It is more than 3 years now since RBC Direct became the first big bank discount broker to offer a US Dollar RRSP. The next year, BMO InvestorLine followed suit and allowed clients to segregate the US dollar investments in their RRSPs. While TD Waterhouse (now called TD Direct Investing) reacted to these moves by implementing an auto wash feature, it is disappointing to note that the broker still does not offer a true US Dollar RRSP account. It is doubly disappointing because TD Direct’s customer service representatives had been hinting to clients that a US Dollar RRSP is in the works and expect it to launch in the first half of 2013.

It is easy to quantify the cost of sticking with TD Direct Investing when some of the competition offer true US Dollar RRSP accounts. The automatic washing helps in saving on currency conversion charges when selling a security denominated in US dollars and buying another USD security even on different days. But, due to the lack of a true US Dollar RRSP, US dollar dividends received by a TD Direct Investor are forcibly converted to Canadian dollars and charged a fee of approximately 1.9 percent.

Let’s quantify the hit to an investor due to the lack of a true US Dollar RRSP. Take John, a self-directed investor, who holds $100,000 worth of Vanguard Total Stock Market ETF (VTI) and $100,000 worth of Vanguard FTSE Developed Markets ETF (VEA) in a TDDI RRSP account. John receives about $5,000 worth of dividends in US dollars from these two holdings and since the currency is being converted at 1.9 percent, staying with TD Direct is costing John $95 per year compared to RBC Direct and BMO InvestorLine.

What TD Direct Investing Customers can do

Clients of TD Direct Investing should quantify their cost of staying (1.9 percent of total US dollar dividends received in registered accounts) and determine whether it is worth their time and effort to switch to a broker that does offer US Dollar RRSP such as RBC Direct Investing or BMO InvestorLine (as an added bonus Norbert Gambits at these two brokers are fully automatic even in non-registered accounts). Clients may well decide that they are willing to bear the cost for the convenience of having all their accounts in one place.

This article has 23 comments

  1. If you enrolled your US dollar Vanguard funds in a DRIP wouldn’t that minimize the currency conversion hit? Presumably they should DRIP directly back into whole units in US dollars and then only convert the modest cash balance, no?

  2. OMG TD sucks.

  3. It is too bad the majors are not offering the big promotions, 1% on the account, incentive to switch. I believe that’s why you moved to TD in the first place right CC?

    By informal sampling at the Canadian Money Forum, does seem like TD has the most clients, but that could simply be because they are complaining about these things and others remain silent.

    People have to start talking with their wallets and the change will happen.

  4. Canadian Capitalist

    @Slacker: To give TD credit, they used to be a very competitive broker offering wash trades, low-cost e-series index funds etc. Unfortunately, your comment applies to TDW today.

    @Sampson: BMO is offering $250 for those switching with at least $100K. That’s about the best I’ve seen lately. I would seriously consider switching if someone offered a large enough bribe or when the cost of sticking with TD exceeds the convenience factor of moving money around easily.

  5. Lump Scotia iTrade in with TDW as well. Still no US$ RRSP either.

  6. Sampson, it was RBC Direct that had the 1% switch deal. I believe they have offered it twice in the last 5? years.

    I took advantage of the most recent offer and it was extremely profitable for the time involved in doing the transfers (I eventually went back to Questrade).

  7. I was ticked when I heard this news from TD, I was looking forward to this account Ram. Thanks for posting and will promote your article, to TD, to get their attention 🙂


  8. Canadian Capitalist

    @Capt Chaos: It is probably worse at Scotia iTrade because I understand their currency conversion charges are higher than average.

    @Mike: You are correct the RBC Direct offered a switch deal twice. TD Waterhouse also offered it once, quietly, to a small group of clients to lure them back. And yes, I wish either RBC or BMO offers it now.

    @Mark: Thanks. It is indeed disappointing that it is taking TDDI so long to provide clients with a USD RRSP.

  9. I wish RBC would offer me 1% on my account, to stay, but I’d probably stay regardless 😉

  10. Wow – I didn’t know that TD offered it as well to some clients. That would be sweet to get paid 1% on both transfers. 🙂

  11. It cost me $500 to find out that Norbert’s Gambits do NOT work at TD Waterhouse for non-residents.

    Contrary to what at least two separate TDW phone reps told me before leaving Canada, non-residents are not allowed to buy any kind of mutual fund — including the TDB166 USD money market fund. They can hold what they already owned before leaving, and they can buy most other types of securities, but not mutual funds.

    I found this out only after attempting my second NG on around $80K. End result is about $700 lost to TDW in currency conversion fees. They “generously” compensated me with a $200 goodwill refund, for a bottom line loss of $500. 😉

    I’d be out of that place in a second, if it were doable from where I live overseas.

  12. Peter MacKinnon

    Has anyone heard of brokerage house called Questrade?

    • Canadian Capitalist

      @Peter: I have heard of Questrade as a matter of fact. I’ve even had accounts with them at one point and due to my less than optimal experience that is chronicled elsewhere on this blog, I do not ever contemplate switching to them. It is my understanding that Questrade has worked out well for many others, so it could be just my luck!

  13. I’m very disappointed with TDWaterhouse. We have several accounts and RRSP accounts with them. Have gotten bunch of promises from TD that they were implementing US Dollars. They are failing.

    Agree with the article…..time to leave TD Waterhouse.

  14. Pingback: Estimating the cost of not having a US Dollar RRSP account | MoneySense

  15. Are there any discount brokerages that will open a new account for non-residents of Canada? I was told that it’s impossible to buy any mutual fund as a non-resident. So the only other option I know of for index investing is ETFs. I read that Questrade and RBC Direct Investing won’t open new accounts for non-residents. Any recommendations for a good discount brokerage for a Canadian living abroad?

  16. On my TDW RRSP account summary I suddenly noticed today that there is a “USD” row. Is this new or have I just not noticed it until now?

    The USD cash and equities are $0 even though I hold some US vanguard ETFs.

    • Canadian Capitalist

      @DG: I’ve seen a separate breakout for USD in RRSP accounts for at least a year now. It comes and goes. Latest rumours out of TDW is to have USD RRSPs in 2015. I think I’ll be bidding adieu to them soon.

  17. I complained to TDW about my RRIF and TFSA that when I sold US stocks the money went into US mm funds but the dividends were converted to Canadian cash. I transferred my TFSA to RBC direct investing where US dividends go into a US cash account. TDW does not have a cash account in RRSP, RRIF or TFSA and will automatically convert US dividends to Canadian cash. This is unfair and I have told their agents that for 2 years but they don’t care. TDW knows that they are making lots of money on conversion.

  18. Word now is that TD Direct Investing will finally be launching a USD RRSP by the end of November 2014.


  19. I just got off the phone with TDW to set up automatic wash trades and was informed that I did not need to do that anymore as I could now open a US$ side to my RRSP!!!! A couple clicks on his end and I should see the new account online next week and he automatically journaled all my US listed holdings over to the new account.

    For those of you familiar with their site you would see CDN SDRSP which would contain your CDN$ holdings and a new line for US SDRSP that contains your US holdings.

  20. Pingback: Which of the Big 5 Brokerages Offer a US Dollar Side, Journal, Ledger or Sub-Account for an RRSP? | Financial Crooks