Author Topic: Canadian Breaking up with advisor: Move RRSPs into ETF TD Direct or Questrade  (Read 2182 times)

finance learner

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Iím a 47 year old single mom living in an expensive city in Canada and I am planning to retire in about 12 years when I expect my mortgage to be paid off and my 2 daughters to be well established (i.e. completed their university studies and working for several years). I basically take care of my girls financially myself.

Currently, I have mutual funds with TD Waterhouse and in what I have only recently discovered to be in funds with ridiculous MERs Ė ranging up to 2.2%. In the RRSP I have 6 funds (some are TD ones) Ė just followed the advisorís guidance. (I really didnít have much time or energy to focus on this given the other things happening in my life). I have to thank my younger brother (who also pointed me to this forum) to wake me up about these things. Now that Iím aware, I really want to do something about this.

I am very interested in breaking up with my financial advisor and just investing on my own to cut down on the MERs Ė but very likely wanting to keep things simple with a Vanguard ETF (likely VGRO or VBAL).

If I make the switch to TD Direct investing, thereís no charge to transfer both my RESP and the RRSP, but they charge $9.99 each time you buy or sell ETFs. If I go with Questrade there is no charge to buy ETFs but up to $9.95 when selling ($0.01/share (min. $4.95 to max. $9.95). Iím unlikely to be doing much selling though.

If I went ahead and moved everything (RRSP and RESP) from TD Waterhouse to another broker (i.e. Questrade), I believe the charges would be $270 ($135 for each account - i.e. 2 x $135).

Questions:
1.   Should I move my TD Waterhouse funds to TD Direct Ė and then sell the mutual funds to buy the ETFs (VGRO or VBAL). Then open a new Questrade account to buy new ETFs (on an ongoing basis) for no charge.
(Pros: save the TD transfer fee; leverage any resources and learning systems in TD Direct; they may have better customer service for asking questions.
Con: hassle to have paperwork and access 2 systems for RRSP and RESP Ė and perhaps you canít have it split across 2 brokers for the RESP?)

2.   Or is it better to have everything in one place. There are 2 options here:
(a)   Keep things in TD Direct for a while until Iíve got a handle on things. Accumulate funds until I reach at least $2,000 before buying more ETFs.
(b)   Bite the bullet and transfer out of TD Waterhouse to Questrade. Sell mutual funds then buy the ETFs.

3. Any other ideas re: my options and investment choices?

Freedomin5

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You need to read Canadian Couch Potato (https://canadiancouchpotato.com). Many of us Canadian DIY investors use a Canadian Couch Potato portfolio of Vanguard ETFs.

We have a TD Direct Investment account and pay the $9.99 fee every time we purchase, but our situation is a bit unique because we only purchase a few times per year, and we have TD bank accounts which make transferring money to the investment account really easy.

BTW, I think TD charges $9.99 every time you sell as well? We have no plans to sell any time soon so Iím not 100% sure on that.
« Last Edit: December 03, 2018, 06:22:36 AM by Freedomin5 »

andreamac

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Hi, Ottawa person here. We woke up aboit 5 years ago and started using virtual brokers (same thing as questrade). We decided to keep our td investments as is since we didnt have a large amount there and also decided to follow couch potato etfs recommendations. Going well so far!!! So depending on amount i would or wouldnt move.

andreamac

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Oh and we also use tfsa and rrsp for investing at virtual brokers

Aminul

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+1 on the Canadian Couch Potato suggestion.  I'm using a very similar approach to that. 

Do some reading on the TD eSeries funds that the Potato suggests.  There aren't $9.99 fees for each purchase of those.

 

Le Poisson

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Welcome to the forum.

Good news - as expensive as your funds are, it could be much worse. Your MERs are high by mustachian standards, but not terrible compared to many products on the market. You could have done much worse.

More good news - if your expensive Canadian City is Toronto, we have "Hippie Money Camp" coming up this fall just outside Hamilton. Come for the weekend and go home inspired by stories of people reaching all the goals you're talking about, and learn strategies to get there faster.

Even more good news - we dumped our advisor at Investor's Group to move to QT a few years ago. Since leaving IG and following the Couch Potato strategy - others have already linked you to him - we've watched our net worth grow from a negative number to about $500,000 (I haven't updated it this quarter). It hasn't been a difficult or painful journey. You can do it too. I would be interested to see how your journey goes if you use the TD e-series as suggested below. If you go to QT, I believe they will cover your transfer fees on a portfolio of $25,000 or more. Call and ask how it works. Their phone help is really good.

« Last Edit: December 07, 2018, 05:46:26 AM by Le Poisson »

finance learner

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I have read some Couch potato but will definitely read more! I appreciate everyoneís support and guidance. You're all very helpful!
My expensive city = Vancouver.

Thanks for the tip to check if the broker Questrade will cover some of the fees. The RRSPs are about 188,000. The RESPs are 67,000.
Although there is some benefits to TD Direct, I think it might be a good option to go with Questrade if they donít charge for ETFs as I am keen on making periodic contributions to keeps me disciplined and I like to regularly contribute to see it grow!

However, I will also check out the TD e-series too. Would they be better than Vanguard funds? I kind of like the sound of Vanguard and their approach though.

utaca

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You might want to see if Questrade will cover the charges to change over. It is a great platform and very easy to learn. I like Questrade because I can buy small amounts of ETFs after every paycheck without paying any commission. That said, I will be opening up a TD Direct account in the near future and, as others have suggested, will just have to make less regular, larger purchases. Either platform is far superior to mutual funds with criminally high fees though.

Prairie Stash

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BC RESP considerations:

https://www.canada.ca/en/employment-social-development/services/student-financial-aid/education-savings/resp/resp-promoters-list.html

Some provinces like BC have additional grants like the BCTESG - $1200/kid. Make sure the RESP is transferred to an institution that supports the BCTESG or you may lose it. The optimal strategy may be spliting the account, the simplest is to keep the RESP at TD.

Do not transfer RESP to Questrade if you want to keep the BCTESG.
« Last Edit: December 05, 2018, 07:26:56 AM by Prairie Stash »

Lews Therin

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I would transfer over to Questrade, they have lower fees, and you get to buy as often as you want, you won't be stuck saying "do I want to pay the 10$, i could wait two weeks and add more for ever and ever."

finance learner

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Thanks for the additional replies...I was trying to get to these posts but work got in the way!!

I will double check any impact to RESPs before doing anything as I don't want to lose the grant I am currently getting.

Also I'm the type who would likely think about a $10 charge each time I put money into an ETF (just like I try to avoid buying coffee in coffee shops where possible and instead brew coffee at home or drink the free stuff at work!) - so ultimately, I think Questrade might work better for my personality.

It's quite unbelievable how helpful all of you are...vs. my financial planner who makes money from me and hasn't been as transparent!!! Thank you all very much.

Lews Therin

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If you know somebody, grab their referral for Questrade, or else there is a thread here that is a continous referral (you take the newest one, and then put your own after)

GreatLaker

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Here are a couple more links for you... Finiki is a great Canadian personal finance and investing resource, and Financial Wisdom Forum is the corresponding forum:
https://www.finiki.org/wiki/Main_Page
https://www.financialwisdomforum.org/forum/

Rob Carrick of the Globe and Mail does an annual rating of online brokerages. He gave Questrade B+ and TD Direct B, so not a huge amount to pick among them. Go to their respective websites and surf around to see if you really prefer one over the other. Here is the link to Rob's article, but unfortunately it is behind the Globe's paywall... I'll provide the link in case you are a subscriber.
https://www.theglobeandmail.com/globe-investor/online-brokerage-ranking-carrick/article37997437/#grades

Moneysense also has broker rankings: https://www.moneysense.ca/save/investing/canadas-best-online-brokers-2018/

But really unless you trade a lot any broker will do.

You asked about Vanguard vs. TD e-Series. For the amount of $ you have Vanguard is likely a better choice because of significantly lower MERs. Some people with TDDI make monthly free purchases of e-Series funds then sell periodically then buy ETFs. A good low-cost compromise if you like TDDI.

I also agree with others that say only use one broker. As time goes on I really value the simplicity of fewer financial institutions. Especially at older ages and to make it easier for your executor when the inevitable happens. Saving/investing regularly and staying invested through good and bad times will add much more to your financial well being than fussing with multiple brokers and chasing the absolute lowest fees.

When dealing with banks and brokers, remember they are not in business to make money for their clients. They are in business to make money from their clients. Decide what you want to do then build an investing plan and transition plan to move away from the current advisor.

Another great resource is If You Can: How Millennials Can Get Rich Slowly by William Bernstein. The author says more in 17 pages than most say in hundreds. It is written by an American, but the same principles apply in Canada if you substitute Canadian Couch Potato funds for the US ones the author recommends.
https://www.etf.com/docs/IfYouCan.pdf
« Last Edit: December 07, 2018, 03:36:32 PM by GreatLaker »

finance learner

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Sounds like the simpler the better regarding sticking to one broker. I'm not likely to trade a lot - plan is to buy a decent ETF and hopefully keep buying more, checking it every 6 months and leave it there.

Good idea to look for the Questrade referral...and all the reading hints (I'm currently trying to read The Millionaire Next Door) but will add the other resources to my reading list.

The other aspect I need to dive into is to make sure I know how to manage the RESP (contributions/withdrawing it so that there isn't money left over after otherwise, I think there may be a concern about paying back the Canada education savings grant).This is making my head spin a bit!


RichMoose

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Given your account size, your best bet might actually be National Bank Direct. They charge no commissions or exchange fees on any transactions, buy or sell, with more than 100 units of any ETF.
A bonus is that NBD has access to all federal and provincial grants for RESPs last I checked.
If you're buying less 100 ETF units in a transaction, you will pay the standard $10.

Lews Therin

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Is there any account fees for NBD?

RichMoose

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Is there any account fees for NBD?
The $100 fee is waived if you have $20,000 in assets across all accounts.

finance learner

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I found out that Questrade will cover the transfer fees if your account has at least $25,000. They're willing to do that for one account but not sure about the other.

I realize that RESPs are move involved because it's better to make sure you withdraw the taxable components (grant plus increase in investment first)

The other interesting thing is that my financial advisor was saying that non managed ETF funds are pretty risky and people don't like to invest in this because it's mainly in equities. Also he was saying that it's better to invest in funds where they are actively managed, hence the higher management fee.  He was using some scare tactics...kind of reinforced my thinking about how they operate.
« Last Edit: December 17, 2018, 11:55:43 PM by finance learner »

NorthernDreamer

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I found out that Questrade will cover the transfer fees if your account has at least $25,000. They're willing to do that for one account but not sure about the other.

I realize that RESPs are move involved because it's better to make sure you withdraw the taxable components (grant plus increase in investment first)

The other interesting thing is that my financial advisor was saying that non managed ETF funds are pretty risky and people don't like to invest in this because it's mainly in equities. Also he was saying that it's better to invest in funds where they are actively managed, hence the higher management fee.  He was using some scare tactics...kind of reinforced my thinking about how they operate.

Ah yes, your advisor was scrambling as they imagined all their future earnings from your investment portfolio being drained away, like sand through an hour glass...

For real though, if you want to play, ask for proof of riskiness. But you know what is best, so you don't have to engage in their scare tactics. Just walk away. When I was getting ready to switch all to Questrade my financial advisor quoted a study from the 1990's about ETFs underperforming. I think it perfectly showcases their conflict of interest; they really are doing what is in their best interest. Either that, or they don't understand, which makes it terrifying that they are working as a financial advisor.

RichMoose

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The other interesting thing is that my financial advisor was saying that non managed ETF funds are pretty risky and people don't like to invest in this because it's mainly in equities. Also he was saying that it's better to invest in funds where they are actively managed, hence the higher management fee.  He was using some scare tactics...kind of reinforced my thinking about how they operate.
Part of what he is saying is correct, but he's conveniently framing the argument as an issue of passive vs. active funds for his own benefit where the data doesn't quite support what he's saying.

The part I agree with is that many passive ETFs are mainly in equities and are pretty risky (ignoring passive bond ETFs for the moment). It is my opinion that most investors are way over-exposed to equities and will probably fall apart financially in the next equity market crash. However, you can easily alleviate this by investing in a portfolio ETF such as VCNS.TO, or making sure that 50 percent of your portfolio (or more) is invested in bonds at this point in the business cycle.

The problem is that most actively managed funds are also way overexposed to equities as part of their mandate in their fund prospectus. Even the so-called balanced funds are at least 60 percent equities and many are up to 80 percent equities. In a equity market crash, they are likely to perform just as badly as a comparable passive ETF portfolio after fees and taxes.

There are a few fund managers who charge reasonably high fees (higher than passive ETFs for sure) who are very good managers that will likely outperform passive ETFs. However, chances are you can't invest with them because they only take high net worth individuals, are just family offices now, or they have closed their fund for new investors. Most fund managers are garbage and they all do very similar things for way too much money.

GreatLaker

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The other interesting thing is that my financial advisor was saying that non managed ETF funds are pretty risky and people don't like to invest in this because it's mainly in equities. Also he was saying that it's better to invest in funds where they are actively managed, hence the higher management fee.  He was using some scare tactics...kind of reinforced my thinking about how they operate.

Yes, he is muddling up multiple things as a scare tactic. Non-managed ETFs don't have to be risky... as you know, just use a balanced portfolio of equities and fixed income such as the ZAG/VCN/XAW portfolio from Canadian Couch Potato, or simpler still, use a balanced ETF like VBAL or VGRO. Actively managed funds have a very hard time overcoming the handicap of their MER. Say the market goes up 8% and your active mutual fund has a 2% MER. That fund has to beat the market by two percentage points before fees. 2% does not sound like much but it is 2 percentage points on 8%, which is actually 25%. So the active manager has to beat the market by 25% year after year just so you as the investor an break even. That's a huge handicap.

Ben Felix of PWL Capital has some good, short videos on investing:
Do Active Managers Protect Your Downside: https://www.youtube.com/watch?v=KmXOvj_kRLA&list=PLiOs3-llXq5BkaFljFEkpy7lYVDUvLdcH&index=23
4 Reasons Your Advisor is Not Recommending Index Funds: https://www.youtube.com/watch?v=FlpwTJJEasA&index=24&list=PLiOs3-llXq5BkaFljFEkpy7lYVDUvLdcH

William Sharpe wrote a paper to prove that in aggregate, active management cannot beat the market. Some will, some wont, but fees make it impossible for them to beat the market in aggregate.
The Arithmetic of Active Management https://web.stanford.edu/~wfsharpe/art/active/active.htm

And the S&P SPIVA Reports prove how few actively managed funds really beat their benchmarks:
https://seekingalpha.com/article/4224850-2018-mid-year-spiva-canada-scorecard-challenging-times-active-equity-managers
https://ca.spindices.com/documents/spiva/spiva-canada-scorecard-mid-year-2018.pdf

damyst

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In my experience, there is no advantage whatsoever to TD Direct over Virtual Brokers or Questrade (we've had accounts with all three).
TDDI is a deliberately separate entity to the retail bank. Branch staff at TD can't help you with TDDI matters any more than they can help you with a CIBC account. They'll just tell you to contact TDDI phone support.
I'm not aware of any resources they have at TDDI that are superior to the independent brokers, but I didn't look very hard.

In terms of online access, Questrade is hands down the easiest to use of the three. Also their support is usually top notch. Buying ETFs is free aside from the tiny ECN fee.

Much more importantly.. By my calculation, you're paying around $5000 per year in management fees, why are we even talking about $270 in transfer fees? Get the advisor's hand out of you back pocket pronto, figure out the rest after.
« Last Edit: December 20, 2018, 01:58:36 AM by damyst »

Goldielocks

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ARGHA!!!  I have just spent the last month trying to send in to TD direct investing a form to unlock some of my LIRA, a process I was told would only take about 3 days, from when the fax was received.   Many, many, many calls later and it MIGHT be finalized tomorrow.   I first called around November 21, 2018.

Questrade has lower fees (except for buying bonds directly).   It is very straightforward for processing requests / forms.

One advantage to TD is the ease of moving money into / out of their brokerage, when you have a chequing account with TD.  That is a pretty minor benefit.   Another good benefit is the quality of the people on the phone when you want to do a Norbert Gambit, or other journal entry accounting type transfer / move.  These do not make up for the eternal hassles with their back systems to process forms that you can't do on line.  (RESP withdrawals, transfering funds from existing plan into TD, setting up new accounts, withdrawing from registered plans).

The fees for TD just aren't worth it.  Even their account setup / close / transfer out fees are slightly higher.  The TD eseries can now be matched with similar free ETF or mutual fund choices with other discount brokers.
« Last Edit: December 20, 2018, 02:15:55 AM by Goldielocks »

Dogastrophe

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Much more importantly.. By my calculation, you're paying around $5000 per year in management fees, why are we even talking about $270 in transfer fees? Get the advisor's hand out of you back pocket pronto, figure out the rest after.

We recently (within last 2 weeks) pulled the plug on our advisor and decided to do it all ourselves (Scotia iTrade)  This was the rational we used - the RRSP accounts we moved had an average MER of 2.44% on combined ~$122K (~$2976 per year in fees).  Assuming 0% growth in this $$, we will save $2880 per year with it all in an ETF with 0.08% mer.   Transfer out / low load / DSC fees we got dinged with will be recouped in 3 months.