as you fill out your application
Double check that you are opening the type of account you want. Most likely you want an account that is:
- Self-directed (rather than managed).
- Individual (rather than joint).
- Cash (rather than margin).
Make sure you understand the commission structure.
When the broker offers a low commission or no commission at all, check if the low commission is not offset by fees, like a monthly access fee to desktop trading platform, an ECN fee (electronic communication network) for lots smaller than 100 shares, or higher cost of currency conversion.
You may be asked to fill out form W8-BEN. If not ask about it - some brokers will complete it on your behalf.
- It is relevant only if you plan to hold US-listed securities and has to do with the so-called withholding tax.
Sign up for an DRIP (automatic distribution reinvestment program).
- A DRIP makes your distributions work for you. Instead of depositing cash in your account and having it sit there, your provider will automatically buy additional units of your portfolio index mutual fund.
You'll receive performance reports for the ETFs in your portfolio. You'll be prompted to choose between mail, email, or checking your online broker portal.
If you are opening an account with an independent online broker, confirm they are a member of the Canadian Investor Protection Fund (CIPF). They insure your account should the broker go out of business.
- The CIPF website has a list of member brokers. Make sure you know your broker's full name. Your broker will likely advertise they're a member (look for the CIPF logo on your broker's website).
- Big-5 online brokers are always insured.
Even though signing the terms and conditions is not a choice, it’s good practice to read them, including the institution’s disclosure about the use and protection of your personal information. Make sure to review your application before you sign and submit.
When opening an account in person, you’ll have leave the signed application in the branch (make sure to ask for a copy to take home with you). If you’re doing it online, you’ll be asked to print and sign a statement of acceptance, then scan and email / mail it, or e-sign (in which case you should expect additional verification questions).
It really shouldn’t but it can take a few days before everything is set up (2-5 if things go well). Follow up if nothing happens after 5 days.
Prepare your IDs. Financial institutions need two IDs to open investment accounts: a government-issued photo ID and proof of address. Try to bring your driver's license and passport. What if you don't have those?
You'll need to provide your SIN (social insurance number). You will be earning investment income which will be reported to the CRA (Canada Revenue Agency). The CRA identifies you by your SIN.
Prepare either your chequing or savings account's banking / account information - you''ll use it to connect your investment account.
You may be asked to complete the provider's a risk appetite questionnaire. Your provider will keep your answers on file and may use them to flag to you any transactions that appear more risky than your risk appetite answers might suggest.
You'll be asked standard account-opening questions. Here's what to expect.
Get your special offer / referral code ready. Online brokers often offer promotions and you can find them on financial blogs. Don’t make that a key factor, but if the platform you’ve chosen has special offers, why not?
If you want a quick dry-run of how to open an account, there are youtube videos like this one from Money Geek on how to open an online broker account (this one is for Questrade):
https://www.youtube.com/watch?v=9C8AhGr4i2c
open an online broker
account
bank-owned online broker
Go to a Big-5 branch to open your account.
You’ll have to go to the bank anyways to show your IDs and sign the application.
It’s best to make an appointment with a specialist because not every branch employee knows the online broker side of the business well enough.
Independent online broker
You may be able to complete the entire process online.
Once you submit the application, you’ll be asked to scan and upload your IDs and banking/account information and the application form with your signature. The verification process is automated.
Once you start online, remember to save your work in case you get disconnected – these applications are long.
once the account is open...
Ask for a tour of the site / demo / practice account (you may have already done so during your research).
Make sure you have online access.
Once your chequing / savings and online broker accounts are connected, learn to transfer money between them .
- When logged into your chequing account online, (in the payments / paying bills area), set up your investment account / online broker as a ‘payee’ to link the accounts.
- Then do the same the other way around, setting up your chequing account as payee from your investment account.
- Banks use different terminology – also look for ‘add an account’ / ‘external accounts’ / ‘transfer money in/out’.
- Test the connection with a small transfer/purchase.
When logged into your online broker, get familiar with the trading area (where you'll place and monitor transactions) and the monthly statement (where you'll receive trade confirmations and account statements).
- You may find Youtube tutorials helpful. Even you don’t find one for your online broker, it’s worth your time to go through one to see how it’s done. A few examples of what you can find:
for several Canadian platforms https://www.youtube.com/playlist?list=PLovWMWBk4UZnaH0Z2hBvtDidGsur2xDf7
for Questrade https://www.youtube.com/watch?v=5QE3L65ywkM
for TD Direct Investing https://www.td.com/ca/products-services/investing/td-direct-investing/investor-education/video-curriculums.jsp.
If you pay commission on your trades, what's the minimum economical transaction size?
before you start
Your online broker account can be opened as a registered or taxable account.
If you're opening a taxable investment account, get familiar with investing and tax.