Brokerage investment savings accounts | Page 19 | General comparisons | Discussion forum

"Order-Execution-Only Dealers"

qtrade's notice: https://help.qtrade.ca/hc/en-ca/articles/4879253623067-Mutual-Fund-Trailer-Fee-Ban-

Basically if you don't get advice, then they have to offer F series.

AltaRed said

That is only for actual mutual funds, not ISAs which are deposit accounts... as Norman1 has already explained. ISAs are NOT mutual funds.  

Not to put words in your mouth, but are you saying qtrade didn't need to switch to F series ISA's, because they're not mutual funds? Or that I'm just not linking to the proper ban for ISA's?
I called in when I got the notice, but I don't really recollect the conversation. Other than my simplified take ("Basically if you don't get advice, then they have to offer F series." - I called in to qtrade about my HISA's. They had notified me that I had to sell out of the fee based version).

AltaRed said
Technically they are incorrect but that is to your benefit since Series F will provide you with slightly better yield over their series A counterparts anyway. Let them go on thinking that.......  

You're right, but I would quibble, or just add a bit to what you're saying, in that Scotiabank is allowing their Series F funds to be distributed through Qtrade, which they don't have to do. As far as I'm aware, besides Scotia iTRADE, only Qtrade and Desjardins Online Brokerage have access to Scotiabank Series F funds (unsure about NBDB and HSBC InvestDirect). Other brokerages may only be to access Scotiabank Series A funds, if at all. In other words, Scotiabank could eliminate distribution of Series F funds to other brokerages at any time, meaning existing holders would only be able to sell that series of funds, or they may even be converted automatically to Series A if Scotiabank stops selling to other discount brokerages.

AltaRed said
Scotiabank has no reason to stop selling F series ISAs though via other brokerage channels as there is no net loss or gain to them (they are indifferent). Their F series DYN6004 generates the same gross yield as A series DYN6000. It is only the customer that sees less yield for A series....by exactly the amount of the trailer fee paid to the brokerage.  

That's all true, yes, but Scotiabank sees other brokerage firms cannibalizing Scotia iTRADE's business, through increased transfers out to specific institutions such as Qtrade or Desjardins Online Brokerage, they have incentive to restrict those institutions access to its Series F funds. It's the same reason why none of the other banks offer their Series F funds to discount brokerages. 🙂

Cheers,
Doug

AltaRed said
... and generate a profit margin.  

Not much of a profit margin, if any.

That's true that the majority of Scotiabank's retail deposits are not sourced through discount brokerage firms, so the reason they're able to generate net interest income on their retail demand deposits is the effective average interest rate on retail demand deposits is much lower than 4.50%. That trend is unlikely to reverse, so no I agree I don't see Scotiabank stop selling all ISAs through any brokerage firm. But they likely offer premium deposit rates to attract investors' dollars, at Scotia iTRADE, for when investors decide to redeploy that capital into capital markets. If Scotiabank sees other brokerage firms, such as those mentioned, holding an increasing share of the Series F version of their ISAs, they may cut those firms off, as they don't want to sacrifice Scotia iTRADE's #1 market share position in the discount brokerage space.

Cheers,
Doug

TDB8152 US$ ISA up from 4.40% to 4.65%

no change today? Canada just increases 0.25% today.

New short term instruments like 30 day Tbills and Bankers Acceptances will start to reflect higher yields almost immediately. You can buy TBills from brokerages but usually with fairly high minimums, with commission costs that detract from net yield.

You are usually better off investing in a short term flow through vehicle like a money market mutual fund or Cash ETF to start to see a yield uplift over the next week or two.

As Norman1 said, ISA rates will not change until the issuing institution wants to keep the deposits coming. In recent months, the big 5 banks have usually increased their ISA rates within a week of every change in BoC rates, and at amounts reflecting most, if not all, of the BoC rate increase.

Added: There is no reason for HISA rates or 1-2 year GIC yields to increase unless the issuers need to do so to compete with market alternatives like the bond yield curve that will reflect the 25bp increase in some way (more inversion most likely).