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Brokerage or online bank offering best GIC rates inside a RRIF or RRSP
March 11, 2019
11:42 am
Lewis100
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I have a set of laddered GICs in my RRSP at TD Waterhouse / Direct Investing. The problem is that the yield on the GICs that TD sells for this account is approx. 0.60% less than that offered by EQ bank and others.
Example: 5-year GIC through TD, 2.82%, through EQ or Oaken, 3.40%.
Over time, this differential will add up to a lot of money.

As the GICs mature, I would like to transfer the cash to an account at another brokerage or online bank, one that can offer me significantly higher rates. But I don't want to be locked in to buying only GICs from that institution -- for diversification I want a choice of GICs.

Any suggestions?

March 11, 2019
12:07 pm
Doug
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As each discount brokerage has different GIC and HISA offerings that they make available, I can't say with any degree of certainty whether they'd be available or not. You could, I guess, open up multiple discount brokerage accounts, but be mindful of annual administration fees when your combined personal account or household account balances are under a set threshold (usually $15,000).

What I can do is share with you the GICs available at Scotia iTRADE, where I have my discount brokerage accounts. They are in three PDF files, one with 30-90 day cashable GICs, one with 6 month cashable GICs, and one with 1-5 year non-redeemable GICs.

Annual GICs - 1-5 years - https://drive.google.com/open?id=1MUgnAfYVGNzg8FOzK2ljcxDM--TJ7E0P
6 month GICs - https://drive.google.com/open?id=1iWJqeGmZrH1WDC7uMmx0kHEW99KPv6Kk
30-90 day cashable GICs - https://drive.google.com/open?id=1UeAZzZnvPT_JsjHcWUYcXpu7duKNdMEM

In terms of savings accounts, generally speaking, among the "Big 5" anyway, each makes available only the series A HISA funds. Through various issuers, Scotiabank's HISA savings accounts (series A) for personal customers in CAD funds pay 1.65%. TD's brokerage savings accounts (series A) pay 1.60%.

I do have a Virtual Brokers account I've never used, but have to work on some other things right now. I'll try and get their GIC availability on or before next weekend. sf-cool

Cheers,
Doug

March 11, 2019
12:47 pm
Doug
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Also, a few more things to note:

  • That when your GICs mature inside of an RRSP or RRIF, there will be transfer out fees (usually at least $50 each time) to transfer part of your funds out to another brokerage account; and,
  • That the rates quoted may be different than the rates quoted on the public websites of certain institutions (i.e., Oaken Financial). This is influenced by two factors: (1) the rates for the institution's deposit broker channel are almost always lower than their branch and/or direct-to-consumer channels, owing to the fact that they can pass on the broker commissions to the client (i.e., it's a cost of convenience of having your GICs in one place in a deposit broker channel) and (2) there are deposit broker commissions that are, at minimum, usually 5-10 bps.

Some institutions don't always note their deposit broker GIC rates, either. The following are some of the deposit broker rates for respective institutions:

Will try and update this list by this weekend.

Cheers,
Doug

March 11, 2019
2:57 pm
Lewis100
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Hi Doug,

Thank you for your rapid and precise answers.

1. The amounts that I am dealing with are such that neither transfer fees nor account minimums are a factor.

2. Looking at the rates offered by Scotia iTrade for 1 to 5 year GICs, I see that they are, by and large, the same as those offered by TD Direct Investing. There is a larger choice of issuing institutions than at TDDI, but only minor differences in the rate.

3. My understanding is that I can open an RRSP account at Oaken and then buy a GIC issued by either Home Bank or Home Trust, both subsidiaries of Oaken, at the rates posted here: https://www.oaken.com/gic-rates/. As you can see, 3.40% compounded, for 5 years. A friend of mine did this last week for his RRIF. But one of your links directed me to a different site, https://www.hometrust.ca/deposits/deposit-rates/deposit-rates-home-trust/, where the posted rates are markedly lower, for example 2.83% for five years. That's in the range of rates offered by TDDI or iTrade, the rates that I'm trying to avoid.
-- What accounts for the difference between the two sets of posted rates for Oaken / Home Bank?

4. Diversification between the GIC issuers and simplicity of administration are major considerations, so I'd much rather hold the GICs in one -- or two -- accounts that give me a choice of issuers at the best possible rates.

Possible? Has anyone else out there found a way to resolve this dilemma?

March 11, 2019
3:32 pm
Bill
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Lewis100, I think you'll find the rate offerings pretty much the same among the discount brokers. At any point in time they're lower (as you've noticed) than the absolute top rates but it's more convenient than having to worry about transferring your registered account because your chosen fi's rates are particularly unattractive when your GICs mature. You'll have to weigh whether or not the lower rates are a price you're willing to pay for the convenience.

Note also that Home Bank and Home Trust are not subsidiaries of Oaken. "Oaken Financial" is just another name for Home Trust that it uses to sell its products, and Home Bank's, at direct-to-consumer level.

March 11, 2019
3:53 pm
dentgal
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Lewis, most of my RRSPs are at Scotia MacLeod. As you mentioned, their GIC rates are not competitive. I did purchase my own OAKEN RRSP GIC last year.

March 11, 2019
4:00 pm
Loonie
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Lewis, you've already been given some good information, and Bill has summed up the situation pretty well. It boils down to simplicity and convenience versus rates.

Since you're obviously talking about a lot of money, the difference in yield will probably be significant enough that you'll probably be motivated to take on a little inconvenience to get what you want and deserve.

I think there are some ways you can mitigate the inconvenience factor, but, first, tell me whether it is important to you to remain within CDIC limits and whether you are willing to go with credit unions that are insured by provincially regulated bodies. You said your reason for wanting access to several FIs' GICs was "diversification". Can you be clearer about what you meant by that, i.e. what sort of diversification you need and why it matters to you? The answers will influence what I suggest. If you are willing to tell us how much money you are dealing with altogether, that might also help narrow it down - bugt not essential.

One idea that occurs to me, regardless of answers to above, is a GIC broker. They handle GICs from a variety of FIs and can negotiate good rates. It's essentially bulk buying. If you develop a good relationship with them, they can sometimes get you non-advertised rates or rates that are only valid through them and for a very short time. They look after all the paper work for you, and, as it's an RSP, there are no T slips to worry about processing at your end.

I am not currently dealing with a GIC broker, although have in the past. There are members here who do and can probably make suggestions, in which case the most relevant question is, where do you live?

I get email updates from one called GICWealth, in Toronto.
Today's email included the following:
Special Rates
1 year 3% *
2 year 3.25% *
3 year 3.55% *
4 year 3.40% *
5 year 3.55% *
5 year 3.75% **
Minimum Investment $25,000*
Minimum Investment $100,000 **
CDIC Deposits Insured up to $100,000
DICO Deposits Insured up to $250,000.

I believe DICO RSPs are insured with no limit actually.
I believe these rates should be available for RSPs but can't say for sure.
Their regular rates, no minimums as far as I know, can be found here: http://moneyguide.ca/mggold/rs.....nual.shtml

Their home website is https://gicwealth.ca/

I must stress that I have never dealt with them personally, but other members of this forum have. And there are other alternatives. Hopefully others will comment.

March 11, 2019
4:19 pm
Doug
West Kelowna
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Lewis100 said
Hi Doug,

Thank you for your rapid and precise answers.

1. The amounts that I am dealing with are such that neither transfer fees nor account minimums are a factor.

Oh, okay, that's good. I just wanted to make sure you'd be aware of that. sf-cool

2. Looking at the rates offered by Scotia iTrade for 1 to 5 year GICs, I see that they are, by and large, the same as those offered by TD Direct Investing. There is a larger choice of issuing institutions than at TDDI, but only minor differences in the rate.

Oh, that's interesting that Scotia iTRADE's GIC offerings is actually greater than TD Direct Investing (I had thought Scotia iTRADE's was pretty slim).

3. My understanding is that I can open an RRSP account at Oaken and then buy a GIC issued by either Home Bank or Home Trust, both subsidiaries of Oaken, at the rates posted here: https://www.oaken.com/gic-rates/. As you can see, 3.40% compounded, for 5 years. A friend of mine did this last week for his RRIF. But one of your links directed me to a different site, https://www.hometrust.ca/deposits/deposit-rates/deposit-rates-home-trust/, where the posted rates are markedly lower, for example 2.83% for five years. That's in the range of rates offered by TDDI or iTrade, the rates that I'm trying to avoid.
-- What accounts for the difference between the two sets of posted rates for Oaken / Home Bank?

Please re-read what I wrote - I explained this difference, I thought, quite well in my original reply to you where I discussed deposit broker rates versus direct-to-consumer rates. To get those Oaken Financial and EQ Bank rates, you'd have to open separate accounts with each of Oaken Financial and EQ Bank and then transfer out (with the requisite partial RRSP/RRIF transfer out fee).

After you've re-read what I originally wrote, let me know if you're still confused, and I'll try and rephrase. sf-cool

4. Diversification between the GIC issuers and simplicity of administration are major considerations, so I'd much rather hold the GICs in one -- or two -- accounts that give me a choice of issuers at the best possible rates.

Possible? Has anyone else out there found a way to resolve this dilemma?  

It's possible to use a deposit broker, if that interests you. I've never used them, but a former colleague of mine used MGI Financial (since acquired and rebranded as Desjardins Financial Security). She dealt with the Regina office and was very happy with them. They are located at: https://investdfsi.ca/

From there, click on "Top Rates," or here, and you can see the best rate available for given provinces is 3.50%.

Hope that helps,
Doug

March 11, 2019
4:25 pm
Loonie
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Looks like our thoughts were overlapping, Doug! I had just amended mine to add info about GIC brokers when I saw what you had written. Didn't read your earlier post thoroughly.

Lewis: Doug's "deposit broker" and my "GIC broker" are the same thing.

March 11, 2019
4:28 pm
Doug
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Loonie said
Looks like our thoughts were overlapping, Doug! I had just amended mine to add info about GIC brokers when I saw what you had written. Didn't read your earlier post thoroughly.  

No problem...thanks for your reply as well, Loonie. I think Lewis should be pretty well covered now. I echo what you said...it comes down to convenience and simplicity. Assuming he also has stocks and/or ETFs at TD Direct Investing, what may make the most sense, to me, is to do a partial transfer out of his self-directed discount brokerage RRSP (the cash and GIC portions) to a deposit broker, such as the one you suggested or Desjardins Financial Security that I suggested. It would be better than opening a half dozen or more RRSPs at each respective bank or credit union, but that's always an option, too.

Cheers,
Doug

March 11, 2019
4:33 pm
Loonie
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It would be good in theory to make a large lump transfer, but as I understand it they are not all maturing at the same time so might be difficult to do that, no?

March 11, 2019
4:38 pm
Doug
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Loonie said
It would be good in theory to make a large lump transfer, but as I understand it they are not all maturing at the same time so might be difficult to do that, no?  

Depends who the GICs are with. My understanding is if both institutions deal with those GIC issuers, GICs can be transferred out in-kind, no?

At any rate, the GICs could be transferred out as they mature, as you suggest.

Cheers,
Doug

March 11, 2019
5:23 pm
Loonie
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I odn't know what can be done, but he could try. Nothing to lose.

March 11, 2019
5:40 pm
Lewis100
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Thanks to everyone who has contributed to this thread. I'll think about what has been said here and return to the thread, tomorrow if I can.

March 12, 2019
8:17 am
Londonguy
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Lewis100 said
Thanks to everyone who has contributed to this thread. I'll think about what has been said here and return to the thread, tomorrow if I can.  

I dealt with a similar problem recently. I finally got fed up with the poor interest rates available to me through my TDDI account, so I opened up a number of new accounts at other institutions and transferred the bulk of the fixed income portion of my TD portfolio into them, leaving only the equities in place at TDDI. Same asset mix, just held in different places now.

Sure, I had to eat some transfer-out fees, and I also lost some revenue while sitting in cash waiting for TD to get off their duffs and process the transfers, but you recover that shortfall pretty fast with the improved returns available elsewhere. If you can secure at least partial fee rebates or transfer-in bonusses to reduce the hits to your accounts, so much the better.

Granted, the more money we're talking about, the greater the incentive to move, so I concede that YMMV and it might not be worth the hassle for smaller accounts. For example, TD's $135+HST transfer-out fee on a $5,000 account is obviously a lot bigger pill to swallow than eating $135 on $1,000,000

March 12, 2019
9:20 am
Doug
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If you don't tell the receiving institution that you're just going to park the funds in a non-commission GIC (or GICs), most, if not all, online discount brokers offer fee rebates of between $125-150 CAD, per account, provided that each transfer of new money is between $15,000-25,000 (varies per institution). sf-cool

I still think, if you don't mind visiting a deposit broker in-person, you'd be better off at least consolidating your GICs and HISAs within a single RRSP, RRIF, and/or TFSA and then maintaining discount brokerage accounts with a single discount broker for your equities, especially since you can get 3.4-3.7% on a 5-year GIC as the top rate (just as good or better than opening up individual bank accounts). sf-cool

Consider your executor, too, please! The banks will require probate on non-registered account values over $50,000 (they can require it on amounts below that value, but that's the typical value that the Branch Manager can authorize waiving of probate; at HSBC Bank Canada, the DVP could authorize up to $100,000 or something like that) and likely will have estate administration fees on registered & non-registered accounts at each institution. As they try and squeeze additional non-interest revenue, they may start enforcing expensive $15-25 per transaction fees for each debit to your accounts, too. sf-cool

(As a personal aside: If I was your executor and had to deal with more than 3-4 financial institutions, I'd definitely take advantage of the maximum permissible executor fee that I legally could take as it would require significant legwork and expense on my part to administer. Just sayin'! sf-wink)

Cheers,
Doug

March 12, 2019
10:08 am
Londonguy
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Doug said

(As a personal aside: If I was your executor and had to deal with more than 3-4 financial institutions, I'd definitely take advantage of the maximum permissible executor fee that I legally could take as it would require significant legwork and expense on my part to administer. Just sayin'! sf-wink)

Fair comment, but my executors and heirs are one and the same, so they'd only be jamming themselves if they wanted to max out their executor fees to the estate. Even worse, they'd be unnecessarily creating taxable income for themselves as executors while reducing their non-taxable inheritance amounts.

Maybe I'm an oddball, but IMO a bit of extra paperwork and some extra running around won't be such a burden to my heirs if the estate is worth thousands if not tens of thousands more in value because the old boy made a sport out of shopping for the highest rates of return while he was still alive

March 12, 2019
10:59 am
Doug
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Thanks, Londonguy, for your reply. sf-cool

In that scenario, you make a good case for not charging an executor fee except that, even if you have multiple heirs, you likely only have one (1) executor. Assuming each heir had an equal share of the estate (or that portion of the estate not donated to charities), that executor has extra legwork (possibly significant extra legwork) and an estate administration fee could be one way to compensate for those extra efforts whilst maintaining the equal shares to the estate.

I would, however, take exception to your characterization of estate settlements being tax-free to beneficiaries. While true, the estate itself still has to settle its final tax bill, including any capital gains from deemed or real dispositions of such assets or from the final withdrawal from tax-deferred registered plans. So, ultimately, while not directly taxed, beneficiaries are beneficially paying the taxes owing by your estate. sf-cool

As for me, I have no children and am having difficulty with who to name as an executor or even as beneficiaries, for that matter. I do technically not even have a will, despite my net worth being ~$250,000. I justify this by the fact that (a) most of my assets are held in registered accounts, with either my parents or my sister designated as beneficiaries and (b) of my non-registered assets, the asset values are such that probate would still be required even if I'd had a will. Dying without a will would see those assets transfer first to my parents and then to my children, assuming I remain unmarried (which is the plan). So, essentially, I'm paying to have a will done up when the provincial legislation largely says the same thing. That being said, with no beneficiaries, I would like to set up a perpetual charitable giving fund via some community foundation.

Cheers,
Doug

March 12, 2019
12:51 pm
Londonguy
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Doug said

In that scenario, you make a good case for not charging an executor fee except that, even if you have multiple heirs, you likely only have one (1) executor. Assuming each heir had an equal share of the estate (or that portion of the estate not donated to charities), that executor has extra legwork (possibly significant extra legwork) and an estate administration fee could be one way to compensate for those extra efforts whilst maintaining the equal shares to the estate.

We actually made the kids co-executors, as did my parents before me, but it's a two-stage default.

My spouse and I set our wills up such that we made each other our executor. The 2 kids then become co-executors of the surviving spouse, or if both of us has passed simultaneously. In short, we wanted to make sure that the surviving spouse retains 100% control of the parental assets if only one parent has died, because in Ontario, if you die intestate, those 2 kids can make a substantial claim (nearly 2/3) on a deceased parent's estate even if the other parent is still living.

I love my children, but I definitely did not like the thought of my spouse trying to survive the rest of her days on 1/3 of our assets while the kids are driving around in Ferraris and taking world cruises on the other 2/3. While that scenario would be most unlikely in our clan, better to simply remove the temptation.

BTW I admire your philanthropic bent -- how about "The Doug Foundation" -- better get that trademarked before somebody else takes it

March 12, 2019
1:17 pm
Doug
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Londonguy, the way you have it set up makes sense - that's how my parents have it set up, such that if my dad predeceases my mom, she inherits everything. I think that makes the most sense. Each serves as executor for each other, though they have my dad's brother set as the executor because my sister and I were minors when the original was made. I've suggested a change to the contingent executor(s) to either me or my sister & I, but I guess it's not a substantial enough change to change the will just to change the contingent executor(s). sf-cool

If the surviving spouse wants to provide a gift to your children before she passes away, she is, of course, more than welcome to do that, but I agree that you wouldn't want her to give up potentially 2/3 of the investment assets that have been set aside to provide her with sustaining retirement income.

As to "The Doug Foundation," I probably wouldn't establish my own independent foundation because of the added legal, trustee, and administrative costs. I'd probably just establish a restricted endowment fund with the Central Okanagan Foundation or Vancouver Foundation and then specify that the net income from investments, after all administrative and investment management fees, are to be distributed to my designated causes. Preserving land is important to me, so I'd probably also leave a similar fund with either of the Central Okanagan Land Trust, Nature Trust of B.C., or Southern Interior Land Trust. sf-cool

Cheers,
Doug

P.S. At 35, I am probably a fair bit younger than you, so I've got time on my side to get this arranged. sf-wink

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