Do It Yourself Investing – Choosing a Brokerage

A series featuring my personal leap into DIY Investing. 

So you’ve decided to start investing on your own.  You’re feeling good, you’re feeling excited, but also probably confused.  With so much to consider, where do you start?

When you invest on your own, one of the first things you’ll need is a discount brokerage account. Lucky for investors, brokerage fees have been dropping dramatically.  In January 2014, RBC leveled the field when they announced fees of $9.95 per trade regardless of the size of your account.  A little while later, CIBC rocked the brokerage world by announcing $6.95 trading fees.

There’s no such thing as a “best brokerage.”  Do you value easy to navigate websites?  Customer service?  Low trading fees?  Access to research?  Good reporting?  We chose CIBC not only because of the low trading fees, but moreso because of the convenient integration it offered with our regular banking.

Two personal finance powerhouses have put the time and money into researching the brokerages for you.  Read these two articles as a first step to deciding which brokerage is best for you.

1. Globe and Mail:  The best and worst online brokers in Canada (December 2014)

2. MoneySense Magazine: Canada’s best discount brokerages (May 2014)

Not ready to invest completely on your own?  Last month we explored “investing-on-your-own-with-help” – a good option for lower fee investing while still having some support.

Once you’ve decided on your brokerage, be ready for the paperwork.  If you have multiple accounts (imagine TFSAs, RRSPs, Spousal RRSPs, RESPs, LIRAs and non-registered), just opening your accounts will be a painful process.  It’s not something you can do on your coffee break or while watching Breaking Bad.  And if you have investments you want to transfer into your brokerage, that means more paperwork yet.  Here are 5 tips on being ready:

1. Watch out for Deferred Sales Charges –  If you currently own mutual funds, find out from your existing institution if they have Deferred Sales Charge fees attached to them.  DSCs can be significant, and can happen if you sell some mutual funds within 6 or 7 years of buying them.  If yes, you can sometimes avoid the fees by transferring the investments “in-kind” instead of “in cash”.  Talk to your new brokerage about this option.

2.  Keep a record of your contact person – If you open the accounts over the phone, make sure to write down the name and extension of the person you are speaking with.  There’s a good chance you’ll need to talk again and it’s simpler to deal with someone familiar with your situation.

3.  Have your most recent account statements handy – It’s much easier to complete the forms online or over the phone when you have your current statements in front of you.

4.  Get reimbursed – Ask if the brokerage will reimburse any transfer and/or closing out fees from your other institution.  Depending on the amount you are transferring in, there’s a good chance they’ll agree.

5.  Ask about incentives – Brokerages compete for your dollars and may offer cash-back incentives depending on the amounts transferred in.

While opening a brokerage account can be onerous, it is not especially difficult.  By putting in some research and time, you’ll be on your way to do-it-yourself investing.

Next up: choosing your investments.  That’s where the fun really begins!

Rich regards,