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Brokerage or online bank offering best GIC rates inside a RRIF or RRSP
March 12, 2019
9:10 pm
Lewis100
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This conversation has been incredibly helpful to me. I'd like to thank everyone who has contributed to it, and the diversity of experiences and circumstances that they have described. I feel that I understand the lay of the land a lot better now. This is how I see my situation now, and the issues that I'm still thinking about --

1. I will keep the equity portion of my portfolio at TDDI. There's no reason to move it.

2. For my fixed income, all of it for now in registered accounts (RRIF / RRSP / TFSA), one choice is to keep it at TDDI. This is the current situation, and it is the simplest to administer - a major consideration for me. But this comes at a cost of approx. 60 bp of yield on the GICs, compounded annually. Suffice it to say that the Fixed Income assets of me and my wife are large enough to make this a serious concern. Simplification vs yield -- which way the balance tilts depends on what the alternatives are.

3. One alternative is to use a deposit broker for our GIC purchases, transferring the funds out of TDDI as each of our current GICs matures. I'm rather unsure how this would work.
-- Would I have to open a set of registered accounts for each of us at the deposit broker, and would the broker hold the GICs in trust for us, as TDDI does currently?
-- How secure would our assets be in this situation, vis a vis the particular brokerage or during a general financial crisis like the one a decade ago?

4. It occurs to me that a simpler alternative might be to open registered accounts (RRSP / RRIF / TFSA) at Oaken and EQ bank, which consistently offer among the highest GIC rates to retail investors. I've dealt with them both before, with good results. I'd need to spread the $$$ between the accounts to stay within the CDIC insurance limits. (At Oaken the GICs of Home Bank and Home Trust are insure separately.)
-- The main disadvantage that I see with this arrangement is that I'd be limited to buying GICs from HB, HT, and EQ - but as long as their rates remain competitive and the CDIC guarantee applies, why not? Am I missing something here?

I suspect that the yield that I will capture at Oaken-EQ will be roughly comparable to what a deposit broker can get me. So the choice between them comes down to security of my capital and the easiest possible administration of the GIC ladder. If it's too complicated for my present circumstances I'll have to stay with TDDI and write off the lost returns.

Any further comments or advice?

Lewis100

March 12, 2019
10:35 pm
Loonie
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I did have deposits with a deposit broker some years back, so I do have some experience but it is not recent. At that time, it was my understanding that the broker does not hold the money, so safety was not an issue.
They are, as the name indicates, only a broker, the middle guy. They arrange the deals and take a commission from the FI. Your registered plans would be transferred directly from TDDI to whichever FI you are getting the new deal with. The broker helps with the forms etc, makes sure everything goes through. The money does not pass out of your control.
When your new GIC comes due, the broker will contact you and ask you what you want to do with it and tell you what they have on offer. If you choose, you can just move it somewhere yourself at that point. You are not obliged to remain with the broker. But the broker would like to retain your business and get another commission.
Think of it like a mortgage broker. A mortgage broker may get you a deal with XYZ bank or a private lender, but they do not make the loan themselves; they simply arrange it.

You should call some brokers and ask your questions directly, or, better, go visit them. FWIW, I have never heard of anyone having a problem with one. Just make sure they belong to their professional organization.

In the DIY model, EQ BANK does not offer registered accounts as far as I know, so I would not count on them to round out your insurance coverage.

Between you and your wife, at Oaken, you can get $400K of RSP insurance coverage and an equal amount of RIF and of TFSA - at least until you reach 71 and must convert your RSPs. Their rates have been good ever since they opened. They had a major financial crisis a couple of years ago as you probably know, so rates went up then and have been slower to come down, but I predict they will gradually become less competitive although still remaining good compared to TDDI.

Bear in mind too that, over the years, new FIs will come on board and you might prefer them. Meridian, for example, is about to go public with its new CDIC-insured bank any day now. EQ will eventually offer registered accounts, i imagine, but who knows how long that will take? Coast Capital is poised to go national with a federal credit union insured by CDIC. And so on.

In terms of consistency of rates, I think the meaningful competition for Oaken so far is from the MB credit unions. You may or may not feel comfortable with them, but they have the advantage of unlimited insurance, and, thus, one-stop shopping. I like Hubert, which is very easy to deal with. Accelerate is also popular. And some like Achieva.

Depending on your age and how you manage your RIFs, the disadvantage of Hubert from my point of view is that they do not offer any kind of one-year GIC for RIFs; it's OK for RSPs. For this reason only, I am putting my RIFs elsewhere, probably Accelerate or Achieva. I find Oaken unsuitable for RIFs or RSPs because they don't offer any registered savings accounts, so you must decide pretty much immediately what to do when a GIC matures; this is a bigger concern for RIFs if you are trying to customize your withdrawals for tax purposes.

So, in my view, it comes down to (1) use a deposit broker; (2) use Oaken and supplement with a MB CU or another new FI; or (3) just use a MB CU such as Hubert or Accelerate.

Bear in mind that if you use a MB CU, your estate will be subject to provincial rules there, which could change. This is the only part I don't like about moving my RIFs to Accelerate etc., but i'm probably going to do it anyway until something better comes along.

Yes, you could leave it all at TDDI, but it's going to continue to annoy you to do so; and who needs that?
$1,000,000 at 0.6% is $6,000 annually - about the same as your TFSA allowance, which, as you know, adds up. It's not just the compounding that is the problem; it's the annual losses compounded. Think of it as extra TFSA. You wouldn't give up the money in your TFSA, would you? In my view, the money justifies the inconvenience, which I think is slight, but that's your decision.

March 13, 2019
8:33 am
Doug
British Columbia, Canada
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Lewis100 said
This conversation has been incredibly helpful to me. I'd like to thank everyone who has contributed to it, and the diversity of experiences and circumstances that they have described. I feel that I understand the lay of the land a lot better now. This is how I see my situation now, and the issues that I'm still thinking about --

I'm glad you appreciated the insight and found it helpful. I trust you understand now the different between Home Trust/Equitable Bank deposit broker GIC rates and Oaken Financial/EQ Bank direct-to-consumer GIC rates. sf-cool

1. I will keep the equity portion of my portfolio at TDDI. There's no reason to move it.

Yeah, sounds good. If you're happy with them for equity trading, this makes sense.

3. One alternative is to use a deposit broker for our GIC purchases, transferring the funds out of TDDI as each of our current GICs matures. I'm rather unsure how this would work.
-- Would I have to open a set of registered accounts for each of us at the deposit broker, and would the broker hold the GICs in trust for us, as TDDI does currently?

Although typically members of the Registered Deposit Brokers Association ("RDBA"), an industry trade group not a regulatory body, the deposits you hold with deposit brokers are held in your & your wife's names. Typically, the deposits are beneficially held in your names through a nominee or held directly in your name through a platform like FundSERV. This is usually allows so that separate accounts do not have to be opened up with each institution. At any rate, regardless of the method used, the funds are, as far as I know, never held in the bank accounts of the deposit broker. The deposit broker is like an agent, with whom each FI can communicate on your behalf and to whom they pay the modest deposit broker commissions of say 5-10 bps. The actual assets are held directly with the financial institution as "personal" (if held directly) or "institutional" (if held in nominee form through CDS or some other clearing agency) deposits using FundSERV. If held in a registered plan, a federally-regulated trust company or bank will custody the plan assets.

-- How secure would our assets be in this situation, vis a vis the particular brokerage or during a general financial crisis like the one a decade ago?

There's never been an issue with deposit brokers. They don't hold the plan assets. Deposits remain insured by CDIC or provincial credit union deposit insurers, to applicable per depositor limits and as applicable.

4. It occurs to me that a simpler alternative might be to open registered accounts (RRSP / RRIF / TFSA) at Oaken and EQ bank, which consistently offer among the highest GIC rates to retail investors. I've dealt with them both before, with good results. I'd need to spread the $$$ between the accounts to stay within the CDIC insurance limits. (At Oaken the GICs of Home Bank and Home Trust are insure separately.)
-- The main disadvantage that I see with this arrangement is that I'd be limited to buying GICs from HB, HT, and EQ - but as long as their rates remain competitive and the CDIC guarantee applies, why not? Am I missing something here?

With respect, this is not a simpler approach. You may be able to get higher rates than the Home Trust and Equitable Bank deposit broker rates, but you're missing the fact that you've got access to credit unions in other provinces that deal only with deposit brokers unless you go in face-to-face (think: Tandia, Omnia Direct, etc., in Ontario) not to mention other Manitoba credit unions (think: Niverville Credit Union, one where my former work colleague had GICs at rates comparable to or higher than Hubert Financial). As you mention, you'd have to open accounts with every single institution. The deposit insurance does not change going through a deposit broker!

I suspect that the yield that I will capture at Oaken-EQ will be roughly comparable to what a deposit broker can get me. So the choice between them comes down to security of my capital and the easiest possible administration of the GIC ladder. If it's too complicated for my present circumstances I'll have to stay with TDDI and write off the lost returns.

Again, with all due respect, have you been reading everything that Loonie, Bill, others, and I have written? Oaken and EQ Bank, the direct-to-consumer divisions, while top rates in that channel, are not the highest rates in Canada. Consider the best rate on a 5-year GIC is 3.75%, if not higher, as at March 13, 2019, and none of those institutions offer such a rate. You seem concerned with missing out on up to 60 bps in deposit interest yet seem satisfied with limiting yourself to 3.30% (45 bps lower than the highest in Canada). This strikes me as a peculiar paradox. 🙁

Cheers,
Doug

March 13, 2019
1:29 pm
semi-retired
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Doug Just wondering where the 3.75 for 5 years is ?The highest I've seen is 3.6 for 5 years.My buddy got 3.75 as a promo from Meridian back in Feb but that is over.

March 13, 2019
1:36 pm
Doug
British Columbia, Canada
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semi-retired said
Doug Just wondering where the 3.75 for 5 years is ?The highest I've seen is 3.6 for 5 years.My buddy got 3.75 as a promo from Meridian back in Feb but that is over.  

I'm not sure which institution it was, or when it was last updated, but I believe I was referring to either of the GICwealth or Desjardins Financial Security Investments websites that Loonie and I linked to in previous posts. It may have also been Omnia Direct.

At any rate, the top 5-year GIC rate should be ~3.6%, which still bests those offered by EQ Bank and Oaken Financial. sf-cool

Cheers,
Doug

March 13, 2019
1:49 pm
Lewis100
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At the time of my previous post I wasn't aware of the problems with registered contributions at EQ or Oaken / Home. After posting, I found other threads on this site that highlighted the problems with them.

With the additional information provided in response to my last set of questions, I've decided on a course of action, namely, to explore the option of working with a deposit broker. That's my preference. If, for some reason I find that it's not workable in our situation, I'll turn to the option of setting up registered accounts at one of the alternative banks or credit unions.

So, from my perspective we can close this conversation now. (Though if anyone wishes to share some final thoughts, please do.) I reiterate my thanks to everyone who has helped to clarify the issues here. With the greatest respect, I can assure you that I have read carefully and thought about every one of your contributions.

March 13, 2019
6:28 pm
JenE
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semi-retired said
Doug Just wondering where the 3.75 for 5 years is ?The highest I've seen is 3.6 for 5 years.My buddy got 3.75 as a promo from Meridian back in Feb but that is over.  

Tandia Financial Credit Union has a 3.75%, 5 year GIC

March 13, 2019
6:38 pm
Loonie
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Sounds like a plan! I'm glad we could help. Thanks for getting back to us.
Good luck!

@semi-retired. Tandia credit union in Toronto is still offering 3.75% for five years as of right now, but you need to go in person to open membership. You may or may not find a deposit broker somewhere who can offer you a similar deal.

March 13, 2019
7:25 pm
Doug
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Thanks, JenE and Loonie...Tandia, maybe that's where I saw it. sf-cool

Cheers,
Doug

March 13, 2019
7:40 pm
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Thanks for the Tandia tip.Unfortunately I am too far from Toronto.Will probably go with Hubert.

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