September 22, 2011 / 12:27 PM / 6 years ago

Canadian investors sour on discount brokers: study

3 Min Read

(Reuters) - Satisfaction among Canadian investors with discount brokerages has "significantly decreased" from a year ago, and lags that of investors in the United States, according to a study released by J.D. Power and Associates on Thursday.

The study, which included responses from 3,358 investors who use discount brokerages in Canada, said that the industry as a whole has failed to keep up with changing market conditions and customer needs.

"Investors are less satisfied because they're seeing less value provided by their firm," Lubo Li, senior director and financial services practice leader at J.D. Power in Canada, said in the release.

Value in the discount brokerage industry is more and more defined by the tools and resources that firms are providing their self-directed investors to make better decisions, Li said.

While firms may offer these tools and resources, they may not be clearly communicating to clients that they are available, he added.

The study also found that Canadian investors' satisfaction with their discount brokers trails their U.S. counterparts.

Overall investor satisfaction with discount brokerage firms in Canada averaged 679 on a 1,000-point scale. A year earlier, it averaged 707 points.

Investor satisfaction in the United States in 2011 averaged 764 points, up 1 point from a year ago.

The main reasons for the declining satisfaction among Canadian investors were in the areas of problem resolution, information resources and account offerings, J.D. Power said.

The study, fielded from May to June, also looked at the firms' interaction with clients, as well as trading charges and fees, and account information and statements.

Out of the three financial service sectors in Canada -- discount brokerages, full-service firms, and retail banking -- investor satisfaction with discount brokerage firms ranked the lowest and was the only sector to see a significant decrease from 2010.

"All major banks in Canada have their own direct investing for the discount brokerage channel," Li said.

"By not delivering a superior experience at the same level as their parent banks, discount brokerage firms not only fail to meet their line-of-business mission, but also run the risk of detracting the value of their parent brands."

J.D. Power and Associates 2011 Canadian Discount Brokerage Investor Satisfaction Study rankings:

Disnat 729

National Bank Direct Brokerage 724

Qtrade 709

BMO Investorline 699

TD Waterhouse Discount Brokerage 693

Industry Average 679

RBC Direct Investing 677

Questrade 676

Credential Direct 672

ScotiaMcLeod Direct Investing 645

CIBC Investor's Edge 640

Scotia iTRADE 633

HSBC (HSBA.L) InvestDirect 631

Reporting by John McCrank in Toronto; editing by Rob Wilson

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