Can anyone walk me through Norbert's Gambit at TD (CANADA)

[powersuitrecall]

Hi all,

I have about $50K of VUN & VDU (CAD) in my RRSP that I would like to move over to VTI & VXUS (USD).  Can someone walk me through Norbert's Gambet conversion at TD Waterhouse?

Here is my understanding of the procedure:

DAY 1
- Sell TSX.VUN and TSX.VDU        (online trade cost $20)

(wait 3 days for sale to settle)

DAY 4
- Buy TSX.DLR in CAD                  (online trade cost $10)
- Journal TSX.DLR --> TSX.DLR.U (over-the-phone cost $ 0)
- Sell TSX.DLR.U in $US               (over-the-phone trade cost $40)
- Buy US.VTI & US.VXUS              (online trade cost $20)

Does this look right?  I'm not happy about having to wait 3 days, but I don't think I have a choice.  Any other / more efficient methods?

[totoro]

Milliondollarjourney (google it) has a recent detailed post on this.

[powersuitrecall]

Thanks Totoro - There are some differences (his was a non-registered account and through BMO), but it conforms some of my expectations.

[Heckler]

I just pulled off my first VTI buy with NG.

The BMO rep told me I didnt have to wait because all three transactions will settle in three days.  Good thing they record thier phone calls.  I did all four transaction on Monday (sell VUN, buy DLR, sell DLR.U by calling BMO - no extra fee btw, just $9.95 trade commission, buy VTI).  Ill keep an eye out for unexpected charges and report back if I get any.

This page helped me through it.

http://www.horizonsetfs.com/horizons/media/pdfs/Educational/LowCostCurrencyConversion.pdf

Be aware VUN appreciates when the $C goes down. This makes VUN appear to perform better than VTI. Im already seeing that difference in the two holdings I have in different accounts.

[powersuitrecall]

I just pulled off my first VTI buy with NG.

The BMO rep told me I didnt have to wait because all three transactions will settle in three days.  Good thing they record thier phone calls.  I did all four transaction on Monday (sell VUN, buy DLR, sell DLR.U by calling BMO - no extra fee btw, just $9.95 trade commission, buy VTI).  Ill keep an eye out for unexpected charges and report back if I get any.

This page helped me through it.

http://www.horizonsetfs.com/horizons/media/pdfs/Educational/LowCostCurrencyConversion.pdf

Be aware VUN appreciates when the $C goes down. This makes VUN appear to perform better than VTI. Im already seeing that difference in the two holdings I have in different accounts.

Thanks for the info Heckler.  I'll be happy if I can get this done in a single day.

[Goldielocks]

I found the TD traders to be very accessible and helpful in walking me through these sorts of scenario questions in advance.   It is obvious that they have a solid financial education before getting on the trade phone lines.

I had a large IRA to roll over into my RRSP, except the RRSP only accepts canadian funds, etc.  With that and a few other things, I called TD to ask how to get the lowest exchange rate (as I was rate comparing to other brokerage exchange houses).

the TD trader I called, walked me through a reverse Norberts gambit, all without my asking for it directly, and it worked very well.   I recall that one trade for something involved in that mash up of investment transfers needed 3 days to settle, but another, converting from the US account to the CDN dollar account was same day -- over the phone during trading hours, I think.

Just call and ask.

[Heckler]

VTI in Canada question - my broker won't set up a DRIP on any US equities. Is this normal?  I'm disappointed to see lazy soldiers building up over the year as I plan to buy VTI annually due to $30 trading commission of Norbs Game to buy VTI.

[Retire-Canada]

VTI in Canada question - my broker won't set up a DRIP on any US equities. Is this normal?  I'm disappointed to see lazy soldiers building up over the year as I plan to buy VTI annually due to $30 trading commission of Norbs Game to buy VTI.

Aren't the dividends from VTI issued in USD?

[Heckler]

I expect they will be in USD.  But why couldnt they be used to DRIP VTI in the same (canadian) account.  Oh well. I wasnt expecting to be told my broker doesnt DRIP any US equities.

[Retire-Canada]

I expect they will be in USD.  But why couldnt they be used to DRIP VTI in the same (canadian) account.  Oh well. I wasnt expecting to be told my broker doesnt DRIP any US equities.

I'm confused if the VTI dividends are in USD then you don't need to do any Norbert's Gambit to buy more VTI with those US funds as you get them quarterly and there won't be a $30 fee, which your post above indicates you are trying to avoid paying more than once per year.

[Heckler]

I collect off my paycheck in a Sunlife account with work match and move a large amount annually to self directed VTI.  The dividends will get rolled in annually because $9.95 commission for $200 or $400 quarterly doesnt make senee.

[powersuitrecall]

This may be of no help Heckler, but here's what I do.  I purchase TD eSeries mutuals (TDB900, TDB902, TDB909, TDB911) during the year as dividends roll in (as well as contributions).  At the end of the year I sell them off and make a single set of ETF purchases.  This keeps my money invested and the costs down.  I haven't had to deal with NG as part of the procedure yet ... we'll see how that shakes out as the years go by.

[Heckler]

Good idea, but that'll require a $20 NG to switch VTI dividends to $C to buy mutual funds  and another $20 to switch back again to $C. 


I used to do the same in my TFSA - $100/month to commission free MFs and then once a year buy ETF.  The USD sure complicates it if you're not using free ETF buys at Questtrade.

[Heckler]

This Mustache doesn't help either.  I'm sure most people don't even notice the $9.95 fees piling up!

[powersuitrecall]

Good idea, but that'll require a $20 NG to switch VTI dividends to $C to buy mutual funds  and another $20 to switch back again to $C. 


I used to do the same in my TFSA - $100/month to commission free MFs and then once a year buy ETF.  The USD sure complicates it if you're not using free ETF buys at Questtrade.

Man! I didn't even notice that my VTI quarterly dividends were being paid out in USD and being converted to CAD automatically at a terrible rate.  I'll have to follow up with TD and see if there is anything to be done about this. 

[Heckler]

Ohh. Good catch. 

[Retire-Canada]

I collect off my paycheck in a Sunlife account with work match and move a large amount annually to self directed VTI.  The dividends will get rolled in annually because $9.95 commission for $200 or $400 quarterly doesnt make senee.

Okay I get it. Any reason not to use Questrade and the free ETF buys? I let my dividends accumulate and use them to rebalance so I don't DRIP even if that was offered.

[Heckler]

I just pulled off my first VTI buy with NG.

The BMO rep told me I didnt have to wait because all three transactions will settle in three days.  Good thing they record thier phone calls.  I did all four transaction on Monday (sell VUN, buy DLR, sell DLR.U by calling BMO - no extra fee btw, just $9.95 trade commission, buy VTI).  Ill keep an eye out for unexpected charges and report back if I get any.

This page helped me through it.

http://www.horizonsetfs.com/horizons/media/pdfs/Educational/LowCostCurrencyConversion.pdf

Be aware VUN appreciates when the $C goes down. This makes VUN appear to perform better than VTI. Im already seeing that difference in the two holdings I have in different accounts.

Thanks for the info Heckler.  I'll be happy if I can get this done in a single day.

Well, not waiting the three days to settle DLR sale cost me $24 interest.  But buying VTI has already made me $754 USD / $940 CAD. Not a bad trade.

[human]

According to that million dollar journey post referenced upthread your broker really shouldn't be charging interest. You should call and get them to fix that.

 I have to admit that although I could follow the mechanics of how the gambit is done, I'm not sure I could explain to someone on the phone why I want the interest charge back. I've never tried the gambit or invested in us listed equities myself.

[powersuitrecall]

I haven't yet pulled the trigger on moving VUN->VTI & VDU->VXUS via NG.  Since it's going to involve 3 days out of the market, I've been waiting for things to cool down post-election.  But you know what they say about market timing :/.  It would almost be worth getting a short term loan for that $50K.  Hmm ...

I'm probably over thinking this.  I've been told I do that.

[Heckler]

Oh, I specifically asked if I'd be charged interest if I dont wait for three days to settle and she said no, I"m good to spend my USD as soon as they show up in my account (it took 5 minutes).   Good thing they record phone calls for quality purposes, and I have a time stamp if the transaction. They will be getting a call on Monday.

[Heckler]

Our plan is to have one VTI holding and use the USD dividends as USD income to travel.  Hopefully we are able to withdraw USD from an RSP account.  I imagine I will need a USD chequing account to do so?

[Heckler]

Oh, I specifically asked if I'd be charged interest if I dont wait for three days to settle and she said no, I"m good to spend my USD as soon as they show up in my account (it took 5 minutes).   Good thing they record phone calls for quality purposes, and I have a time stamp if the transaction. They will be getting a call on Monday.

I called today and the rep had no problem creditting me the interest charged, in fact he told me that's a normal step they should have done in the first place when they journaled over to DLR.U.   

[avrex]

There are some excellent white papers at the Canadian Couch Potato website.
Please note that there are different processes for each of the institutions (TD, RBC, BMO, CIBC, Scotia).

Norbert’s Gambit: The Complete Guide

[avrex]

My only concern is that the TD White Paper may be a little out of date (2013), as TD has now upgraded their computer system to allow USD in an RRSP/TFSA account.  (Non-registered accounts, were a different system and you were already allowed to hold USD.)

Here's a further explanation that I found from the TD Helps website (where they answer customer questions).
Do you support Norbert Gambit for transfer US Funds from a US Web Broker Account to my CAD​ Web Broker Account?

Here's a review.  You will need to complete the following steps.
• ​Purchase a currency neutral security, such as DLR, in the same currency of the account.
• ​Call TD Direct Investing at 1-800-465-5463 to journal the investment to your TD Direct Inv​ esting USD Cash or Margin Account (service is not available online through TD WebBroker, ​you will have to call)
• The security will now show as DLR.U in your TD Direct Investing U​SD Cash or Margin Account and display in USD funds

Here's an overview of the rules:
- You must have purchased the security in one currency account before the sell can be placed in the other currency account.
- The purchased security does not have to be settled before placing the interlisted sell order or before submitting a journal request.
- The journal will not be processed until the purchased security has settled (trade day + 3) .

[Le Barbu]

My VTI and VXUS dividends are isued in USD (no DRIP) and I just use TDB 217 until it reach 5k$ then buy VTI or VXUS to re-balance. For account under 100k$ I would not bother with NG but use VXC or XAW, especially if you contribute more than once a year. Simplicity is the best!

[drewdeezee]

Our plan is to have one VTI holding and use the USD dividends as USD income to travel.  Hopefully we are able to withdraw USD from an RSP account.  I imagine I will need a USD chequing account to do so?

I can't find any documentation where it shows that you're allowed to directly contribute or withdraw USD into your TD RSP account.  This TD Webroker site shows "no USD contributions allowed." https://www.td.com/ca/webbroker/help/transfer.html

No contributions allowed to the $USD component of your TFSA (K) or RSP (U))

I've asked several TD reps and I've learned that the only way to have VTI in a TD RRSP account is to:

1. Open a USD component for your RRSP
2. Contribute CAD into the CAD component of your RRSP
3. Convert the CAD into USD; or perform Norbert's Gambit
4. Buy VTI in the USD component

Then, withdrawing from the RRSP would be the exact reverse: sell step 4 > convert step 3 > withdraw step 2 ($25 fee per withdrawal aka deregistration)

I'm overall happy with TD Direct Investing, but this is the one thing I'm disappointed about.  RBC and Questrade allows direct contributions of USD and records the currency exchange rate at the time of deposit. 

[Heckler]

Investorline appears to allow USD withdrawals.

https://www.bmoinvestorline.com/FAQs/FAQ_US_Dollar.html