The following question is from Andrew:
I was wondering whether it is possible to set up an RRSP that includes direct ownership of stocks, bonds and ETFs, and if so, how to go about this. Most banks that I know of only organize RRSPs around mutual funds (with too-high MERs and low choice). Is it possible for a brokerage to set up an RRSP as well?
A self-directed RRSP at any of the major online brokerages will allow you to hold a mixture of stocks, bonds, GICs, mutual funds etc. Opening an account is a very simple process. For instance, TD Waterhouse allows you to open an account online or you can print out an application form, fill, and mail it in.
There are a few differences between the brokers that you should be aware of. Many, but not all brokers charge an administration fee if your account is smaller than a certain amount. The discount brokerage arms of the major banks typically charge very high commissions compared to some of their competitors.
Rob Carrick of The Globe and Mail ranks the online brokerages every year and last year’s rankings (available here) could help you to pick out the broker you want to go with.
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24 responses so far ↓
1 MillionDollarJourney.com // May 16, 2007 at 7:26 am
CIBC requires a min account balance of $25k before eliminating the annual fee of $125.
FT
2 Sean // May 16, 2007 at 8:23 am
Thanks for the link to Rob’s rankings! I’ve read one of Rob’s books and really appreciate his honesty and impartiality to lay out all the facts.
I’ve been looking for some more sources for other opinions/reviews of online discount brokerages since coming across http://www.surviscor.com/.
3 Big Cajun Man // May 16, 2007 at 8:26 am
Indeed, I am miffed at TD Waterhouse because in my regular trading account I typically get a number of FREE trades in a year, yet for EVERY trade made in my RRSP I am charged $29.00 (remember to include that in your “wealth” calculations, I keep forgetting too).
–C8j
4 Canadian Capitalist // May 16, 2007 at 8:54 am
How do you get certain number of free trades every year? I know that they routinely offer free trades for 3 months when you initially sign up, but this seems to be new to me!
5 Fernando // May 16, 2007 at 9:05 am
Hi!
Does anyone know of anyone who offers a self-directed RRSP that can hold securities in other currencies? I know TD offers a manual “wash” of trades based on a money market US$ account, but is there anyone who offers direct holding of US securities (regular and ADR…)
6 Steve Heath // May 16, 2007 at 9:33 am
While trying to research this very same thing (which online discount broker to start with) I came across a recommendation for Questrade, and they look pretty darn good (and cheap) considering I only intend to have a sleepy portfolio.
The thing that makes me nervous is it doesn’t even seem to get mentioned in rankings such as these, and on Sean’s link to surviscor it doesn’t make the overall or investor lists, although it is #4 on the trader list. When looking closer it shows they didn’t even grade it on investors saying their target market is active traders.
And yet, if you only intend to buy the big Barclay & Vanguard ETF’s and sit on them for 30+ years, wouldn’t this be an ideal brokerage?
Anyone have any advice on the best brokerage for just doing ETF’s in a self directed RRSP?
7 Canadian Capitalist // May 16, 2007 at 9:54 am
Fernando: I don’t understand your question. If you are asking if any broker allows you to hold foreign currency, the answer is no. If you are asking if any broker allows you to hold US stocks, ADRs etc. directly, all of them allow you to do so. The advantage of a wash trade is that when you sell a US security and then buy another with the proceeds, you don’t incur currency fees. With other brokers you do, but that doesn’t mean you can’t buy USD denominated stocks.
Steve: Yes, Questrade looks good and cheap. They don’t seem to allow wash trades though, so I am not interested.
8 FinancialJungle // May 16, 2007 at 12:03 pm
I have a Self-Directed RRSP with QuesTrade to hold stocks and ETFs. One drawback is I can’t hold mutual funds. Usually that’s not an issue, since I’m not a fan of mutual funds in general except for a selected few like Chou RRSP.
QuesTrade’s exchange rate is expensive (1.25% each way), but I don’t know of a better alternative. Interactive Brokers has exceptional exchange rate, but they don’t offer RRSP accounts.
9 Steve Heath // May 16, 2007 at 12:33 pm
Hmmm… maybe the best solution is to split it up and put my CDN RRSP with Questtrade since they have no minimum and my USD RRSP holdings with someone that does was trades like TD waterhouse or apparantly CIBC does (I checked them out, despite their mediocre ratings, since I’m pretty happy with PC Financial).
10 MillionDollarJourney.com // May 16, 2007 at 12:53 pm
Jungle, Questrade does offer Mutual funds, you just need to phone in to order them.
11 MillionDollarJourney.com // May 16, 2007 at 12:54 pm
Steve, where did you hear that CIBC does washtrades?
12 FinancialJungle.com // May 16, 2007 at 1:27 pm
I didn’t k now QuesTrade sells mutual funds, albeit manually. Good to know. Now I can buy Chou Associates in my QuesTrade account. Sweet.
13 Steve Heath // May 16, 2007 at 2:58 pm
MDJ: I emailed them and asked about it, and they wrote back that as long as you call in to do it and tell them you want to both buy and sell they will not charge exchange. That sounded like what you guys were describing with TD, the only thing I didn’t check on was whether CIBC also had a no fee money market mutual fund you could jump in and out of as a holding spot.
14 Big Cajun Man // May 16, 2007 at 3:14 pm
Typically it’s the first two trades of the year are free, occasionally I get notes reminding me of this fact (this is for a straight trading account, which they want me to use a lot more). It may be my LACK of activity that causes these offers? Not sure, but my last 3 transactions (over 2 years) have been for free.
15 Joan McCulley // May 16, 2007 at 10:45 pm
Don’t forget there is Trade Freedom which does selfdirected RRSP’s in both American and Canadian stocks. $9.95 a trade. Like Questrade it gets overlooked in Carrick’s rankings.
I wouldn’t put mutual funds in their RRSP, because they charge for each move (about the same price as a TD Waterhouse RRSP stock trade) even within a family of mutual funds. I don’t think you can do their mutual funds on the computer either. Has to be called in.
16 Sean // May 17, 2007 at 12:48 pm
Anyone have any experience with Credential Direct? I hadn’t heard anything about them until I discovered them in the last week on Carrick’s and the Suvivcor rankings.
From what I’ve been researching, they look like a good fit for me but am looking for more opinons.
17 Maiden // Jun 21, 2007 at 11:06 pm
I would like to withdraw $15,000 from my RRSP however I am wondering will I get less withholding taxes if I withdraw the amount in $5000 chunks since $5000 at 10% withholding will be $3000 vs $6000 if I took out $15,000 at 20%
18 FourPillars // Jun 22, 2007 at 8:41 am
Maiden, you can reduce the withholding tax to 10% by keeping the withdrawals to $5000 each. I would do the transactions on separate business days since some companies will use the total of multiple transactions done the same day for this calculation. I would call and ask your financial institution for the easiest way to do it.
Keep in mind the $15k will get added to your 2007 income so depending on your situation you might end up with a big tax bill next spring. If this will be your situation, you might want to consider borrowing the money instead of taking it from the rrsp.
Mike
19 Canadian Capitalist // Jun 22, 2007 at 9:13 am
Maiden: I’ll second Mike’s suggestion. Talk to your financial institution about how you can withdraw in chunks of $5,000 and pay 10% withholding tax.
Remember that the withholding tax is just a down payment if you have other income in 2007. You’ll be taxed at your marginal rate on the withdrawals. If you decide to withdraw, make sure you have enough money set aside to meet the tax obligation.
20 Rilla // Sep 22, 2007 at 11:57 am
Does anyone know if any financial institution allows Self Directed RRSPs for Commercial Mortage. RBC will only allow regular mortages
21 Mayur // Nov 1, 2007 at 10:14 pm
Questrade is not all that it seems. Their account management screens are absolutely terrible and are severely lacking in information and clarity. For example, I had no idea that having a negative USD balance meant I was trading on margin and was being charged prime+7%. Have a look at my post on RFD for more info: http://www.redflagdeals.com/forums/showthread.php?t=508143
My still unanswered question: How do I know my account is a self-directed RRSP? I assume it would be since I specified that during my account creation.
22 peterD // Jan 12, 2008 at 10:12 am
Hi Everybody,
I am new to the game. I want to open a self directed RRSP.
Now the question is, can I have a self directed RRSP, lets say for instance with Scotiabank or TD and use the OUTSIDE BROKER (Canadian or US) to buy shares (stock) within than RRSP?
Or the rule is that I have to use the institution (in this case Scotiabank or TD) that provides a self directed RRSP account to buy and sell the stock?
It would make sense to have the directed RRSP account with an established Canadian bank and use the discount brokers for trading. Please help!
peterD
23 FourPillars // Jan 12, 2008 at 12:58 pm
Peter - you have to use the brokerage where your account is. Not sure why you want to use an account at a bank if you are doing your trading elsewhere.
Mike
24 david // Feb 21, 2008 at 12:55 am
How is Etrade canada? Any body has experience there on self-directed RRSP, RESP account for stock trading?
Price? tools? etc.
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