Author Topic: [Canada] DCPP and RRSP in a rip-off pension provider - what are the options?  (Read 637 times)


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Dear Mustashian community,

(I hope I'm posting at the right place. If you think I better moved this please let me know.)

I am asking for your advice about Canadian registered pension of my Canadian dad (age 64, still working full time, stable job, zero investment education) whom I'm trying to convert into a self-directed index fund investor. But I myself am not so clear on the employer/pension provider restrictions. Also, I myself am new into investing so it's a bit of a "the one-eyed leads the blind" situation (as is probably obvious from some of my questions), and I'm not sure I can give him reliable enough advice - and we are talking Dad here, so anything I tell him has to be scrutinized and peer-reviewed. 
That said, as newbie as I am, I have been full-time reading for weeks now before posting this, and for all I know so far, I know that he can do better with some very simple steps that are likely very obvious to the average reader of this forum and can help me build the case to convince him.

So Canadian Mustashians, please help my Dad have as decent retirement account as possible...

Here are the facts of his situation:
Pension provider: Sunlife
DCPP: about 70% of funds
RRSP: the other 30% of funds

Recent statement shows:
0.32% interest income (paid for the 2020 Q1)
total portfolio investment losses of a few thousand $$$

The investment options Sunlife provides him are (IMHO all terrible!) in the attached file 1
The portfolio performance that Sunlife estimates net of its fees are in the attached file 2
Investment options listed along with management fees are in the attached file 3

What Dad owns currently, total across both accounts (the ones in blue in file 3):
Over 90% of the assets in a 3 year 'guaranteed fund' at rate 0.75% (his logic: better guaranteed +0.75% than those few 000s losses)
1.25% of portfolio in "CC&L GroupCdn Q Growth"
7.25% of portfolio in "B.G. CanadianEquity"
a negligible amount (under $100 total) in "SLF Money Market"

I am trying to convince him that:
- He should transfer as much as possible into a self-directed RRSP account; I think (hope) this means all of his RRSP or at minimum any future RRSP contributions. He claims that the DCPP account is unmovable, so 70% of his assets are stuck with Sunlife (also the employer match happens there and as far as I get it, it cannot happen in RRSP). So he can move at most (if at all) 30% of his assets (that's all of the RRSP) to a self-directed RRSP and do something useful with them. Canadians, what do you know about this? Is all this true? Is RRSP movable or he is stuck for life with Sunlife? Can he at least make the future RRSP contributions to a self-directed bank account? Where can we check this? As far as I got it (here: it seems that it should be possible; if so, is it better to transfer in kind or in cash? I would bet on in cash and then start from scratch at his bank. Could there be some hidden fees or other considerations that make this less desirable?)
- What looking at his Sunlife investment history for the past couple of years tells me is that my dad is very risk-averse (I'm judging from his behavior of moving most of his funds from the balanced fund and TD bonds to the 3 year guaranteed fund last year). I hope I can play his risk-aversion in favor of my case and show him unequivocally that he is better off with a self-directed RRSP invested in Vanguard index stocks and bonds no matter what. Or, said in terms of risk aversion: that pretty much any investment choice he makes with an index fund can't possibly make him worse off than he is by staying with Sunlife, i.e. that self-directed RRSP is more risk-averse than Sunlife RRSP. Not only is he losing money nominally, but he's also losing money to inflation (so his 'guaranteed' fund is not helping for wealth preservation here at all). He has to aim to at least beat inflation.

Am I right?

Here are my questions for you:
1. Is it really impossible to move the DCPP away from Sunlife? What do you gather from the attached files? Where can he best allocate his 70% DCPP among the options that Sunlife provides?  My hunch is 70/30 in TDAM Bond Index fund/BG American Equity as my dad is a very risk-averse person and he is at an age where he cannot ignore short-term fluctuations for the long-term benefits of an all-stock portfolio.
2. Is it really possible to move the RRSP money out of Sunlife to a self-directed RRSP bank account (such as TD, BOM, RBC, CIBC etc)? Are there any hidden downsides of moving his RRSP from Sunlife to a self-directed RRSP from the bank that he should be aware of?
3. Once the RRSP money (30% of total savings) is (hopefully!) moved to a self-directed RSSP account, what should he invest in? I would suggest 70/30 bonds/stocks but that's just a hunch (again: Dad is very risk-averse and not investing for long-term, so I don't want to upset him with huge fluctuations). On the other hand, I imagine that after this dip the market will go up so he might want to benefit from this and I would push him to try a 50/50. Any advice on specific Canadian index ETFs? I'm thinking of the bare basics: 70% in VAB (Vanguard Canadian Aggregate Bond Index ETF) and of the 30% stocks, half of them (so 15% of the portfolio) in VFV or VSP (S&P 500 Index ETF unhedged/CAD-hedged) and the other half in VCE (Vanguard FTSE Canada ETF).
4. I haven't factored in a TFSA account thus far. His TFSA is at a sad 0. Is there any advantage to focusing on filling up a TFSA instead of RRSP if he is still working? Any thoughts? My common sense says that as long as he is having income, it's better to focus on RRSP because it's pre-tax money and may reduce his tax bracket. Since he is not contributing to the max, I would only worry about TFSA in the unlikely case that he maxes out the RRSP. Is that correct?

Secondary questions to qn 2:
2.1. is it better to hedge or not to hedge? If CAD goes up, hedge would be have been better, if CAD goes down, not-hedged better.
2.2. are these funds the best option? Here are all options for Canadian Vanguard index funds:
What is your take?
I picked VAB, because they are the basic Vanguard index with lowest MER.
But VLB (Vanguard Canadian Long-Term Bond Index ETF) seem to have a much better performance since their inception in 2017 and actually a better coupon value net of MER (2.53% coupon for VAB and 0.09% MER vs 2.69% coupon for VLB and 0.19%). Am I right? 
Not sure if there's anything better than VFV/VSP? Am I missing something?
Not sure what the difference is between VCN and VCE? I picked VCE because it seems to have gone down less in down periods and up more in up periods than VCN.
2.3. Once Dad makes his RRSP self-directed and buys ETFs, how does contributing to that RRSP work? (I'm thinking the $10 (CAD) fee per trade here). Can it be automatic as it was until now, and is there a way to avoid the $10/trade fee? If there is no way to avoid it, what is a good strategy to at least minimize it? (e.g. one month all contribution to VAB, next month to VFV, next month to VCE, then start over)? Is there a non-ETF alternative of the portfolio for Canada? I know in US there are a bunch of options (like mutual funds), but in Canada I don't see them with Vanguard. (Am I missing something?)

Finally, two questions of more general nature on my logic behind statement II: that any index investment is better off. Since my dad is very risk-averse and might not listen to stories about historical averages of index funds, I am basing my statement on two basic ideas that seem much more tangible:
1. The VAB coupon is 2.53% (or 2.44% net of MER). MUCH better than a 0.75% in his guaranteed account (and really it's 0.32% that he was paid - I guess the difference is that the rest was eaten by the Sunlife commissions charged in addition to other fees that further lower his gains, i.e. further exacerbate his losses with them).
2. VFV dividends are 1.55% and VCE dividends are 3.18%. As far as I understand, dividends are paid even if the stock price goes down. Is that correct?

Sorry about this long post and I hope you can help me help my Dad - one of the most precious assets I have in my life, - and potentially other Canadians who will look up this topic in the future. (I looked up before writing this one)

With all my thanks and happy Canada day tomorrow!
Dad's Daughter


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Hi Late Savings, I think you will get traction here. My first thought reading through your post, is a reminder to you that your looking at your father's money. HE is the one who has to be okay taking the risks and dealing with the complexities with where he places is money. His list of investments looks like someone who does not like risk,
Over 90% of the assets in a 3 year 'guaranteed fund' at rate 0.75% (his logic: better guaranteed +0.75% than those few 000s losses)
. So risk is a no go for him, and keeping it simple is also important. That being said their is improvements to be made. Lets attempt to answer your questions:

1. Typically you can not transfer out until your no longer working. It would be in the information package he received when signing up for the plan. Sunlife would also be able to tell him if he were to call them. For asset allocation, that is a larger question. You are going to want to look at his investment as a whole. You hint that this is all of his financial assets, can you confirm that? Side note, can you grab the ticker symbols for all the options ( Example the Beutel, Goodman Canadian Equity fund is either BTG300, BTG770 or BTG100 depending on the fee structure.) it will make comparisons easier. Final note, it sounds like he is paying an additional management fee to Sunlife on top of the MER of the underlying fund. Is that right?

2. Yes, typically for a fee. The only downside I can think of is potentially loosing a matching contribution for Sunlife RRSP's. This is unlikely, but worth checking for in his investment package.

2.a. Hedging is expensive, and I am not convinced it offers any real protection.
2.b. Vanguard is great, but I think you are getting ahead of yourself. I think you need to answer question 3 first
2.c. There are lots of minimal fee options. Again I think we need to answer question 3 first

3. Does your father want to be actively participating in purchasing and re balancing investments? From the way you posted I would gather not. Are you intending to do it for him? Maybe an option 1 from the Canadian Coach Potato model portfolio would be better suited than self managing? Figuring out what he/you are and are not willing to do will lead you towards different solutions

4. This is a matter of taxes. Do you happen to know/willing to share his gross income and total assests? The RRSP vs TFSA debate is very dependent on what tax bracket he current is in, and what tax bracket he intends to retire in.

5. Not entirely true. VAB is a bond fund and has risk associated with it while the cash fund is similar to a bank account. Are you suggesting VAB would be a better choice than the garantuedd account? 

6. Incorrect. Dividends are not guaranteed! Remember 2008/2009.

If your willing to put in the work, I would suggest looking at the case study wiki'case-study'-topic/ and posting in the required format there, you will get more people to help. @Lews Therin this also seems up your alley.

Lews Therin

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Outside of my knowledge range.

I`d talk to him, and ask to see the advisor in person, and have them walk you both through the whole ball of yarn.

Speak to the advisor, ask questions about what type of fees, comissions, account fees MERs.

Be prepared though, it took me a few months to get my uncle out from under Desjardins` investments, and I knew exactly what I was talking about, but it still took a long time.

It`s going to be a arduous process. Go step by step.

What are the fees, What are the costs of moving the accounts, which accounts can be moved, what is your dad`s acceptable level of risk.