RBC Direct Investing (read my review) is letting clients know that it will soon be offering the option of holding U.S. dollars in registered accounts such as RRSPs and TFSAs. The Direct Investor newsletter included along with the March brokerage statement contains this announcement:

Coming soon, you will be able to hold U.S. dollars in your registered accounts

In response to requests from our clients, RBC Direct Investing is pleased to offer investors the option of holding U.S. dollars in their registered accounts. This will enable you to buy and sell U.S.-dollar-based investments without the inconvenience of converting currencies.

Starting later this spring, you will be able to hold U.S. dollars in most of your registered accounts, including the Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). You will also be able to hold U.S. dollars in the Tax-Free Savings Account (TFSA).

If you currently hold one or more of these accounts, you will find this new capability automatically added to your accounts.

RBC Direct might choose to characterize currency conversion as a mere “inconvenience”. At 1.5% each way, clients would more aptly term it (in polite conversation) as “expensive”.

It is not clear if RBC Direct Investing will charge a separate admin fee (like QTrade does) or charge extra commissions for transacting in US dollars (like Questrade does). But RBC Direct Investing, which currently does not offer a way to save on foreign exchange fees when buying and selling US dollar denominated stocks in registered accounts, has removed a major irritant with the discount broker.

Here’s my question to TD Waterhouse, BMO InvestorLine and the other majors: what are you waiting for now?

PS: Hat tip to Chris for his heads up on RBC Direct Investing’s announcement.

This article has 22 comments

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  2. Finally! This is so overdue… and you’re right… what are the others waiting for? Let’s just hope they don’t fee us to death!

  3. I spoke with someone at RBC Direct last week about this.

    I was told the registered accounts will now function exactly the same as non-registered accounts at RBC Direct– i.e. Canadian cash and investments will be segregated into one part of the account, US cash and investments into another.

    I was also told the roll-out is scheduled for mid-May if there are no glitches– if unexpected bumps occur, it could be as late as June.

    Finally, the person told me this feature will not be allowed in their RESP accounts– according to the person I spoke with at RBC DI, the HRSDC grant program does not allow currency segregated accounts.

  4. This is indeed excellent news. I’d expect the other major bank brokerages to fall into line shortly. I’m gonna try to push them myself the tiny bit that I can by phoning the ones where I have accounts!

    btw, the Questrade extra charge is $5 for the day on which a USD trade occurs (see http://www.questrade.com/trading/registered_accounts_usd.aspx), which is really miniscule compared to the min 1% charged on the FX e.g. 1% of $1000 is $10.

  5. Outstanding news! This has been a major source of hidden revenue for all registered investment accounts for too long now. Hats off to RBC for taking the lead over its banking competitors.

  6. Canadian Capitalist

    @Doctor Stock: The others were probably waiting to see which of the majors will throw the switch first. I expect that the others will follow suit pretty soon.

    @B.C. Doc: Thanks for your comment. I’d be interested in finding out from RBCDI on the fees. If they don’t charge any fees it would be really good.

    @CanadianInvestor: Yes, Questrade’s $5 charge is small but at brokers like TDW and BMOIL you can have the exchange rates set to the same value on the buy and sell and effectively avoid losses on the currency conversion. So, Questrade’s $5 charge is better than many brokers but not all.

    I’m going to nudge TDW to match RBC’s move here.

    @Neil: Yes, RBC does deserve a pat for being the first mover here. Hopefully, the others will follow suit pretty soon.

    Edit: Comment edited to clarify TDW and BMOIL wash trading.

  7. I agree with everyone, great news. Now, if RBC will just offer that 1% bonus to switch money to RBCDI again. 😀 I’m likely to switch from TD anyway, but the 1% bonus would be icing on the cake.

  8. Yep, I asked BMO InvestorLine a few times, they have been considering it in the last several years. (hope you feel the sarcasm)

  9. I wonder if now that RBCDI is out of the gate with an apparent technological workaround to the problem with their clearing software* that everyone will suddenly figure out how to do it? (like G, I’m also being sarcastic).

    * Background: Apparently brokerages routinely site their equity clearing software’s design for not being able to settle US$ in an RSP.

  10. Please delete my last comment. I just realized you meant selling a USD stock and buying more USD stock without currency conversion. So that makes sense.

  11. Canadian Capitalist

    @pessimist: Reading that sentence again, I see that it is not very clear. I’ll change it to “at brokers like TDW and BMOIL you can have the exchange rates set to the same value on the buy and sell and effectively avoid losses on the currency conversion”. Thanks for pointing it out.

  12. Re: my post above. Does anyone know if the other brokerages which allow US dollar holdings already (e.g. Questtrade) allow USD holdings in their RESP accounts? Thanks.

  13. Canadian Capitalist

    @B.C. Doc: I haven’t heard anything about USD holdings in RESP accounts. I won’t be surprised if banks / brokers don’t bother. My understanding is RESP accounts are a hassle due to all the paperwork involved for what are essentially small portfolios.

  14. Finally!!!!!

    and woo-hoo!!!

  15. I wonder if now that RBCDI is out of the gate with an apparent technological workaround to the problem with their clearing software* that everyone will suddenly figure out how to do it? (like G, I’m also being sarcastic).

    * Background: Apparently brokerages routinely site their equity clearing software’s design for not being able to settle US$ in an RSP.

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  17. Looks like they went live today. There’s a FAQ on the site that answers the relevant questions. For instance, there are no additional administrative fees. US holdings are not automatically added to the US$ side of an RSP. That can be done by phone or secure email.

  18. Canadian Capitalist

    @gene: It’s great that there are no fees. I’ll wait and see if TD Waterhouse (my current broker) does anything about this. I can already avoid currency conversion fees with wash trades at TDW. Keeping USD assets separate would help in avoiding currency fees on dividend payments but it is not high in my priority list. Hopefully TDW would match RBC because it seems BMO will pretty soon.

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  22. I grew tired of waiting for CIBC Investors Edge to go with a US-denominated RRSP and switched to RBC. Works fine, with one enormous caveat: I was told that you can’t transfer funds to/from a bank account and your RBC-DI account except for RBC bank accounts. All other brokerages that I have used allow for transfers to/from my ING account. Although not a huge problem for my once-yearly RRSP contribution, which I can do by mailing a cheque, I will never switch over my non-registered investments because I regular move money between my investment and bank accounts.

    I’ll be checking out Questrade and the others, and if RBC doesn’t resolve this, then I may switch (yet again, not what I want to do) in order to bring registered and non-registered investments into the same place.