Questrade vs. Interactive Brokers: A Comparison for 2021
Investing in the stock market can be daunting, especially if your only experience with investing is your quarterly meeting with your investment advisor that lasts all of fifteen minutes. Fortunately, the investment world is changing with the proliferation of online brokerages.
Online brokerages are platforms that allow the average Canadian investor to open a trading account and purchase investment products like stocks, fixed income, Exchange-Traded Funds (ETFs), and even mutual funds, all on their own.
All online brokerages aren't created equally, so today, we are looking at two of Canada's more popular online brokerages, Questrade and Interactive Brokers, and deciding which one is the best choice for both new and seasoned Canadian investors.
Table of Contents
Questrade vs. Interactive Brokers : An Overview
Questrade and Interactive Brokers are online brokerages in Canada with unique offerings. Here's a broad overview of each one and our first-look opinion on which is better.
Questrade is one of Canada's original online brokerages, and it is also the largest, with $20 billion in assets under management. Questrade was founded in 1999 and is privately owned with headquarters in Toronto, ON.
Questrade allows users to open many types of registered accounts, including Registered Retirement Savings Account (RRSPs), Tax-Free Savings Accounts (TFSAs), and more. Questrade has also expanded its product offerings beyond an online brokerage (more on that below).
Interactive Brokers: Overview
Interactive Brokers is the Canadian arm of the international brokerage IBKR. Interactive Brokers is a high-powered investment tool for those looking for an inexpensive way to invest in global markets and was part of the Canadian expansion of the US-based brokerage Interactive Brokers.
The US-based Interactive Brokers was founded in 1978 and launched in Canada in December 2000, intending to connect Canadians to high-speed international trading markets.
For the average investor, Questrade is going to be the more practical choice. Interactive Brokers provides access to international markets, and the average Canadian investor does not need this type of access.
Questrade vs. Interactive Brokers: Products
Both Questrade and Interactive Brokers offer online investment products for new and experienced investors alike. Read about them below.
Questrade offers two primary products aimed at two types of investors.
If you're an experienced investor who is not afraid to build your investment portfolio, the main Questrade platform is right for you.
Questrade's main trading platform gives you total control over your portfolio, allowing you to buy and sell stocks and other types of products yourself. If you are an experienced investor looking for that extra edge, Questrade also has the option to upgrade to one of three tiers of data packages. These packages give you the latest research tools and snags a discount on pricing if you are a high-volume trader.
For new investors or those without much experience investing in the stock market, Questrade offers Questwealth Portfolios. Questwealth Portfolios is a robo-advisor style product that works by having you fill out a questionnaire to assess your risk tolerance and investment goals. It then uses that information to choose from one of several premade, diversified investment portfolios.
Questwealth Portfolios allows new investors to have a great user experience and take advantage of the lower fees associated with online brokerages without forcing them to go through the daunting process of building an investment portfolio from scratch.
Interactive Brokers: Products
Interactive Broker's primary product is its trading platform. While you can use it to buy stocks and bonds in both the US and Canada, its primary function is to allow traders to access international markets. Their 'SmartRouting' technology connects you to the best prices in over 125 markets in 31 countries.
In addition, Interactive Brokers has a mobile app and various data sources to stay up to date on the latest international news.
We think that Questrade's dual product offering of both a robo advisor and online investing platform will serve most Canadians better than Interactive Broker's highly specialized international market platform.
Questrade vs. Interactive Brokers: Features
Both Questrade and Interactive Brokers offer a wide range of features. We'll outline the most important ones below.
- Many account options including RRSP, TFSA RESP, LIRA, LRSP, LIF, cash, margin, and trust
- Questwealth portfolios for new investors
- Very low trading commissions and commission-free ETFs
- A low minimum deposit of $1,000* to start trading. Open an account with no money and fund it from your bank account later
- A wide variety of investment types, including stocks, bonds, ETFs, mutual funds, options, new issues, foreign exchange, precious metals, and CFDs
- Fully functional browser, desktop app, and mobile apps
- Several different free platforms to trade on to suit your preferences
- No inactivity fees, no registered account fees, and no annual fees
*Rates current as of September 2021
Interactive Brokers: Features
- Wide range of accounts including TFSA, RRSP, individual, joint, trust, friends and family, small business, advisor, and money manager
- An option between tiered or fixed pricing depending on trading frequency
- Lowest currency exchange fees in the world
- Mobile apps and browser-based trading, but mobile apps are poorly rated
- $20* per month fee for accounts under $100,000* or for those paying $30* or more in commission each month
- Access to stock exchanges outside of Canada and the USA
- The platform is geared toward advanced international day traders
- Reports of poor customer service
*Rates current as of September 2021
Interactive Brokers has a wide variety of features suitable for high volume professional traders, but the average Canadian won't find most of them helpful.
Questrade, on the other hand, has made it their business to tailor their features to their Canadian customers, whether newbie or experienced. Questrade wins this round.
Questrade vs. Interactive Brokers : Fees
One of the most significant benefits of investing with an online brokerage is the lower fees you'll pay relative to traditional mutual funds. Online brokerages structure their prices a little differently than mutual funds, where instead of paying a percentage of your investment holdings like a mutual fund, you'll pay per trade.
Questrade has two primary products: Questrade and Questwealth Portfolios.
For the Questrade platform, you'll pay a minimum of $4.95* per trade, up to a maximum of $9.99*. If you reach high-volume trading status, you'll pay as little as $0.01* per share.
If you plan to purchase ETFs with your Questrade account, you'll be pleased to know that Questrade does not charge any trading fees to buy ETFs. For mutual funds, expect to pay $9.99* per trade.
For experienced investors looking for a high-powered trading platform, you can upgrade to one of their three tiers for between $19.95* and $89.95* per month.
Questwealth Portfolios charges a percentage of your portfolio called a management fee.
If your portfolio is worth less than $100,000*, the management fee is 0.25%*. For portfolios above $100,000, you’ll pay 0.20%*. When compared to other robo advisors in Canada, these fees are very competitive. On top of the super low management fees, there are no inactivity fees and no registered account fees.
*Rates current as of September 2021
Interactive Brokers: Fees
Interactive Brokers has a straightforward pricing system, with either tiered or fixed pricing depending on your trading volume. The tiered system charges a price per share based on your volume traded per month and is geared more toward active traders than casual investors. The tiers are:
- Up to 300,000 shares per month $0.008* per share
- 300,001 to 3,000,000 shares per month $0.005* per share
- 3,000,001 to 20,000,000 shares per month $0.004* per share
- 20,000,001 to 100,000,000 shares per month $0.003* per share
The tiered pricing structure depends on how many shares you buy per month, and even the lowest pricing tier allows for a higher volume of shares than the average Canadian investor would need.
The other option is a fixed fee structure. With the fixed fee structure, you'll pay either $0.01* per share with a $1* minimum and 0.5%* of the trade value as a maximum.
Interactive Brokers also charges $5* per mutual fund purchase, along with $20* per month in fees for accounts with a value of less than $100,000*.
*Rates current as of September 2021
The high monthly fees associated with Interactive Brokers for smaller accounts make this online brokerage an unattractive option for new investors or Canadians looking to manage their own portfolios.
Questrade, on the other hand, has very low fees for Canadians and is even free for those looking to build an ETF-based portfolio.
Questrade vs. Interactive Brokers: Safety and Security
Canada has sophisticated and high-level safety and security for all online brokerages. Questrade and Interactive Brokers are no different. Here's what protection looks like with each online brokerage.
Questrade: Safety and Security
Questrade is regulated by the Investment Industry Regulatory Organization of Canada (IIROC).
Additionally, Questrade is also a member of the Canadian Investor Protection Fund (CIPF). As a member of CIPF, your investments are protected up to $1 million.On top of being heavily regulated, Questrade also has a personal data security guarantee and uses firewalls and encryption protocols to keep your data safe.
Interactive Brokers: Safety and Security
Interactive Brokers is an international company regulated by more than just IIROC and CIPF (although they have memberships in those organizations).
In addition to those organizations, Interactive Brokers is a member of the NYSE Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Corporation (SIPC), and is regulated by the US Securities and Exchange Commission (SEC).
Since Interactive Brokers is based in the US, we will note that there may be some tax implications for estates held with Interactive Brokers.
Unfortunately, the details online seem murky, so while your money is undoubtedly safe from insolvency or fraud, there do seem to be some questions about whether it is safe from US taxation in all scenarios.
Once again, we think that Questrade offers a more secure and less complicated solution when it comes to managing your money, as this platform has the benefit of being located in Canada.
Our Final Thoughts
The average Canadian investor looking to save money on fees and commissions by building their diversified investment portfolio will be well served by the straightforward and low-cost solutions offered by Questrade.
As well, even experienced investors will appreciate the additional data upgrades available through Questrade.
On the other hand, our Interactive Brokers review has reviewed that this platform is a powerful tool for active traders seeking access to international markets.
While this tool is undoubtedly helpful for some people, we think that for most Canadians, it is too expensive and overpowered to beat Questrade. The bottom line is that when it comes down to Interactive Brokers vs Questrade, we think Questrade wins hands down.
Frequently Asked Questions
Questrade belongs to the Questrade Group of Companies. Questrade Group of Companies is composed of Questrade Financial Group and its affiliates.
Questrade Financial Group was founded in 1999 by Edward Kholodenko and his three partners. Questrade is still a privately owned company today.
If you're concerned if Questrade is safe to use, you can rest assured that Questrade is a member of IIROC and CIPF, which protects your investments if anything ever happens to the company.
Suppose you are interested in trading a high volume of stocks and are looking for fast access to Canadian, US, and international markets. In that case, Interactive Brokers could be a good choice.
Their platform is geared toward serious investors who may be managing more than their own money, and if this sounds like you, Interactive Brokers might serve your needs better than Questrade.
If you've never invested before, then Questrade is the right choice for you.
Their Questwealth Portfolios are ideal for new investors who aren't comfortable building their own portfolios yet.
However, experienced investors will also enjoy buying stocks and other financial products at a low cost. In addition, the no monthly or annual fees are perfect for smaller portfolios, and the wide variety of registered accounts mean you can invest in whichever tax-sheltered account suits your needs.