Brokerage investment savings accounts | Page 38 | General comparisons | Discussion forum

I surmise that all? (most?) of the discount brokerages waive commissions for the buy/sell of money market mutual funds but each should confirm that before buying. Those few that would charge commissions would certainly be non-competitive with those that do not.

Also unlike ISAs in which discount brokerages could limit one to purchasing ISAs to A class with a trailer fee of circa 0.25% (because they are not mutual funds), discount brokerages cannot sell true money market mutual funds (MMFs) with a trailer fee per regulatory rules.

This often (or sometimes) makes a MMF yield higher than that of a Class A ISA (with trailer fee). Further, an ISA yield is rather opaque in that it is a deposit account with an interest rate set by the bank just like a savings account. You can be assured the banks are pocketing some spread in that area of business.

A MMF is transparent in that it must flow through all income net of expenses such as MER each month.

As a for example for myself: In my Scotia iTrade account, I buy the DYN6004 (Class F) ISA with a current rate of 4.25% rather than DYN6000 (Class A) version at 4%. On the other hand, over at BMO Investorline, they won't let me buy their Class F version of their ISA so I would have to buy their Class A BMT104 at 4% that has an implied trailer fee of 0.25%. So I say, nuts to that and I buy their BMO95142 Class F MMF with an MER of 0.13% and current yield of 4.5%..... but floating downward as holdings mature and new ones are bought at lower yield.

All of this is pretty much 'playing at the margin' though and there is minimal benefit of chasing rabbits for 25bp here or there.

So what have you guys been doing? Keep it there or moving to something else?

It's interesting, given that yields on 30-year treasuries went up last week.

https://www.cnbc.com/2024/09/20/treasury-yields-lower-as-investors-digest-unemployment-data.html

I am not fussed about the drop either. It is as expected and will continue to be so. I also never keep very much in USD cash equivalents anyway since my ongoing cash flow need for USD is minimal. A number of USD ISAs dropped late last week. I expect Scotia and BMO to follow sometime this week.

In many cases, retail investors cannot buy F class (0% trailer fee) ISAs at their discount brokerage....though they should be able too since there is no advisory relationship involved. Retail investors who cannot buy F class at their discount brokerage have little choice but to buy A class (typically a 0.25% trailer fee) though that might be discounted 10-15bp or so for large sums, e.g. >$100k.

Of the big bank discount brokerages, I am aware of only Scotia iTrade that will permit its account holders to buy F class of their DYN series of ISAs. I believe some independents like Questrade that will only let their account holders purchase F class of a variety of ISAs. In other words, luck of the draw.