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Streetwise Questrade expands mortgage lending footprint with deal for Ontario trust company

Questrade Financial Group Inc. is stepping into the lending and deposit-taking business after acquiring Mississauga-based Community Trust Co. for an undisclosed amount.

The deal, which closed on April 16, expands Questrade’s footprint in the financial-services industry beyond its traditional investment-management business. Community Trust specializes in commercial and retail mortgages. Questrade, meanwhile, is best known for its discount brokerage platform, which it promotes through a series of television advertisements that depict people firing their financial advisers so that they can invest at a lower cost.

Managing more than $9-billion in assets, Questrade charges $4.95 for stock trades and commission-free exchange-traded fund purchases. Earlier this year, the company slashed its management fees on its robo-adviser business – Questwealth Portfolios – to 0.25 per cent, making it the cheapest online portfolio manager in Canada. Together, the company’s brokerage and robo-adviser platform are opening 50,000 accounts a year.

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Community Trust first entered the industry in 1975 and is primarily a mortgage lender. With nearly $1.2-billion in assets – the vast majority in mortgages – the company provides both residential and commercial mortgages, term deposits and guaranteed investment certificates, and registered retirement accounts.

Questrade declined to provide a reason for the acquisition. Community Trust declined to comment. This is the first acquisition Toronto-based Questrade has made since opening in 1999.

The acquisition comes at a time when the financial-services industry is increasingly automating mortgages and other lending products through various online offerings, including mobile apps, in a bid to cut costs and improve convenience for consumers. A Questrade spokesperson said that in the near term, "the primary focus is to continue to grow both companies as separate businesses.”

Online investing and lending platforms have begun to emerge as bigger factors within the Canadian wealth-management sector, as the industry courts a generation of consumers who prefer to manage their affairs online.

At the same time, regulators have begun to push for heightened transparency around fees in the investing world. Online lenders, such as Borrowell and Lending Loop, have also emerged to address challenges many retail clients and small businesses face when accessing financing from traditional sources, such as Canada’s five big banks.

As an independent financial-services company, Questrade has been seen as a disrupter among its Bay Street competitors, hitting nerves throughout the financial adviser community with its marketing campaigns against the high fees that can be associated with investing in mutual funds.

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In 2017, Questrade sold its exchange traded-funds business to New York-based WisdomTree for $2.4-million. The deal provided WisdomTree with eight ETF products that held approximately $89-million in assets under management. At the time of the sale, Questrade president and chief executive Edward Kholodenko said the firm was exiting the business of manufacturing ETFs to focus more on its direct online and robo-adviser businesses.

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