2 weeks Ago By Joel Schlesinger
‘Start small and dream big” is an oft-unspoken, simple approach to wealth building over time. Read this article for free: Already have an account? To continue reading, please subscribe: * ‘Start small and dream big” is an oft-unspoken, simple approach to wealth building over time. Read unlimited articles for free today: Already have an account? Opinion ‘Start small and dream big” is an oft-unspoken, simple approach to wealth building over time.
Indeed, it can be highly effective when you can consistently set aside small amounts of money to invest, and let compounding returns work their magic over many, many years. That’s partly the idea behind TD’s new offering through TD Direct Investing, its online trading platform to buy and sell stocks, bonds and exchange-traded funds (ETFs). Alex Lupul / The Canadian Press files Investors will have the ability to buy and sell a portion of one stock or ETF when TD launches its online trading platform.
TD recently launched fractional, or partial, share trading, the first large financial institution in Canada to offer the service aimed at helping investors, who may not have substantial sums to invest on a regular basis. “It’s really a game-changer for individual investors at large,” Tony Ierullo, vice-president of strategy and product at TD Direct Investing in Toronto. “Partial shares, as the name suggests, offers investors the ability to buy and sell less than one stock or ETF (unit).
” The new trading tool allows TD Direct clients to purchase as little as one-hundredth-thousandth of a share, he adds. Not that you’d want to purchase that small a slice of ownership in a company in one trade, given that might amount to much less than a cent’s worth of an equity stake, and TD’s commission is $1.99 per fractional trade.
It’s more likely to work as Ierullo explains: “If a client wants to buy a share of a company that is priced at $100, now they could easily invest $10 to own 10 per cent of that share.” That is a handy tool for investors starting out small, seeking to build and grow their money over time. “This plays into the golden rule of wealth building, which is to start investing as early as possible and doing it regularly,” he says.
TD also offers Easy Trade, a mobile app for TD Direct Investing, which offers 50 commission free trades a year. (As well, TD charges no commission for buying or selling TD’s in-house ETFs.) Using the new fractional trading capabilities paired with Easy Trade, you could purchase $10 of a diversified U.
S. stock market ETF twice a month with no commissions. That’s about as low-fee a diversified investment strategy as you can find.
Ierullo says TD’s latest launch is aimed at meeting Canadians where they’re at. “Fractional trading was born out of client feedback.” TD clients not only wanted to invest smaller amounts to purchase partial shares of expensive companies like Booking Holdings Inc.
— which has a share price of about $3,800, and owns Booking.com among other popular online travel sites. Many indicated that they also wanted the money they had available to invest to go as far as possible.
“Before (fractional trading), there would always be a residual amount of cash laying around when making a trade because you could only buy full shares of companies,” Ierullo adds. “Now, you can invest right down to your last cent with partial share purchases.” TD Direct Investing is not the first brokerage in Canada to offer this service.
Interactive Brokers and Wealthsimple, two non-bank investment platforms, both launched fractional trading in the last few years. “Wealthsimple was the first platform to offer fractional trading for both U.S.
and Canadian securities,” says Tara Kennedy, head of capital markets at Wealthsimple. And it has been particularly popular for investors using DRIPs (dividend reinvestment plans) that allow dividends from a stock to be re-invested to purchase more of the same stock, she adds. Wealthsimple also has no-commission trades and, overall, is no slouch regarding innovation in the industry.
It was among the first to offer automated, online portfolio management, or robo-advisory, services, and it has constantly pushed boundaries of mobile phone wealth management services. “Our goal is to make investing accessible to all Canadians,” Kennedy says. Of course, most wealth management firms chant a similar mantra.
While the growing array of digital tools to build wealth on your own are indeed impressive, face-to-face advice is never out of style, particularly when it comes to planning for major life goals like retirement or buying a home. The older and wealthier you get, the more complicated finances can become, and in-person advice’s advantage is that your adviser gets to know you well to develop a truly personalized plan unique to you. Also, a trading platform will never meet with you during the pandemic at the end of your driveway to discuss retirement.
But that is exactly what Winnipeg investment adviser Monica Rietvelt at iA Private Wealth did. She brought her own table and chairs to still be able to meet clients in-person in a safe manner. “Apps have a place,” she says.
“But they don’t take the place of an adviser with the personal touch to understand clients beyond their investment accounts.” Still, financial institutions increasingly recognize the writing on the touchscreen. More Canadians want to do personal finance online on their own, and be able to access personalized advice when they need it, Ierullo says.
“It’s a digital shift that really accelerated during the pandemic.” Financial institutions are now engaged in a digital arms race, constantly developing new offerings like fractional share trading. And while TD’s latest endeavour may not be the first in Canada, it is unique in that its fractional trades are executed immediately.
In contrast, other providers do fractional trades in larger batch trades a few times daily, Ierullo says. “So with us, the price you see is the price you get when you place your order.” Monday mornings The latest local business news and a lookahead to the coming week.
Although not that important if you’re investing for the long-term, being able to get the market price immediately when executing a fractional trade is yet another incremental improvement for little investors that can add up over time to help them get a larger piece of the wealth pie. Expect more innovative trading tools to come — including the ability to automate recurring, multiple fractional trades that can put DIY portfolio building on autopilot, Ierullo says. “It’s not available now, but it’s something that we’re looking at for the near future.
” Joel Schlesinger is a Winnipeg-based freelance journalist [email protected] Advertisement Advertisement.
