The Globe and Mail announced its annual discount brokerage rankings yesterday and crowned a new winner. Virtual Brokers took top spot for 2012, ending a six-year run by Qtrade. In his article about the rankings, Rob Carrick commended the winner for its low costs and innovation, noting that “new for this year, commissions to buy any and all ETFs have been waived.” I have to admit that was news to me.
Following Scotia iTrade and Qtrade, Virtual Brokers became the third in Canada to offer a menu of commission-free ETFs last fall. (I’ve summarized the offerings of all three brokerages here.) VB’s current list of eligible ETFs has 100 names, including many from iShares and BMO, as well a few dozen US-listed funds, most of them very narrowly focused. All these ETFs can be bought and sold with no commission, as long as the two trades do not occur on the same day. However, what I had not realized—it’s not clearly explained on the site—is that Virtual Brokers now allows its clients to buy any ETF with no commission. You only incur a commission when you sell the ETF, and even then you pay only a penny per share, subject to a minimum of $0.99.
And yes, they confirmed with me that this policy applies to US-listed ETFs as well as those traded on the Toronto Stock Exchange.
I think it is fair to say that Virtual Brokers now offers the most compelling suite of services to ETF investors. I have often discouraged people with small accounts from using ETFs because the trading costs can make them far less efficient than index mutual funds. But with VB, you can now add new money to your portfolio every week or every month at no cost: you’d only pay commissions once or twice a year if it becomes necessary to trim a holding or two while rebalancing. The brokerage also levies no annual account fees on TFSAs, and no fee on RRSPs and other registered accounts as long as the balance is at least $15,000. (The one exception is a $25 annual fee for RESPs.) You can even hold US dollars in your registered accounts, although this service comes with a $50 annual fee.
Experienced investors know that low cost is not the only factor to consider when choosing a discount brokerage: user-friendliness and customer service are also important. For example, Rob Carrick pointed out that VB could improve by offering personalized performance reports—something all brokerages should do, though most do not. If any readers are using Virtual Brokers for their ETF portfolios, please share your experiences in the comments section.