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Is it simpler to hold GICs in a brokerage account?
October 31, 2019
10:21 am
oldlady
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I am getting on in years and trying to simplify my finances and my tax reporting. Chasing the best rates has left with me with too many accounts at too many financial institutions, so I am thinking that as my current GICs mature maybe I could consolidate them by buying replacement GICs in my brokerage account at Scotia iTrade. I know I would be sacrificing some interest, but it would be worth it to make my financial life simpler. Can someone tell me whether doing that would actually consolidate my GIC holdings in one place, with one tax document for all of them? Or will I still end up with multiple accounts at multiple banks, getting separate T5s from each bank that issued a GIC to me? Thanks to anyone who can shed any light on this for me.

October 31, 2019
10:37 am
Doug
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@oldlady, great question! 🙂

(Aside, I may write a longer article for this site in the spring on this very topic.)

To answer your questions first, yes...your GIC holdings would be consolidated within one location. If you go with Scotia iTRADE, you will be issued one tax slip for all the GICs you have in a given account (one for your husband's RRIF (assuming you're still married and not widowed), one for you, and one for your joint account (see previous assumption and assuming you have one)). Scotia iTRADE pairs your tax slip with a detailed transaction summary itemizing the interest paid by GIC, stock, mutual fund, ETF, or whatever security is in your account, to aid you with reconciling your total interest paid per account against the GICs in that account (you don't have to do this, but some people like to double-check the math even though I've never had an error).

It's definitely much simpler and note, too, that CDIC insurance is by issuer and deposit category. So you could, in theory, have 10 different GICs from 10 different issuers in your RRIF and be fully CDIC insured. Similarly, the same applies for your other account types. The reason is because the GICs are held in the name of The Canadian Depository for Securities, Limited, a securities-clearing firm owned by the Toronto Stock Exchange's parent company, TMX Group, Limited., in trust for your carrying brokerage firm or the carrying brokerage firm's intermediary trust company (for registered plans). CDIC reporting rules are being enhanced next year for so-called brokerage firm, nominee accounts (also called book entry form accounts) which enhance both the disclosure and reporting requirements such that CDIC will now receive, in a master list from your brokerage firm, on a monthly basis, the names and basic contact information of all the CDIC insured deposits for which the brokerage firm holds.

@Loonie said he or she would definitely consider this (you sacrifice between 0.20-0.50%, but as I noted elsewhere, that spread is lowering to as little as about 0.15% when compared to Hubert's current GIC rates) once he or she gets a bit older (say in 10 years from now or something).

As an added note, as a brokerage firm, your accounts are also protected to $1 million per account in the event of the brokerage firm's insolvency. CDIC would be the primary payor, though, for GICs, so the CIPF coverage would mainly be for your non-CDIC insured holdings.

Cheers,
Doug

October 31, 2019
11:18 am
Bill
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I agree with Doug, oldlady, it's way simpler and less time-consuming if you're used to chasing the best or nearly-best rates, but the cost is lower rates. Royal Direct Investing's top 1-year GIC rate today is 2.25%, top 5-year rate is 2.4%, that's what you'll get for your first $100K if you want to stay within CDIC limits, then it goes down (marginal increments) from there. For some of us as we get closer to the end of our time on this earth it becomes worth increasingly more to spend less time on money matters, seems to me.

October 31, 2019
11:55 am
savemoresaveoften
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depends on size of portfolio, a $1MM portfolio 10bps = $1000 a year just for being convenient. just saying...

October 31, 2019
12:01 pm
hwyc
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In the context of GIC interest reporting, I thought if you provide your SIN during the application, the FI will upload an e-copy of your T5 to CRA. From CRA-My Account, you can download to auto-fill your tax software. I have been training myself for that process. IMO, you don't have to cut 0.25% on rate to let brokerage manage something CRA already did ?

October 31, 2019
12:45 pm
Bill
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hwyc, agreed re CRA reporting, but having one brokerage account with all your GICs in it does simplify your finances, no longer have multiple accounts at multiple institutions. That, to me, is the real time-saver, not so much the tax reporting aspect. And if you're at an age and wealthy enough not to care about the extra cost, i.e. you're likely just "wasting" some money that would go to heirs, you'd be surprised how attractive the convenience and time-saving becomes at that point if it frees you up to spend more time on things you'd rather do. On the other hand, there are many old people who like to spend time on their finances - time may have robbed them of some things but they still have their dough, or else they have not many other interests - so for them rate-chasing, saving money, etc, gives them something to do until time's up.

October 31, 2019
12:53 pm
GICinvestor
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I have an itrade account for TFSA only.

For a cash account you need to confirm iTrade fees for the account. GIC purchases are free. No interest on cash.

October 31, 2019
1:17 pm
hwyc
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Ditto GICinvestor. I hold all registered GICs in a single brokerage (not Scotia iTrade) account. But I cannot say I am happy with my brokerage's GIC rate offering sf-frown.

October 31, 2019
1:38 pm
GICinvestor
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hwyc said
Ditto GICinvestor. I hold GICs in a single brokerage (not Scotia iTrade) registered account. But I cannot say I am happy with my brokerage's GIC offering sf-frown.  

I agree. ITrade GIC offerings are poor. I have $4000 left and will move all out at maturity. But OP just wants to centralize and knows she has to suffer rate wise. And I can understand that if she is older and single or the finance person of the family.
BUT
1. Who can recommend what brokerage has low or no fees and good GIC rates.
2. Or give another suggestion of how to centralize.

If she is in BC she can PM me for a name. Recently my 92 year old mother-in-law moved to a retirement residence. She had some savings and GICs at a CU and BMO and the proceeds of her condo. Rates at BMO and Westminster Savings are poor. And Westminster Savings does not go out of their way for competitive rates and the adviser is more interested in her annual bonus than customer retention. And she, the advisor, noticeably gets agitated and more unhelpful if my wife and I show up to assist. My mother-in-law also had RRSP with a boutique type agency that uses the Manulife as their backbone. She has given all her proceeds and maturities to him and he has good credentials. He keeps, without asking, all funds under $100,000 per institution. Rates compare to other brokerages and the service is superior. And has interest on cash and GIC interest paid monthly etc. And good advice to collapse the balance of RRIF without impact on OAS clawback.

And if something happens to me I have suggested to my wife to back to this office and in the mean time my daughter can help her manage as she works for an advisor.

October 31, 2019
2:12 pm
AltaRed
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I have no idea what the talk is about re: Scotia iTrade fees. The OP already has a Scotia iTrade brokerage account. There are no account fees beyond minimum thresholds and the OP already must be above it.

There are no fees to buy/sell GICs at Scotia iTrade. I buy all my GICs at iTrade to keep financial accounts down to a bare minimum. No fuss, no mess, no bother. Sacrificing a bit of interest over chasing rates at multiple financial institutions when one is at an older age is a small price to pay. I highly recommend it.

Scotia generally has the largest number of GIC offerings of any of the discount brokerages and has interest rates equal to, or occasionally better than, other discount brokerages depending on which unique GIC issuers they may carry (I have access to both BMO Investorline and RBC Direct Investing to cross check).

The OP should only get one T5 consolidating all investment income that is reported on a T5 along with an itemized summary of the income from each holding.

October 31, 2019
3:08 pm
Doug
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hwyc said
In the context of GIC interest reporting, I thought if you provide your SIN during the application, the FI will upload an e-copy of your T5 to CRA. From CRA-My Account, you can download to auto-fill your tax software. I have been training myself for that process. IMO, you don't have to cut 0.25% on rate to let brokerage manage something CRA already did ?  

I see where you're going, @hwyc, but what I think @oldlady means is she doesn't want to have to track down and manage the paper slips that invariably come whether she's signed up for CRA My Account or not. And, like I and Bill said, the spread is narrowing between best direct and best brokerage GIC rates. sf-cool

@oldlady's executor will love her if she consolidates things into fewer accounts. (Her executor likely already loves her, but will love her more.) sf-cool

Cheers,
Doug

October 31, 2019
3:14 pm
Doug
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AltaRed said
I have no idea what the talk is about re: Scotia iTrade fees. The OP already has a Scotia iTrade brokerage account. There are no account fees beyond minimum thresholds and the OP already must be above it.

There are no fees to buy/sell GICs at Scotia iTrade. I buy all my GICs at iTrade to keep financial accounts down to a bare minimum. No fuss, no mess, no bother. Sacrificing a bit of interest over chasing rates at multiple financial institutions when one is at an older age is a small price to pay. I highly recommend it.

Scotia generally has the largest number of GIC offerings of any of the discount brokerages and has interest rates equal to, or occasionally better than, other discount brokerages depending on which unique GIC issuers they may carry (I have access to both BMO Investorline and RBC Direct Investing to cross check).

The OP should only get one T5 consolidating all investment income that is reported on a T5 along with an itemized summary of the income from each holding.  

+1 (or more) to this, @AltaRed. I, too, suspected that the OP is above the minimum household balance threshold to waive annual administration fees. Scotia iTRADE recently re-did their USD currency conversion such that instead of charging a quarterly fee for no-fee USD/CAD currency conversions, they added free USD side accounts of registered accounts. So that's an added plus.

AltaRed is also correct re: no fees for GIC purchases. There are minimum holding periods for cashable GICs (30-90 days), but that's pretty standard anywhere.

As @Bill said, when you get older and realize you have less time on the Earth, there are some things more important than squeezing every last dollar out of a financial institution. She acknowledged the rates are somewhat lower, but to her, the simplicity matters more. In my view, we should not be trying to persuade @oldlady against this move. She's aware of the pitfall of modestly lower rates, so that's good, but to her, simplicity of recordkeeping matters huge.

I think it's a great strategy.

Also, someone else mentioned that Scotia iTRADE cash accounts pay nothing, which is true except that you can easily, commission-free, transfer your non-locked-in funds into either of a BNS or ADS Canadian Bank brokerage HISA (currently paying 1.6-1.65% p.a. for Series A). Here, too, OP can take advantage of BNS, Scotia Mortgage Corp., BNS Trust Company, National Trust, Montreal Trust, and ADS Canadian Bank to maximize CDIC insurance.

Cheers,
Doug

October 31, 2019
3:30 pm
oldlady
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I certainly am glad I brought this question to this group. Thank you, everyone. You showed not only great depth of knowledge on the subject but also great understanding of how one's financial goals change with age.

@doug, I hope you do write that longer article. In fact I hope you, or others in this discussion, will consider writing lots of articles on best ways to simplify ones finances as one gets older. I think there is going to be more demand for this kind of information as more of us enter that phase of life where it becomes more important to divest sensibly and live well than to accumulate savings. I don't know how many of you have reached this point yet, but to those who haven't -- it's quite a change, it's a little frightening, and knowledgeable assistance is hard to find!

October 31, 2019
3:38 pm
Doug
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oldlady said
I certainly am glad I brought this question to this group. Thank you, everyone. You showed not only great depth of knowledge on the subject but also great understanding of how one's financial goals change with age.

@doug, I hope you do write that longer article. In fact I hope you, or others in this discussion, will consider writing lots of articles on best ways to simplify ones finances as one gets older. I think there is going to be more demand for this kind of information as more of us enter that phase of life where it becomes more important to divest sensibly and live well than to accumulate savings. I don't know how many of you have reached this point yet, but to those who haven't -- it's quite a change, it's a little frightening, and knowledgeable assistance is hard to find!  

Thanks, @oldlady. I'm glad that the information was helpful. If you do end up transferring some or most of your assets, as your GICs mature, try and transfer to Scotia iTRADE chunks of at least $25,000 because Scotia iTRADE will then reimburse you transfer out fees charged (to $150 per transfer, per account) if you ask them ahead of time each time. sf-cool

As to ages, it really varies. I know Loonie is in his or her early to mid 70s; Bill and AltaRed are still in their early to late 60s. GICinvestor, I'm not sure how old, but, presumably, is of pensionable age or greater (55+).

I'm still in my mid-thirties, like Peter, and I suspect maybe Bud and @hwyc as well, but even I—at this young age—am realizing that there's more to life than trying to get the absolute best rate. I'm willing to sacrifice a bit of interest rate spread, moreso as the direct vs. brokerage spread narrows.

Cheers,
Doug

October 31, 2019
6:13 pm
Bill
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Another possible advantage for using such a brokerage account: if you unexpectedly need some cash and your money is locked in GICs you can ask them to sell a GIC, apparently there's a market of sorts for them. I happened to be helping someone do that today, brokerage says by tomorrow they should be able to find a buy offer, and if it's not too punitive financially it's an option to raise some cash if needed. Maybe someone else has some experience re this.

October 31, 2019
6:45 pm
Briguy
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Isn't it easier to put all your money in a FI that consistently has good rates and has an unlimited guarantee from their respective deposit insurance corporation? eg. put your million dollars into a Manitoba credit union such as Hubert, that we know will accept probate from a different province.

October 31, 2019
7:18 pm
AltaRed
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@Doug - I will have you know I am 70+ but young at heart.

Consolidation is clearly a winner as one ages. Many other things become way more important in life than managing multiple accounts.

I've gone through the experience of managing my mother's accounts including probate and having everything down to 2 brokerage accounts and one bank account was pure heaven. I have also helped a few other seniors consolidate to one FI.

If I was ever asked to be an executor, I would make it conditional on them having consolidated their accounts.

November 1, 2019
5:50 am
savemoresaveoften
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My thinking is as one ages, managing one's own finance actively keeps the mind sharp. But then some just dont want to deal with numbers and why in the age of ETFs, online discount trading etc, financial advisers of all capacities still manage to thrive.

November 1, 2019
8:15 am
Doug
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Bill said
Another possible advantage for using such a brokerage account: if you unexpectedly need some cash and your money is locked in GICs you can ask them to sell a GIC, apparently there's a market of sorts for them. I happened to be helping someone do that today, brokerage says by tomorrow they should be able to find a buy offer, and if it's not too punitive financially it's an option to raise some cash if needed. Maybe someone else has some experience re this.  

I hadn't thought of that because they say no sales prior to maturity, Bill, but it makes sense, and it's easy for them to do that since the GICs are locked in to to the registered owner, CDS, in trust for the brokerage firm's end clients. sf-cool

*waits for Loonie's ears to perk up at this*

Cheers,
Doug

November 1, 2019
10:49 am
Bill
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Update re selling GICs into secondary market: value of all GICs including accrued interest up to today approx. $543,500, 8 months remaining to maturity, best buy offer Investor's Edge could come up with was about $539,600. I'm assuming this would be typical for other brokers too. Owner would have to decide if that's worth it to them to get at their money.

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