are no investment minimums. Wealthsimple Trade currently serves 175,000 everyday traders like you in Canada, the United States, and even the United Kingdom.
Wealthsimple started as a low-cost robo advisor but soon evolved into one of Canada’s most prolific fintech companies. They started with cutting-edge financial technology that used cutting-edge software to create a diversified ETF portfolio based on your risk appetite. But they didn’t stop there.
For the more experienced, practical investor, Wealthsimple Trade was launched. This was soon followed by Wealthsimple Crypto, the first federally regulated cryptocurrency trading platform in Canada. Today they now offer Wealthsimple Cash, Canada’s answer to Venmo and Wealthsimple Tax; easy-to-use and cheap tax filing service.
Additionally, Wealthsimple is on a mission to empower Canadians to take complete control of their money. On their website, you’ll find extensive financial education resources that explain all things money, from investing to budgeting. They even have an extensive video series called Investing Masterclass that deconstructs intimidating investing principles into bite-sized, easy-to-understand pieces. Not only does Wealthsimple make investing accessible at zero commission, it also gives you the peace of mind that you know what you’re doing before you even start.
Online brokerage Desjardins (Disnat)
Non-bank fintechs are not the only ones driving change. Desjardins Group is the largest group of credit unions in Canada; Credit unions in Quebec are called caisse populaires. Desjardins’ online broker, called Disnat, is the only financial institution-owned trading platform that offers commission-free stock and ETF trading. Currently, free trading is offered through the Disnat Classic platform, designed specifically for beginner investors with a user-friendly interface and easy-to-use research tools.
While stocks and ETFs are freely traded, options are technically commission-free but cost $1.25 per contract. Most mutual funds can also trade freely, but certain conditions apply. If you are aged between 18 and 30, some costs, such as inactivity and administration fees, are exempt if other criteria are met. However, the minimum investment amount to start is $1,000, which may be prohibitive if you’re new and don’t have a lot of cash.
Unlike major chartered banks, credit unions are owned by their members rather than private shareholders. By opening an account at the bank, you become a co-owner and share in the profits. Historically, credit unions have been the first to adopt new financial technology and initiate change.
Credit unions are often ahead of the competition. They were the first to offer Canadians debit cards, online banking and creative lending solutions such as Home Equity lines of credit called HELOCs. They are also committed to social change, reinvesting their profits into the local community five times more often than traditional banks. And they were the first to lend to women without a man signing; represents a huge step forward for women’s rights and financial independence.
TD Easy Trading
Keeping pace with the competition, TD is the second bank-owned online brokerage to move towards free trading. In January 2022, TD announced the launch of TD Easy Trade, an enhanced version of the previous TD Goal Assist tool that makes trading accessible to everyone, regardless of budget or experience level. With TD Easy Trade, new DIY investors can grow their wealth with confidence. The goal is to reduce some of the barriers that exist between Canadians and the stock market with a more intuitive, beginner-friendly app interface and commission-free trading in stocks, ETFs and mutual funds.
With TD Easy Trade, users can still enjoy the same unlimited, free, one-click trading of TD ETFs and ETF portfolios that the old app offered. But the new app now also includes 50 free stock trades per year, a US dollar account that helps reduce conversion fees on US stock trades, up-to-date quotes and market data, and access to licensed investment professionals for additional support. The TD Easy Trade app has been designed with the new trader in mind.
TD Easy Trade even includes extensive educational materials such as live masterclasses and webinars, as well as the ability to create a customized trading plan to achieve any goal. Not only do they bring you closer to the market, but they set you up for success by providing all the resources you need to start your business. With no account minimums, TD Easy Trade gives Canadians even more control over their money. As the trend towards self-investing gathers pace, low-cost brokerages help put wealth aside; in the hands of people who earned it.
National Bank
Not to be outdone, National Bank shook up the financial world by announcing the launch of zero-commission trading on the National Bank Direct Brokerage platform. It was the first bank-owned brokerage to do so. In August 2021, the Brokerage House of the National Bank of Poland stopped charging commissions on transactions in shares, i.e. stocks and shares, as well as ETF funds.
Historically, legacy banks have been slow to change, but National Bank has seen a major disconnect. Financial services that maintained the status quo simply did not meet the needs of a dramatically changing economy. Millions of Canadians felt the system was rigged against them. By eliminating trade fees, the National Bank showed Canadians that it is with them, not against them.
When you open a National Bank Direct brokerage account, you’ll have access to zero-commission trading on Canadian and U.S. stocks, ETFs, options and bonds, which are a type of bond. Although Options is commission-free, it costs $1.25 per contract. They also offer commission-free trading on most mutual funds, but certain conditions apply. There are no minimums when trading shares. Your trading account is subject to an annual administration fee of USD 100, which is waived if certain conditions are met.
Is Zero Commission Trading in Canada Really Free?
There is nothing perfect under the sun. Financial tools are no exception. While your transactions may be free, there are other costs to consider.
You still pay for your transactions
How are more and more brokerages moving to commission-free trading? One of the less transparent ways brokers profit from your trade is through something called the spread. The spread is the difference between the price at which they buy an asset and the price at which they sell it to investors. With a spread, you almost never pay true market value. This is because the brokerage sells it to you at a slightly higher price than they paid for it, and buys it back at a slightly lower price than the actual market value when you sell it.
Other notes about commission-free transactions in Canada
There are other, less obvious disadvantages to consider when it comes to trading with zero commission. It can influence your trading behavior in ways that impact more than just your wallet. Day trading has tax consequences that some novice investors may not be aware of. Every time you make a profit, for example when you sell an asset for a profit, that transaction is subject to investment tax. The more trades you generate profit, the more tax you have to pay. While zero-commission trading is a huge win for Canadian investors, make sure you understand the tax implications of frequent, short-term trading.
Moreover, day trading does not actually help the economy. When you day trade or swing trade, you make a quick profit rather than investing in companies you believe in. Long-term investments help companies grow, create jobs and add value to their local economy, as well as the Canadian economy as a whole. This does not mean that increasing your wealth has a positive effect, but it is something to consider before engaging in frequent trading.
Do you get what you pay for?
The short answer is yes. National Bank and Disnat offer much more than a simple, bare interface. They also offer research and education to clients. Wealthsimple offers financial education and award-winning technology. Commission-free trading does not mean a bare-bones service. This means that investors who felt left out or were hesitant to accept so many fees can feel more confident investing their money.
