Discount brokerage firms in Canada have experienced a considerable increase in new customers during the past year, largely due to low rates, new product offerings and efficient online trading, according to a survey released Wednesday by J.D. Power and Associates.

Nearly one-third of discount brokerage customers in Canada indicate they have been with their primary firm less than 12 months.

“The large percentage of investors that have migrated to these discount brokerage firms in such a short period of time is truly a true demonstration of the growth within this channel,” says Lubo Li, senior director and financial services practice leader at J.D. Power and Associates, Toronto.

The study finds that while lower trading fees are an important factor in the rapid growth of discount brokerage firms, new investment products such as Exchange Traded Funds (ETFs), also help to attract customers. Advanced Internet technology and online trading, which make transactions almost instant and more secure, also help to draw in these investors.

“Although investors are generally willing to recommend their primary firm, there is a high risk in that nearly 50% of discount brokerage investors believe it is easy to switch firms if they so choose,” saus Li. “With this in mind, it will be paramount for discount brokerage firms to focus on keeping customers satisfied, particularly by providing them with high quality customer service and assistance when needed.”

The inaugural study examines investor satisfaction with their discount brokerage firm by measuring six key factors. In order of importance, they are: interaction; account information/statements; trading charges and fees; account offerings; information resources; and problem resolution.

The study also finds that interaction with customers-which includes both trading and customer service components-is the most important factor driving customer satisfaction, accounting for 36% of the index. While discount brokerage firm Websites are the most frequently used channel for trading, the telephone and in-branch channels are primarily used for customer service.

“Although lower pricing may be the primary focus for discount brokerage firms, interaction channels and direct engagement with a representative are still very important,” said Li. “Discount brokerage customers may be independent and very self-directed overall, but when something goes wrong or they need assistance, it is critical that the firm delivers in efficiently resolving any issues.”

2009 Canadian Discount Brokerage Investor Satisfaction Rankings

Disnat, which is owned by Desjardins, ranks highest in discount brokerage customer satisfaction with a score of 723 on a 1,000-point scale. “Disnat performs particularly well in interaction, account offerings and information resources,” J.D. Power says.

RBC Direct Investing (714) follows Disnat in the ranking while ScotiaMcLeod Direct Investing (702) ranks third overall.

The 2009 Canadian Discount Brokerage Investor Satisfaction Study includes responses from 2,696 investors who use investment services with discount brokerage firms in Canada. The study was fielded in May 2009.

IE