I got a very nice note from my TD Waterhouse friends saying that now all Canadians can take advantage of their $9.95 per trade fees (not just folks like me who had very large RRSPs, and thus a “good client”), as long as they are customers of TD Waterhouse.
This change doesn’t do me any good (I already had that rate), in fact it makes me feel less special, however, now folks can get the same trading fees that cheaper on-line houses give, from Waterhouse (and evidently from other trading houses as well (not just Questrade)), but I can’t help but wonder does this have a down side?
Overall I think this is a good thing for most folks (not paying $21.00 or higher per trade), and it may mean more folks may put more money into their trading account more often (with a cheaper trade premium), but will it cause some folks to start ignoring the fee as part of the trade? Worse, will it cause folks to want to do more trades because they are cheaper? I doubt it, but it remember if you are tracking the initial COST of the trade is:
Cost of shares purchased + Trading fees
Obvious isn’t it? You’d be surprised how many folks I know who seem to forget that when trying to track the value of their holdings. Yes, if you purchase $4000 worth of ETF adding a $26 trading fee to that cost doesn’t seem much, but you do need to include it.
For those that are chuckling about how since they buy Mutual Funds they don’t have to pay those fees, think again. Much higher fees are hidden in your funds’ MER (and in the purchase and/or selling price too).
As a consumer I have mixed feelings about fixed fees – on anything, especially if I end up overpaying for a service. However tiered pricing also makes me uneasy because someone is always getting screwed over and it’s usually the guy who can’t afford it.
As a financial planner I am a huge fan of mutual funds and I don’t feel the MERs are hidden. On most fund information sheets the MER is clearly stated and the fee is taken out before clients get their rates of return. I believe in paying for a service that’s worth it and the fund manager has to get paid some how. I absolutely see your point about feeling less special because that was my initial thought as well. I guess TD Waterhouse is trying to make securities investing affordable for the masses.