arrow46 Comments
  1. Michael James
    Oct 10 - 11:42 am

    I don’t use BMO Investorline’s synthetic drip service, but I do know that they left U.S. securities in the Canadian dollar side of RRSPs by default after they introduced a U.S. side of RRSPs. (Customers have to ask to have securities moved over.) This makes me suspect that most synthetic drippers at Investorline are getting hit with these double currency conversions, but I don’t know for certain.

    • Rick D.
      Oct 14 - 12:15 pm

      Yes you do have to tell them what you want. Some people want the cash coonverted so they need you to tell them what you want.

  2. Richard
    Oct 10 - 12:21 pm

    This seems to directly contradict what you wrote a couple of years ago (http://www.canadiancapitalist.com/how-to-avoid-currency-conversions-on-us-dividends/), at least specifically with respect to TDW. If this article truly reflects the way things work I recommend that you add a disclaimer to the old article so that folks going through the archives aren’t misled.

  3. Slacker
    Oct 10 - 12:53 pm

    One of the reasons I switched out of TDWH and went to Questrade. Not that this is costing me that much money, but I hate the feeling of getting robbed.

  4. […] an investor enrolling in a synthetic DRiP would incur double the currency conversion charges. See this post for […]

  5. Canadian Capitalist
    Oct 10 - 4:37 pm

    @Michael: I suspect you are right as well. I don’t think this issue is limited to TD Waterhouse but I don’t have any information otherwise either.

    @Richard: You are right. That post is totally incorrect today. I’ve added disclaimers and thanks a nuch for catching it.

    @Slacker: Are you happy with Questrade? I tried them once years back and I had a lot of trouble with them. I still hear complaints occasionally, so I’m loathe to give them another chance. If I were to move, it would be to RBC Direct or BMO IL.

  6. Viscount
    Oct 10 - 6:19 pm

    > It is likely that clients at all discount brokers, even those that currently offer segregated USD registered accounts, charged double currency conversion fees on US stock DRiPs in the past.

    I don’t think that’s true. What makes you think that? I remember Questrade making it a point in some of their advertising that they never do double conversions.

    At this point, I just think that management at TD Waterhouse doesn’t really have any respect for its customers and essentially has no problem with nickel and diming them. I’m still steamed that they don’t mention “wash trading” in any of their account materials or in their help system. (I would never have discovered the concept if I hadn’t clued into the personal finance blogs, especially yours, and I’m sure I’m not alone.) I lost thousands in forced conversions over the years because of that. People should be willing to vote with their feet and use brokers with proper dual currency accounts… I did.

    • Canadian Capitalist
      Oct 11 - 10:59 am

      @Viscount: Fair enough. I don’t *know* that other brokers double dip on conversions. If any readers have actual numbers, please post.

  7. My Own Advisor
    Oct 10 - 6:49 pm

    Definitely in my weekend reading list for this week…great post.

    I have and will continue to call TDW every few months to see where they are with this initiative (USD $ RRSP accounts).

    I called tonight about something else, and they said about this acccount:

    “We are actively working on it.” I asked if they had a timeline, and the representative said “you should expect to hear something about this account in another 6 months.”

    We’ll see….

    Mark

  8. Slacker
    Oct 10 - 9:38 pm

    I’m ok with Questrade. Yes there has been a couple of screw ups, but TDWH had screw ups as well. The difference is that TDWH fix the problem a lot better and faster.

  9. Paully
    Oct 11 - 9:18 am

    I am a bit confused by your post. When I recently spoke to a rep at TDW, he told me that my US$ dividends from my US$ holdings could be reinvested in additional shares before the currency is converted to Canadian. He claimed that hey would only convert the remaining cash balance of the dividend that could not be used to purchase a whole share.

    In his description, I am only paying the currency conversion on a small portion of the dividend, not the whole thing, and certainly not paying it twice.

    Did I miss something in your post?…Or have I been misled by TDW?

  10. Sampson
    Oct 11 - 9:47 am

    Like BMO, RBC DI also left US securities in CAD accounts unless customers actively requested journalling. Its possible that RBC customers get double dinged too if they haven’t made the switch. I’ll try to check my records, but I don’t think I dripped any US shares after they introduced the USD accounts.

  11. Cal
    Oct 11 - 10:23 am

    Paully, you have probably been misled by an unknowing rep.

    Great Post CC!

  12. Canadian Capitalist
    Oct 11 - 11:07 am

    @Mark: It’s my understanding as well that TDW is working on dual currency accounts. I don’t DRiP and the hit from forced currency conversion of US ETF dividend payments is small enough for me to stick with TD for the convenience factor of consolidating all accounts at one place.

    @Slacker: Good to know that your experience with Questrade has been satisfactory. Still, I pay $10 per trade and I trade so little, so TDW it is for me. Unless of course, some other broker offers me a deal I can’t refuse to switch.

    @Paully: I believe the TDW rep was misinformed. Can you post any USD DRiP info you have, so we can double check whether TDW was correct?

    @Sampson: It would be nice to have information on other brokers. One doesn’t always get the correct information from brokerage agents. TDW told me in the past that they do not charge currency conversion fees on USD DRiPs and then I learn different.

    @Cal: Thanks.

  13. Rick_J
    Oct 11 - 7:03 pm

    I spoke with TDW recently (when I noticed this issue) and they confirmed that US dividends were subject to Fx charges both ways in a registered account because it is a synthetic drip (this was not explained when I enrolled in their autowash and synthetic DRIP programs). Based on comparing the conversions I experienced over the last year compared to the bank of Canada noon rate for US dollars the currency conversion cost is 1.7% over the spot price each way. As 80% of my equity holdings are in VEA, VWO and VTI this has meant I have paid approximately $200 in hidden fx charges due to the fact that TD cannot handle US cash in their registered accounts. I am now seriously considering switching to a discount brokerage that can allows US dollars in registered accounts. If they are in fact going to create a US side to registered accounts I would happily stay, but only if they refund my double fx charges will I wait for the registered accounts with US sides. For now I am testing out Questrade and RBCDI practice accounts to see where I will move.

  14. […] Capitalist said TDW continues to double-dip investors on U.S. dollar RRSPs.  I really want them to get their act together and offer U.S. dollar RRSP accounts – apparently […]

  15. Scott Gilfoyle
    Oct 11 - 10:18 pm

    I am a firm believer that anyone that writes an article about fees and or compensation should be required to disclose what they were compensated to write the article

  16. Sampson
    Oct 12 - 12:19 am

    Looking back through my records, RBC DI also double-dipped for USD-denominated synthetic DRIPs. Thankfully they set up the USD RRSP quite some time ago.

  17. Ted
    Oct 12 - 1:07 am

    Scotia iTrade does not double dip their drips. I have a synthetic drip set up with VWO in my RRSP and only the leftover dividends is subject to the foreign exchange fee.

  18. Friday Links
    Oct 12 - 5:01 am

    […] This week Money Sense went in-depth about Double Dipping on Currency Conversions in US Dollar RRSP DRiPs. […]

  19. Canadian Capitalist
    Oct 12 - 11:34 am

    @Rick_J: I understand your frustration. I recall calling TDW to check whether one can save on forex conversions by signing up for a DRiP and I was informed yes. But turns out it is worse. We get dinged twice on foreign exchange. The poor disclosure is troubling and I would say that you are justified in asking for a refund of at least one of the foreign exchange conversions.

    @Scott: I was paid $0 to write this post. See http://www.canadiancapitalist.com/what-you-can-expect-on-this-blog/ for editorial policy on this blog.

    @Sampson & @Ted: That’s good to know. Can you share actual numbers?

  20. Rick_J
    Oct 12 - 2:16 pm

    I just spoke to RBC and they do not currently offer a US dollar side in their RESP. This is a deal breaker for me as I hold 70% of my equity allocation in Vanguard ETFs.

  21. OP
    Oct 13 - 11:22 pm

    I am at Scotia iTrade. I have DRIP for VIG in RRSP account. Just recent example(Sept 28,2012), I have 476 shares and dividend rate: 0.323/share for total=USD$153.75. $149.75CAD were deposited into the account. There were 2 shares bought at $59.48USD(total $118.96USD). $115.87CAD were taken out of the account. Total amount left in the account: $33.88CAD

    • Canadian Capitalist
      Oct 13 - 11:40 pm

      OP: Thank you for these numbers. It confirms that Scotia iTrade does not double dip on currency conversions. Good on them!

  22. Rick D.
    Oct 14 - 11:56 am

    BMO now allows all retuns from US trades to remain in US dollars. There is also a class action lawsuit to make them refund what they charged in the past.

  23. Joe K
    Oct 14 - 6:41 pm

    From my calculation:
    spot rate sept 28th 1.0167 USD = 1 CAD

    If you got spot rate you should have gotten $151.22 CAN instead of $149.75 CAN
    2 shares @ 59.48 USD = $118.96 USD should have cost you $117.01 CAN but you only paid $115.87.
    Remainder should be $34.21 instead you have $33.88

    Pretty close to spot rate but the way they do it baffles me unless my math is wrong.

  24. Jackie
    Oct 14 - 8:50 pm

    Great post. Should I pay the $125 rrsp transfer fee to move from TDW to RBC and save about $60 in double dipping fee every year… Or will TDW finally support $US rrsp soon enough? RBC has had that feature for over 2 years. If TDW was seriously actively working on it, they would have had it by now. Not looking promising at all.

    • Canadian Capitalist
      Oct 15 - 11:17 am

      You have to first find out if you can get account transfer fees rebated by RBC. If your account balances are large enough, you should be able to get RBC to rebate the transfer fees for each account.

  25. Slacker
    Oct 15 - 7:38 am
    • Canadian Capitalist
      Oct 15 - 11:15 am

      Wow. I wonder why BMO is the only one picked here. Was BMO the only one against whom poor disclosure could be alleged?

      • Rick D.
        Oct 16 - 7:41 pm

        Its easier to pick one and get a judgement thatwill apply to all the others than to get them all envolved.

  26. Jackie
    Oct 15 - 8:51 pm

    TDW has hardly been forthcoming on this DRIP matter. When you check the Activities list in your account, it makes no mention of forex. It just says DRIP, the number of stocks purchased and the value. The double conversion is totally hidden from the records provided by TDW. This really comes as a bad surprise.

  27. Joe K
    Oct 16 - 1:34 pm

    I won’t be able to determine how iTrade handles the synthetic DRIP of US$ securities because according to the rep I spoke with they do not offer it for VOO, VBR, VNQ, VWO and VEA.

  28. OP
    Oct 16 - 2:21 pm

    Joe K,
    In my experience, iTrade is really good adding securities to the DRIP. If the etf is not already on the DRIP, ask the rep to send a request to add it. VXUS was not on DRIP, just asked them. It’s on the list now. I had more than 3-4 etfs that were not on list, now they are.
    When I was researching to consolidate my assets, I tried RBC Direct, there were a lot of etfs that were not on DRIP and they told me that if there are enough customers with that etf then then would consider adding it to DRIP hence I consolidated at Scotia iTrade.

  29. Joe K
    Oct 16 - 3:21 pm

    Talk about hit and miss. Called iTrade and now all of those securities are available for DRIP except VOO which is one of the largest of them all. I asked to request VOO and was told it is Vanguard who decides that and not iTrade.

  30. Chris
    Oct 31 - 5:31 pm

    This is the answer I got from TDW ( email: td.waterhouse@td.com ), relative to the synthetic drip in a RRSP for US ETFs.

    “TD Waterhouse does not charge a currency conversion twice when dripping ETFs. Shares are first purchased with the US dividend paid and then the remaining cash will be converted to Canadian Dollars. ”

    I then sent them a link to this forum and asked them to really confirm who is right here about the double dipping. But I get no answer anymore.

    Am I the only one who find this very misleading? Shouldn’t TDW be required to clarify broker’s fees? Or are they actually correct and the information in this thread doesn’t apply to TDW?

  31. Chris
    Nov 02 - 7:08 am

    That reply is indeed more informed than the one I got. Hopefully their representatives will finally be spreading correct information from now on.

  32. Spitfire 6280
    Nov 02 - 4:45 pm

    As a follow up to this most interesting post, I checked with Scotia to see if they double-dipped on RRSP accounts, and indeed they are. This is the answer I got:

    “Thank you for your email inquiry. In regards to your inquiry about USD
    dividends and the rate they are charged at, Scotia iTRADE applies the
    end of day rate for currency exchange. When the Dividend is paid you
    will be paying 2 times for exchange, one from USD to CAD when dividends
    are issued, and then again from CAD to USD for the DRIP on the security.”

  33. Joe K
    Nov 05 - 10:40 am

    Spitfire 6280,

    It seems to me they are as well; however, if you look further up in the comments the final amount seems to be pretty good.

    I have only receieved cash for my $US dividends and I have been charged less than 1% in FX fees.
    I won’t be able to confirm what kind of rate I get for DRIP’s in US$ securities until Jan.

    Joe

    • Spitfire 6280
      Nov 05 - 8:41 pm

      Joe K,

      I agree the double conversation may not expensive depending on what FX fees you get charged, but it remains a less-than-optimal situation. This 1% may be a small pebble, but after 20 years that pebble will be a rock of sizeable proportion :-)

      I sent another e-mail to Scotia following their response, and it appears that iTrade is exploring an option to avoid this double conversion in the future, although nothing official yet.

      I think our best bet – as clients of Scotia, TD and other banks – is to strongly suggest their representatives to work on better solutions to avoid such charge.

  34. oldnestor
    Dec 27 - 11:11 pm

    Here.s some more numbers from dividend payout Dec 27, 2012. There.s a DRIP set up on VT (Vanguard Total World Stock) in TFSA account at TD Waterhouse:

    338 shares * US $0.555 dividend = US $187.59
    US $187.59 less 15% US withholding tax = US $159.45
    DRIP.d 3 units of VT closing price of US $49.08 * 3 = US $147.24
    So US $159.45 less US $147.24 = US $12.21
    US $12.21 = CAD $12.15 at BoC closing rate (12.21 * 0.9949 = 12.15)
    At BoC exchange rates, I expect CAD $12.15 cash in TFSA when all said and done.
    What I actually had in cash is CAD $10.65

    This doesn.t seem bad to me. In fact it seems good. Has TD fixed the double dipping issue?

  35. red
    Feb 13 - 10:23 pm

    Can you clarify why it “would be that it’s better to reinvest on your own if you receive more than $2,000 worth of dividends.” Can you explain why if you receive less than $2K in dividends it’s ok to enroll in the syn. DRIP?

    • Canadian Capitalist
      Feb 14 - 12:53 pm

      @red: I’m referring to using the Norbert Gambit to do a currency conversion. $2,000 is the break even point for a Gambit. So if you receive large dividends in chunks greater than $2,000, you can convert on your own cheaper than the bank would on a synthetic DRiP.

  36. red
    Feb 14 - 9:46 pm

    Oh I see, so if I have VTI for example invested in my RRSP, it would not be a good idea to enroll in the synthetic DRIP due to the double dipping, it would be best to just collect the dividends and invest it perhaps once a year?

  37. […] Capitalist said TDW continues to double-dip investors on U.S. dollar RRSPs.  I really want them to get their act together and offer U.S. dollar RRSP accounts – apparently […]

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