This post is a review of Canadian ShareOwner Investments Discount Brokerage, otherwise known as “Share Owner”. I’ll be looking at the costs and comparing various scenarios with the cheapest Canadian discount brokerage Questrade.
What is Share Owner?
Canadian ShareOwner Investments is a different type of discount broker. It is the only broker that allows you to set up regular purchase plans for stocks and allows you to buy fractional shares. It promotes regular investing on it’s website, which sounds like a good idea, but I’m not so sure that regular contributions and stocks should go together. ShareOwner started in the 80’s, and at that time were fairly ground-breaking since they were a very cheap option for buying stocks.
If you would like to compare all the different Canadian discount brokerages, check out the Canadian discount brokerage comparison.
ShareOwner has a limited pre-selected list of stocks and ETFs you can buy – they are mostly Canadian and US dividend stocks and some ETFs as well.
One of the big advantages of ShareOwner is the fact that you can automate your purchases. For example, maybe you would like to buy $250 per month of a certain stock? With ShareOwner, you can set that up quite easily.
However, when I took a look at the overall fee schedule, I was less than impressed.
Some stuff I didn’t like
The trading costs are $9.95 per trade which is no bargain. At Questrade, the trade would be $4.95. There is a limit of $40 per “order” so if you do a purchase of 9 stocks or more then it would be cheaper than Questrade.
Account administration costs were high as well. The non-registered account doesn’t have an annual fee which is good, but all the other account types have high fees. $79 for RRSP, $100 for RIF or LIF accounts. RESPs are not offered. Questrade on the other hand, has no annual admin fees.
The fee which I thought was most unusual was the “account withdrawal fee“. This is a fee charged if you want to remove money from the account. It is $12 for a non-registered account, a whopping $48 for a RRSP account and $100 for a home buyers withdrawal!
I’ve never heard of any other brokerage charging a fee for account withdrawal. This fee is charged on top of trading fees so if you sell some stock in a non-registered account and want to withdraw the money, the trading fee will be $9.95 and the withdrawal fee will be $12 for a total of $21.95. The same action would cost $4.95 at Questrade.
Let’s take a look at some scenarios and see which brokerage is better. Keep in mind that these scenarios assume you want to do monthly purchases in several securities which is not the cheapest way to buy stocks. A future post will go over some cheaper strategies.
Scenario 1 – buying a few stocks every month
Investor wants to invest $350 each month, spread out into three different stocks.
Questrade total fees for one year would be 3 x $4.95 x 12 = $178.20 which represents 4.2% fees on the purchases.
ShareOwner total fees for one year would be 3 * $9.95 * 12 = $358.20 for an open account which is 8.5% of the purchase price. For an rrsp account the total charge would be $437.20 which is 10.4% of the total purchase amount.
Please note that both these percentages are excessive – buying stocks on a regular basis is not a cost-effective strategy, unless you are buying large amounts ie $1,000 per stock per transaction.
Also note that using this method of purchase, you would need to have $17,820 in the Questrade account to get the total fees down to 1% of the assets. In the open ShareOwner account you would need almost $36,000 in assets to bring the total fee down to 1%.
Scenario 2 – buying a large number of stocks every month
Investor wants to invest $350 each month, spread out into 12 different stocks.
Questrade total fees for one year would be 12 x $4.95 x 12 = $712.80, which represents 17% fees on the purchases.
ShareOwner total fees for one year would be $40 (max) * 12 = $480.00 for an open account, which is 11.4% of the purchase price. For an rrsp account the total charge would be $559.00 which is 13.34% of the total purchase amount.
Clearly, the advantage ShareOwner has is the $40 maximum commission. If you buy 9 or more stocks at a time, then ShareOwner will be cheaper than Questrade.
Here are some pros and cons of ShareOwner:
Pros of ShareOwner
- Automated transactions which aren’t available anywhere else.
- Can purchase fractional shares.
- Trading costs are reasonable, especially compared to big banks.
- No minimum investment amount.
- “Philosophy of investing” – they do some stock selection for you.
Cons of ShareOwner
- Limited selection of securities. If you want the big dividend players, however then you should be able to find what you want.
- Dividends must be reinvested.
- RRSP annual administration fee is $79. Even the big banks charge less than this. TFSA annual fee is $50 and RIF/LIF annual fee is $100. This is not competitive at all.
- Account withdrawal fees are $12 for open account, $48 for RSP, $25 for TFSA. Home buyer withdrawal is $100!???
- The purchase automation might be convenient, but I think if you are buying shares in individual companies that you should be more hands on. If you really want a minimum effort investment plan, then do a couch potato portfolio using TD e-funds.
ShareOwner is fairly unique broker that comes with it’s own investing philosophy and education if you wish to use it. The trading fees are ok, but account admin fees and withdrawal fees are excessive. I really don’t like how they promote regular purchases and then charge $10/purchase. This is not a good way to invest.
If you are only looking to do the occasional purchase and no withdrawals in a non-registered account, then ShareOwner is not a bad choice. Otherwise, shop around.