Targeting Specific Investor Types Pays Off For Canada’s Top Online Brokers, G�mez Canada’s Internet Broker Scorecard Reveals

BMO InvestorLine maintains top overall ranking; E-Trade Canada, Disnat Direct, CIBC Investor’s Edge hurdle to better positions

May 26, 2003, Toronto — BMO InvestorLine retained its top ranking overall for the second consecutive Internet Broker Scorecard in G�mez Canada’s recently completed analysis of online brokerage firms.

DisnatDirect, a division of Desjardins Securities, and E-Trade Canada were among the top online brokers for the hypercritical active trader and serious investor segments respectively. BMO InvestorLine took top honors for the Life Goal Planner segment, while E-Trade Canada was atop the One-Stop Shopper group.

In an investment climate showing recent signs of increased activity, many self-service brokers have invested time and money in research and monitoring tools to improve their online offers. Competition for investor loyalty, customer retention and growth is fierce as firms vie to solidify their industry standing, and even elevate their services to higher levels, as several have done. Nine of the twelve online brokers evaluated in G�mez Canada’s biannual Internet Broker Scorecard showed an absolute improvement in their Scorecard ranking.

“In particular, significant work was accomplished by almost every online broker since our last Scorecard,” said Sam Cukierman, managing director of G�mez Canada. “Online brokers have been implementing changes to improve navigation, provide more sophisticated trading tools, and have made a quantum leap on educating the investor with an emphasis on financial planning engines and programs that inform, teach, calculate, compare, provide alerts, watch lists and other educational content.”

Some bank-owned online brokers also made inroads into integrating their banking and online brokerage platforms, allowing customers more timely and convenient accessibility to their investment, bank account, credit card and wealth management information.

Also noteworthy is the continued focus on retaining the loyalty of the active trader, a segment that is a continued source of fees and commissions generated. A strategy for several online brokers is to actively research and monitor their needs on a timely basis, with responses that range from differentiated levels of service to fee breaks.

While retaining its tried and true methodology, some of the G�mez Canada weightings for the 2003 online broker rankings were adjusted to meet the market realities firms are placing on focusing on individual investor segments. Specifically, increased emphasis was placed on providing weightings to categories that reflected a more relevant overall cost that took into account price and volume rather than simply measuring minimum commission levels.

“As online brokers continue to use price and value added services to differentiate themselves, G�mez Canada responded by focusing on more than just best price available on market and limit orders for small equity transactions” Cukierman noted. “The current scorecard is now much more comprehensive. The Overall Cost category uses more cost criteria points versus the prior scorecard. It also focuses on Internet channel value.”

G�mez Canada’s current scorecard evaluates tiered pricing for the precise cost of equity trades, option trades, the availability of discounts on specific orders, the purchase and sales commissions on front and back-end mutual funds, fees on registered plans; as well as interest rates on margin borrowing and credit balances.

DisnatDirect leapt to top position in the overall cost ranking, followed by Qtrade, Credential Direct, and E-Trade. DisnatDirect recently launched its direct-access brokerage service in April of this year, becoming the first Canadian financial institution to offer investors a direct, no-intermediary link to the market at attractive pricing. CIBC Investor’s Edge ranked fifth in overall cost but ahead of the other major chartered banks’ on-line brokerage arms.

G�mez Canada also adjusted its Internet Broker Scorecard by refreshing how it evaluates service levels, technical analysis, special offers for active and high balance customers, improved or enhanced trading tools and techniques and Web-site integration.

The overall rankings for Q2 2003 (versus Q3, 2002, in parentheses) were as follows:

  1. BMO InvestorLine (1st)
  2. E-Trade Canada (3rd)
  3. TD Waterhouse (2nd)
  4. CIBC Investors Edge (6th)
  5. Qtrade (4th)
  6. Scotia Mcleod Direct (5th)
  7. RBC Action Direct (7th)
  8. DisnatDirect (12th)
  9. Merrill Lynch HSBC (8th)
  10. Credential Direct (10th)
  11. National Bank Discount (9th)
  12. eNorthern (11th)

Rankings by customer segment are considered important to the online broker’s strategic focus.

In addition to overall cost, rankings are the result of analysis made to questions on ease-of-use, customer confidence, on-site resources, and relationship services.

The ease of use category focuses on new and repeat users and their ability to efficiently and accurately navigate a site and accomplish specific tasks. BMO InvestorLine and CIBC Investor’s Edge got top rankings in this category.

Customer confidence relates to online factors that affect a customer’s confidence in using their on-line broker. TD Waterhouse scored highest in this category. Royal Bank Action Direct fell to tenth position here owing to problems encountered with amongst other things email and telephone responses.

On-site resources focus on the depth and breadth of the broker offer. TD Waterhouse and E-Trade Canada scored highest in this category.

Relationship services are attributes that create and maintain value-added services with customers. BMO InvestorLine and Scotia McLeodDirect scored highest in this category.

Ten of twelve online brokers surveyed showed absolute improvements in this category.

About G�mez

G�mez serves companies that strategically depend on the effectiveness of their Internet channel to increase revenues and decrease expenses and provides the industry’s only comprehensive set of integrated solutions that help firms maximize the performance, functionality, and usability of their Internet channel.

G�mez Canada Financial Services provides Internet Channel Effectiveness research tools, techniques, products and services to the brokerage, banking, mutual funds and insurance verticals within financial services. G�mez Canada’s commitment to the Internet is evidenced through offering some of the most advanced competitive benchmarking, monitoring and research tools enabling businesses to make informed decisions for business alignment and growth. Only G�mez integrates actionable research and applied analytics with performance measurement services to provide a comprehensive view of the entire customer experience.

G�mez Scorecards bi-annually measure the quality of e-commerce offerings, with a predominant focus on the Internet channel and a secondary focus on auxiliary channels and measures. Scorecards rank all firms in an industry that meet minimum standards of service (typically in terms of depth and breadth of product and national availability), and provide a snapshot of how industry players compare and contrast across user profiles and usage categories.

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