Flash Retirement

Securities Brokerage Firms

In 2013, there are over 200 brokerage firms in Canada. The 10 largest firms—eight of which belong to banks and credit unions—generate 85% of the industry's sales in Canada.

There are 2 categories of brokerage firms:

  • Full service brokerage firms
  • Discount brokers

Self-regulating organizations require that firms in both categories be registered as set out in provincial securities regulations in order to protect investors and ensure fair and equitable practices. All firms that deal in investments must also be members of the Canadian stock markets and the Investment Industry Regulatory Organization of Canada (IIROC).

Full Service Brokerage

Large brokerage firms—subsidiaries of banks or credit unions—operate through several business segments, including private services, institutional services, business financing, corporate finance, and economic research.

  • Private Client Services
    Investment advisors in the private client services segment must understand the objectives of their clients (individuals with money to invest), give recommendations about asset allocation for portfolios proposed to clients and about the types of securities available (stocks, bonds, mutual funds and liquid assets), and buy and sell securities for clients.
  • Institutional Services
    Brokers in this segment offer recommendations and investment trading services to institutional investors like pension funds, insurance companies, investment funds and portfolio managers.
  • Corporate Finance
    Corporate finance brokers provide funding for corporations by issuing shares or fixed-income securities.
  • Economic Research
    Mainline brokerage firms have economic research departments, primarily made up of economists and  financial analysts. The departments make recommendations that are useful both to investors wanting to know which stocks to pick and advisors needing to evaluate their clients' portfolios and suggest courses of action.

Discount Brokers

Discount brokers do not provide advice and cannot make detailed recommendations on stock picks unless their firms have financial analysts.
Their main role is to receive transaction orders and process them quickly at the lowest possible cost. Investor transactions can be made at any time and from any place, by Internet, cell phone, or telephone. Discount brokerage clientele are generally investors with the knowledge and ability to manage their own investments.

Discretionary Management

Most financial institutions offer clients who have sizeable holdings discretionary management services, by which investors transfer responsibility for their portfolios to expert portfolio managers, who make financial decisions and handle transactions in their stead. The consultants are required to report back to the investor.

For a fee, investors free themselves of all portfolio decisions. But that doesn't release the advisor from the obligation to "know the investor well". Generally speaking, the fees for the type of investor who needs discretionary management services are lower than would be charged if the client were to invest in mutual funds. However, these services are only available to investors whose portfolios total hundreds of thousands of dollars, if not more.

For More Information...

Flash Retirement recommends visiting the following sites to learn more about brokerage practices and the regulations that govern them:

This text is intended exclusively to provide general information on financial security at retirement. This information may not be appropriate to the reader who wishes to obtain particular information on one of the treated subjects and cannot be a guarantee for results. It is up to the reader to make pertinent expert advice requests. This information capsule does not bind partner providers of these information.

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