Something to be aware of with "odd-month" GICs | Page 2 | GIC discussions | Discussion forum

Meh, believe what you will. Again, it is available online. I am looking at mine right now. Some people just like to make things difficult.

Loonie said

My info comes from someone who bought the 18 month cashable at 2.35. They said at the time that they would sent him the paper work later as it was the end of the day and they didn't want to take the time to make the copies, but they never came, so he inquired by email as to whether the rate was compounded annually, never imagining that it was only a term rate. He could not get an intelligible answer except to say that the interest would come at the end of the 18 months, so asked how much interest he would receive at that time. They were able to answer this question! It was a simple matter to figure out that this was not an annual rate, but a term rate as it was exactly 2.35% of the principal.

I suppose it's possible that this employee doesn't have it figured out right, but that too would be a red flag if true.

Since this is what he's been told and since it's cashable, he plans to move it elsewhere asap, although it will cost the mandatory $50 probably, as it's an rrsp. I think he'll be glad to get out of there. I feel badly that I recommended it as an option in the first place but am glad I didn't personally invest with them.
I would not do business with them.

I'm glad you have documentation about yours which suggests an annual rate, Koogie. Hang on to that document! It may have been designed for "regular" rates and not updated for their more recent intentions. Who knows? Something is screwy anyway.
My warning stands, as it's always something one should look out for. No telling what they'll think up next!

Loonie, am I missing something??? Who is the wonderful fianancial institution that put this offer out? Would be interesting to see how they promoted it.

Luminus' site now shows a special offer "2 Year Fixed Term Deposit at 2.50%".

Loonie said
...
However, here it is, with the numbers blocked out.
"I inquired further about your term, and from what I have been told, the interest is based on the entire 18 month period, and no, it was not set up to compound.
The total amount of interest that will be paid out is $XXX, according to the system, making the total you will have at maturity, including the principal, $XXXXX."

I agree, there is basis for a complaint, but I have the feeling my friend feels he has already expended too much time on this disappointing exercise, and is exasperated.

If it were me, I would expect at least a fee-free transfer-out and be glad to be done with them. Perhaps the Complaints Officer, who is also the CEO, can do this, but it would undoubtedly involve several more phone calls and/or emails.

Norman, it's possible that if we had (1), as you suggest, then the answer to (2) would be included, although I remain skeptical because I know it was not clear on the original online offer (which I don't have). I suppose that in calling it a "term deposit", they think that covers them for not offering annual interest. However, they use that language on all their rates, including 5 years. Surely they don't propose to give 2% total after 5 years?!
You will note that in neither of the two most recent communications have the phrases "per term" or "per annum" been used, and that is consistent with every other communication from them. The only way to get an answer to the question was to ask how much money he would have at the end of it all.

It may be that the best we can hope for is that everyone here will learn something from this experience, which is why I have posted it.

I can see how your friend is exasperated with the experience! The responses so far are suggesting that the rate is 2.35% per term, instead of the expected 2.35% per annum.

This is looks like the offer from a Luminus Financial February 18, 2015 posting on their Facebook page:

Luminus Financial at 1 Yonge st.
February 18

Check out our special offer until March 31st! 18 Month Fixed Term Deposit at 2.50% OR 18 Month Cashable Term Deposit at 2.35%. Toll free: 1.877.782.7639 ‪#‎clearlybettersavings‬ ‪#‎creditunion‬ ‪#‎specialoffer‬

Koogie posted earlier that he invested in an 18-month term at 2.5% on January 13th. I presume that's the non-cashable, 18-month fixed term. Koogie found that the paperwork mentions annual compounding and the rate appears to be per annum.

I find it hard to believe that the implied presentation switched from 2.50% per annum to 2.35% per term in the same sentence.

In all the years I've been investing, I've only seen per term rates with RBC MarketSmart GIC's. Everything else I've seen (regular GIC's, term deposits, 90-day treasury bills, corporate bonds, government bonds, commercial paper, and strip bonds) have had their returns presented as a per annum rate.

Consequently, I highly suspect that the two responses Luminus sent your friend are incorrect.

Any way your friend can be convinced to fire off an e-mail to the Luminus Financial complaint officer?

May not need to be a complaint. Just a question about that 2.35% rate on the 18-month cashable term deposit he invested in. Was the rate supposed to be 2.35% per term or 2.35% per annum?

Been thinking about the two e-mails your friend received from Luminus:

An email from two days ago said the following: "You have $XXX in an 18 month cashable term, at 2.35% interest. Interest is paid annually into your rsp variable account." This was the first he had heard about interest being paid into another account (not compounded annually), and contradicts two earlier communications which said interest would not be paid until end of the term. It would be too much effort at this stage for me to dig out the earlier emails, but you get the drift.

However, here it is, with the numbers blocked out.
"I inquired further about your term, and from what I have been told, the interest is based on the entire 18 month period, and no, it was not set up to compound.
The total amount of interest that will be paid out is $XXX [exactly 2.35% of principal], according to the system, making the total you will have at maturity, including the principal, $XXXXX."

No compounding. Interest paid annually into RSP variable account. The total amount of interest that will be paid out is $XXX, according to the system.

Could both Luminus employees be mistakenly interpreting the "no compounding" on their computer screen to mean just one interest payment at maturity?

Perhaps, they are used to terms of one year and shorter where that is the case. But, for your friend's 18-month Luminus term deposit, there may be an interest payment at one year and another at maturity at 18 months.

Could that interest of 2.35% of principal shown by their system actually be just the amount of the next interest payment at 12 months and not of the one and only interest payment at maturity at 18 months?

Re points 8. And 9. Very important points!!

Don't leave without copies......but rarely does the FI sign your copies.

Save all emails and in the event of an online purchase keep a copy of every step you take by making a full screen print and keep any copies of emails that are associated to the CIC. As in most cases that is your one and only paper copy on your complete transaction.

I recommend using a PDF maker for doing screen prints. It is easy to use and becomes a printer driver to easily select.
Download here, it is free http://www.dopdf.com

And I am still waiting for my chocolates

I'm glad it worked out for your friend, Loonie: His 18-month cashable deposit at Luminus turned out to be 2.35% per annum, as one normally expects, and not 2.35% per term.

As I suspected, a Luminus staff member had misinterpreted what was shown in their system. It looks like the other staff member did not know herself and relied further on that incorrect interpretation.

Challenges with arithmetic can be compensated for by a calculator. However, a calculator won't be able to tell them when the term deposit has multiple payments.

Unfortunately, such frontline staff misunderstandings about the details of a financial product are not limited to Luminus. I've run into them even at certain branches of the big banks. As well, someone found in Accelerate are very strict that what he and his wife were told by a major bank was incorrect. They were told they could not consolidate any of their four non-spousal and spousal RRSP with the bank. As a result, they were going to be charged four transfer out fees of $100 for each individual transfer.

I think it really depends on what transactions the staff have the opportunity to do day-to-day. I'm sure the Luminus staff can efficiently do purchases of their various term deposits and enter them into their system. But, I don't think any of them are involved in calculating the interest payments. I strongly suspect their system does that for them.

After a while, the staff will forget what that 2.35% rate means exactly. Customer asks what the rate is. Answer with the 2.35% shown on their system. Your friend may have been the first to ask them whether that rate of 2.35% is per annum or per term!

Luminus' product description for their term deposits on their web site has room for improvement. It is clear that interest is paid at maturity for their short term deposits. But, how interest is paid on their longer term ones is left to the imagination:

Long Term Deposits

Want certainty and flexibility with your investments? Our L-Series of Term Deposits introduce a brand new benefit for our members: the transferable option. Choose from our 12 month, 18 month, 24 month, 36 month, 48 month and 60 month options!
• You can switch from one term to another within the L-Series without penalty, within a 90 day period
• Unlike mutual funds or stocks, which can go up or down, you are guaranteed a highly competitive interest rate. Thus, you know how much your investments will be worth at the end of their term
• You can use your term deposit within your RRSP
• All term deposits at Luminus qualify for our Member Rebate Program
• Eligible deposits are insured by DICO up to an aggregate maximum limit of $100,000 except for Registered deposits which have unlimited coverage

The months it took to obtain copies of the original signed documents is definitely odd. That's especially since the documents were signed months ago and not years ago. Could your friend also be the first to request a retrieval from their microfiche archive too?