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GICs through discount brokers
July 11, 2019
5:47 pm
kelbee
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I guess it makes sense but there usually is a bit of a hit to buy a GIC from an institution through something like TD Direct Investing or Questrade than through the institution itself.

eg. 5 year GIC for Cdn Tire Bank is 2.58% through Cdn Tire Bank but only 2.33% through TD Direct Investing.

However there is a convenience to be able to buy from multiple institutions from a discount broker rather than having all those accounts at various institutions.

For some of the banks it is just weird.

eg. 5 year GIC for BNS is 1.6% posted on their website but 2.33% through TD Direct Investing. I hope anyone approaching BNS demands at least what they pay through TD Direct Investing.

July 11, 2019
6:05 pm
GICinvestor
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You can still do better diversifying yourself. The convenience of having one source of many all with their own CDIC coverage is nice. But also compare as attached fresh off of iTrade (owned by BNS) to the GIC Chart here. Screen-Shot-2019-07-11-at-6.01.45-PM.pngScreen-Shot-2019-07-11-at-6.01.59-PM.png

July 11, 2019
6:07 pm
Doug
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I can get 2.34% on BNS 5-year GIC through Scotia iTRADE, which is equivalent to TD Direct Investing, not 1.6%. I think you might be quoting BNS' 5-year GIC rate offered through their online and branch network channels. Such channels usually offer premium rates to deposit broker channels because they, generally speaking, (I disagree with Norman on this), (a) offer lower cost and (b) offer the cross-sell potential; however, this isn't always the case. Notably, Coast Capital Savings Federal Credit Union, which is a markedly lower credit than Bank of Nova Scotia, cut their direct-to-consumer GIC rates to sub 2.00% pretty much across the board meanwhile offered deposit broker rates higher than the direct-to-consumer rates. Perhaps BNS is trying to do this because they need the deposits and are having trouble raising deposits in the branch network due to uncompelling products? 😉

Here are BNS, ADS Canadian Bank, National Trust, and Montreal Trust GIC rates as at today's date through Scotia iTRADE:

Bank of Nova Scotia
1-year: 2.100
2-year: 2.190
3-year: 2.220
4-year: 2.290
5-year: 2.340
DBRS rating: AA (outdated, as at 2013)
Minimum purchase: $1,000

It amazes me that companies like Coast and Meridian think they can get away with 2.10 or 2.00% on a 1-year GIC despite having significantly lower credit ratings than BNS. sf-cool

Cheers,
Doug

July 11, 2019
6:53 pm
Loonie
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I think Meridian etc don't need the money very badly right now. If they did, they'd offer more, wouldn't they?

I think it depends to a large extent on how much money you have in GICs. The more you have, the bigger difference those extra bps can make.

When I get to the stage where managing all this is too much bother, I'll probably just use a deposit broker and maybe keep some on auto-renewal at reliable FIs. You can do almost as well with a deposit broker as you can do on your own, and occasionally better. They look after all the transfers; you just decide from among their offerings.

July 13, 2019
9:24 am
GICinvestor
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Loonie said
When I get to the stage where managing all this is too much bother, I'll probably just use a deposit broker and maybe keep some on auto-renewal at reliable FIs. You can do almost as well with a deposit broker as you can do on your own, and occasionally better. They look after all the transfers; you just decide from among their offerings.  

I sort of agree with that. If I was to pass away my spouse would be lost, as far a managing the investments. And if the decision was to be made that way I would go back to what I know...Manulife.

But how would you:
Accept the lower rates
Accept the fee for a non registered/RRSP/RRIF Account
Accept the additional fee for the TFSA Account
Deal with transfer fees for registered accounts

The like is:
Only one person to deal with for probate and POA
No out of province issues as I would have now
Can do everything by phone or email instructions

July 13, 2019
9:43 am
AltaRed
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If one has a discount brokerage account (or even a full service commission brokerage account), most folks would have, in aggregate, enough funds across accounts to qualify for account fee-free TFSA, RRSP/RRIP, non-registered accounts. I really don't know anyone who pays account fees any more based on aggregated sums.

Virtually all discount brokerages will reimburse up to $150 in transfer fees (get it in writing/email/text first). At least that is the way the big 6-7-8 discount brokerages work.

The trouble with what Loonie, GICInvestor, and perhaps others forget about is there may be only a 50/50 chance of an investor becoming aware they are losing their cognitive abilities, and further to that, an accident, heart attack, or a stroke or? could render one incapacitated at any time. The longer one waits, the higher the risk of an unplanned event.

What I have done for my POA and Executor, kept in my electronic Estate folder, is keep a list up to date of all the important materials, including FI and account numbers of every financial account, and push/pull EFT links, and I also have a hand drawn flow chart showing all the links between accounts. I also have PDFs of all my account statements in My Documents folder. That way, if I drop dead or have a stroke before I complete this post, the materials are always up to date! Lastly, they know how to find the password for my LastPass password manager for online access to my entire world.

And as I have said many times, I don't have the inclination to have accounts all over the place. My assets are all in 2 big bank institutions with the exception of a US domiciled chequing account and one online banking FI (HISA/GIC). I have no desire to ever have accounts with more than one FI on the list of institutions on this forum at any given time. If I want more interest than what I can get with a GIC with a discount broker, I will buy a 5 year BBB/BBB+ corporate bond with a regulated* entity instead, that likely betters any GIC rates quoted in this forum.

* Such as a secured note with a utility, pipeline or telecom, etc.

July 13, 2019
1:55 pm
Loonie
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I'm not quite sure what AltaRed's point is in regards to what I'm currently forgetting.
Yes, we are all subject to declining cognition. We all have or should have POAs in place with details and instructions.

However, what I was referring to when I said I would move to deposit broker when I can't be bothered with all this any more is that interim phase of life when one still has cognitive powers but may have other limitations or decide to spend one's limited time differently than searching out the internet for the best possible deal. If you've done your work well up to that point, the few extra bps that you won't be getting won't matter so much.
The only alternative that I can see is to have your money managed by a professional wealth manager or hand it all over to someone else you trust earlier than necessary. I certainly know people who have a wealth manager at a full service house and who spend next to zero time considering their investments. They carry on in blissful ignorance and tell me they "don't have time" to do any more. Over the long term, they have done well, so they're happy. By being uninvolved, they were spared making bad decisions based on market gyrations.

July 13, 2019
2:14 pm
Loonie
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GICinvestor said

I sort of agree with that. If I was to pass away my spouse would be lost, as far a managing the investments. And if the decision was to be made that way I would go back to what I know...Manulife.

But how would you:
Accept the lower rates
Accept the fee for a non registered/RRSP/RRIF Account
Accept the additional fee for the TFSA Account
Deal with transfer fees for registered accounts

The like is:
Only one person to deal with for probate and POA
No out of province issues as I would have now
Can do everything by phone or email instructions  

Rates through deposit brokers are only slightly lower than what one can get on one's own - and occasionally higher, as with the Habib Bank deal a through GIC Wealth earlier this year. I would accept that as fair trade-off for not doing it all myself. I look upon the work I do to get the best rates as a kind of part time retirement job for which I get paid. It pays me well enough to be worth my while.
Deposit brokers don't charge fees. They make their money from the issuing institutions.
Transfer fees are typically reimbursed, except by those FIs which do not, themselves, charge them. Not a concern for me. I have been getting rid of my RSP GICs anyway, and only have 2 right now. Will never have more than 5 TFSAs. The most this could cost would be about $150/yr, which is unlikely.

Perhaps we're talking apples and oranges here. I referred to a deposit broker. Perhaps you thought I meant discount broker?

July 13, 2019
6:02 pm
AltaRed
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I definitely assumed discount brokerage, not deposit broker. And I did mis-read that part of Loonie's point where one still has cognitive abilities but no longer any interest in spending time on investment management.

I'd simply consolidate and simplify with a single discount brokerage during that stage in life. I don't see the point of having an account with an entity that can only handle 'deposits'.

July 13, 2019
9:20 pm
Loonie
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AltaRed's solution may make sense for people who are largely invested in non-GIC products, but I don't think it's the best answer for those who are in GICs.

July 14, 2019
7:25 am
AltaRed
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Loonie said
AltaRed's solution may make sense for people who are largely invested in non-GIC products, but I don't think it's the best answer for those who are in GICs.  

Maybe not, but AFAIK, brokerages are the only places where one can buy a wide range of assets... from stocks, bonds, mutual funds, GICs, and more exotic things, and make it a 'one stop shop'. Few people would have only GICs in their portfolio, and isn't that all that a deposit broker can do? And the deposit broker likely can't get the investor any better GIC interest rates than a discount brokerage as in the Scotia iTrade list up thread?

July 14, 2019
8:06 am
BillieBob
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AltaRed said

Maybe not, but AFAIK, brokerages are the only places where one can buy a wide range of assets... from stocks, bonds, mutual funds, GICs, and more exotic things, and make it a 'one stop shop'. Few people would have only GICs in their portfolio, and isn't that all that a deposit broker can do? And the deposit broker likely can't get the investor any better GIC interest rates than a discount brokerage as in the Scotia iTrade list up thread?  

I think you would be surprised how many people ONLY have GICs.

July 14, 2019
11:48 am
Norman1
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AltaRed said

… Few people would have only GICs in their portfolio, and isn't that all that a deposit broker can do? And the deposit broker likely can't get the investor any better GIC interest rates than a discount brokerage as in the Scotia iTrade list up thread?

Not all deposit brokers are just a deposit broker. Quite a few of them are also licensed to sell insurance or mutual funds. One I dealt with tried to upsell me some mutual funds. That would have resulted in a 1% per year trailer instead of the customary ¼%-per-GIC-year deposit brokerage commission.

Deposit brokers can get better GIC rates than a discount broker, like Scotia iTRADE. Not continuously. But, on occasions.

Smaller financial institutions don't want the large deposit flow that Scotia iTRADE, TD Direct Investing, or BMO Investorline would bring in. When needed, such institutions would give flash rate offers, good for a day or two, to select deposit brokers to raise controlled amounts of deposits that match their lending needs.

July 14, 2019
1:44 pm
Loonie
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I have subscribed to a daily rates update from a deposit broker for some time. The rates tend to be in the same range as the ones posted on this forum's GIC list. They are normally in the middle of that range or the lower end; occasionally, they are the highest ones available anywhere. They are normally better than those offered by discount brokers.

These are the rates quoted by my deposit broker on July 11 for minimum $25K:
1 year 2.50%
2 year 2.55%
3 year 2.60%
4 year 2.80%
5 year 2.85%

These are the rates quoted by my deposit broker for July 11 without the 25K minimum, for registered and non-registered funds:
1 year 2.40%
2 year 2.60%
3 year 2.65%
4 year 2.75%
5 year 2.80%

The rates cited for iTrade for July 11 by Doug (#3 above) were:
1-year: 2.100
2-year: 2.190
3-year: 2.220
4-year: 2.290
5-year: 2.340

As you can see, in all cases, the deposit broker's rates are significantly higher than iTrade's.

While it's obvious that an investment brokerage, discount or otherwise, has the widest range of investment products, this is not what everybody wants or needs.

July 14, 2019
2:08 pm
AltaRed
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I assume the major difference is deposit brokers 'pull' for better rates. Discount brokers simply offer what the issuers want to 'push', i.e. they don't really care....and they shouldn't since discount brokers are simply 'order takers' by law/regulation.

FWIW, I recognize most members of this forum are into HISA/GIC 'investing' or maybe better said 'savings' and this is really the primary purpose of this forum. It is where I first learned about EQ Bank and is now the FI I use for my cash reserve.

July 14, 2019
2:22 pm
Loonie
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It's not a question of discount brokerages not being permitted to do more than take orders. If that were the issue, then one would expect to get the very best possible rates through full service investment brokers and wealth managers. But that is highly unlikely. I doubt the full service brokerages offer anything better than the discount ones, even though their staff are supposed to be helping their customers. Years ago, we had one of those guys and I had a lot of trouble convincing him to even get me some long provincial bonds, which were then at 12%, never mind GICs. I did succeed and happily held them to maturity, but all he really wanted to sell me was stocks and mutual funds with high MERs, deferred charges, and trailer fees.

If you want GICs, the best place to buy them is simply NOT a brokerage firm, discount or full service, although it may be convenient if you have other investments with the brokerage and especially if you are not planning on investing a lot in GICs anyway. I don't know why you assumed it would be otherwise.

Your concept that very few people would invest in GICs only may reflect your personal experience and that of people you interact with, but it's not wise to make assumptions about everybody else.

I am not privvy to exactly how the deposit brokers get their rates, but, from speaking with them I have the impression that it's basically a question of bulk buying. They offer the provider a way to get significant investment capital by outsourcing all the fiddly work of getting clients and setting up individual GICs and dealing with people like us directly. The providers pay them for this service, and we benefit. I do know that some of the clients of deposit brokers are corporate and have very large amounts to invest.

July 14, 2019
4:44 pm
Briguy
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Loonie said
I have subscribed to a daily rates update from a deposit broker for some time. The rates tend to be in the same range as the ones posted on this forum's GIC list. They are normally in the middle of that range or the lower end; occasionally, they are the highest ones available anywhere. They are normally better than those offered by discount brokers.

  

These rates seem to be significantly less than what you can get from the FI's highest on the GIC list, but I'm sure they are higher at times.

I know that deposit brokers mentioned here before include GIC wealth management and Desjardins Financial Security Investments. I wonder if Desjardins Financial Security clients have had their identities stolen as well, or was it just the Credit Union clients? I'm very paranoid nowadays since I have a Desjardins bank account and wondering if it's safer to use a deposit broker or mutiple FI's to hold GIC's.

July 14, 2019
5:11 pm
Norman1
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Deposit brokers don't actually hold the client GIC's.

The GIC's I've purchased through a deposit broker were under my name in the records of the GIC issuer. Issuer had my name, address, and other details, just as if I bought them directly from the issuer. Issuer would mail me the T5 tax slips and account statements.

I used to receive individual statements and T5 slips from each issuer of the GIC's I bought.

If one ends up with GIC's from five different issuers buying through a deposit broker, then there's five places where one's identity could be stolen from.

July 14, 2019
5:14 pm
Briguy
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Norman1 said
Deposit brokers don't actually hold the client GIC's.

The GIC's I've purchased through a deposit broker were under my name in the records of the GIC issuer. Issuer had my name, address, and other details, just as if I bought them directly from the issuer. Issuer would mail me the T5 tax slips and account statements.

I used to receive individual statements and T5 slips from each issuer of the GIC's I bought.  

Thanks for the reply. It seems like a slightly increased risk, since both the FI and the deposit broker have your information.

July 14, 2019
5:43 pm
AltaRed
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Given the discussion, this chart (3rd column and last column for 2016) is interesting. Doesn't really respond to the back/forth between Loonie and I on GIC holdings because we can't tell from this what RRSPs/RRIFs/TFSAs really hold for assets.

But the breakdown for non-pension assets suggests virtually every Canadian has deposits at FIs (makes sense) but the amount is small per family ($5k). There may be more data in StatsCan but it is not worth my energy to go looking. Can't really extrapolate that to Private Pension assets.

https://www150.statcan.gc.ca/n1/daily-quotidien/171207/t002b-eng.htm

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