Robinhood in Canada: What Are the Alternatives?

There are a number of reasons why people want to know about Robinhood in Canada. The app has revolutionized investment in the US and is among the most reliable names out there. Hence, it doesn’t come as a surprise that investors look for Robinhood alternatives in Canada.

The company has more than 31 million verified users with a vast majority residing in the US. Currently, US nationals living abroad, including Canada, can use the service. However, foreign nationals cannot open an account unless they have a permanent legal address in the US.

Robinhood has grown by leaps and bounds in the last few years and is said to be holding more than $80 billion in assets. Most Robinhood users are traders around 31 years of age. However, that’s not all that makes this platform so popular.

Some experts credit ‘free trading’ for the company’s main success. It came at a time when other names were charging $4 to $5 per trade. While many platforms now offer free trades, they don’t come close to the popularity of Robinhood.

The app seems to have popularised the idea of fractional trading and brought risky trades back into the fold. The company is credited for bringing retail investment to Wall Street and showing that anyone can trade if they have the right tools.

It’s known for being easy to use, affordable, and fun. So, what are some Robinhood alternatives in Canada? We’ll look at the top names in this article.

What is Robinhood?

Founded in 2013 and headquartered in Menlo Park, California, Robinhood is an American financial services company offering commission-free stock, exchange-traded funds (ETF), and crypto trading. Moreover, you can also use it to invest in gold and options. Rumors are that the company is planning to introduce some more products in the future.

It is a Financial Industry Regulatry Association (FINRA) regulated and Securities Exchange Comiision (SEC) registered name with more than 1.6 million people on a waitlist for its growing crypto wallet. The company is one of the fastest growing apps in this niche and gives users the option to access their portfolios through the web portal or mobile app. The ease is one of its biggest benefits.

It was recently in the news for applying for a banking licence and now offers some banking-related services as well including cash management. It's truly a discount broker with no stock or cryptocurrency trading fees. But, it does have some flaws as it doesn't offer mutual funds, bonds, or retirement accounts.

Also, it has been a part of some controversies. Now a public company, the road to the market wasn’t smooth and Robinhood had to pay nearly $70m for misleading users and causing them huge losses. The business was in a similar situation when the company got sued for enacting trading restrictions against Gamestop and other meme stocks.

Despite winning the lawsuit, Robinhood’s brand name took a hit due to the case. In addition, it has also received criticism due to data breaches. The brokerage house seems to be working on its flaws and is said to be more secure today thanks to encryption and The Transport Layer Security (TLS) protocol. Also, funds are protected up to $250,000 for cash claims and $500,000 for securities.

Is Robinhood Coming to Canada?

Robinhood uses market-makers, i.e.: an organization that operates as a wholesale buyer and seller so that there's always enough trading volume to perform transactions without issues. This is why you are able to buy and sell stocks and other assets without having to wait. We don’t get the same flexibility with other assets like cars and houses.

Robinhood makes money through market-makers as they pay the company for the bid to execute trades. In return, market-makers make money through ‘spreads', which is the difference between the buying and selling price. This is important for businesses like Robinhood that charge no trading fees.

Such a model, however, hasn’t been seen in Canada as it is not legal in the country. Canada restricts brokers from using market-makers. Businesses are lawfully required to complete all transactions themselves for increased transparency. This requirement means Robinhood cannot make money through market-makers, and thus cannot offer free trades in the country.

There still are some names in Canada that offer free trades. The company hasn't given official statements on entering Canada and there’s no news on when it may happen, if ever. However, we must mention that US residents or citizens who move or travel to Canada for any purpose will be able to use their Robinhood account from within Canada without any issues.

It prohibits Canadians from opening an account but the website and app work without any hiccup. Canadians who move to the US, create an account, will also be able to use it in Canada for as long as they still hold a valid permit. Sadly, it doesn’t look like the app will launch in Canada in the near future. Robinhood’s attempts to enter global markets haven’t been very successful and it even had to close its UK branch after a test run.

Canadian Alternative to Robinhood to Trade Stocks

Just like the US, Canada now offers free stock trading. As mentioned earlier, there are no market-makers in Canada but you will find a lot of Canadian brokers that offer zero-commission trades by executing their own orders. Some, however, may come with conditions such as minimum investments or fees on foreign currency conversion.

Compare online brokerages to pick the right one. We have covered some of the top Canadian alternatives to Robinhood below. Let’s have a look:

Wealthsimple Trade

Wealthsimple Trade is the go-to option for Canadians who want to enjoy free stock trading. It is a safe platform with some great products and perks. This table defines the main similarities between the two and why Wealthsimple Trade can be a great Robinhood alternative in Canada:

As you can see, both these platforms are nearly identical. However, upon close inspection, you will find that Wealthsimple Trade is different with some great pros including the ability to trade RRSP, TFSA, and non-registered accounts. Robinhood doesn't offer this feature.

While both platforms are free to join and use, Robinhood offers a paid program called Robinhood Gold, which costs $5 per month. Wealthsimple Trade has no such plans. Also, both companies offer mobile apps and have no minimum requirements.

You will be able to trade not just Canadian but US stocks as well, but they come at a price. There is a 1.5 percent base conversion fee for trading US stocks. The no-fee option only applies to Canadian ETFs and stocks.

TD Easy Trade

TD Easy Trade has found immense fame in the last few years by constantly evolving and offering new features. It’s a trusted broker that offers some no-fee trades with great benefits. This table defines the main similarities between TD Easy Trade and Robinhood:

Let’s make it clear that TD Easy Trade offers a limited number of free trades. You will enjoy 50 commission-free stock trades per year. There’s, however, no limit on free TD ETFs.

On the downside, TD Easy Trade doesn’t offer fractional trades. This might deter some users since fractional shares can be a great way to reduce the risk and start with little money. But, TD Easy does have some great perks as well including more assets. You can choose short sales, no-load, no-free mutual funds, and also futures. Robinhood presently doesn't offer these features.

TD Easy is also said to be suitable for new users as it comes with Robo advisory. On the plus side, penny stocks and Forex are also available.

Both options are straightforward and use similar technologies. Still, there can be some confusion when it comes to TDA fees. It isn’t completely free. Futures will cost you $2.25 per contract and there is a $0.65 per contract option fee on some assets.

National Bank Direct Brokerage

National Bank Direct Brokerage (NBDB) is a subsidiary of National Bank of Canada, which makes it a reliable name. It was the first bank in the country to offer zero-commission trading on Canadian and US stocks and ETFs. Here are some of the main similarities between NBDB and Robinhood:

A look at the chart above and you will realise that National Bank Direct Brokerage pales in comparison, yet it is still considered one of the best Robinhood alternatives in Canada due to some features that other brokerages do not offer.

Its brick-and-mortar presence makes it a solid option for users. Plus, it offers some great services including estate settlement, withdrawal from RDSP, TFSA, RESP, and internal transfers between accounts.

There is no account minimum and you can enjoy special young investor and student discounts. The bank used to charge a trading fee until August 2021 when it introduced commission-free trading. There are both cash and margin accounts available and you can even choose USD accounts in some cases.

We think this can be a great option for some investors as the yearly fee will be waived if you hold at least $20,000 in all your accounts combined. But, be aware of other fees such as wire transfer charges ($75), NSF cheque charges ($45), and administration of restricted shares ($250/transaction).

Desjardins Online Brokerage

Desjardins Online Brokerage, also called Disnat, is another Canadian discount broker that is considered a reliable Robinhood alternative in Canada. Here’s what’s in common between the two platforms:

Unlike Robinhood, Desjardins Online Brokerage has a minimum of $1,000. We suggest that you try demo accounts or other platforms if you don’t know much about trading before giving it a try as you will not be able to start with a smaller amount. This can be a major drawback for some.

Stocks, ETFs are free. You can also trade fixed income assets for $50 per trade. Options are available but at a fee of $1.25 per contract with a minimum of $8.75. While mutual funds are free, you may have to pay up to $45 if you don't hold these for at least 90 days. There are also minimum purchase requirements for bonds ($5,000) and bills ($10,000).

These limitations make Desjardins Online Brokerage more suitable for experienced investors. Also, only consider this option if you are willing to be active as the inactivity fee is $30 per quarter. An account is considered inactive if there are less than 6 trades in the last 12 months. You can avoid this fee by keeping your portfolio above $15,000. There are also discounts for new users that fall under 30 years of age.

Mogo Trade

Mogo is known for a lot of things including robo-advisor investing, personal loans, and identity fraud protection. It launched Mogo Trade in December 2021, but so far, the app seems essentially to be a wait-list. Here’s a comparison table for a clear understanding:

Mogo Trade offers both US and Canadian stocks but only the latter are offered for free and you will have to pay a fee to trade US stocks. However, the fee isn’t clear. Tax Free Savings Accounts (TFSA), registered retirement savings plan (RRSP) accounts are available and there is no account minimum.

Unfortunately, fractional shares are not available. But, we liked how easy the mobile app is to use. You will be able to even set up future orders without any issue.

Web trading is not possible at this stage. Since it is a new option, not much is known about it at this stage. But, you can use it without worries as it is safe and your money is guaranteed even if the company goes bankrupt.

Canadian alternatives to Robinhood to trade cryptocurrencies

A major reason Robinhood has found such immense success is due to it allowing their users to trade cryptocurrencies. You can currently trade 7 digital coins on Robinhood including Bitcoin, Bitcoin Cash, Bitcoin SV, Dogecoin, Ethereum, Ethereum Classic, and Litecoin. Just like stocks, you can buy and sell digital coins for free.

Fortunately, there are some Robinhood alternatives in Canada that offer commission-free crypto trades. Here are some of the best options:

Bitbuy

Bitbuy is a Robinhood alternative that has a lot in common with the US brokerage.

A look at the chart above and you will realise that the two platforms are very similar. Both offer seven cryptos but the options differ. Originally called InstaBT, Bitbuy supports Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Ripple, and Stellar. Bitbuy supports fiat currencies and even offers Bitcoin insurance with Knox.

Both offer analytical tools and live streaming of prices. On the downside, there is a maximum trading limit on Bitbuy. You cannot trade more than $50K in a day. There are no such limits on Robinhood, which also offers free withdrawals. On Bitbuy, you will have to pay a small withdrawal fee based on your withdrawal method.

Shakepay

Shakepay has proven to be a reliable name due to its no free structure. A licensed and regulated name, it is considered a safe Robinhood alternative and comes with some exciting pros.

Unlike Robinhood, Shakepay offers only two currencies: Bitcoin and Ethereum. You can trade both for free. Instant deposits are available and withdrawals are free.

There are no monthly or yearly charges. The company makes money through spreads that are fairly priced. We enjoyed using the mobile app and found customer service to be excellent as well.

Newton

Newton is a fast growing name as it offers a large number of digital coins. The chart below highlights similarities between Newton and Robinhood.

Newton hits the bull’s eye when it comes to the number of cryptos. It doesn't only support popular names that you'll find on Robinhood such as Bitcoin, Ethereum, and Bitcoin Cash, but also some new names such as Cardano, Uniswap, and Dash. This makes it one of the best brokerages for trading cryptos in Canada.

Spreads are competitive but keep on changing from time to time. We found that opening an account takes only a few minutes but there are no instant deposit methods available. The fastest method can take a few hours. Fortunately, liquidity is great and the app is very easy to use.

Coinsmart

Last on the list is Coinsmart, which isn’t completely free but is still considered a top Robinhood alternative due to its low prices.

The fee is on the lower side. Expect to pay about $2 when you invest $1,000. Credit and debit cards can be used for instant deposits but there's an additional fee of up to 6%. Wire and e-Transfer options wire are also available but funds added using these methods can take up to 24 hours to show.

Deposits will cost you 1% of the total amount ($15 minimum). This makes Coinsmart more expensive than Robinhood. On the plus side, it supports a larger number of currencies including Bitcoin, Ethereum, Bitcoin Cash, Litecoin, ADA, Stellar Lumens, USDC, and EOS

FAQ About Robinhood

How does Robinhood make money?

Robinhood makes money in a lot of ways. Most of its revenue comes from market-makers who pay the company for the right to execute trade orders submitted by Robinhood users. According to the latest reports, about 72.8 percent of Robinhood revenue is attributed to transaction-based revenues (market-makers).

It also makes money through paid subscriptions but they don’t bring a major chunk. About 17.5 percent of total revenue is attributed to net interest. The company earns money on securities lending transactions. Moreover, it also earns money on margin loans given to users.

Is Robinhood available in Canada?

Robinhood isn’t banned in Canada but Canadians cannot make an account on the platform unless they have a valid US visa. You will be able to open the app and view what it offers but not open an account if you are in Canada. Those who want to trade stocks or cryptos without a fee can try Robinhood alternatives such as Wealthsimple Trade and TD Easy Trade.

What is Robinhood investing?

Robinhood is an online discount brokerage that serves US clients and offers a wide range of commission-free investing tools. Suitable for both new and experienced traders, it gives users the option to buy and sell stocks, ETFs, and digital coins. Users can sign up for a free account or upgrade to a paid account that comes with additional benefits such as instant deposits.

Does Robinhood work in Canada?

Robinhood works in Canada but you will not be able to sign up for an account if you’re not a US citizen or resident. Americans living in Canada will be able to sign up for an account and use it in Canada.

Who owns Robinhood?

Robinhood went public in 2021 and is now owned by a variety of owners. Baiju Bhatt and Vladimir Tenev, who co-founded the company in 2013, are still among its most important shareholders. Tenev presently serves as the CEO and Bhatt works as the Chief Creative Officer.

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