Archive for September, 2012

ING Direct Lags the Competition

September 27, 2012


In its early years ING Direct was a pioneer in the high-interest savings accounts space offering an interest rate that was far and away better than any of the banks. But for many years now, the best rates can be obtained not at ING Direct but at one of its new competitors.

Take high-interest savings accounts, for instance. ING Direct offers an interest rate of 1.35 percent on savings and RRSP accounts and 1.40 percent on TFSA accounts. But Ally, a competitor with CDIC coverage, offers a significantly better 1.80 percent on savings accounts. Peoples Trust, a small financial institution with no online access, offers 1.9 percent on savings accounts and a significantly better 3.0 percent on TFSA accounts. In fact, ING Direct’s interest rate on savings accounts is now so average that Canadians with discount broker accounts can get a comparable rate with high-interest savings accounts that are sold like mutual funds.

In an earlier post, I compared GIC rates available from ING Direct and Ally and found that Ally offers higher rates across every maturity and it remains true even today. Ally also offers a better rate for cashing out early compared to ING Direct. A quick check at TD Waterhouse shows that investors who can put up a higher initial investment of $5,000 can an interest rate that is 0.35 percent better for non-redeemable GICs at the discount broker.

This pattern can be observed in other products offered by ING Direct as well. Its THRiVE no-fee chequing account appears to be comparable to the competition. The Home Equity Line of Credit from ING Direct has an interest rate of 3.65 percent which even Royal Bank is able to beat with an interest rate of 3.5 percent.

While ING Direct may not offer the best rates anymore, it remains a leader in an important way. It offers a whole range of banking products in one place with better rates and lower fees than the big banks. The convenience factor of all accounts in one place is perhaps the reason why ING Direct, despite the competition, continues to remain very popular among cost conscious Canadians.

Should we care who owns ING Direct?

September 25, 2012


Recently, Scotia Bank announced that it intends to purchase ING Direct Canada from its Dutch parent company ING Groep NV, which is divesting assets to repay billions of Euros in bailout money it received from the Dutch Government during the financial crisis. The sale has upset many ING Direct clients who had moved to the online bank attracted by high interest-rate savings products and a promise to charge no fees. News reports on the ING Direct sale attracted a flood of comments from clients who are worried that Scotia Bank might lower interest rates or institute service fees.

Such fears are understandable because it is not uncommon for the big banks to jack up fees after acquiring an erstwhile competitor. For instance, Scotia Bank acquired E*Trade Canada a few years back and online trading commissions for small accounts went from $19.99 to $24.99 and the high-interest rate Cash Optimizer accounts was scrapped entirely. TD Waterhouse’s acquisition of Ameritrade Canada offers yet another example: trading commissions on US stocks went from $10 to $29.

Scotia is making the right noises about the acquisition saying that it is “committed to preserving everything that ING Direct Canada’s customers have come to love about it”. One hopes that Scotia will maintain ING Direct’s high-interest savings, RRSP and TFSA accounts, high-interest GICs, no-fee chequing account, low-cost mutual funds and keep the existing no-fee structure. Offering clients access to Scotia’s banking machines would be an icing on the cake. As long as Scotia delivers on its commitment, customers will likely not care that ING Direct is owned by a big-five bank and ING Direct by any other name will sound just as nice.

This and That: Staying the course, adviceDirect, QE3 and more…

September 13, 2012


Why stick to an investment plan?

The past 10 years have not been a happy one for stock investors. But diversified, low-cost portfolios have generated modest returns. A New York Times column makes this point with a retired couple’s portfolio that has been through two big stock market downturns.

Carrick on adviceDirect

BMO InvestorLine recently launched a product called adviceDirect that promises to offer personalized assistance to investors (for a price, of course). Rob Carrick weighed in calling it a co-pilot for DIY investors.

What the Fed is doing?

The Federal Reserve announced new quantitative measures (dubbed QE3) this week that sent US stocks soaring to five-year highs. This article on Money magazine explains what the Fed is doing and why.

Auto Insurance Loophole

A column in The Ottawa Citizen pointed out that a little-known loophole in Ontario’s insurance rules allows auto insurers to limit the liability amount if the driver is found to be criminally negligent. In the story, a couple waiting at a bus stop were hit and killed by a driver who was later found guilty of criminal negligence. The driver’s auto insurance policy included a $1 million liability coverage but the insurer paid out just $300,000.

Loyalty is for suckers?

This blog post on the Time Magazine website looked at a report that found that auto insurance companies “reward” loyal customers by charging them more. The implication is that it is worthwhile to shop around for such things as cable, Internet, cell phone service, home and auto insurance etc.

Zvi Bodie defends his strategy

In an article titled Why Stocks Are Riskier Than You Think in the Wall Street Journal last spring, Zvi Bodie and Rachelle Taqqu recommended that investors build a safety net of real return bonds and implement a collar for the risk portion of their portfolio. In a follow-up article, the authors addressed some of the reader criticisms of the strategy.

Is organic produce more healthy?

The New York Times reported that an analysis of multiple studies comparing organic with conventional meats and produce found lower pesticide residues in organic foods but no obvious health advantages.

Best time to buy US Real Estate

The Financial Post reported that according to BMO the combination of the high C-dollar and recovering US home prices makes this the best time to buy real estate south of the border.