Retail Brokerage and Distribution Canada—Online Brokerage Pricing A Zero-Sum Game?

Pricing (or lack thereof) in the Online Brokerage Channel

This issue of the Retail Brokerage and Distribution Report examines pricing in the Canadian online/discount brokerage channel and documents the early impacts of the shift to zero-commission trading.

We last covered zero-commission trading in 2019, where we examined the shift to zero-commission trading in the U.S. online brokerage industry and examined, in great detail, the alternative revenue sources in that country. At that time, only Wealthsimple had launched zero-commission trading in Canada. Since that time, three more firms have fully shifted to zero-commission trading and many others have offered partial or promotional zero-commission offers.

With a growing cohort of firms offering zero-commission trading offers, this story looks at the impacts of this model on revenue, account openings, trade volumes and assets. The story also features newly collected segmentation data which shows that younger investors have been attracted to the channel by these offers. While the data contained in this story will help answer some key questions about zero-commission trading impacts, the commentary poses further questions that industry executives must ponder as they evaluate their pricing strategy.