July 16, 2006
GData
O'Reilly Radar > A Week in the Valley: GData
By nat on July 14, 2006
I spent the week before Where 2.0 visiting companies between San Francisco and San Jose. I've already written about my trips to Ning and Meebo. Next is an account of a meeting with Mark Lucovsky, who was architect of the HailStorm web services product from Microsoft.
I had a great lunch with Chris DiBona and Mark Lukovsky at Google. There's a huge move within Google away from SOAP and even REST-style ad hoc APIs and towards GData instead. The big point for me was that GData is just Atom/RSS for reading, Atom Publishing for writing, and A9 stored queries for searching. They had to specify a bit of glue around sync and so on, but the whole thing is that simple.
The big thing about GData for Google is that it's extremely simple to build into the server-side, so they can offer APIs very easily. This is important as they offer APIs for lots and lots of new stuff. Atom is quietly becoming the standard for reading and writing to Google (RSS for reading as well). They're not saying that in public, but it's happening. Atom is becoming the standard RESTian web services envelope.
They're building APIs to your Google-stored data via GData, and it's all very reminiscent of HailStorm. Mark, of course, was the architect of that. So why's he coming up with more strategies to the same ends? I figure he's hoping Google won't screw it up by being greedy, the way Microsoft did. Microsoft always asks "where's the prioprietary edge?", which is a great strategy for making money but not necessarily the best nurturing technique for open APIs. I did some digging around HailStorm and found these patent applications filed in Europe at the same time as Microsoft was shopping HailStorm as "open". This is a classic proprietary grab: they point and say "look, open APIs!" and then meet with patent lawyers to figure out what bits of the schemas can be patented.
That's the strategy if you want to make money off the use of the APIs and you want to own the services. Google doesn't look at in the same way. I pushed Chris DiBona on Google's take on APIs and he said, "we just want so many developers using straightforward HTTP and XML that it's impossible for someone to introduce anything proprietary that would weaken Google". Google doesn't need the proprietary ownership of the services, they make their money when people use the Internet. The biggest threat to Google isn't that someone else will implement the same Calendar API as Google, it's that someone will make web pages uncrawlable through proprietary extensions to HTML or HTTP. They need web standards so firmly entrenched in common use that nobody can break the Internet from under them, and this pits them against proprietary evilness.
The reaction to the GData APIs for Calendar have been very positive. This is in contrast to HailStorm, of course, which was distrusted and eventually morphed its way through different product names into oblivion. Noting that Mark's trying again with the idea of open APIs to your personal data, I joked that GData should really be "GStorm". Mark deadpanned, "I wanted to call it ShitStorm but it didn't fly with marketing".
July 16, 2006 at 12:38 PM in Web/Tech | Permalink
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Trades and grades
Taddingstone Consulting Group - Press Article
01-16-2000
By: Canadian Business Staff
The best and worst discount broker rated by criteria
When researching the discount brokers for this special issue, we didn't just walk up and kick the tires a couple of times. We stripped them right down and studied every nut and bolt. We took roughly $40,000 and opened accounts at 1 discounters. We made hundreds of phone calls, sent scores of e-mails and placed dozens of trades to help you learn which broker is right for you. We also received expert guidance from The Taddingstone Consulting Group Inc., a Toronto-based financial services consulting firm.
Cost We looked at how much each broker would charge in commission for the following three trades: (1) 100 shares of a $20 TSE-listed stock; (2) 500 shares of a $20 TSE-listed stock; and (3) 100 shares of a US$50 stock listed on the New York Stock Exchange. We then multiplied by eight, for a total of 24 trades, or two per month over a year. We assumed that 12 of the trades were placed over the Internet and the other 12 were placed in live conversation with a broker. Where a broker charges more for limit orders than market orders, we applied the higher fee to four of the trades.
Other costs We looked at: the purchase of one contract of $3 options, the purchase of a $2,500 front-end-load mutual fund, the annual administration fee for RRSP accounts and the fee for transferring your assets to another broker. Where a firm waives the front-end-load mutual fund fee only for customers with accounts of $15,000 or more, we took the average of two purchases: one by a customer with the necessary $15,000, one by a customer with less.
Online trading We looked at 13 criteria including ease of navigation, real-time updates, charting tools, news sources and whether 24/7 technical support was offered. We deducted points for persistent technical problems. Since most investors trade over the Internet, online service was given double the weight of the other five categories.
Telephone service This category has two parts. First, we asked the brokers if they offered automated touch-tone trading or voice-activated trading, or both, and tested how easy those services were to use. Then we graded them on the quality of service we received from their customer help lines. We called each broker several times and posed questions or problems, and compared their responses.
Mutual funds & products In preparing this year's ranking we focused on two product areas where discount brokers can add value for investors-mutual funds, and IPOs and new issues. For mutual funds, points were assigned based on fee structure, selection and availability of no-load funds. Brokers were graded on the quantity, quality and breadth of initial public offerings and new issues over the past eight months.
Response time Do the brokers quickly pick up the phone or leave you on hold listening to elevator music? We phoned each firm 11 times with a stopwatch in hand. We also sent four e-mails to each broker and timed how long it took them to respond. Finally, we phoned the brokers and asked them to mail an application package to us.
Research & extras In this category we looked for value-added services provided by discount brokers. Of particular importance was the availability of research, both online and offline. We considered how many physical branches each broker has (not including regular bank branches) and whether they have specialized customer support staff to deal with questions about mutual funds, options and fixed-income securities. Finally, we took into account the level of access to foreign markets each broker offers its clients.
A- TD Waterhouse
It was close this year, but TD Waterhouse came out on top, thanks to all the value-added extras-like branches from coast to coast, voice-activated trading and proprietary research. But it's on the expensive side, and that could haunt it in the future as other brokers improve their services. www.tdwaterhouse.ca 800/465-5463
B+ BMO InvestorLine
A lack of research kept InvestorLine from clinching first place this year. But in most other respects, it's as good as Waterhouse. BMO offers value: a Web site that's very easy to use and some of the cheapest online trades around. www.bmoinvestorline.com 800/387-7800
B+ Charles Schwab Canada
The haute couture of discount brokerages, it's got a straightforward, user-friendly Web site that Mr. Clean would approve of. But unless you've got $20,000 just sitting around, don't bother-that's what you need just to open an account. www.schwabcanada.com 888/597-9999
B E*Trade Canada
E*Trade's Web site is great, but even a little attention to other things, like answering the phone more quickly, would be nice. If you're looking for cheap mutual funds, though, come here. www.canada.etrade.com 888/872-3388
B Royal Bank Action Direct
Royal's discount broker is like a mule-it's dependable and hardworking, but nothing to get excited about. The Web site is simple to use and the reps know what they're talking about. Action Direct hovers at the high end when it comes to price. www.actiondirect.com 800/769-2583
C+ HSBC InvestDirect
A mediocre grade for a mediocre discount broker. HSBC's prices are good, and if you want to trade Hong Kong stocks online, this is the place to go. But its unimaginative Web site is falling behind the competition, and you have to pay for all but the most elementary research. www.hsbcinvestdirect.com 800/398-1180
C CIBC Investor's Edge
CIBC says it plans to change its Web offering. Good-because the current one is a mess. Investor's Edge did score well for its access to IPOs, and it gets bonus points for introducing voice-activated trading. www.investorsedge.cibc.com 800/567-3343
C- Scotia Discount Brokerage
Scotia has come a long way since its last-place finish in our 1999 ranking, but it still has to work on some things-like price. It may boast the cheapest minimum trade, but Scotia will ding you on everything else. www.sdbi.com 800/263-3430
C- National Bank Discount Brokerage
Trades are cheap, but National's online offering needs a complete overhaul. On the other hand, it's easy to get a knowledgeable rep on the phone. www.invesnet.com 800/363-3511
D- eNorthern
The baby on the block has a lot of growing up to do. ENorthern offers little in the way of research or extras. And though it calls itself an online broker, you can get an eNorthern rep on the phone faster than you can load the Web site. www.enorthern.com 888/829-7929
D- Sun Life Securities
Sun Life has an interesting business model: offer your customers nothing special and charge through the nose. We're not sure why anyone would want to trade with Sun Life. Maybe that's why its representatives pick up the phone so quickly. www.sunsecurities.com 800/835-0812
COST
A - BMO InvestorLine
A- HSBC InvestDirect
B E*Trade Canada
B eNorthern
B National Bank
B Discount Brokerage
C+ Scotia Discount Brokerage
C CIBC Investor+s Edge
C- TD Waterhouse
C Sun Life Securities
C Royal Bank Action Direct
D Charles Schwab Canada
When James Powell started looking for a discount broker two months ago, he had one thing in mind-price. His first choice was US-based Datek, with its ultracheap US$9.99 trades. But Powell, a retired teacher living in Markham, Ont., discovered that it's illegal to trade with Datek because it's not a registered securities dealer in Ontario. So he was stuck with the current lineup of Canadian discount brokers, many of which charge twice as much to execute a trade.
In the end, he settled on newcomer eNorthern and its $24 trades. With a modest five-figure portfolio, Powell is a no-frills kind of guy. And he finds that when he calls up eNorthern-which keeps costs down by having just six licensed stockbrokers-they answer the phone right away. "I think it's because right now they're very small," says Powell. "I hope it stays that way."
Many investors want to do more than just trade equities, however. So we created a hypothetical investor who makes two trades a month, has an RRSP account, tries her hand at options, and wants to buy a $2,500 front-end-load mutual fund. When she trades stocks, our fictitious investor doesn't limit herself to the Internet; she makes half her trades on the phone, through a representative.
The broker who gave our imaginary investor the best deal was Bank of Montreal InvestorLine. It charges about $1,069 annually for our collection of services and would have been even cheaper if it didn't charge extra for limit orders (which allow an investor to state the exact price at which she is willing to buy or sell a stock). InvestorLine's minimum commission for market orders over the Internet is $25.
The two discount brokers most Canadians associate with inexpensive trades, E*Trade Canada and eNorthern, came in third and fourth in this category. That's because their fees for broker-assisted trades are much higher than those charged for online trades. The broker with the cheapest minimum fees is actually Scotia Discount Brokerage, whose online commission schedule starts at $20. But its fees go up quickly as you trade larger numbers of shares.
At the other end of the cost spectrum sits Charles Schwab Canada, the Canadian arm of the world's largest discount brokerage. Schwab charges a whopping $261 more than BMO InvestorLine for our package of services. Then again, its customers must have $20,000 just to keep their accounts open, so they're less likely to squabble over commissions. Probably the worst value for the money is Sun Life Securities. It's almost as expensive as Schwab, but provides much less in the way of service.
Finally, we were curious whether anyone was listening to all the grumbling over high fees. Over the past year, some brokers-including TD Waterhouse, CIBC Investor's Edge and Sun Life-ditched their fees for buying front-end-load funds, and Waterhouse slashed the minimum fee it charges for orders placed through its voice-activated telephone trading service, TalkBroker, to $29.95 from $35. Schwab, on the other hand, actually hiked its minimum fees for electronic trades to $33 from $30. Our advice: if you're waiting for bargain-priced trades a la Datek in the US, don't hold your breath.
BY JASON KIRBY
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ONLINE TRADING
A TD Waterhouse
A- BMO InvestorLine, Charles Schwab Canada,
A- E*Trade Canada B Royal Bank Action Direct
C Scotia Discount Brokerage
D+ HSBC InvestDirec
D+ CIBC Investor's Edge
D eNorthern,
D Sun Life Securities
D- National Bank Discount Brokerage
Like medicine men pushing magical elixirs, discount brokers have touted the Internet as the cure for all your investing ills. No more heart-stopping shocks from your full-service broker when that monthly account statement arrives. Gone are the debilitating $200 commissions. Simply log on, trade, make money, then log off-and repeat as necessary. Some discounters live up to the hype and make buying stocks and mutual funds an absolute joy. The bad ones, on the other hand, should have a Health Canada warning slapped across their order screens.
Four discounters battled it out for top spot in the online trading category: E*Trade Canada, BMO InvestorLine, TD Waterhouse and Charles Schwab Canada. All four have revamped their sites since we ranked them last year, adding new features. E*Trade made its site much easier to navigate, and has added some research on small Canadian companies. The folks at Schwab put on their thinking caps and came up with an innovation we feel was too long in coming-real-time updates to account holdings. When you make a trade with Schwab, it shows up in your account information right away. (Other brokers update customer accounts overnight.) In fact, with a site so clean it's almost sterile, Schwab would have ranked higher if it offered 24/7 access to technical support.
BMO InvestorLine, meanwhile, became the first to offer fixed-income products on its site, with a handy "quick picks" option that finds bonds, T-bills and the like, depending on how much you're looking to spend. BMO also stands out because it automatically lists the purchase price of shares and how much you've made-or lost-right in the account holdings section. There's also an area to track the monthly and quarterly performance of your portfolio. And we really liked InvestorLine's charting tool, which (among other things) allows you to compare the progress of one stock to another going back to when Reagan was president.
TD Waterhouse made the first tier, mostly because of the ease of navigating the site-we could get just about anywhere with just two clicks of a mouse. We especially liked Waterhouse's new eServices feature, which stores and sends electronic copies of trade confirmations and statements to customers. Waterhouse has also come a long way since last year in providing online research, especially for mutual funds (for more on research, see page 55). And there's no skimping on real-time quotes-Waterhouse has links scattered throughout the site. We don't like that there's no apparent way to change the start-up screen, which is a list of "important messages" that won't seem all that important when the market is tanking.
Scotia Discount Brokerage gets extra marks (but not an A) for effort. Their online offering last year was abysmal. You had to download special software before you could trade, which was a hassle. And Macintosh users found it plain didn't work. Now Scotia Discount customers can trade on the Web like everyone else. Its new-and-improved Web site is comparable to those of other mid-ranked brokers we looked at. Scotia's drop-down menus make it easy to get around, but there's nothing in the way of research.
Other discounters must have figured that catching up to the leaders is the same as trying to out-drive Tiger Woods, because it sure looks like they've given up and gone home. We were surprised how many discounters did little to improve their online services over the past year. "They've been trying to solve problems, rather than enhance their offerings," suggests Keith Sjögren of The Taddingstone Consulting Group.
CIBC Investor's Edge offers a couple of new features, such as online access to IPOs. But its research selection is still limited, and the site remains gawky and cheesy. And they still haven't fixed a problem we complained about last year: if you accidentally get kicked out of the site, you can't log in again for 15 minutes. As for National Bank Discount Brokerage, well, its Web site was already outdated a year ago, and it's not much better now. Preserve it for posterity-maybe someday it will find a home in a museum. We had a hard time even getting real-time quotes, and error messages were often transmitted in French. Zut alors!
The newest offering is from the people at eNorthern, who made a point of telling Canadian Business that they're not a "discount broker" but an "online broker." Guys, semantics should be the last of your worries. Sure, they're just getting started, but it looks like eNorthern designers went wild splashing useless diversions, like a streaming quote ticker, on the start-up page. All the fluff cramps an already sluggish download. A word of warning to potential eNorthern customers planning to trade using a Macintosh computer-don't. When one of our orders failed because the confirmation page took so long to load, an eNorthern customer service rep offered some stunning advice: "Try shutting down and booting up again." Don't bother, it doesn't work.
BY JASON KIRBY
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TELEPHONE SERVICE
A- TD Waterhouse
B BMO InvestorLine,
B National Bank Discount Brokerage
B- Charles Schwab Canada
B- CIBC Investor's Edge
B- Royal Bank Action Direct
C+ HSBC InvestDirect
C Scotia Discount Brokerage
C E*Trade Canada
C- Sun Life Securities
D eNorthern
You've been stuck in traffic for an hour, and you can still see your house in the rearview mirror. Then you hear on the radio that your star company has issued a surprise profit warning. Internet trading doesn't do you much good now, does it? In the scramble to offer online services, many brokers have given their automated phone service the bum's rush. Well, guess what, folks: punching sell orders into your dashboard computer isn't going to happen anytime soon. And we don't feel you should have to pay through the nose, or wait on hold forever, to place a telephone order just because your PC isn't handy.
TD Waterhouse is tops in this category, thanks to its voice-activated TalkBroker service. Getting quotes or portfolio updates and placing orders is as easy as saying, "Buy WestJet Airlines." Most of the time, the computer understands what you're saying.
Other brokers offer automated phone trading, but they vary in user-friendliness. We liked E*Trade Canada's touch-tone trading line for its simplicity. CIBC Investor's Edge allows you to punch a few keys and get company news faxed to you within minutes. CIBC has brought in a voice-activated system, too, though they're still testing the trading function. On the other hand, we found using the touch-tone services at BMO InvestorLine and Scotia Discount Brokerage cumbersome. But as it turns out, the most expensive broker also offers the worst in automated phone service, which is nothing at all. This summer, Charles Schwab Canada did away with touch-tone trading. "We literally had a handful of clients that were wanting to use that," says Schwab president and CEO Paul Bates. (Schwab will be rolling out voice-activated trading sometime in 2001, he adds.)
Schwab also lost marks for not offering 24-hour customer support, but the broker redeemed itself in this category with its knowledgeable staff. Through dozens of calls, we tested customer-service representatives on their understanding of the market. For example, we played dumb and insisted on buying shares in Hutchison Whampoa Ltd., a huge Hong Kong-based conglomerate that, in the US, trades over-the-counter as an American Depositary Receipt (ADR). We also quizzed them with questions about bonds, which are complicated enough to make anyone's head spin.
Schwab did very well, answering the phone and giving us the information we wanted quickly and painlessly. So did BMO InvestorLine, whose fixed income specialist found the price of the bond we wanted faster than anyone else. Not surprisingly, HSBC aced the question about Hutchison, and even explained how to trade on the Hong Kong stock market. Most reps fumbled that question, especially one guy at TD Waterhouse. When we asked if the company trades on US markets as an ADR, he asked: "Is that the company symbol?" E*Trade's rep simply gave up: "I can't explain it." In the end, we were given three different symbols for Hutchison shares, but everyone said they could get them for us. If we had gone through with the trade, who knows what stock we would have ended up with.
BY JASON KIRBY
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MUTUAL FUNDS AND PRODUCTS
B+ TD Waterhouse,
B+ Charles Schwab Canada
B E*Trade Canada
B Royal Bank Action Direct
B CIBC Investor's Edge
B- BMO InvestorLine
B- HSBC InvestDirect
C- National Bank Discount Brokerage
C- eNorthern
C- Sun Life Securities
D+ Scotia Discount Brokerage
Which share offering would you like a piece of: Celestica Inc., the much-loved IT component maker, or Stroud Resources Ltd., a tiny mining outfit and suffering penny stock? Obviously, it's no contest. Trouble is, you need connections to get your hands on the sweetest deals. Like finding a great job or snagging a princely federal government grant, getting in on sought-after IPOs and secondary offerings often comes down to who you know.
Not surprisingly, Canada's 11 discount brokers offer widely different access to new shares. Bank-owned discount brokers, such as TD Waterhouse, CIBC Investor's Edge and Royal Bank Action Direct, still have the inside track. For instance, Royal, which offered those tantalizing Celestica shares in March, tendered 89 share offerings in the first eight months of 2000, compared with eNorthern's eight IPOs (which included that unappetizing Stroud deal early this year).
Why? The banks own full-service investment dealers, which underwrite the IPOs. The full-service dealers decide who gets a piece of the action, and sometimes they will give their affiliated discount brokerages dibs on the leftovers. TD Waterhouse sold 49 new issues, while E*Trade Canada, an independent discount brokerage, offered approximately 20, including many small technology plays. Worse yet, Sun Life Securities offered none. If Sun Life customers want access to an IPO, they must explicitly ask for a piece of the action; only then will Sun Life try to scrounge up a few shares. Sun Life says it intends to improve its access to IPOs, but don't hold your breath.
Signing up with a bank-owned brokerage won't guarantee surefire access to IPOs, however. Full-service operations would much rather reserve lucrative deals for their own clients, not discount customers. Case in point: only two discount brokers got allotments of the coveted 360networks inc. IPO in the spring, even though three Canadian bank dealers helped underwrite the offering. This awkward relationship between the full-service and discount operations might explain why BMO InvestorLine offered just 19 new issues.
While access to IPOs and new issues varies, the gap between discounters narrows when it comes to mutual funds. Every discount broker has beefed up its selection. (All offer at least 1,000 funds.) Royal Bank Action Direct leads the pack with more than 100 fund families to choose from. But selection isn't the only consideration. For the second year in a row, E*Trade deserves top marks for selection, mutual fund research and low minimum-purchase restrictions. Best of all, it doesn't charge any fees or commissions when buying or selling funds. The same goes for eNorthern-as long as you don't redeem funds for six months after purchase. TD Waterhouse has seen the light and dropped commissions on the purchase and sale of 1,215 funds.
Royal and CIBC will ding you with a $40 redemption charge, as will National and BMO on funds other than their own. At Sun Life, you'll pay $45 to redeem front-end-load funds. The worst offender is still Scotia. Not only does it require a minimum purchase of $2,500 (the minimum is $1,000 at many other discounters), but in some cases it charges when you buy a fund and when you sell it. It's a minimum of $50 to purchase funds from a live agent, $20 to buy funds over the Internet and $15 to redeem them (unless they're Scotia products). The bottom line: don't be wooed by selection, and watch out for hefty commissions-which could quickly empty your wallet.
BY KEITH KALAWSKY
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RESPONSE TIME
A Sun Life Securities
B+ Charles Schwab Canada
B TD Waterhouse,
B BMO InvestorLine
B Royal Bank Action Direct
B HSBC InvestDirect
B CIBC Investor's Edge
B- eNorthern
C+ Scotia Discount Brokerage
C+ National Bank Discount Brokerage
C- E*Trade Canada
When Alan Richter called up Royal Bank Action Direct last week to place an options order, a rep answered so fast that Richter figures the staff must be sitting around with nothing to do. "I had a mental image of brokerage reps covered in spider webs, with tumbleweeds blowing through their offices." About the only thing missing was the howling coyote. How far things have come. Back in February, it was normal for Richter to be on hold for an hour or more with Royal. For investors at any brokerage, getting a rep on the phone required Zen-like patience, and the ability to withstand an extended pan flute version of "You Light Up My Life."
Ask any discount broker now and they'll tell you they learned their lesson. Some brokers, such as TD Waterhouse, have gone wild hiring people to handle calls. Waterhouse has doubled its staff since February, to 1,200 trading reps, opened a new call centre in Markham, Ont., and is building two more in Edmonton and Ottawa. "Given what happened, we're planning to handle everything RRSP season throws at us," says senior vice-president Bruce Shewfelt. We'll see. Come next February, customer rage will be the true measure of whether discount brokers have improved their service. But what we can do in the non-RRSP season-which, let's face it, makes up the bulk of your trading year-is help you avoid the worst time-wasters.
And boy, did E*Trade Canada ever waste our time. They were bad last year, and by our stopwatch they're even worse this year. On average, E*Trade took more than two minutes to answer our phone calls-almost twice as long as their last-place performance in 1999. While other brokers hired new call centre staff, E*Trade's big improvement seems to be a grating recorded voice that blithely spits out the time while you wait on hold. (It's a good thing 90% of transactions by E*Trade clients are done over the Web.) The next worst times were National Bank Discount Brokerage with an average wait of 44 seconds and BMO InvestorLine at 25 seconds. Most of the discounters picked up the phone within about 10 seconds, but three brokers really won our hearts. Sun Life, Schwab and HSBC InvestDirect were taking our calls faster than we could push the start button on our stopwatch.
No wonder Richter is happy with Royal Bank Action Direct these days; the broker fared well in this category, in part because the reps were quick to respond to our e-mail queries. Royal was one of only four brokers who wrote back to us in less than an hour. Once again, E*Trade kept us waiting. More often than not, their responses came trickling in hours, if not days, after everyone else's. If they're not answering the phones or typing out e-mails, what the heck are they doing?
One of the first things we did was also the simplest: we called the brokers and asked them to mail us an application to open an account. It must be a rare request at TD Waterhouse, because the representative had to ask someone if it was possible: "I've never done this before." He learned fast, though, because the package arrived in three days-the same time clocked by BMO InvestorLine, Charles Schwab and Sun Life Securities. The rest trickled in over the next few days, except for the package from Scotia Discount Brokerage, which took a full two weeks. eNorthern warned us right up front that vultures would be picking at our bones before we'd get any mail from them-they only take online applications.
BY JASON KIRBY
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Honestly, if investing were only about making trades online, you could get by with any of the discount brokers in Canada. But the vast majority of do-it-yourself investors want more than just a Web site where they can swap stocks. That's why we looked for value-added perks that put some discount brokers way ahead of the pack.
The most important item in this category is research. It's a word discounters obviously interpret in different ways. Sun Life Securities, National Bank Discount Brokerage, Scotia Discount Brokerage and BMO InvestorLine seem to think research means letting customers throw darts at the stock pages. None of them offers much analysis to help their clients make informed decisions. In fact, Tom Flanagan, chief operating officer of BMO InvestorLine, isn't convinced that people are looking for extensive help from their brokers. "I think a lot of customers who come to us are fairly sophisticated anyway and do a lot of research on their own," says Flanagan.
That's not what the folks at Schwab believe. They offer a mother lode of free research, including Zacks, Pershing Investment Research and Analyst Centre. All three are useful sources of information on large-cap companies. The only problem is, they're primarily focused on US stocks, so it's hard to find information on small to midsize Canadian companies. Schwab and Royal Bank Action Direct get around that problem by also offering research from the Financial Post Data Group. And Schwab actually keeps two analysts on staff who write proprietary reports.
There's also some pretty good mutual fund research to choose from. Royal Bank Action Direct, E*Trade and TD Waterhouse have solid tools to help you cut through the mass of available funds. But Waterhouse goes further, offering analyst picks along with reports on their choices of the best funds by category.
On top of the free research, several brokers offer premium reports for sale through their sites. We bought a few to see how useful they are. The best stuff comes from TD Waterhouse, which actually sells TD's own analyst reports, complete with buy-sell recommendations. (For $21 a month, you get 10 analyst reports, plus a morning market newsletter.) From HSBC InvestDirect we bought a report on Nortel Networks Corp. for $10.50 that had everything you could ask for. We were less impressed with E*Trade's Inside Edge service. For $15 a month you get research from Yorkton Securities. But the latest report on Nortel is a year old.
Having research is great, but sometimes you just need to talk to an expert. No one makes it easier to do that face-to-face than TD Waterhouse, which has 40 branches across Canada. And when you've got those really obscure questions about bonds, options or mutual funds, only BMO InvestorLine, CIBC Investor's Edge, Royal Bank Action Direct and TD Waterhouse have representatives who specialize in all three areas.
It might seem like we're asking the brokers to give us the world, but we'd settle for access to international markets. Only five brokers (BMO InvestorLine, CIBC Investor's Edge, TD Waterhouse, National Bank Discount and HSBC InvestDirect) let clients trade stocks that are not listed on North American exchanges. In almost every case, you still have to phone a rep. The only exception is HSBC, which lets you play the Hong Kong stock market on the Web.
Finally, we think you should feel safe trading with your broker. The good news is, we didn't have to shell out big bucks to hire a pimply-faced hacker to break into the brokers' sites; the bad news is, we found gaping security holes by poking around on our own. Take E*Trade Canada. One morning we logged in, made a trade, then closed our Web browser window. Five hours later, we visited the Web site again-and found that we didn't even have to re-enter our password. Anyone using the same computer in the interim could have looked at all our stock holdings, balances and personal information. We got an even bigger shock when we placed a telephone trade through a broker at eNorthern. Usually, brokers will ask for some personal information (address, social insurance number, mother's maiden name-that sort of thing) to ensure callers are who they say they are. But eNorthern just asked for a name and account number before putting the trade through. Surprisingly, the same thing happened with TD Waterhouse when, according to a rep, the computer system crashed. He scribbled down our name and account number along with our trade instructions and said he would hand it to a trader. That was it. The trade went through-three hours later.
July 16, 2006 at 02:12 AM in Financial Services | Permalink
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Expect more consolidation among on-line brokers
Expect more consolidation among on-line brokers
By ROB CARRICK
Saturday, February 16, 2002
Goodbye, Charlie.
Charles Schwab Canada is about to exit the on-line brokerage business in this country and other brokers are sure to follow in the year ahead.
There are now 15 on-line brokers providing the same basic service to Canadians -- trading of stocks, mutual funds, bonds and sometimes options over the Internet and by telephone.
For sure, all the big banks are going to hang onto their on-line brokerage operations. The banks want to dominate the wealth management business and you can't do this without offering an option for clients who prefer to make their own investing decisions.
As for everyone else, you have to wonder whether they've got the money and commitment to survive the killer slump that has weighed down the sector for almost two years now.
Schwab Canada is owned by San Francisco-based Charles Schwab Corp., which pioneered the discount brokerage business, and is still regarded as the premium name in the sector. Schwab arrived in Canada in 1999 and now it's leaving via a proposed sale of its assets, including $1.5-billion held in 28,000 client accounts, to Bank of Nova Scotia.
It's a deal that perfectly captures the new on-line brokerage reality. Schwab, a small and struggling player in Canada, sells out to a bank that is building its presence in on-line investing by making an acquisition.
Expect more small fish to be swallowed just as Schwab was.
"It's a natural evolution because, quite frankly, there were probably far too many companies getting into the discount brokerage than there should have been," says Douglas Hart, president of research firm Hart & Associates.
"We haven't seen much [attrition] so far, but it's just a matter of time," adds Tom Flanagan, president of BMO InvestorLine. InvestorLine is owned by Bank of Montreal,which is another example of a bank that is firmly devoted to on-line investing. Last year, it paid $830-million to buy CSFBdirect, a large U.S. outfit owned by Credit Suisse of Zurich.
Aside from Scotiabank's purchase of Schwab Canada, the only recent sign of consolidation in the on-line sector was the purchase last year of tiny Canada Invest Direct by eNorthern, itself a marginal player.
Mr. Flanagan said dismal conditions in the investing industry right now may hasten the departure of some on-line brokers.
"This RRSP season is one of the worst I've seen," he said. "Trading volumes are not coming up the way we had hoped."
Most prominent among the independent, non-bank on-line brokers is E*Trade Canada, a subsidiary of the big U.S. on-line broker E*Trade Group. E*Trade Canada has long been dismissed as a minor player by its bigger competitors, but president Colleen Moorehead says the company is committed to the Canadian market.
In fact, E*Trade is making a play for Schwab Canada clients by offering them free trades and other deals that could be worth as much as $1,800 in total.
Ms. Moorehead said E*Trade's strategy is to portray itself as an alternative to the bank-owned brokers for active, savvy investors. As evidence of how the strategy is working, she points to an increase in the number of customer accounts to 85,000 from just over 50,000 a year ago.
Some might point to Schwab's exit from Canada as a sign that on-line investing is a fad in decline, but Ms. Moorehead disagrees.
"Has the market been as buoyant as it was in 1999 and 2000, when we were in the middle of a raging bull market? The answer is No," she said.
"But on the other hand, you also have to look at the question of whether the consumer is actually turning around and saying, 'I don't want to invest on-line, I'd rather go back to doing it with the abacus.' The answer, again, is No."
For investors, consolidation means less choice and the annoyance of having your account switched to a broker that may not be as good as the one you're with now.
For example, look at Schwab Canada and Scotiabank's on-line brokerage, which is changing its name to ScotiaMcLeod Direct Investing from Scotia Discount Brokerage.
Schwab won The Globe and Mail's 2000 ranking of on-line brokers and placed fourth in 2001. Scotia Discount has improved a lot lately, but it was well back in both rankings.
If you're concerned about a lack of competition in the on-line brokerage world going forward, you can take some encouragement from the fact that U.S. broker Datek Online continues to work on opening up a Canadian operation.
While Canadian brokers charge anywhere from $25 to $29 for trades of up to 1,000 shares, Datek charges $9.99 (U.S.) for all trades of up to 5,000 shares. Now, that's competitive.
rcarrick@globeandmail.ca
July 16, 2006 at 02:08 AM in Financial Services | Permalink
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E*Trade slashes its fees in bid to shake up market
E*Trade slashes its fees in bid to shake up market
ROB CARRICK
Those low stock-trading commissions that American on-line investors have enjoyed for years are coming to Canada.
Discount broker E*Trade Canada is to announce today that its minimum commission for trading stocks on the Internet will fall 26 per cent effective Jan. 10. The new rates are to be $19.99 for mainstream investors and $9.99 for active traders, down from E*Trade's current top fee of $26.99 and as much as $29.95 at other firms.
Discount brokers are basically order takers for investors who call their own shots, and that's why they charge about one-third the commissions of full-service investment dealers. You can trade on the phone with a discount broker, but the lowest commissions are always reserved for on-line trading.
E*Trade is cutting commissions to build its presence in the Canadian market, where it has never made much headway against dominant bank-owned brokers, such as BMO InvestorLine, CIBC Investor's Edge, RBC Action Direct, ScotiaMcLeod Direct Investing and TD Waterhouse, the industry leader.
"Separating ourselves by a dollar or two from the pack isn't really separating yourself," said R. Jarrett Lilien, president and CEO of New York-based E*Trade Financial Corp., parent of E*Trade Canada. "We have to make a clear statement."
When it comes to price, the only clear statement from Canada's bank-owned discount brokers is that stock-trading commissions are an area where they choose not to compete these days with anything more than perfunctory effort.
A grand total of $4.95 separates the most expensive of the bank-owned brokers, Action Direct at $29.95, from the cheapest, which is Investor's Edge at $25. A $24 commission is available at the tiny independent firm, eNorthern.
"The market is less competitive in Canada," Mr. Lilien said. "That's one reason why we haven't had to become more competitive earlier with our commissions."
E*Trade's commission cuts will bring its Canadian fees in line with those charged in the U.S. market. The firm says it polled some of its Canadian clients and found that 80 per cent of them believed there was an unacceptable difference between Canadian and U.S. commissions. More than 50 per cent said they would bring additional assets to the firm if commissions were cut to U.S. levels.
Canadian discount brokers have certainly lowered prices from the early days of on-line stock trading in mid-1990s, when E*Trade Canada charged $38.88. But most now have pretty much the same pricing scheme they had in place five years ago or more.
Brokers in Canada have a few stock reasons why they're so much more expensive than their U.S. counterparts. There's the larger U.S. market and the economies of scale that entails, and there have been claims that Canadian investors don't trade as much as Americans and thus don't generate as much revenue.
Whatever the reasons, the competition that hit the U.S. market hasn't arrived north of the border until now. Ironically, Mr. Lilien says, price is hardly an issue for U.S. discounters any more. "People aren't competing on price any more," he said. "They're competing on functionality and service."
E*Trade Canada compares well with other brokers in terms of functionality, but its service has generated many complaints to this column over the years. Mr. Lilien said that in addition to cutting commissions, the firm will also try to improve its services levels.
The bigger problem for E*Trade, one of the largest discount brokers in the U.S. market, is that it's an independent going up against bank-owned competitors who have a built-in pool of potential customers.
At $26.99 for stock trades, E*Trade Canada doesn't have enough leverage to pry investors away from the comfort of dealing with a familiar name.
E*Trade also hurt itself in Canada with fuzzy marketing that seemed to target aggressive stock traders as opposed to mainstream investors, even while the firm provided the mutual funds and bonds that the mainstream requires. E*Trade offered steep commission discounts for active traders, but the pricing scheme was laughably complex.
"Our pricing hasn't been awful, but it has been confusing and it hasn't been the most competitive," Mr. Lilien said. "Our overriding idea now is to take control, to go after it a little bit."
Active clients will qualify for the $9.99 rate if they trade more than 30 trades a quarter. As is standard practice in the discount brokerage business, this commission will be applied in Canadian dollars for trades on domestic exchanges and in U.S. dollars for trades on U.S. markets.
The changes at E*Trade Canada include a new head of operations, Duncan Hannay, who replaces Bruce Seago, a 10-year veteran at the firm. In a sign of further change in the discount world, BMO InvestorLine recently parted ways with president Tom Flanagan.
rcarrick@globeandmail.ca
The cost of trading stocks
E*Trade Canada will be cutting its minimum stock trading commission to $19.99 from $26.99, effective Jan. 10. Here's how E*Trade compares with other discount brokers for trades of up to 1,000 shares.
MARKET ORDERS LIMIT ORDERS
E*Trade Canada $19.99 (from $26.99 Jan. 10)
eNorthern $24
BMO InvestorLine $25 $29
CIBC Investor's Edge $25
Credential Direct $25 $29
ScotiaMcLeod Direct Investing $25.95 $28.95
Qtrade Investor $27
National Bank Discount Brokerage $27.95
Disnat $29
HSBC InvestDirect $29
TD Waterhouse $29
RBC Action Direct $29.95
Market orders are where the investor accepts or pays the going market rate for a stock, while limit orders specify a maximum the investor is willing to pay or a minimum he or she will accept.
July 16, 2006 at 02:06 AM in Financial Services | Permalink
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July 08, 2006
Wag the dog
Economist.com | Articles by Subject | What the long tail will do
A new book about entertainment, technology and statistics predicts that popular culture—and the businesses associated with it—will be transformed by the internet.
FOR the past two years in Silicon Valley, the centre of America's technology industry, conference-goers have entertained themselves playing a guessing game: how many times will a speaker mention the phrase “long tail”? It is usually a high number, thanks to the influence of the long-tail theory, which was first developed by Chris Anderson, the editor of Wired magazine, in an article in 2004. Though technologists and bloggers chuckle at how every business presentation now has to have its long-tail section, most are envious of Mr Anderson, whose brainwave quickly became the most fashionable business idea around.
hether a blockbuster film, a bestselling novel, or a chart-topping rap song, popular culture idolises the hit. Companies devote themselves to creating them because the cost of distribution and the limits of shelf space in physical shops mean that profitability depends on a high volume of sales. But around the beginning of this century a group of internet companies realised that with endless shelves and a national or even international audience online they could offer a huge range of products—and make money at the same time.
Mr Anderson’s book is based on an idea he first discussed in a Wired article from 2004. He also runs a blog on the subject.
The niche, the obscure and the specialist, Mr Anderson argues, will gain ground at the expense of the hit. As evidence, he points to a drop in the number of companies that traditionally calculate their revenue/sales ratio according to the 80/20 rule—where the top fifth of products contribute four-fifths of revenues. Ecast, a San Francisco digital jukebox company, found that 98% of its 10,000 albums sold at least one track every three months. Expressed in the language of statistics, the experiences of Ecast and other companies such as Amazon, an online bookseller, suggest that products down in the long tail of a statistical distribution, added together, can be highly profitable. The internet helps people find their way to relatively obscure material with recommendations and reviews by other people (and for those willing to have their artistic tastes predicted by a piece of software) computer programs which analyse past selections.
Long-tail enthusiasts argue that the whole of culture will benefit, not just commercial enterprises. Television, film and music are such bewitching media in their own right that many people are quite happy to watch and listen to what the mainstream provides. But if individuals have the opportunity to pick better, more ideally suited entertainment from a far wider selection, they will take it, according to the theory of the long tail. Some analysts reckon that entire populations might become happier and wiser once they have access to thousands of documentaries, independent films and sub-genres of every kind of music, instead of being subjected to what Mr Anderson calls the tyranny of lowest-common-denominator fare. That might be taking things a bit far. But the long tail is certainly one of the internet's better gifts to humanity.
Conglomerates, such as Rupert Murdoch's News Corporation, on the other hand, regard the long tail as another swing at them from a dragon-like blogosphere which resents the “mainstream media” or MSM, as bloggers often call it. Lowest-common-denominator hits, after all, are an important part of their business. Like many people connected to the technology industry, Mr Anderson (formerly a journalist for The Economist) clearly relishes the way the internet is challenging traditional media companies. Perhaps because of this, he is a little too dismissive of hits. Some are indeed manufactured and cynical: the music industry bribes radio stations to blitz people with tracks they have picked; book publishers pay retailers for the spot in the window; and Hollywood holds back films from honest reviewers lest a bad write-up spoil an opening. But most hits are popular because they are of high quality. As Mr Anderson's book acknowledges, there is an awful lot of dross in the tail. And the way in which the internet makes it easy for people to share likes and dislikes about entertainment will help hits as well as more obscure material.
Mr Anderson has backed away somewhat from his original article in Wired in which he suggested that the long tail would be a bigger market than the hits. His book says, more cautiously, that “all those niches can potentially add up to a market that is as big as (if not bigger than) the hits.” Perhaps the true effect of unlimited digital distribution on individual media choices will be even more positive than he imagines. It may be that only the middling, manufactured sort of hit will fall by the wayside: the genuinely popular variety will remain just as powerful. Most hits start somewhere in the long tail and move up; so as content in the tail becomes easier to discover, the hits that emerge from it should also be of higher quality.
One weakness of this otherwise excellent book is that it tries to apply the theory of the long tail to fields far beyond entertainment and e-commerce. Offshoring, for instance, is the long tail of labour, says Mr Anderson, and there is also a long tail of national security, in which a “short head” of state violence has been challenged by niche producers such as gangs and terrorists. In trying to find long tails everywhere, Mr Anderson risks diluting some of his idea's meaning and novelty.
The cover of Mr Anderson's book promises to answer the question: “Why the Future of Business is Selling Less of More”. But his book may alarm as well as help businessmen. Karl Marx once described a communist society in which “nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes...to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner.” Mr Anderson suggests that the long tail is bringing about something similar. The tools of media production—computers, desktop printers, video cameras—are now so widely and cheaply available that a generation of young people are becoming amateur journalists, commentators, film-makers and musicians in their spare time, rather as the philosopher imagined. Amateurs offering their work free of charge will contribute a significant portion of the long tail, so at the very end there will be a “non-monetary economy,” says Mr Anderson. If true, that could prove to be the most fascinating long-tail effect of all.
July 8, 2006 at 01:02 AM in eCommerce | Permalink
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July 05, 2006
More Internet users mobile than wired in Japan
Digital World Tokyo
The number of Internet users in Japan accessing from cellphones exceeded those using it from personal computers in 2005, according to a government report published Tuesday.
At the end of the year there were 69.2 million people using the Internet from mobile devices, compared to 66 million conventional PC users, the Ministry of Information and Communications' annual "Information and Communications in Japan" white paper said. Of these two user groups, 48.6 million use both a mobile device and a conventional PC, it said, giving Japan a total Internet population of 85.3 million users. That's equivalent to two in every three people in the country.
Japan's merchants are keen to cash in on the popularity of mobile Internet services like NTT DoCoMo's i-mode. The number of mobile e-commerce sites is increasing and consumers appear to be taking to shopping by cellphone.
In 2005 the total mobile Internet commerce market was worth ¥724 billion (US$6.3 billion), according to the report. Sales of mobile content like ringtones and wallpapers still make up a large proportion of that. Last year was the first in which sales of conventional goods from mobile Internet sites exceeded that of mobile content, the white paper said.
The move towards faster, always-on fixed-line connections continued. Japan had 23.3 million broadband subscriptions at the end of the year, of which 5.5 million were fiber-to-the-home lines. Such connections are generally capable of speeds of 100Mbps.
Between the two user groups, mobile Internet users access the Internet more frequently. About 55 percent of these users log on at least once per day, compared to 44 percent of PC-based users.
Browsing the web and checking email remain the most popular uses for the Internet, although consumer-generated media is becoming increasingly popular. In March 2006 there were 8.7 million bloggers in Japan versus 7.2 million users of social networking services, the report said.
Telephone services via the Internet such as VoIP. As of March this year there were 10 million IP telephone lines. A newer type of Internet telephone service that allows consumers to keep their existing phone number is also proving popular and there were 1.4 million of these lines by the end of March, the report said.
— Martyn Williams (IDG News Service)
July 5, 2006 at 12:33 AM in Japan | Permalink
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July 02, 2006
Is Online Banking at a Crossroads or Traffic Jam?
eMarketer.com - Is Online Banking at a Crossroads or Traffic Jam?
NOVEMBER 10, 2004
eMarketer estimates that 31.5 million households are currently banking online, and that figure will rise to 45.0 million by the end of 2007.
According to the new eMarketer Interactive Banking report, the success of online banking is creating a crisis at many banking institutions.
Customers have unquestionably adapted to online banking services — they use them, like them, even demand them — but far too many banks are still struggling with how to integrate interactive banking into their other customer service channels.
"Until banks stop treating the Internet as a new, separate channel, run by a separate division within the company," says David Hallerman, Senior Analyst at eMarketer and author of the report, "not only will they continue to lose money on the service, they will fail to take advantage of the cost-savings, customer-retention, cross-marketing and revenue-building opportunities the Internet offers."
No one agrees on exactly how many online banking customers there are, but everyone agrees that there are a lot.
"Counting how many customers bank online is an inexact art," says Mr. Hallerman. "First off, while a few banks that have strong Internet bases are willing to reveal their numbers, most other institutions are extremely close-mouthed about the topic. Secondly, what's an online banking customer? Is it a customer who has ever banked online, or is it a customer who has banked online recently? And does it matter what the customer does online? If it's only checking balances, but no transactions, is that an online banking customer?"
For eMarketer's count of US households banking online, the definitions include only those who've banked online recently, within the past 60 days. However, any online banking action counts, even if it's not transactional (such as moving funds from one account to another).
On that basis, eMarketer estimates that 31.5 million households are banking online this year, a figure which should rise to 45.0 million by the end of 2007.
"While this year's growth rate for online banking is still considerable, at 17.5%," says Mr. Hallerman, "we're projecting a smaller rate of growth over the next three years, as more and more consumers add the channel to their banking experience."
Figures from eight researchers for 2004 range from IDC's older projection of 24.0 million at the low end to NFO's 36.0 million, and Financial Insite's 37.0 million at the high end.
While the absolute numbers may be difficult to gauge, the growth rates for online banking are more in line. For 2004, all estimates call for double-digit gains, and six of the eight researchers project growth rates between 11.5% (Celent) to 20% (NFO).
The figures bear out the comment Chris Musto gave to Newsday earlier this year, "Online banking has gone mainstream."
To put all these customer counts into perspective, eMarketer has calculated the percentage of online banking households as a share of all US households (based on Census Bureau data) and as a share of online households (based on eMarketer estimates). eMarketer projects that by 2006, more than one-third of all US households will be doing at least some portion of their banking on the Internet.
There is no question that online banking is now a mainstream activity. The question is — can banks make it a strong revenue stream?
To find out, read eMarketer's Interactive Banking report.
July 2, 2006 at 02:49 AM in Financial Services | Permalink
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