Questrade Offers FREE ETF Purchases

{20 Comments}

I read a Moneyville article by Robb Engen (Boomer and Echo) last week and it had some great news: as of February 1st, Questrade customers can buy Canadian and US Exchange-Traded Funds and for free (you pay the commission but then get a 100% rebate within a few days). According to the details Questrade posted on their blog: ”…there are no trading commissions on purchases of ETFs. Yup: buy any ETF for free.”

Any ETF? Sorry for repeating myself, but this is stunningly awesome news. Buying index ETFs across several asset classes is a great way to diversify, generate income, save costs, and recover free time.The reason that this move is a game changer is that it’s a massive boon to a small or medium investor’s portfolio. People who save a few hundred dollars per paycheque will no longer need to accumulate a couple grand in savings before pushing that money into the market. In Questrade’s honour, I’ve prepared a comprehensive promotional strategy for free:

Questrade  free ETF purchases - suggested marketing idea

While Questrade’s famous $4.95 trade commissions are incredibly low, that’s a 1% dent in $500; if you did that every two weeks you’d put yourself at a sizable performance disadvantage. But with the new free ETF policy, Johnny or Sally Canuck can buy ETF shares from each paycheque without paying commissions — whether they’re adding to a single position or many. Questrade’s new free ETF purchases policy apparently covers all North American ETFs. This is completely different from the “list of free ETFs” offered at other brokerages and will shake up the industry. Scratch that — it’ll change the industry if consumers wake up. OK, so maybe not that much will change but consumer laziness doesn’t undermine how awesome Questrade’s new policy is.

Sure, there’s fine print. The policy doesn’t apply to sales of ETFs. That means that if you need to re-balance by selling a certain ETF, you’ll pay a commission. But if you need to re-balance by selling, it’s probably because (1) your future contributions aren’t big enough compared to your portfolio to make up the difference and (2) the ETF being sold has appreciated relative to your portfolio. So quit whining. Also, remember that Questrade has the lowest or almost the lowest commissions in Canada — if you’re selling a hundred grand from your multi-million dollar ETF portfolio, paying a penny per share (up to the maximum of $9.95) isn’t going to break the bank. Well, maybe it will. But it certainly won’t break you. Also, if you change an order to reduce the number of shares before fulfillment, their ECN fees apply, yada yada. The limitations sound entirely reasonable to me but check them out for yourself before making a decision.

I know I’m in. Upon my return to the workforce from leave, I’m definitely going to funnel some excess cashflow into index fund ETFs. Vanguard has an amazing line of index ETFs trading on the TSX – most with MERs of under 0.21% a year. Note the ZERO in front of the .21%. I also want to load up on a high-yield fixed income ETF like iShares’ CHB. It’s a junk bond fund with a less attractive MER (0.55%) but the yield is insane (greater than 6.5% at the time of writing). Are junk bonds risky? You bet. The benefit is that the fund’s bonds are highly diversified (the biggest holding is 1.51% of the portfolio).

If you’re a regular reader, you may recall that I declared Questrade to be Canada’s best brokerage. Some people expressed doubts and, to their credit, raised reasonable concerns — e.g. people with a balance below $5,000 now pay an account maintenance fee (waived with a single trade per quarter), etc. Well, take Questrade’s new ETF policy as a definitive sign that — despite minor drawbacks — the Canadian brokerage offering the most value is Questrade. After the original article, even I had some doubts. But I’m now incredibly confident that Questrade is legitimately on the lookout for ways to save average investors like you and I from ridiculous fees.

Oh, and make sure you get $50 free towards your non-free trades (hopefully there aren’t many).

Get $50 in free trades.

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20 Comments… Share your views

  1. LEET PAINT SKILLZ!!!!!111

    That’s what I got out of the article :).

  2. Giggity. This is very good news. I am a Questrade customer myself, and was becoming disappointed that the brokerage that positioned itself as Canada’s cost-leader was dragging its feet so much on this. Scotia iTrade, Qtrade, VB, and a few others started offering zero-comm ETFs as far back as 1.5 years ago. Although the lists of available ETFs in the beginning tended to be sketchy (ie the ones you shouldn’t be buying anyway), you could tell a trend was starting. I actually contacted Questrade months ago to see if they would match VB’s zero-comm offer, and they refused. I told them that I was considering moving my accounts if they couldn’t match the offer. Perhaps I was not the only one, and they finally got the message – competition at work, and good news for customers.

    • Giggity indeed. After the last couple posts about Questrade where people pointed out issues, I was concerned because Questrade was no longer a clear #1. I think this is a pretty epic move to take back the undisputed title.

  3. That’s amazing. I think this may take the lead over the e-Series funds for small investors between the lower MERs and the simpler signup process (I haven’t signed up for Questrade, I just know everything is easier than an e-Series account). I actually need to open a few accounts in the next few months so I think I’ll try this out and move everything over if it looks good.

    • e-Series are pretty good but your choice to move is obviously a smart one. The MER of an e-Series is likely double or triple the lowest-priced ETF equivalent (e.g. VCE.TO versus the e-Series TSX index). When there’s no commission to buy anymore, and you can purchase in way smaller lots, it’d be foolish to NOT start shifting to Questrade.

      • The only disadvantage is the accumulation of loose change since you can’t buy fractional units, and the way the fees are rebated also seems like it would leave a bit of cash lying around. Dealing with that is a bit more work than you would have with the e-Series funds but I’m sure the lost returns on $5 won’t hurt anyone.

  4. w00t! I like that it applies to the purchase, but not sale of ETFs. I’m confused by the rebating you the commission after a few days though – then you have that cash sitting in your brokerage account! I guess it’s to make people still think about the purchase?

    What’s also super cool is that on their blog, they mention Young and Thrifty! They actually read personal finance blogs!

  5. Thanks for sharing this! I missed the Moneyville article. I’ve liked the idea of ETFs, but based on my current needs the fees were just too much of a deterrent. For some reason, banks don’t offer discounted student trading fees they way they do with bank accounts. :P

    I’ll be checking out Questrade again, and will likely sign up this time!

    • Thanks for sharing, I’m happy to have encouraged a smart move. The only caveats I’d mention are for students generally (but since I don’t know the particulars of your situation, I think it’s important to mention them): (1) if you have student loans don’t invest, focus on getting out of debt, and (2) make sure you’ll have well over $5,000 in the Questrade account to avoid their quarterly fee if you aren’t making at least one trade each quarter (although I think this fee is waived for students, but I’m not certain of that).

  6. Be sure to send an email to any other brokerages you have telling them where you’ll be spending your new investment $$$ and why. Other changes at the Big 5, like the drop to 50k for $9.95 trades, were brought about largely by the vocal minority. I’d rather not have to transfer my existing accounts so I think making noise might be a profitable use of my time.

    • The Big 5 will never beat their lower cost, smaller, more nimble competitors, e.g. Questrade, ING Direct (THRiVE chequing), formerly MBNA (credit cards), People’s Trust (savings accounts), etc. etc. Well, I shouldn’t say never… but they do their best to avoid it, only do so with massive reticence, and often backtrack later (without being public about it). Get out of that evil system and don’t look back. I paid $50 to dump TD Waterhouse and I haven’t regretted it for a second.

  7. But if *I* pulled out all of our investments, the share prices of the Big 5 would tumble like autumn leaves.

    …..wouldn’t they? At least tremble like a breeze passed through?….. twitch, maybe????

    Hmmmm. Questrade, eh?

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