The National Bank of Canada recently made a ground-breaking announcement for the Canadian bank. It announced that their online brokerage, National Bank Direct Brokerage will offer no-commission trading.
Why is this a ground-breaking announcement? Because this marks the first time that a major Canadian bank offers free online trades on Canadian and US stocks and ETFs. Previously, the only Wealthsimple Trade offered commission-free trades.
I was extremely intrigued by National Bank Direct Brokerage’s announcement. $0 per trade is a lot cheaper than Questrade’s $4.95 trade commission. $0 multiplied by 20 is still $0, whereas $4.95 multiplied by a few times quickly adds up.
Since this ground-breaking announcement, many readers have asked me if I am considering moving our accounts to National Bank Direct Brokerage and taking advantage of the commission-free trading.
Therefore, I have decided to do some research and write an honest and comprehensive National Bank Direct Brokerage review based on my findings. Like many Canadians, we already use online brokers like Questrade, TD Direct Investing, and Wealthsimple. With National Bank Direct Brokerage’s commission-free trades, should we consider switching to NBDB?
About National Bank Direct Brokerage
National Bank Direct Brokerage, NBDB for short, is the online brokerage arm of the National Bank of Canada. Since 1987, NBDB has offered Canadian investors accessible and reliable online trading products and services. Like other online brokerages, NBDB offers self-directed trading of stocks, ETFs, options, GICs, and bonds.
National Bank Direct Brokerage Accounts
NBDB offers Canadian DIY investors many different account options, both registered and non-registered. You can open the following accounts with NBDB:
- Spousal RRSP/RRIF
- Taxable accounts (i.e. cash, margin, and short selling)
- Individual pension plan
- Estate Accounts
- In Trust Account
- Investment Club Account
- Corporate accounts
Compared to Wealthsimple Trade, NBDB offers more account types. Compared to Questrade and TD Direct Investing, NBDB offers similar account types.
What can I trade using National Bank Direct Brokerage?
NBDB’s online platform allows you to trade just about everything, including:
- Mutual funds
- Exchange-traded debentures
- Linked notes
National Bank Direct Brokerage Pricing
The biggest draw for National Bank Direct Brokerage is the $0 online trade for stocks, ETFs, mutual funds, and options.
|Options||$0 + $1.25 per contract (minimum fee of $6.25)|
|Options (Value <$2,000)||$0 + $1.25 per contract (max fee of $19.95)|
|Mutual funds||$0 on most funds|
While one can purchase mutual funds for free, you still need to pay the fund MER. Also, for most mutual fund transactions, one must purchase a minimum of $1,000.
If you’re not placing your orders online and placing them by phone instead, you will pay a hefty commission of $44.95 per trade. But who places trade by phone nowadays anyway? Last time I checked, we aren’t living in the 1980s.
National Bank Direct Brokerage Fees
Despite the $0 online trade for stocks, ETFs, mutual funds, and options, the NBDB fees caught my eyes immediately. I believe this is where National Bank Direct Brokerage will make money from DIY investors.
First of all, NBDB charges an account administrator fee of $100 annually. The fee is waived if you meet one of the qualifying requirements below.
- You are a young investor age 30 or under
- You have assets of $20,000 or more as of May 31
- You make at least 5 stock, ETF, or option trades between June 1 and May 31
- You participate in a financial program for engineers, teachers, healthcare, or business professionals
- You only have an InvestCube account (automatic portfolio rebalancing, $10k minimum investment, 0.30% to 0.50% rebalancing fee. Note: You’re better off using Passiv)
I do like that NBDB will waive the account administrator fee if you are age 30 or under. This may encourage young Canadians to invest. However, if you are over 30 years old, your accounts’ total value is less than $20,000, or you make less than five trades a year, you will need to fork over $100 each year.
So, if you fall into the latter camp, you might be better off to utilize other online brokers like Questrade or TD Direct Investing, and continue to pay for trading commissions. If you’re looking for no-frill DIY investing, Wealthsimple Trade might be a better option.
Similar to other online brokers, NBDB has a bunch of transaction and transfer fees that you should be aware of.
- RRSP, RRIF, or LIF withdrawal fee: $50
- Internal transfer between registered accounts: $100
- NSF cheque: $45
- Excess contribution reimbursement: $100
- Wire transfer: $75
- Total or partial transfer to another institution: $150
- Portfolio statement by mail: $6/quarter
- Trade confirmation by mail: $2 per trade (billed monthly)
- Administration of restricted shares: $250
- Custodial services: $30 per security per month
- Donation or substitution of securities: $50 (max $150 per transaction)
- Registration/delivery of certificate: $50
- Registration/delivery of certificate (rush): $200
- Deposit of a stock certificate: $100
- Estate settlement: $200
National Bank Direct Brokerage – Interest Rates
I don’t recommend investing on margin because you can get into trouble easily. If you do decide to invest on margin, here are NBDB’s interest rates:
|$100,000 or more||2.75%||4.25%|
National Bank Direct Brokerage – Opening Accounts
According to many users on RedFlagDeals, the account opening process can be hit and miss.
A small selection of investors stated that the overall account opening process was easy and went smoothly. Going to a National Bank branch and talking to a representative may have contributed to the easy process.
Alarmingly, many investors stated that the overall process for opening an account with NBDB was much more complicated than Questrade or Wealthsimple Trade. Many of them had to call NBDB and be put on hold for half an hour or longer before talking to an associate.
National Bank Direct Brokerage – Online Trading Platform
Since I haven’t signed up for an NBDB account and I’m simply doing the review based on what I can find on NBDB’s website, I don’t have any personal experience with their online trading platform.
Based on what I could find, NBDB’s online trading platform is slightly more advanced than Wealthsimple Trade’s minimalistic simple trading platform. But NBDB’s online trading platform is not as advanced as Questrade or TD Direct Investing. Many current NBDB users have also complained about the poor user interface (UX) of the online trading platform.
NBDB gives you access to analysis and research from National Bank Financial and Morningstar. This should be sufficient for most Canadian DIY investors.
Younger investors who prefer using mobile apps to trade might be disappointed to learn that National Bank Direct Brokerage currently does not have a mobile app for online trading. To make trades on your mobile phone, you’d have to log in to your NBDB account via the mobile web browser.
National Bank Direct Brokerage – Market-Q
Market-Q streams market price in real time and allows investors to create up to 20 dynamic watchlists with up to 200 securities each, as well as custom charts.
This useful tool is not free by default. Market-Q is free only when you carry out 10 or more trades per month.
|Quotes||0-9 trades||10-39 trades||40-99 trades||100+ trades|
|Level I Quotes||$39||Free||Free||Free|
|Level II Quotes||$99||$60||Free||Free|
|Level I with TSX-V||$64||$25||$25||Free|
|Level II with TSX-V||$148||$109||$49||Free|
What do these levels mean? With Market-Q Level I, you can get real time quotes from TSX, NYSE, and NASDAQ, which is sufficient for the majority of DIY investors.
I really don’t like that NBDB is forcing investors to make more than 10 trades in order to get real time quotes. Take Questrade for example, they offer unlimited one-click real-time level 1 data for US and Canadian stock exchanges.
If you don’t make 10 or more trades per month, you will experience a 15 minute delayed price, just like what you get with Wealthsimple Trade (you can subscribe to Wealthsimple Trade’s premium features for $3 a month). Since you shouldn’t quibble over eighths and quarters, not having real-time quotes shouldn’t be a big deal for most DIY investors.
National Bank Direct Brokerage Customer Service
According to my research on online forums like RedFlagDeals and Reddit Canadian Investor subreddit, National Bank Direct Brokerage has had poor customer service over the years. Many Canadian investors complained about the long phone wait time.
Unlike Questrade, there is no online chat option to talk to an NBDB associate. So when you have a problem, the only option is to call or email NBDB. Many investors using NBDB have reported that they usually have to wait for 30 minutes to 1.5 hours or even longer before talking to someone. This can be extremely frustrating.
A few Canadian DIY investors also pointed out that to use Norbert’s Gambit to exchange currency, you have to call NBDB to start the journaling process (I’m shocked you can’t just email them like Questrade and ask to start the journaling process). This certainly isn’t ideal. However, some investors also pointed out that NBDB has improved the system in recent months such that emailing NBDB about journaling shares works fine.
It appears that NBDB has improved its customer service slightly since the $0 trade commission announcement. Let’s hope the customer service improvement continues.
Pros & Cons of National Bank Direct Brokerage
Before I determine whether we should be considering switching to NBDB, let’s take a look at the pros and cons of National Bank Direct Brokerage.
- $0 commission for trading stocks, ETFs, mutual funds, and options.
- Lots of different accounts available.
- $100 account administrator fee annually unless condition is met.
- Less sophisticated online trading platform with poor UX.
- No online chat available and long phone wait time.
- No real time quotes unless making 10 trades per month.
- Web platform only. No mobile app.
- Lacking some features for more advanced trading.
National Bank Direct Brokerage Review – Summary
Here’s a quick summary of National Bank Direct Brokerage.
|Stock/ETF/Mutual Fund/Options Trading Fee||$0|
|Option contract||$1.25 to $19.95|
|Type of Accounts||RRSP, TFSA, RESP, RRIF, LIRA, LIF, non-registered, corporate, etc|
|Account administrator fee||$100 per year if balance less than $20k or not meeting other conditions|
|Synthetic DRIP||Yes (have to call in to set up DRIP).|
|DRIP Discount||? (Cannot find any info)|
|Norbert’s Gambit||Yes (have to call to start journaling)|
|Dual Currency Account||Yes|
|Real-time quotes||Yes if you make over 10 trades per month|
|Trailing stop loss support||No|
|Multi-legged options trades||No (Must enter trades separately)|
National Bank Direct Brokerage Review – Should I consider switching?
Should I switch to National Bank Direct Brokerage and take advantage of the $0 commission free trading and say goodbye to other online brokers that we currently use?
After going over all what NBDB has to offer and its pros and cons, I came to the conclusion that the answer is no. At the time of writing, it makes no sense for us to transfer all of our investment accounts to NBDB.
Sure, we’ll save quite a bit of money on trading commissions and since our portfolio is larger than $20k, we won’t have to worry about the account administration fee.
But the painful account opening experience is very concerning.
The poor customer service and no online chat option available are also extremely worrisome. I simply can’t imagine having to wait for 30 minutes or longer to talk to someone. The opportunity cost simply outweighs the trading commissions I may be saving.
Furthermore, I don’t like the idea of using a somewhat outdated trading platform with poor UX. When I buy or sell stocks or ETFs, I like to perform my transactions as quickly as possible. Having to deal with an outdated trading platform will create a lot of frustration.
In other words, while National Bank Direct Brokerage’s commission free trading is nice, it is not enough to persuade me to switch. However, it is possible that NBDB will improve the account opening process and overall customer service experience over time.
Despite all of that, National Bank Direct Brokerage may be a solid choice for Canadians that are already banking with National Bank and want to keep everything under the same umbrella.
For most investors who want commission-free stock and ETF trading, I believe Wealthsimple Trade is currently the better option. For more advanced investors, I believe Questrade remains to be a solid choice.
Another important thing to consider is that no-commission trading may cause some investors to pull the buying or selling trigger easier without going through proper stock research and analysis. Emotional buying and selling become a lot easier when there’s no trading commission involved. There’s no need to think twice before pulling the trigger on trades. One simply hits the buy or sell button. This can potentially cause major downfalls for many investors.
I applaud National Bank for offering $0 commission-free trades for its online brokerage. Although National Bank Direct Brokerage isn’t the right fit for us currently, I hope the announcement will force other Canadian financial institutions to change their online trading fee structure.
Who knows, maybe Canadian consumers can finally win for once.
As a dividend investor, I think National Bank has a lot to gain from announcing the commission-free trading with National Bank Direct Brokerage. This should hopefully attract more Canadians to invest and bank with National Bank and improve their profits. As a National Bank shareholder, I like what National Bank is doing. This is why I will continue to list National Bank as one of the top 13 Canadian dividend stocks to own.
Dear readers, what’s your view on National Bank Direct Brokerage? I’d love to hear your thoughts if you are currently using NBDB or have made the switch.