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Email this8:46 pm
January 7, 2023
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Hello, We were talking to an Ontario Credit Union today, asking why the Broker Fiscal Agents can give a higher GIC % rate with a specific Credit Union, above what we would get investing with the same Credit union directly? The Credit Union response was that the insurance would be from/by the Broker, not the Credit Union for such an investment, that "it would not show on the Credit Union books" in our names! But if we look at the information on the broker website, it appears to suggest that the coverage is from the Bank or Credit Union? So, what is correct?. We would very much appreciate your expert advice regarding Brokers and who is actually responsible for insurance of deposits.
9:30 pm
August 4, 2010
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First, aside from exceeding the maximum deposit insurance in a particular category with an institution ($250,000 for Ontario credit unions, I believe), all deposits are covered by the applicable deposit insurance scheme no matter how they are purchased.
Second, GIC brokers such as Fiscal Agents only act as bookkeeping agents for you, and GICs purchased through them are in your name, not theirs. [For stock brokerage firms like Questrade or Scotia iTrade, etc. (not your situation), there can be a variation where they are "in trust", "in nominee name" or similar phrases, but the deposit insurance still applies.] Your credit union seems to have provided wrong or misunderstood information.
Where a GIC broker is providing a better rate (for the same deposit amount) than you can get directly from the credit union, it is likely because dealing with a bunch of individual customers costs the credit union money, and they may offer a lower rate than for the GIC broker channel where the broker is doing all the client work. It isn't because of a difference in deposit insurance.
10:07 pm
October 21, 2013
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I suggest you talk to branch manager or head office of CU. I too have been given completely false info by both CU and bank reps. Meridian rep in branch, whom I'd already been dealing with for at least a year, told me that it would take many weeks to clear a wire transfer; not true at all.
What this person probably meant is that he/she doesn't have access to the account, knows nothing about it, and can't answer any q's about it (which is true) - in which case they should refer you to a manager rather than making up an answer or passing on hearsay.
I don't know if this is what goes on or not, but I can imagine that it's not in the best interests of the branch or service rep to let you think the broker deal is more attractive. Some have been known to be completely shocked when told by a customer on the phone that this is an option. It never came up in their training.
Ontario CUs vary in policy as to how much they want to interact with those who buy through a broker. I know of one that will refuse to sell to you directly if they know you have bought one of their GICs from a broker as it would man you have two memberships. How would they know, since it doesn't appear on your statements from them? They know because they have another set of records for brokerage accounts; they know your name and they will be sending you a T5 and relevant cheques.
Other CUs may be more flexible. I know of another which welcomes those who bought through a broker, has no difficulty acknowledging them and their money, and invites them to invest more, directly!
11:13 pm
April 6, 2013
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Info on Fiscal Agents' site is correct about GIC's placed through in-client-name deposit brokers like them.
The info is also correct about GIC's placed through in-nominee-name deposit brokers like Scotia iTRADE or BMO InvestorLine. There is extra CIPF insurance when one buy's through an investment dealer like Scotia iTRADE or BMO InvestorLine. But, that extra insurance covers replacing any missing GIC certificates held in the dealer's name should the dealer fail. CIPF insurance does not cover anything if the GIC certificate doesn't go missing.
GIC issuers will offer better rates through deposit brokers from time to time because the issuers need to. If an issuer wishes to place $10 million of two-year GIC in the next two weeks through deposit brokers while another issuer is also offering 6.10% for two-year GIC's, then no funds are going to come in if the issuer offers just 5.75%.
2:31 pm
October 21, 2013
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Norman1 said
Info on Fiscal Agents' site is correct about GIC's placed through in-client-name deposit brokers like them.The info is also correct about GIC's placed through in-nominee-name deposit brokers like Scotia iTRADE or BMO InvestorLine.
We need to be clear about language here. iTrade and Investorline are not deposit brokers; they are investment brokers - as discussed by Northern Raven above.
Deposit brokers can be identified through the Registered Deposit Brokers Association, rdba.ca
11:34 am
December 12, 2009
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Loonie said
Norman1 said
Info on Fiscal Agents' site is correct about GIC's placed through in-client-name deposit brokers like them.The info is also correct about GIC's placed through in-nominee-name deposit brokers like Scotia iTRADE or BMO InvestorLine.
We need to be clear about language here. iTrade and Investorline are not deposit brokers; they are investment brokers - as discussed by Northern Raven above.
Deposit brokers can be identified through the Registered Deposit Brokers Association, rdba.ca
Agreed completely on the language distinction, Loonie (and NorthernRaven). It's an important distinction, notably as "registered deposit brokers" are not subject to any level of direct regulation as investment brokers and banks, trust companies, and loan and mortgage companies are. While they are similar in terms of services offered with respect to federally-regulated financial institution deposit acceptance and offerings, they're not the same. For example, if a bank or trust company terminates its relationship with a deposit broker, you now have to deal with that bank or trust company directly. In this way, the fintechs like Neo Financial are actually closer to that of a deposit broker than an investment broker. 
Cheers,
Doug
12:35 pm
April 6, 2013
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Investment dealers, like Scotia iTRADE and BMO InvestorLine, are also deposit brokers.
The Registered Deposit Brokers Association only represents part of the deposit brokerage industry:
Registered Deposit Brokers Association (RDBA) is the professional standards association for the Canadian client name deposit industry founded in 1986. …
Those who place deposits in nominee name, instead of in client name, are definitely not part of the RDBA.
There is no requirement for a client name deposit broker to join the RDBA. Many such brokers place deposits as a side business to a larger insurance or mutual fund retailing business.
12:50 pm
October 21, 2013
Online
That's true, Doug, as far as I know.
However, there is perhaps less need to regulate deposit brokers so closely since, unlike investment houses, banks, trustcos etc., they never actually hold any of your money; they only your cheque.
They do have the ability to get the FI you have chosen to open your account and deposit your cheque. I suppose that, in theory, they could do this at the wrong FI, although I have never heard of this happening. I always enclose written instructions with my cheque, to confirm my choice of FI, term and rate.
12:56 pm
September 7, 2018
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Loonie said
Ontario CUs vary in policy as to how much they want to interact with those who buy through a broker. I know of one that will refuse to sell to you directly if they know you have bought one of their GICs from a broker as it would man you have two memberships.
I think you are incorrect re "two memberships". I have purchased GICs from both the issuing FI and from a broker for the same issuer. I was in touch with the issuing FI and they say they do NOT issue 2 memberships - they check the client information to verify if the purchaser is already a member or not. They say they do not issue two memberships. But of course errors do happen and/or one can receive erroneous information, as we all know.
Which Ont CU told you they would not sell to you directly if they knew you had bought via a GIC agent? That is very odd.
9:35 pm
October 21, 2013
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I didn't say or mean that 2 memberships would exist. Rather, the FI feared that it might result in 2, or at least that was my impression. They were trying to avoid it.
Equity told me they wouldn't sell me a GIC if i had one through deposit broker. I'd like to think they've figured out a better approach by now.
4:30 am
September 7, 2018
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Loonie said
I didn't say or mean that 2 memberships would exist. Rather, the FI feared that it might result in 2, or at least that was my impression. They were trying to avoid it.Equity told me they wouldn't sell me a GIC if i had one through deposit broker. I'd like to think they've figured out a better approach by now.
Equity CU is a one branch CU with 3900 members, so they can easily monitor detail of their member information. I can understand they would not want members to buy from GIC brokers (at higher rates than Equity's listed rates) because the effect on their bottom line could be material. Their bottom line profit is only around $3M - on assets of $342M and liabilities of $324M a fairly "tight" operation.
2:08 pm
October 21, 2013
Online
On the other hand, they may, as a result, lose deposits from existing members. And there is the open question as to whether they will get what they need through deposit brokers, knowing they have to pay premium for it. It may have been fairly short term.
Yes, they're small, but generally not wasting money on frivolities and unnecessary branches.
I like Equity. I hope they didn't get burned from experience with deposit brokers.
4:24 pm
November 7, 2014
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Loonie said
I didn't say or mean that 2 memberships would exist. Rather, the FI feared that it might result in 2, or at least that was my impression. They were trying to avoid it.Equity told me they wouldn't sell me a GIC if i had one through deposit broker. I'd like to think they've figured out a better approach by now.
FYI : We have had simultaneous GICs with the same credit union, some without the use of a broker and some with. The credit union acknowledged this by having 2 separate account areas, one for the broker account and the other independant. These were not separate memberships. The CU was fully aware of our two methods of investing and had no issues with it.
As I have indicated elsewhere in previous entries, sometimes, if you ask nicely, the FI will allow you to invest directly with them at a broker "matched" rate. Sometimes they insist you go to the broker for the better rate.
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