QTrade (a reader shares his experience with the broker here), which consistently earns top honours in Globe and Mail’s annual discount broker rankings, is now offering US-dollar self-directed RRSP accounts. These accounts would allow investors holding US-dollar assets in their RRSP accounts to avoid currency conversion fees when buying and selling (for brokers that don’t allow “wash trading”) and to keep the dividend received from US-listed holdings in US dollars. Regular reader Gene sent the following note on why he is considering switching to QTrade and I’m publishing it with permission below as it might of interest to many of you.

I just contacted Qtrade about their new US$ RSP account. The Customer Service Representative wrote back that it operates much like a US$ investment account — all dividends are paid in US$ and you can hold and trade in US dollars in the RRSP account. The main drawback is that it costs $50US annually, which I understand is charged every February for the following year. If you open the account in mid-year, they prorate the fee based on the the portion of the year the account will be open. So, presumably, if you open an account in June, you will be charged about US$25 in July.

Transferring US stocks to the USD RSP account is a two-step process. First, stocks are transferred to a C$ RSP, then the client contacts Qtrade and asks for the US stocks to be “journaled” (broker jargon for moved) to the US$ RSP. Once a US stock is held in the US$ RSP, dividend payments from the stock will be placed in the same account in US dollars, saving you the currency exchange fee.

I’m considering switching from TD Waterhouse to take advantage of 1) US trades settling in US dollars, 2) keep dividends in US$, 3) Qtrade’s good reputation, and as a bonus 4) Transfer fees are reimbursed for accounts transferred to Qtrade before March 31st (up to $125 plus taxes if the account transferred has a balance of at least $10,000).

My take: Given that you are transferring out of TD Waterhouse and QTrade charges a $50 US annual admin fee, you’ll see cost savings only when your USD holdings exceed a certain threshold. Assuming a 2.5% one-way conversion fee (anyone notice how discount brokers seem to have bumped up foreign exchange conversion charges), a 2% dividend yield and assuming all dividends are reinvested in the same securities, you’ll see savings only if your USD holdings exceed $50,000. However, investors transferring out of a broker that doesn’t offer wash trading could potentially see substantial savings because they avoid the foreign exchange hit that comes from buying and selling US-listed securities in a self-directed RRSP account. Thank you for your note, Gene.

This article has 28 comments

  1. …and thank you for your interest, Canadian Capitalist.

    Your sentence:

    “However, investors transferring out of a broker that doesn’t offer wash trading could potentially see substantial savings because they avoid the foreign exchange hit that comes from buying and selling US-listed securities in a self-directed RRSP account. ”

    This is certainly true. When each US trade gets settled in C$, there is a conversion fee. If someone then goes on to purchase another US stock, the freshly settled C$ are converted again, with each conversion giving the brokerage a 2.5% (is it really that high now?!) windfall. It’s easy enough to see why so few brokers offer wash-trade/US$ RSP services, currency exchange fees are a real cash cow.

  2. Just a note for other readers. Questrade has the same (US$ RRSP) but no annual fee. I’ve been doing it a year or two and it works as expected although the Questrade interface regarding US dollars (and CAN for that matter) leaves a lot to be desired when go looking for dividend payments, etc.

  3. TD Waterhouse washes trades in RRSPs, using the TD US$ money market fund. You have to call each day after you buy/sell US stocks.

  4. Hello,

    I wonder if you could explain the conversion fee a little more.

    I just set up an RRSP with RBC Direct Investing and moved my U.S. stocks from a non-registered account to avoid the witholding tax on dividends (I learned about this strategy on this site, by the way, so thank you)

    They told me that when dividends are paid, they will be converted to CAD (I was a little surprised about that) and then re-invested, with any remainder sitting as cash in the account.

    Will this conversion fee affect the dividends? or does it only relate to new purchases/sales of the securities within the RRSP?

    Thanks in advance.

  5. In fact, Questrade Canada offers no-fee USD accounts in all registered accounts (RSP, Resp…) and TFSA. They charge 5$ each day that a USD trade is made in the account though.
    Commissions will be 1 cent per share, minimum 5$ and maximum 10$. I typically trade less than 500 shares so I would pay 5$ commissions only.

    I am seriously considering moving all my accounts there from NBDB.
    Would it be a smart move?
    Anyone can comment on overall satisfaction in using Questrade?


  6. Epicrider: I am a Questrade costomer for a second year. Unfortunately the only reason I stay with Questrade is $5 per trade commission(I am not buying more than 500 shares) and USD trades. I am using only free service they provide. For my trading pattern (10-15 trades a year per account, mostly ETFs) I am satisfied with the service they provide, probably because I use very little for my needs. As soon as there is another brokerage with same price structure and better service I will move on(so far I could not find one). If you do not need stock research, you are ok with web based trading platform(you will not be able to do quick trades), retrieving your monthly statements from a third party secured website(to avoid $2 charge for a regular mail) and you want to pay as little as possible per trade then I think it is an acceptable choise.

  7. I am a Questrade user as well. I do maybe 10-15 trades a year as well. Been really satisfied and actually find their support to be pretty good. Live chat is what I use. I use the free webtrader platform.

  8. Thank you very much.

    Yes, it was helpful.

    I have my first dividend coming into the account tomorrow, so I should be able to see the total effect first hand.

    Thanks again.

  9. Damir’s comments are spot-on with my experience with Questrade in general and their USD RRSPs in particular.

    The only thing I’d add is that their system will generate a phantom transaction confirmation when a US dividend is paid. The transaction will show a conversion to CAD that never really happened.

  10. Interesting comments on Questrade’s US$ RSP system. I had passed them over since I had read a lot of people had issues with deposits being very slow to be credited and other customer service problems.

    Since they end up charging $5US for every day that a trade is made in US$, they would be cheaper than Qtrade’s $50 if someone traded US securities fewer than 10 days per year.

    Am I to assume the $5 is not charged on days that US$ dividends are paid (assuming no US$ trades on that day)?

    The commission charges also seem lower at Questrade than Qtrade. This seems to tilt the favour towards Questrade for economy, but the intangibles of good customer service and easier interface seem to favour Qtrade.

    Not too easy to decide which one to go with.

  11. Hello, me again.

    Here’s an interesting post for anyone considering Questrade (besides those of you who are already happy clients):


    The post itself is all right, but it’s the comments that are really eye opening. I started at the bottom comment (most recent) and read backwards for awhile. There are a lot of comments relating very negative experience with Questrade.

    Even though I could save significant money with Questrade, I will switch to Qtrade.

    Again, thank you everyone for the informative comments.

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  13. @CC: I noticed one thing has changed at Questrade since I read the reviews. There is no longer a $4.95 level and a $9.95 level. They now charge 1 cent per share for each trade, with a $4.95 minimum/$9.95 maximum.

    It still sounds like they have serious customer service issues, though. Some people complain about extra, difficult to explain fees. I prefer to steer clear of such aggravation, even if I don’t get the cheapest commissions around.

  14. Hi Gene, regarding your first comment on this post, I don’t think I am being charged 2.5% for currency exchange. I made some US trades yesterday, so when I get the settlement records, I’ll check and see. However, I searched through the DirectInvesting site (the brokerage I use) and I wasn’t able to find any information about additional currency exchange fees on investment accounts or RRSP accounts. I’ll send an email to the support desk to find out. When I do make a trade on the US markets, all I get is a message saying that a conversion from CDN to USD will apply, but no mention of a fee.

    If I have been paying 2.5% fee per trade, I am going to completely lose my sh…stuff. I don’t usually watch for things like that, and for the sake of convenience, I usually convert my US trades to CDN. But, most of my portfolio is in US equity right now, so a 2.5% haircut per trade is pretty irritating. I’ll hold back the rage until I find out for sure, though.


    • Canadian Capitalist

      @TEMPLE: I recently converted CAD to USD at TD Waterhouse and when I checked the conversion rate against the rate published by the BoC, I noticed a 2.5% difference. About a year or two back, the conversion costs were roughly in the 1% range. It is possible that RBC Direct still charges just 1% but at least at TDW, the conversion fees seem to have go up significantly.

  15. I just started trading on my own last year. I debated with Questtrade but decided to pass on them because there were just way too many complaints. I decided to go with QTrade instead, and I have to say that their service is stellar. If I have a question, I just send them an email and I usually get a response within the hour. The one time I had to call them, everything went smoothly. I got a rep right away, he answered all my questions and fix everything up for me.
    Yes, it’s a little more expensive, but I’m at the $9.95 level now (over 30 trades per quarter) and quite frankly, it’s worth the extra money for the piece of mind.

  16. @TEMPLE – You won’t notice the 2.5% conversion fee… you have to dig deeper yourself and calculate the bid/ask and round trip currency conversions. Last trade I completed with TD, I had a whopping 1.9% charge each way over a two day hold meaning they cost me almost 4% on the trade. Riduculous since institutional investors typically pay in the range of single basis points for these trades.

    What I would like is to send registered CDN dollars over to a another RRSP trustee and have them convert into USD at a reasonable charge, ie sub 20bp. Then I could leave it with them and invest strictly in the US markets. Anybody know a firm like this?

  17. Just bought some US stock (in my RRSP account, thus paying with C$) at RBC Direct Investing and the exchange rate they gave me includes about 1.5% exchange fee.

    In order to get out of that position, I will likely do a swap with my cash account, thus avoiding more conversion fees.

    There was talk of them offerering US$ RRSP some time in the future. I hope they’re actually working on it and not just promising it to keep clients.

  18. What about OptionsExpress?


    I noticed they now offer USD RRSP accounts – has anyone tried them? I’ve been with BMO for years, but their service is not great, fees are high, and they are very tough on options requirements (for a non rrsp account).
    I was considering opening an account for options outside of BMO, but now wonder about just switching to them. Any experiences out there?

  19. I also have an RRSP account with RBC.

    I get charged 1.5% exchange rate when I buy a US stock, and then get charged another
    1.5% exchange rate when I sell the stock.

    Thats 3% total. Plus the 29.95 U.S. x 2 per 1000 shares bought and sold.

    On top of that you have to be carefull because if the Canadian $ goes up then you lose more.

    I have lost a lot of money on the conversion. In one instance i sold my stock after it went up 11%, but in the end only to made 1%.

  20. Hi everyone, I need the help of the math wizards here. As promised (but a bit late), I am trying to figure out exactly what conversion rate I am paying, and I have a settlement record here that is difficult to sort out.

    Here are the specifics of the trade: on January 20, 2010, I bought some US shares for a subtotal amount of 9869.83 USD, which includes the commission charged in USD. My settlement record indicates an “exchange” of 378.01, which is added to the USD subtotal, resulting in a net amount of 10247.84 CAD. I was given an exchange rate of 1.0383, according to my settlement record. In other words, 9869.83 x 1.0383 = 10247.84.

    From the Bank of Canada page (http://www.bankofcanada.ca/en/rates/exchform.html), $9869.83 converts on 20 Jan 2010 to 10341.61 CAD, at a published rate of 1.0478. Seems like I got a better exchange rate than the average rate posted by the BoC. Presumably, the differential is due to a falling Canadian dollar after I made my trade. However, (and this is where I need the math brains) is it possible to figure out the conversion rate applied?



  21. The BoC rate is 10341.61 / 9869.83 = 1.0478.

    Your rate is 10247.84 / 9869.83 = 1.0383. That is the rate they applied; you had it right.

    You definately got a better deal. The BoC site provides a single rate per day (could be the average or the end-of-day); you got a specific rate within that day. You were lucky.

  22. Just got my March statement from RBCDI and it came with good news: starting later this spring, they will allow US$ to be held inside their RRSP (and TFSA) accounts. This means no more currency conversion commissions when trading and receiving dividents. It took a while (they had first promised it for 2009), but it’s finally here.

  23. Canadian Capitalist

    @Chris: Thanks for the heads up. As a matter of fact, tomorrow’s post is on the RBCDI US Dollar account news.

  24. @Chris, Thanks from me, too. I wasn’t aware of this change, even though I have RBCDI accounts. I get my statements electronically and they haven’t mentioned this to me yet. I guess there will be a message as they get closer to introduction.

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