Resource Centre Online Investing

Resources Getting Started The Wise Investor Online Investing Glossary Book Centre globefund.com Alert Online investing articles from The Globe and Mail BMO InvestorLine top pick among on-line RRSP brokers February 8, 2003 The Globe and Mail's On-line Brokerage Rankings September 14, 2002 Direct-access trading geared toward aggressive investors August 24, 2002 Expect more consolidation among on-line brokers February 16, 2002

No-fee funds could spark price war Discount broker E Trade to charge no commission on mutuals held for three months ANDREW BELL Investment Reporter Thursday, September 18, 1997 In what could spark a new price war among discount stockbrokers, aggressive newcomer E Trade Canada has become Canada's first discounter to offer hundreds of mutual funds with no purchase, switching or redemption commissions so long as investors hold the funds for three months. Until now, discounters have charged purchase commissions of up to 2.5 per cent for funds. For no-load funds, excluding those run by their parent banks, they levy redemption fees of about $45. "I think most competitors like ourselves will do some very quick thinking and respond appropriately" to E Trade's move, said Bruce Schwenger, president of InvestorLine, Bank of Montreal's discount operation. Asked if InvestorLine will go to zero loads, he said "we're looking at it as we speak." But John See, president of Toronto-Dominion Bank's Green Line Investor Services, Canada's biggest discounter, predicted that the E Trade initiative will have a "minimal effect" on Green Line immediately. About 70 per cent of Green Line's fund business is in no-load funds, which don't charge purchase or redemption commissions, "and I think that's probably indicative" of other discounters as well, Mr. See said. Nevertheless, he said, "we're looking at" the idea of charging no loads on any funds. Green Line already offers 25-per-cent discounts on funds traded through its Internet site. David Birkbeck, marketing manager at Action Direct, Royal Bank of Canada's discount brokerage, said the company has no plans at the moment to drop sales loads on funds. The broker's range of services for clients means "we think we offer fair value," he said. E Trade, a unit of Toronto-based electronic broker Versus Brokerage Services Inc. , says the new service covers more than 600 mutual funds traded through its Internet site, by automated telephone service or with a live phone operator. To discourage in-and-out trading, an investor who sells a fund in less than 90 days must pay a commission of 1 per cent, with a minimum of $38.88. Customers can also buy funds monthly, with a minimum purchase of $100. The broker offers 24-hour access to automated computer or phone trading, and it has live operators available five days a week, from 8 a.m. to 8 p.m. Like other brokers and financial planners, including discounters, E Trade will still get to collect "trailer fees" paid to brokers by mutual fund companies. Those annual trailer fees range as high as 1 per cent of a client's assets (Canadian Imperial Bank of Commerce has started shelling out 1.5 per cent each year on equity funds). Small zero-load mutual fund brokers have sprung up over the past few years, offering a wide range of funds with no commissions and living off trailer fees. One of those, Mutual Fund Direct Inc. of London, Ont., says it has more than 16,000 accounts and client assets of more than $200-million. E Trade "is just another competitor," said president Margery Yuill. Success, she said, "will be based on service." E Trade says its Web site offers "a full range of mutual fund investing services," including tools to search for funds that meet set criteria, fund profiles, prices, calculators, price charts and comparisons. It will provide monthly fund performance data taken from Fundata Canada Inc. "We are revolutionizing the industry," said Colleen Moorehead, Versus president. But it remains to be seen how many Canadians are willing to forego the hand-holding that a broker, financial planner or other salesperson offers. Fund companies such as Investors Group Inc., Trimark Financial Corp. and Templeton Management Ltd. that sell through brokers have attracted billions of dollars in assets in recent years. "This market wants service and it votes time and time again that service is what it wants," said industry veteran Paul Starita, who is building an in-house mutual fund operation for broker First Marathon Inc. This spring, Green Line announced a new flat fee commission schedule for stock trades executed electronically after E Trade entered the market with its flat charge of $38.88 for some orders. Discount brokers also axed their registered retirement savings plan fees for many clients this year after InvestorLine dropped its fee. Related Web sites Internet sites for a few discount brokers: http://www.Canada.etrade.com http://www.tdbank.ca/greenline/ http://www.royalbank.com/english/adirect