Selecting a Broker in Canada

Choosing a Broker

With the Toronto Stock Exchange commanding $3.3 Trillion in market cap and being the 12th largest market worldwide, it is a great market to start investing in. Selecting a broker in Canada is the first step to dipping your toes into the stock market. There are several avenues to take, whether you decide to go through a bank brokerage, an independent brokerage, or through an international brokerage that serves Canadians. Before you decide which brokerage to go with, you must make sure the brokerage you go with bides with your financial goals whether this is couch investing or evenly to actively trade. Our comprehensive guide will introduce you to some of the most popular brokerages in Canada.

Wealthsimple (Beginner)

Wealthsimple (WS)

The first distinction one must make is that Wealthsimple (WS) and Wealthsimple Trade (WST) are two separate entities. WS is a bot investing platform that manages your money for you much like a mutual fund but with significantly cheaper fees. WS is both app and web-based offering portfolios with a risk that you can adjust (1-10). The product auto-adjusts your portfolio for you and it invests in a mixture ranging from global ETFs to bonds. We advise this product for those who want to build a retirement fund or just want to have money invested without picking the product yourself.

Pros:

• "Set and forget" system of investing

• You can choose your own risk tolerance (Scale of 1-10)

• Cheaper MER than mutual funds

• Easy interface to use

• No minimum deposits

Cons:

• Not for those who want to actively manage their accounts

• Be advised that US investments have a 15% withholding tax on ALL brokers

• Robo invester invests in ETFs that one can easily mirror and not have to pay the management fees

Our rating: 3/5

Wealthsimple Trade (WST)

WST is an active investing platform intended for Canadians specifically. The number one best thing about this platform is that there are NO commissions when buying Canadian securities. For buying stocks listed on the TSX we recommend this broker. Currently, it is offered as both on mobile as well as on the desktop. WST is mainly for the casual investor and long-term investors on the TSX. We highly recommend beginners who want to focus on building a core TSX portfolio to start with WST. Beware of buying US securities through WST as there is a 1.5% commission on exchange rate both on buy and sell transactions. They have recently added 250$ instant deposit.

Pros:

• Easy to use

• 0$ commission on Canadian stocks

• User friendly

• Great for couch potato investing

• No minimum deposits

Cons:

• Unreasonable commission rate for US securities (1.5%)

• 15 min Delayed charts (Please use charting software such as Yahoo finance or Tradingview to bypass this issue)

Note: WST has a 3$ subscription program that allows for instant deposits of up to $1k

Our Rating: 3.5/5

Questrade (Intermediate)

Questrade is a Canadian broker that offers both self-directed and pre-built portfolios for both the Canadian and American markets. Questrade is a great entry-level broker for Canadians who wish to also hold a USD account to trade on the American markets. Commissions however for Questrade is competitive among popular brokerages at $4.95/ + 1 cent/ share up to a maximum of $9.95. For the Active traders, we recommend either purchasing the advanced US/Canada data package or Interactive Brokers. For those only wishing to buy Canadian stocks should stay with WST. Active traders may find the commission rates to be slightly too high and execution speed on high volume days to have a noticeable delay.

Pros:

• Competitive commission rates

• Ability to hold both USD/CAD accounts

• Charting software with IQ Edge

• 0$ commissions for buying ETFs

Cons:

• Slightly slower execution speed

• Poor customer service

• Outdated phone app

• Extended Hours Trading is only limited to 7:30 am EST - open and market close to 5:30 pm EST

• $1000 Minimum deposit

Our Rating: 3/5

Interactive Brokers (Advanced)

Interactive Brokers (IBKR) is a US-based publically traded broker which serves 33 countries worldwide and over 135 markets worldwide. This platform is made for more advanced traders as IBKR has its own clearing house which allows for fast, almost instantaneous order executions. The list of products by IBKR is extensive with abilities to trade equities, forex, options trading. There are two commission structures of which we recommend the tiered for investors and fixed pricing for the active trader. We feel that the platform is the best for the most Active trader although we recommend pairing the application with a charting provider such as Webull or TradingView as the charting software on IBKR leaves much to be desired. Please beware that IBKR has account maintenance fees.

Pros:

• Cheapest commission rates in Canada

• Wide variety of tradable assets

• Charting software with Trader Workstation

• FULL Extended hours trading

• Ability to trade equities on every major stock exchange worldwide

  • • Update: Maintenance fees are now waive

Cons:

• Requires higher income to qualify for when signing up

• Overwhelming platform to begin with

• No minimum deposits ($2000 minimum to enable margin)

Our Rating: 4/5

Bank Brokers

In general, we recommend against using banks as your primary brokerage as the commission rates are significantly higher than the aforementioned brokerages (up to 10$/ execution). We grouped the bank brokerages together as the feature sets are consistent and commission rates are consistent across the board as well. That being said, having a brokerage account with your own bank is great for instant transfers of money to your account. Additionally, banks tend to have better customer service than the brokerages aforementioned. Aside from high commission issues, banks are a good option for those who want to keep their finances under one roof.

Pros:

• Customer support

• Instantaneous fund transfers

• convenient

Cons:

• High commission rates

• Platforms are more intended for passive investors

Our overall rating 2/5

Update: National Bank offers commission free brokerage services***

International offshore brokerages

Offshore brokers

We recommend against using off-shore brokerages even if they accept Canadian clients as most are registered in deregulated jurisdictions such as Marshall Islands and the Maldives which are notorious for deregulation. We will always recommend going with a broker who is insured by the CIPF. That being said, there are brokers who are serviceable such as Trade Zero geared towards low commission rates and day trading. In picking an offshore broker, make sure to do proper research into where a certain broker is based out of and what your account would be backed by in the event of the broker going bankrupt.

Pros:

• Cheap commissions

• Focus on Day Trading

Cons

• Some offshore brokers are not secure and are potential fronts for white-collar crime

• Accounts can take up to months to be approved

Note: Last updated: November 2021