Seventeen years after the launch of CommSec, National Australia Bank (NAB) has finally responded with a share trading platform that is seriously competitive. To be fair to NAB, they have had an online trading platform for more than a decade, however the previous platform was just a rebadge of another broker’s service and suffered from chronic under-investment.

More than $100 million in investment later (if you believe the industry rumours), NAB has launched nabtrade. With a headline price of $14.95 on trades up to $10,000, some powerful research and analytical tools, a very competitive interest rate on cash balances, and a pretty sleek design – this platform is worth considering.

Pricing

Let’s go straight to the brokerage and interest rates. NAB charges $14.95 on trades up to $10,000, then $29.95 or 0.11% on trades over this amount. This compares favourably with the other major online brokers, as the table below shows.

Competitive, but not market leading brokerage. The interest rate story is far more interesting.

Like CommSec, nabtrade has integrated into the platform a standalone bank cash account. Unlike CommSec, the nabtrade cash account is compulsory (you can’t settle to another bank account), and comprises two accounts – a ‘cash account’ and a ‘high interest account’. For some reason, you have to apply separately to open the ‘high interest account’ (this can be done online after you have opened the initial account).

High interest

Now for the good news. Nabtrade is paying 4.50% pa on any size balance up to $1 million in the high interest account – a whopping 1.25% over the Reserve Bank’s benchmark interest rate! CommSec, by comparison, pays only 3.50% on its high interest account. Whether this rate will last, time will tell – however an SMSF can almost think of this ‘platform’ as a place to park and invest its cash.

The usual caveats apply – you get paid next to nothing (0.25% pa) on funds in the ‘cash account’ and if you have a share transaction coming up, you need to go online and move the cash back from the high interest account to the cash account before the settlement date. All painful (this is how banks make money), however if managed actively, your fund can earn a very competitive interest rate.

Research and tools

The nabtrade promotional video says “nabtrade is designed by traders, for traders” and in this respect, they have put quite a deal of effort into the research and analytical tools. Research is provided by Morningstar (nearly every retail broker in town uses this or ‘rebadges’ it), and two American-based quantitative research firms – Columbia Capital and Ativo Research. In addition, nabtrade has taken a tool from Morningstar that they have branded as ‘nabtrade Research Team’ which consolidates the research from the three providers and produces a single recommendation. This recommendation is tracked – so you can see how reliable it has been over the last six months.

Some of their tools, such as their stock scranner, are pretty neat, as is their market snapshot that automatically updates to give a concise picture of what the market, individual stocks, and sectors are doing on a real-time basis.

That said, this technology is clearly sourced from America – very important considerations for Australian investors, such as whether a dividend is franked or unfranked, and the level of franking, are largely missing. For example, while you can do a ranking of all stocks by dividend yield or dividend payout ratio – you can’t rank stocks by their franked dividend yield. Dividend imputation is not a concept that Americans understand!

What we don’t like

Apart from some localisation issues, the other major weakness is that the ‘depth’ of market is two clicks away. Nabtrade does offer the usual platinum plan for very active traders (streaming market prices and potentially IRESS Trader), however for the bulk of investors who will be using their gold or silver plans (qualification is not very difficult), you need to first punch in the stock code and click, and then click again on a separate button to bring up the market depth. This is particularly frustrating (and time consuming) if you want to review several stocks, particularly those that are less liquid and where depth is important.

The account opening process also needs some work. Some innovative features have been introduced (such as electronic verification of your identification – a very big plus), however NAB still requires a ‘wet’ signature, I think I had to key in my address four times (once for each of the trustee, fund, and the two members), and it is pretty easy to get lost – there is next to no information about the process and how to complete the steps to finalise your account. Teething issues, no doubt.

The bottom line

There is no doubt about it – it is an innovative broking platform and in some respects, streets ahead of the competition. As with any new platform, there are some obvious improvements that can be made – so when these are addressed, it is going to be fairly impressive. This is good news for investors. It will also encourage NAB’s competitors to respond and improve their offering.

I think this product is worth a try – and for many SMSFs, that cash rate is very tempting.