If you watched last night’s Super Bowl you probably noticed during the commercial breaks two common themes: Jon Hamm from Skip the Dishes, Questrade and Wealthsimple. Despite spending a lot of money to air during the Super Bowl, both Questrade and Wealthsmple have investment track records that leave a lot to be desired. Over the years,these two companies have focused on shifting the entire investment conversation to purely about cost (which I suppose is no surprise given their relatively poor investment returns). As such, their misguided basis is a simple calculation of who paid the least amount in fees. Don’t get me wrong, we’ve always said that costs and fees are important. It’s one of the reasons we provide an industry-leading fee structure to our clients. But don’t the actual investment results matter?
Investing, Performance and Fees
The real cost of investing may be higher than it’s ever been even though trading is "free" on many sites and brokerage sites. In a bygone era, the cost of trading was mostly apparent. A commission was charged on every transaction. Commissions acted like a speed bump or a governor on a car’s engine. It was tangible. It was obvious. It forced investors to slow down, think and realize a cost was involved that had to be overcome to make a profit. Today that speed bump is gone. In its place is a new second cost of trading, which is less obvious and easily overlooked. It’s self-imposed. It’s driven by human nature and fueled by bad behaviour. The propensity to gamble is always increased when a large prize can be won with a small entry fee, no matter how poor the true odds may be. That’s why Las Vegas casinos advertise big jackpots and why state lotteries headline big prizes. In securities, the unintelligent are seduced by the same approach. In various ways many investment companies and brokers are in favour of these new trading vehicles. Their enthusiasm tends to be in direct proportion to the amount of activity they expect. The more the activity, the greater the noise, the greater the cost to the public and the greater the amount of money that will be left behind by them to be spread among the brokerage industry - the house makes money when you play. A great deal of money is always left behind, where the casino always takes their profit from each transaction.User OptimizationWebsites and apps focus their design on something called user optimization. The site/apps are built around the user experience to optimize engagement and retention. The goal is to keep you online using the interfaces as long as possible, while ensuring ease of use or number of transactions as easy as possible - something Facebook and Amazon have mastered. The tactics used are pulled from psychology. This is what the new online "wealth management" firms focus on. Both Questrade and Wealthsimple have online trading platforms, both have online trading apps and most recently Wealthsimple introduced "free" trading. What About RiskRisk should be as important – if not more important than the return. One size does NOT fit all. Let's get away from the excitement and bright lights of the casino floor and get back to focusing on creating a sound investment portfolio that is tailored specifically to you. If you want some excitement, you can always bet on Tom Brady winning another Super Bowl.
Jason De Thomasis, BMOS, CFP®[email protected]T 905 731 9800 ext 229
Tony De Thomasis, BSc, CFP®
T 905 731 9800 ext 225
As always, if you have questions about the current market, your investment portfolio or simply want to share your thoughts about the above content, please give us a call anytime. Zoom meetings are
available if preferred.
We are proud to introduce mobile apps for both Apple Iphone and Android mobile devices.