Slow discount trading frustrates Canadians
TORONTO, March 13 (Reuters) - Zeljko Zidaric is so mad at his discount brokerage that he plans to get even -- by taking it to small claims court.
The Canadian entrepreneur is one of many who have been pushed over the top by tardy response times at Canada's many discount traders, which are struggling to cope with an unexpected influx of clients excited by recent rallies in stock markets.
Unlike full service brokers, who have analysts to dissect company spreadsheets and advisors to discuss the suitability of a trade for each investor, discount brokers allow market players to call their own shots by buying and selling stocks for a smaller fee.
However, service times have slowed across the board in the last few months and normally easy-going Canadians have been frustrated. Trades via phone, Internet and voice recognition lines, which used to take seconds, now stretch 30 minutes or more.
Some investors have retaliated by ranting online, switching from the bigger traders to smaller ones, and in Zidaric's case, making a small but defiant gesture.
Zidaric believes he's lost about $4,400 of potential profit due to the slowed responses at discount brokerage TD Waterhouse Canada
"The service is just abysmal. Atrocious, in my opinion," said Zidaric, an M.B.A. graduate who is trading in an attempt to raise money for his Internet start-up, MBA101.com, a Web site which helps M.B.A. students do research.
"I think I have more than enough evidence to show that I've been damaged because of the long time that it takes for them to approve the trades," Zidaric told Reuters.
Brokers throwing every resource at service
TD Waterhouse Canada, the nation's biggest discount broker with 750,000 clients, could not comment on the specifics of the case, as Zidaric plans to launch it this week.
However, Paul Boivin, executive vice president of national sales and service at TD Waterhouse Canada, made it clear that the broker was throwing every possible resource toward fixing the staff shortage and other concerns.
The firm has added about 500 people to its front office payroll, almost doubling staff from September. And by March 15 it would have expanded Web capacity by 75 per cent from Feb. 1.
"We're trying to bring our service up to the level that our customers expect from us," Boivin said. "It is frustrating for us as well, because we're not able to provide the high level service that we're used to. We're playing catch-up."
Zidaric figures that a slow-moving lawsuit would take too much time. Instead, he prefers the quicker method of small claims court, which he said takes less than a year to process, avoids lawyers and involves both sides pleading their case in front of a judge over a day or less.
John See, vice-chair of TD Waterhouse Group, which oversees Canada, freely admits one of the company's biggest headaches is the client's extended wait to find a trader. Instead of taking an order between 30 and 45 seconds, 95 per cent of the time clients now find themselves on hold upward of 20 to 30 minutes.
"Clearly, that's unacceptable. We're adding capacity across our entire system, in terms of call centers (and) call center seats," See said.
TD Waterhouse Canada has also curtailed all discretionary advertising, keeping a very low profile during the savings pension season that just passed in Canada, See said.
And the company's worries have been compounded by glitches. "Where things might have creaked before, they've cracked in a couple places -- so we've had some down times and outages, although it's been pretty limited," See said.
Smaller brokers picking up some frazzled clients
The big broker's pain is sometimes the small broker's gain.
"We've virtually stopped advertising, and yet we are seeing an acceleration in the number of new accounts we're opening on a daily basis. And our assets actually are growing at 20 per cent a month," said Paul Bates, chief executive at smaller Schwab Canada.
Bates, who stresses Schwab is a full-choice brokerage with online trading, can't put a figure on the number of account swappers who want quicker responses. "People are frustrated, and are looking for an alternative. Which is not to say we don't have occasional slowdowns ourselves, but we seem to be in slightly better shape," he said.
All the beleaguered brokerages also point to their own restrictions under Canada's tight regulatory standards. First, traders must work a minimum of 90 days under the licensing process -- and the stock market boom in the last few months took many companies by surprise.
Second, brokers must adhere to the "Know Your Client" rule, which forces them to review every trade -- even the risk-reducing ones like an order to sell -- to make sure it fits with a customer's portfolio.
"We're lobbying heavily with the regulators, who seem to be very sympathetic to our position, that ... it's impeding service and access to the markets," See said.
See added that over the next couple weeks, TD Waterhouse Canada's newly hired staff will be licensed and will begin handling telephone lines in efforts to reduce wait times.
Zidaric said he's filing his claim not for the cash, but to demonstrate that he'll act, not just complain. "It's not a big sum of money, but it's making my point." |
