If you are looking for a Commsec review, you are probably trying to work out the best broker for your situation.
Commsec is still the biggest broker in Australia. It’s the largest, and most trusted stockbroker in Australia. The platform boasts a host of features, online education and an active online community discussion group. Its big bank reputation ensures customers feel safe using the platform.
A number of disrupters have entered the Australian broking industry over recent years. They offer cheaper brokerage and simple, easy to use platforms. Check out my overview of the main Australian brokers and my detailed Pearler review. A number of micro-investment apps have been launched in Australia, and Commsec has, in competition, launched Commsec pocket.
Commsec Review – Reasons to Stick with Commsec Despite the Cost
- Ability to set up a trust account
- Ability to purchase shares or ETFs immediately (without clearing your funds) and settle 48 hours later
- You want access to international markets other than the US
- Experienced investors looking for high risk high reward options
- Commsec pocket if you have $1000 lump sums to invest monthly want to narrow down options to a manageable choice.
Commsec Review: Main Features
There are several main features you can sign up for with commonwealth bank.
- Share/ETF trading
- Margin lending
- Options trading
- International trading
- Commsec pocket on a separate platform
Commsec Review: Commsec Fees
The only undisputed ways to improve your investment return are by reducing fees and sticking to your investment plan. Long-term investors will want to eliminate “Assets under management fees.” These are fees charged every year as a percentage fee on your investment balance. Because they are charged every year, this model ends up eating into returns over the long term.
Micro investment apps and Vanguard personal investor charge management fees instead of brokerage. This is fine for small investments, and a great way to ease your way into investment. But it gets very expensive the longer you use this fee model, and the more you have invested.
Long-term investors will want to graduate to their own stockbroker account. Paying brokerage fees of $5-$20 is more cost-effective than a percentage of investment fee over the long term.
Minimising these fees is an easy and guaranteed way to improve your returns. But extra fees are worthwhile if you need the extra features offered.
Commsec fees are more expensive than the discount online brokers but offer more features.
There are no management fees or inactivity fees with Commsec.
Commsec Brokerage Fees: For Australian ASX purchases:
If you have less than $3000 to invest at a time, Commsec Pocket may be more appropriate. You can invest up to $1000 at a time, for $2 brokerage, again without paying management or inactivity fees.
Most investors would be investing less than $10,000 at a time, making the $19.95 brokerage fee most relevant. In comparison to the $9.95 brokerage with Pearler* (for an unlimited amount) or Self wealth, this is double to cost. Stake has the cheapest Australian brokerage at $5, but like most of the micro-investment apps (excluding Commsec pocket), they are not CHESS Sponsored.
Commsec Brokerage Fees For International purchases:
If you want to buy international, non-US shares, brokerage starts at $39.99 USD or 0.4% of the purchase price, whichever is greater.
Comparison with Other StockBrokers Fees
Commsec are comparable in price, with better features than the other big banks.
Many of the newer discount brokers are significantly cheaper.
The micro-investment apps charge no brokerage but charge ongoing management fees.
“Stake” offers brokerage free US trades, but is not CHESS sponsored (read on for why this matters).
Self Wealth is CHESS sponsored and offers ASX and US trading for only $9.50, with no management fees. They have been extremely popular with younger investors. Your cash needs to clear into the account before you can purchase an investment. This may be fine for long term regular dollar cost average investors, but a negative for anyone wanting to invest extra during market dips.
Pearler is CHESS sponsored and also offers trading for only $9.50 in ASX and US markets. They have the auto-invest function. They also allow you to earn brokerage credits by referring friends, another way to reduce costs. Although designed for long-term dollar cost average investors, they now have an instant deposit function which is convenient for those wanting to lock in a stock price or buy at a specific price fall.
Vanguard Personal Investor
Vanguard Personal Investor has improved its offerings significantly over recent months. You can now purchase Vanguard investments only brokerage and management fee-free. Other investments incur $9 brokerage and a 0.1% management fee. The one big feature still missing is the ability to automate your investments.
Access to International Markets
Commsec does offer international trading, although you have to set up a Commsec International share trading account, separate from the regular share trading account. Brokerage fees are described in the fees section and are significant outside Australia / US.
Size, Reputation & Safety
Commonwealth is the largest bank in Australia. It is the most trusted, and most commonly used stock broker.
I don’t think anyone could imagine the biggest bank in Australia going bust, and it’s fairly obvious the government would bail them out if some catastrophe did occur.
No one thought Lehman brothers collapsing was a likely scenario (see the Big Short).
Commsec is CHESS sponsored. CHESS sponsorship means that you legally own the investments you have brought in your own name. When you purchase your investment, they will be registered with an independent share registry. You are not tied to your broker if your shares are CHESS sponsored. Investors can move investments to another broker using the HIN number you will receive from the share registry.
You may have assumed this was the case no matter which broker you purchased with. Many of the low costs brokers (Stake) and micro-investment apps (Acorns) are not CHESS sponsored. They have the shares in trust for you, but consequences, if the broker were to go bust, are not so certain.
There is an extensive help centre on the website with articles and FAQs. An online query form, responsive Twitter account and phone line are provided for customer support. The set-up process is a bit painful, but customer support (by phone) was friendly and patient with me.
Set Up Hassle
To open a Commsec account online, follow easy and clearly set out steps on the website.
Initially, it offers you this choice:
Even with the CDIA account, Commsec allows you to purchase up to $25,000 in investments and they will direct debit the owed amount from your allocated account 2 days later. If you are purchasing more than $25,000 at a time, the more expensive option directly from your bank account may be worthwhile.
Commsec email to let you know you have made an investment (in case you use limit orders) and need the funds available. If you fail to have the funds available, you will have to pay a fee.
It takes a few days after this for Commsec to contact you, with a few more steps until you are ready to trade. It wasn’t completely intuitive and felt challenging at the time, but their phone customer support was great.
Commsec Review: Easy to Use Interface
Once the account is open and functional, the platform is very easy to use. They have a mobile app as well as a desktop site. There is a lot of educational material on the website, and Query buttons next to the options to help.
Great Features Readers May Use
If you bank with CBA, your brokerage account will be easily accessible from your internet banking. This could be convenient, or a problem if the temptation to look might lead to panic selling. I have found myself less aware of what the market is doing (probably a good thing) since I have started using a new broker, separate from my bank.
Commsec also have a mobile app, although I have never really felt a need to check my investments when I can’t get to my computer (I don’t need the encouragement!)
Commsec allows investment accounts to be opened up in joint names, trusts, companies and self-managed super funds. This offers more flexibility than for many of the other brokers,
Commsec is integrated with Sharesight. Selfwealth and Pearler also integrate with share sight. Sharesight allows you to see all your holdings in one place and simplifies tax time.
Distracting Features (for most)
Commsec has thought up all sorts of complicated ways to increase their profits made off their customers.
The biggest risks to early investors are overconfidence and impatience. Just because CBA tell you it is easy to make a profit with advanced options, doesn’t mean it’s true!
Commonwealth Direct Investment Account
This account is the most cost-effective way to reduce brokerage costs. But I wouldn’t leave any cash in it after seeing this detailed breakdown of interest paid.
It’s a pretty good deal being able to purchase your investment and let them take the money from your designated bank account 2 days later – just make sure the money is there ready to go.
If you are impatient, Commsec is kind enough to offer you a loan at almost 3% above current mortgage interest rates. Check out these tantalizing rates (March 2021, sarcasm font)
And then, of course, you will have to pay for brokerage and find emergency cash in the event of a margin call. Sounds like a fast track to having your 1st cardiac event.
The website calls it powering up your portfolio and accelerating your wealth creation. They even suggest combining with “advanced strategies” such as exchange-traded options (a type of derivative).
They do have some warnings about the risks involved down the bottom of the page with some protective limits on who can open such an account. You cannot open an account unless you earn $50,000 and are happy to borrow up to 40% of your annual income.
Warrants are a type of derivative, and another way to leverage gains or losses. A company or bank normally issue a warrant. Owning the warrant gives you the right to buy a set number of shares on a future date at a predetermined price. A warrant can take up to 15 years to mature.
The cost of holding a warrant for significant equity is low. Leverage magnifies gains and losses by leverage. Losses are limited to no more than you have invested, unlike margin loans.
On top of the inherent high risk of these investments, there is a risk the warrant issuer won’t honour their side of the contract. The ASX does not guarantee warrants.
If the warrant issuer (Goliath) is significantly out of pocket, do you think the private investor (David) is going to get paid?
Exchange Traded Options
Options are similar to warrants, except they are issued by other investors. They are also shorter-term tools, maturing in up to 2 years.
Brought call options give the investor the right (but not obligation) to purchase a certain number of shares at a set price on a predetermined date.
Brought put options give the investor the right (but not obligation) to sell a certain number of shares at a set price on a predetermined date.
Sold call options mean the SELLER has to deliver stock if the brought put option investor wishes to complete to purchase the agreed stocks at the agreed price up to the predetermined date.
Sold Put options mean the SELLER has to purchase the stock at the price agreed up to the predetermined date if the put option investor wishes to complete the sale.
Options are high risk, high reward due to the leverage involved. For every option investor, there is an options investor betting in the opposite direction.
Commsec Review: Education Centre
“Commsec Learn” is a structured series of educational articles and videos that provides a short crash course in investing. It has short quizzes to check your understanding at the end of each section.
It’s common to feel quite lost when starting out as an investor. Structured introductory education is a useful resource. You do not need a Commsec account to use the education centre, you can access it from the Commsec website. Keep in mind, it is in Commsec’s interest for you to trade (and pay brokerage) often. This is very much normalized in their educational content. Despite evidence clearly demonstrating that minimising trading (and associated fees) is one of the best moves an investor can make.
Conflicts of Interest
Investing long term in index funds usually results in better returns than stock picking. Despite this, Commsec’s education centre also minimizes the benefits of new investors starting with broad and passive index ETFs.
Instead, its beginner education program touches on fundamental vs technical analysis of individual stocks and even offers a link to more information about margin lending.
I am feeling increasingly cynical, working through the Commsec education site. It goes on to encourage beginner use of their “Trading Tools” including recommendations from Goldman Sachs and Morningstar.
It does go on to make a sensible suggestion – to test your newbie “trading skillz” on the ASX trading game, without the risk of losing your money.
Some investors do well investing in individual stocks or trading. The majority do not. To suggest a beginner investor should start here reflects the conflict of interest involved in receiving your education from a brokerage platform.
Too Much Information?
Late in the education series, this useful video takes you through how to actually purchase your investment.
Commsec release three daily “market report” videos, perhaps useful for traders, superfluous for long-term investors. If we remember that studies have found the best investors are dead or have forgotten about their accounts. Being up to date with market conditions for most of us is harmful rather than helpful.
There is an enormous number of articles, podcast episodes and videos in the education centre. It is worth having a couple of sources of education, always being mindful of conflicts of interest. It’s important not to become obsessed and spend all your spare time doing this. Pick 2-3 sources of information you find relatable and subscribe. If you want to obsess, even more, there is a Commsec “Online community” where you can discuss investing with others.
Commsec Education Centre – Conclusion
The Commsec education centre has some really useful content, but it’s heavily skewed towards individual stock picking and frequent trading. Rask invest also has some free educational content which I think is quite useful. Despite a conflict of interest here as well (they offer a stock-picking advice newsletter), the information provided is less biased. Passive Investing Australia has fabulous detailed information beyond the basics, is free and can be worked through over a weekend.
Commsec pocket is a micro-investment platform, but it is CHESS sponsored. This is unusual amongst micro-investment apps and means that you legally own the investments. The ETF ownership information is held by an independent third party.
Micro investment apps are a great way to get started investing, for those with only a little money to invest, or those overwhelmed with options on what to invest in.
Commsec Pocket -Fees
The big issue, as always is fees. Many micro-investment apps charge a management fee – a percentage per month or year on the total you have invested. This works out very expensive the longer you are invested.
Brokerage becomes comparatively expensive the more frequently you invest, particularly with smaller amounts.
Commsec pocket charges brokerage of $2 for investments between $50 – $1000. Investing $1000 at a time, is 0.2% of the investment, and comparable with the main Commsec platform. Investing less than $1000 at a time is expensive, probably more than brokerage fee, management fee-charging RAIZ or Vanguard Personal investor.
Commsec Pocket Investments
Commsec pocket offers a choice of 7 exchange-traded funds. Less choice is probably quite helpful as a brand new investor. The choice of ETFs on the ASX can otherwise be quite overwhelming.
Investors will need a Commonwealth bank account, or CDIA account to fund investments from. If you don’t have a commonwealth bank account already set up, you can avoid account fees by opening a free Commsec account with a CDIA account. The CDIA account can then be used as your Commsec pocket settlement account.
Commsec Pocket Autoinvesting
Commsec Pocket also allows auto-investing, a great feature that is powerful in helping investors stick to the plan. Fortnightly or monthly investments can be scheduled to coincide with your pay schedule.
Commsec pocket is a reasonable option for those looking for an easy way to start investing, and able to invest $1000 regularly.
Read the full Commsec Pocket review.
Conclusion: Commsec Review.
Commsec is Australia’s largest brokerage platform. Brokerage is more expensive than competitors, and it offers no ability to automate investments (other than with Commsec Pocket).
Commsec does allow immediate purchase for settlement two days later, ideal for traders or those wanting to invest rapidly at a known price (eg in a falling market). It has a range of advanced options potentially suitable for some experienced investors.
This Commsec review finds the platform too expensive for dollar cost average investors wanting to follow a passive index investing approach. It has features that may make the extra costs worthwhile to experienced active investors and traders.
Aussie Doc Freedom is not a financial adviser and does need offer any advice. Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes.