TD Bank’s July increase in transfer costs is part of a series of fee changes that will increase the monthly cost of some account packages by $1.Andrew Lahodynskyj/The Canadian Press
The going rate to transfer investment accounts from one bank or broker to another is roughly $150.
Toronto-Dominion Bank TD-T has long been under this threshold, but not for much longer. Starting July 1, the fee for TD Canada Trust clients who move a tax-free savings account, a registered retirement savings plan or a first home savings account to another financial company will rise from $75 to $150.
Account transfer fees are a mostly hidden but potent example of financial industry arrogance. After failing to earn your continuing loyalty, these companies charge you to make your escape. Open banking rules that will boost competition cannot come soon enough.
TD took a business-as-usual approach when asked for details on the fee hike. “We regularly evaluate our product offering to align with customer’s needs,” the bank said in an e-mail response to questions. “The change to the registered plan transfer fees was made based on various factors, including the costs involved in processing and moving assets to another institution, market conditions, and to align with the value we provide our customers.”
TD’s fee hike was highlighted in a recent LinkedIn post by Paul Teshima, Wealthsimple’s chief commercial officer. Wealthsimple has built the most credible diversified banking, borrowing and investing alternative to the big banks and, guess what, it doesn’t have account transfer fees.
Wealthsimple has its own customer-service vulnerabilities. The interest rate on its chequing account has dropped to the lower tier among alternative banks in recent months, and its foreign exchange fees looked comparatively pricey in the latest Globe and Mail digital brokerage ranking. Lower forex costs are available if you subscribe to a $10-per-month U.S.-dollar account package.
Still, Wealthsimple has a point in drawing attention to TD and other banks that charge clients to take their accounts elsewhere. In total, millions of dollars are charged to a segment of the investing public that can least afford them. Bank branches are a natural destination for people who want help investing amounts too small to interest an investment adviser.
A $150 fee on a $15,000 account is a one-per-cent hit, which is significant when you consider that a return of five to six per cent is what you should expect over the long term from a diversified portfolio.
That one-per-cent fee comes in addition to money already made on that $15,000 account if invested in mutual funds. Bank mutual funds have fees – measured through the management expense ratio shown in disclosure documents and fund profiles – that are typically in the 1.5-to-two-per-cent range in the balanced and equity categories.
Whether you make or lose money in mutual funds, your fees are scooped off the top. Those…
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