GómezCanada scores Canadian brokerages in about 250 categories, ranging from an evaluation of financial planning tools and cost to online security and Web site navigation. In addition, Gómez determines which firms are best suited to four types of investors: active, serious, life-goal planners and one-stop shoppers.

BMO offered the best customer service, GómezCanada said. The brokerage has focused heavily on adding sophisticated financial planning tools to guide clients who have grown tired of unfocused investing. BMO's Web site organization and resources also earned the best marks among all brokerages.

"The addition of asset allocation models and improved analytics as well as exceptional customer service, enabled BMO InvestorLine to maintain its lead," said Guy van Rooyen, senior analyst with GómezCanada.

BMO has also zeroed-in on more dedicated clients, namely serious investors with a long-term plan, not daytraders.

So-called "life-goal planners" continue to dominate the marketplace, constituting nearly 65% of active online investors, GómezCanada found. BMO is excelling in this segment, which is also attracting other players.

"The type of customer that the Bank of Montreal in general is trying to serve is the long-term customer," said Tom Flanagan, president and chief operating officer of BMO InvestorLine. "For us, it makes a lot of sense to set ourselves apart by trying to attract those kinds of individuals and supporting their investing needs."

Following its "guided investing" model, BMO has added a selection tool to help clients pick stocks by gauging their appetite for risk, growth expectations and approach to investing. BMO has also improved access to its asset allocation tool that allows investors to construct a suitable slate of investments. It has also worked on tuning up its Web site's navigation.

Despite the market downturn, BMO InvestorLine is proving that self-directed investing is a viable business, Mr. Flanagan said.

"Direct brokerage is a very attractive model as long as you manage the business effectively as we have in Canada," he said. "What we're doing really is staying true to our strategy and continuing to build our business."

Vancouver-based Qtrade saw a "rapid rise" in the rankings, scoring particularly well for customer service. It recently added online tools and resources, such as streaming quotes, online short selling and technical charting.

"Qtrade has built [financial planning] functionality and educational material, and good research tools as well. It's a very easy-to-use site," Mr. van Rooyen said.

Qtrade offers online brokerage services via 130 regional credit unions and other financial institutions, including Alberta's ATB Financial, which has about 600,000 customers and $12-billion in assets. In total, about 1,000 branches across Canada are marketing Qtrade to their customers. It is now broadening its focus to signing up financial planners.

Of course, a high ranking doesn't necessarily mean Qtrade will be a financial success or even survive, given the immense power and reach of its competitors.

But Qtrade figures its business model is strong enough to endure the tough equity markets and equally tough competitors.

Most of Qtrade's new clients have defected from the bank-owned brokerages and are eager to trade, they added.

"It's not like we're sourcing people who've never used online brokerage services before," said Joe Meehan, Qtrade's president and co-founder, pointing to the company's partnership with First Calgary Savings, the city's largest credit union. "FirstCalgary has tremendous customer demographics. They're young, they've got a lot of assets, they're well-educated. These are the dream clients for online brokerages," he said.

"These people aren't the people from 1998 or 1999 that opened an account just because everybody said you had to be in the market," said Scott Gibner, Qtrade's chief executive.

Qtrade's partners are also eager to retain customers and an online brokerage offering is a key facet of that goal, he said. If a customer deals with TD Waterhouse for example, Toronto-Dominion Bank will attempt to sell that client other products. Credit unions and other regional players are trying to combat this cross-selling.

"A large part of what we do right now, especially in these tough market times, is dealing with bringing customers back from competitive brokerages," Mr. Meehan said.

But Qtrade's competition is fierce. E*Trade Canada continues to rule among active traders and serious investors, GómezCanada found. And TD Waterhouse, a strong finisher in all rankings of discount brokerages and the country's largest industry player, was singled out for the breadth of its online products and services, reliability and online security.

ScotiaMcLeod Direct Investing moved from eighth spot into fifth, mainly because it acquired Schwab Canada in February. Scotia significantly improved its offering by exploiting Schwab's strong technology, Mr. van Rooyen said. Scotia is also eyeing the long-term, serious investors like BMO, said Don Rolfe, managing director at GómezCanada.

Although product development continues, market volatility and investor pessimism will motivate brokerages to keep expenses down.

Mr. van Rooyen said firms should begin putting costly administrative functions online, such as address changes and ordering old statements. It will also be vital to attract a larger share of each client's assets. Most brokerages have tailored their fees to encourage clients to use online trading instead of a live broker to cut costs. And a host of new charges have been slapped on brokerage customers, such as fees on inactive accounts and increasing administrative fees on self-directed RRSPs.

Over the next six to 12 months, GómezCanada also believes mutual funds will emerge as a key product among online brokerages.

"According to our research, over 60% of active online investors believe they will purchase mutual funds in the next six months," Mr. van Rooyen said. Firms with the best selection and research capability will be poised to capitalize.

TOP 10 RATED DISCOUNT BROKERS:

Q3 2003

( ) denotes previous ranking

Source: GomezCanada

DISCOUNT BROKERS RANKED: Q3 2002, rating on a scale of one to 10:

BROKER: BMO InvestorLine

OVERALL RATING: 7.50
EASE OF USE: 8.30
COST: 6.13
WEB SITE RESOURCE: 7.53
CUSTOMER SERVICE: 6.27

BROKER: TD Waterhouse

OVERALL RATING: 7.09
EASE OF USE: 6.97
COST: 5.26
WEB SITE RESOURCE: 8.55
CUSTOMER SERVICE: 5.07

BROKER: E*Trade Canada

OVERALL RATING: 6.94
EASE OF USE: 6.89
COST: 8.48
WEB SITE RESOURCE: 7.26
CUSTOMER SERVICE: 4.98

BROKER: Qtrade

OVERALL RATING: 6.44
EASE OF USE: 6.47
COST: 6.10
WEB SITE RESOURCE: 7.27
CUSTOMER SERVICE: 5.50

BROKER: ScotiaMcLeod Direct

OVERALL RATING: 6.42
EASE OF USE: 5.85
COST: 5.41
WEB SITE RESOURCE: 5.98
CUSTOMER SERVICE: 6.23

BROKER: CIBC Investor's Edge

OVERALL RATING: 6.38
EASE OF USE: 7.25
COST: 7.30
WEB SITE RESOURCE: 6.22
CUSTOMER SERVICE: 4.43

BROKER: Royal Bank Action Direct

OVERALL RATING: 6.30
EASE OF USE: 6.33
COST: 5.00
WEB SITE RESOURCE: 7.25
CUSTOMER SERVICE: 4.69

BROKER: Merrill Lynch HSBC

OVERALL RATING: 6.09
EASE OF USE: 6.59
COST: 5.26
WEB SITE RESOURCE: 6.57
CUSTOMER SERVICE: 3.76

BROKER: National Bank Invesnet

OVERALL RATING: 5.35
EASE OF USE: 5.26
COST: 5.57
WEB SITE RESOURCE: 6.14
CUSTOMER SERVICE: 3.17

BROKER: Credential Direct

OVERALL RATING: 5.23
EASE OF USE: 6.23
COST: 5.25
WEB SITE RESOURCE: 4.81
CUSTOMER SERVICE: 3.46

BROKER: eNorthern

OVERALL RATING: 5.15
EASE OF USE: 6.76
COST: 10.00
WEB SITE RESOURCE: 4.41
CUSTOMER SERVICE: 2.68

BROKER: Sun Life Securities

OVERALL RATING: 4.50
EASE OF USE: 4.79
COST: 6.40
WEB SITE RESOURCE: 4.52
CUSTOMER SERVICE: 2.89

BROKER: Disnat

OVERALL RATING: 4.22
EASE OF USE: 3.64
COST: 5.26
WEB SITE RESOURCE: 4.61
CUSTOMER SERVICE: 2.07

THE GÓMEZ METHODOLOGY

Gómez Scorecards assist consumers who want to conduct business on the Internet by helping them identify firms whose offerings best meet their needs.

Firms are ranked by how well they serve each of several customer profiles and by their performance in each of five service categories:

Scorecards evaluate online brokerages based on 250+ objective criteria, which accurately capture the quality of the Internet delivery of goods and services.

Examples of specific criteria for the Internet Broker Scorecard would include:

A variety of data collection methods are used to determine if criteria are satisfied:

Each one of these criteria is either satisfied or not according to specific standards. In this way, Gomez is able to maintain objectivity across sites.

Source: GomezCanada, National Post

© Copyright 2002 National Post

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