Registered Transfers
Did you know that some of your financial products are sticky?
Gross, I know. But true in the sense that some financial products are more likely to stay with the institution where they were first purchased.
Banks, in particular, pay very close attention to how many sticky products any given client has, and do their best to make sure everyone has at least one…but ideally more. Sticky products keep clients around to pay fees and hear pitches for whatever the bank is trying to sell on any given day.
The stickiest products include:
Chequing accounts with automatic withdrawals and deposits, especially payroll deposits (because it’s a pain in the neck to change pre-authorized deposits and withdrawals)
Mortgages (because there’s usually a penalty involved for leaving before the end of the term, and it’s easier to renew a mortgage than to apply for a new one somewhere else)
Guaranteed Investment Certificates (because you’re locked in for the term of the GIC, during which time the bank can lend that money out to other people at a higher rate than they’re paying you)
But there’s one set of financial products that seem stickier than they actually are, and that’s registered accounts.
As a refresher, registered accounts are ones that have specific rules about who can open, contribute to, and withdraw from them, and what happens to the money when it goes in or out of the account. Think RRSPs and TFSAs (although there are more than those two, and I’ve listed them below).
You can move your registered account anywhere you want, anytime you want. You’re not withdrawing from one institution and re-contributing the money at another one. Instead, you’re moving the entire account, registration and all, to an institution you’ve decided suits you better.
Step One: New Accounts
Decide where you want to move your accounts to. This is often the most time-consuming part of the whole process, since presumably you want your investments managed according to an evidence-based investment policy, followed with discipline, at a reasonable cost given the level of human involvement, and finding that can be difficult, especially if you have less than $500,000 to invest.
Reasonable options might include Justwealth, Leith Wheeler, or a discount brokerage like Questrade (none of those are affiliate links, I only accept money directly from clients for financial planning, not referrals).
Once you decide where to go, open the same kinds of accounts that you want to move.
Step Two: Transfer Forms
You’ll need to tell the new institution what account number you want to transfer from and whether you want to transfer your investments “in cash” or “in kind”.
“In kind” means that your old institution will send the investments themselves to your new institution.
“In cash” means that your old institution will sell any investments you own inside your registered account and send the cash to the new institution.
If your account is one of the locked in varieties, you’ll need to tell the new institution what jurisdiction the account falls under. If you don’t know, call your old institution to find out. Take it from me: guessing makes the whole process take longer.
Your new institution will send the transfer forms to your old institution, and manage the transfer. That’s it. There’s nothing else you have to do except wait.
Step Three: Trust, But Verify
Transfer times between institutions are guidelines, not rules, and set by the self-regulating bodies that make up the industry, including the Canadian Bankers Association and the Canadian Investment Regulatory Organization.
The guideline for how long a transfer should take says:
A delivering Member and a receiving Member shall act diligently and promptly in order to facilitate the transfer of the account in an orderly and timely manner.
And the Ombudsman for Banking Services and Investments says:
When we investigate complaints involving account transfers, we will first determine whether there has been an unreasonable delay. In evaluating the reasonableness of a delay, we will consider the regulatory rules and accepted business practices that applied at the time of the request as well as the firm's internal policies.
Your transfer could be handled precisely according to the guidelines and take two weeks or twelve. Your new institution (or “the receiving member”) should be on top of it and keep you updated, but set a reminder for yourself to check in on the transfer after two weeks, and every two weeks after that until it’s done.
Step Four: Get That Final Statement (And Fee Rebate)
Watch out for the final statement for your old account and check it to see if you’ve been charged a fee to transfer it out. If you have, ask your new institution if they’ll cover the cost.
Your registered investments are probably pretty important to you. Don’t leave them stuck at an old, mediocre institution that doesn’t take them as seriously as you do.
A Non-Exhaustive List of Registered Account Types
Registered Retirement Savings Plan (RRSP)
Spousal Registered Retirement Savings Plan (SP-RRSP)
Registered Retirement Income Fund (RRIF)
Tax Free Savings Account (TFSA)
Registered Disability Savings Plan (RDSP)
Registered Education Savings Plan (RESP)
Locked In Retirement Accounts (LIRA)
Life Income Fund (LIF)
First Home Savings Account (FHSA)