The discount broker associated with Desjardins Group eliminates commissions on transactions of stocks and exchange-traded funds. (Photo: The Canadian Press)
Desjardins Online Brokerage (DCL) clients no longer pay commissions on stock transactions since Monday morning. The announcement could have a snowball effect among the main discount brokers in the country, now that the cooperative and National Bank Direct Brokerage (BNCD) have adopted free.
The discount broker associated with Desjardins Group eliminates commissions on transactions of Canadian and American stocks and exchange-traded funds (ETFs) traded on its website or mobile application.
The trend towards free transaction fees was very strong, said Marjorie Minet, vice-president, Wealth Management Advisory Services at Desjardins, in an interview. She points out that transaction costs have been trending steadily for more than 20 years on the web. Since 2019, free transactions have been made for the vast majority of discount brokers in the United States. “Everything tended towards this evolution, quite simply.”
Banque Nationale Direct Brokerage (NBDB) was the first discount broker associated with a major Canadian bank to make a similar announcement on August 23. In Canada, Wealthsimple, of which Power Corporation is the largest shareholder, already offered commission-free brokerage with no minimum account balance.
Experts interviewed by The Canadian Press anticipated that large financial institutions would eventually follow in BNDC’s footsteps. Transaction fees at bank-affiliated competitors range from $ 5 to $ 10 per transaction.
“Many US brokers have been offering free trades for quite a while, and since the Canadian market usually lags the US market by a few years, it is only a matter of time before most brokers at a discount offer free transactions, ”commented Jean-Philippe Tarte, lecturer at HEC Montréal.
At Desjardins, we claim not to have felt a ripple effect that would have forced him to follow BNCD. “I followed the number of emails and calls we received and I was surprised by their low number,” says Ms. Minet. I felt a lot of confidence that we would do the best anyway [pour nos clients]. “
The vice-president does not want to reveal the amounts that Desjardins foregoes by abolishing the commissions. However, it ensures that the discount broker will not create new fees to compensate for the lack of commission.
Gabriel Dechaine, the specialist banking sector analyst at National Bank Financial, estimates that commissions represent between 1% and 4.2% of the profits of the six major Canadian banks.
Popularity of discount brokerage
The announcement comes as online brokerage experiences unprecedented popularity during the pandemic. From July 2020 to July 2021, the number of new clients jumped by 14% at Desjardins Online Brokerage.
During the first six months of the year, nearly 23,000 people attended at least one of the 120 webinars offered by Desjardins to familiarize themselves with the platform and the securities traded on the stock exchange.
The enthusiasm was marked among 18 to 30 year olds, who are taking their first step on the stock market. The number of customers in this age group jumped 16.7% between August 2020 and August 2021.
In fact, 31% of its customers exclusively use the mobile to access their brokerage account. About 25% of transactions are carried out via mobile.
The intensity has fallen somewhat since the peaks of activity, but demand remains strong, notes Ms. Minet. “We are still twice the volume of usual activity.”
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