Just last month, TD Waterhouse announced that as of November 4, 2010, it will start charging clients who hold between $50,000 and $100,000 in household assets a flat trading commission of $9.99. Clients with less than $50,000 in assets will continue to pay $29 for most stocks. The previous threshold for the lower commissions was $100,000 in household assets.
It may be a coincidence but CIBC Investor’s Edge, which used to be one of the discount brokers that still charged $29 for all clients announced that it will begin charging just $6.95 per trade for clients that have $100,000 or more in business with CIBC. Clients with total balances between $50,000 and $100,000 will be charged $9.95 per trade. The total balance is calculated by adding deposits, investments, loans and mortgages held by all occupants of a household with CIBC or its affiliates. The new pricing plan goes into effect January 1, 2011.
Today, BMO InvestorLine joined the bandwagon and announced that beginning December 1, 2010 it will the threshold for qualifying for the flat rate commission of $9.95 from $100,000 to $50,000. Clients can combine assets in all BMO InvestorLine accounts over which they have trading authority.
It has been more than 3 years since the last round of discount broker price wars. At that time, TD Waterhouse first announced a low flat rate commission for clients with $100,000 or more in assets. RBC Direct Investing and BMO InvestorLine quickly followed suit.
The latest price war is encouraging because it will reduce the cost of buying and selling stocks for even more self-directed investors. Hopefully, retail investors will not fall into the trap of trading more simply because commissions are lower. It would also be interesting to see if we’ll see competition in other areas between discount brokers. For far too long, discount brokers have been getting away with pocketing trailer fees that are supposed to compensate for financial advice. Since self-directed investors receive no advice, it is only fair that most of the trailer fees be rebated back. We would also like to see more brokers follow RBC Direct Investing’s lead and offer US dollar RRSP accounts.
Update (Nov. 5, 2010): RBC Direct extends $9.95 pricing to clients who hold between $50,000 and $100,000 in household assets.