RRSP Mutual Fund - TD Canada Trust vs TD Waterhouse

[ayeung]

Just started looking to invest my RRSP savings with the mutual fund option ... I notice that some institution, you need to pay yearly admin fees while some you don't, yet I can't figure out the difference - I mean ... they are all RRSP mutual fund that you can buy and sell.

For example ...

TD Canada Trust - No yearly admin fees, just Management Fees of fund, you can also buy and sell as I understand ...
TD WaterHouse - $25/yr + Management Fees of fund
PC Financial - $12/yr + Management Fees of fund + rebate 10% of Management Fees quarterly

etc ...

[Thalo]

TD Investment Services (through a TDCT branch) would be a good choice to start. Your selections are limited to TD funds only, however there is no minimum, no annual account fee, no commissions and you do get advice from licensed mutual fund reps.

TD Waterhouse gives you a much greater selection. The $25/yr account (Basic RRSP) lets you pick from pretty much all mutual fund companies in Canada and you can buy all funds commission free. It is totally self directed though, so no advice. The full price self directed RSP (SDRSP) is $100/yr plus GST and gives you a selection of just about every investment imagineable, including options. Fees on the TDW accts are waived when your account balance is $25K or more.

My advice would be to start at TDIS and move to TDW once your account reaches $25K. Once you reach $100K you can get full fledged financial planning through TDW free of charge. Nobody should pay annual fees on an RSP, the only reason they're there is to detract people with low balances from using an inappropriate product.

[stevethewheel]

I don't know about TD, but at Royal Bank there are (identical) funds with lower management fees available if you go to the equivalent of TDWaterhouse and use self-directed. If this is true and you have enough invested to meet certain minimums then the lower management fees will likely pay off the annual fee of the TDW account.

[Thalo]

There are e-funds that you can buy either through TDW or a special TDIS account. There are other series of funds available that may have lower MERs for larger minimum purchases. Generally, the investor series funds available through TDIS are the lower fee funds available for small purchases.

[ai_c]

TD Investment Services (through a TDCT branch) would be a good choice to start. Your selections are limited to TD funds only, however there is no minimum, no annual account fee, no commissions and you do get advice from licensed mutual fund reps.

TD Waterhouse gives you a much greater selection. The $25/yr account (Basic RRSP) lets you pick from pretty much all mutual fund companies in Canada and you can buy all funds commission free. It is totally self directed though, so no advice. The full price self directed RSP (SDRSP) is $100/yr plus GST and gives you a selection of just about every investment imagineable, including options. Fees on the TDW accts are waived when your account balance is $25K or more.

My advice would be to start at TDIS and move to TDW once your account reaches $25K. Once you reach $100K you can get full fledged financial planning through TDW free of charge. Nobody should pay annual fees on an RSP, the only reason they're there is to detract people with low balances from using an inappropriate product.

When you say account balance, are you referring to money held at TD?

[Thalo]

No, balance of the SDRSP.

[florch]

I used ~$10k as the point where it made sense to switch from TDIS to TDW. If you are going to be in that neighbourhood soon consider that it is a minor PITA to switch over and consider TDW from the start.

[Bullseye]

I used ~$10k as the point where it made sense to switch from TDIS to TDW. If you are going to be in that neighbourhood soon consider that it is a minor PITA to switch over and consider TDW from the start.

Why did $25k make sense? Seems $25k is the smarter start point, to avoid the fee.

[ayeung]

Thanks for all your reply. So, the cheaper annual admin fees (waive or not) is basically letting you to choose from more mutual fund companies and the higher annual fees let you buy and sell yourself without commission ... But for the exact same funds that both TD waterhouse and TD Canada Trust offer, I think the latter yield a lower return (with a higher MER etc) so they can make up the admin fees? Also, their managed portfolios are probably more expensive than if you pick up the same mix of funds at Waterhouse? Right?

I don't know much about mutual fund so last night I went to the TD branch to set up RESP for our 6-month-old. The rep said she honestly didn't know this stuff very well either.:eek: (but I called them to book the appointment and told them this is for RESP mutual fund days ago). She kept showing us the info of their Managed FundSmart Portfolio (which i later found there is a min invest $20,000 when i got home) and ended up getting us the regular Managed Portfolio without telling us. Anyways, we got a low risk one which on average of the past 9 years yield a 4.4% annual compounded return, which I bet many of you will think it's low. I considered picking one of their 5 star balanced funds (average 6-10% return) but the rep said those are not managed, so if anything happens, you'll lose all your money.... But I can't imagine losing all my money on a 5-star fund...?

[ayeung]

Perhaps for RRSP, it'll be worth it to go to TDwaterhouse once it's over 25K. But my RRSP is all over the place .... PCF, ING and now thinking TDwaterhouse .... just because I was so lazy and set them up online. I tried to consolidate them all in one place, but it was a real pain. After almost 4 months of calling back and forth and one bank lost the cheque, I just cancel the move and lost interest of those 4 months as the banks said that's not their fault ...

[napoleonz]

Thanks for all your reply. So, the cheaper annual admin fees (waive or not) is basically letting you to choose from more mutual fund companies and the higher annual fees let you buy and sell yourself without commission ... But for the exact same funds that both TD waterhouse and TD Canada Trust offer, I think the latter yield a lower return (with a higher MER etc) so they can make up the admin fees? Also, their managed portfolios are probably more expensive than if you pick up the same mix of funds at Waterhouse? Right?

I don't know much about mutual fund so last night I went to the TD branch to set up RESP for our 6-month-old. The rep said she honestly didn't know this stuff very well either.:eek: (but I called them to book the appointment and told them this is for RESP mutual fund days ago). She kept showing us the info of their Managed FundSmart Portfolio (which i later found there is a min invest $20,000 when i got home) and ended up getting us the regular Managed Portfolio without telling us. Anyways, we got a low risk one which on average of the past 9 years yield a 4.4% annual compounded return, which I bet many of you will think it's low. I considered picking one of their 5 star balanced funds (average 6-10% return) but the rep said those are not managed, so if anything happens, you'll lose all your money.... But I can't imagine losing all my money on a 5-star fund...?

Are you sure you know what you got? You sounded like either you have no problem losing your money, or you don't understand what is the risk return profile. "I can't imagine losing all my money on a 5-star fund...?".....this one is very scary comment. I strongly suggest you take a step back and do some research before getting your hands on it, if you've not already done so.

* 5-star? Who gives the stars? What methodology is used?
* managed or un-managed portfolio has no direct relation with your market performance, thus your return.
* As long as you're buying mutual fund with stocks in their portfolio, you could potentially lose all your money.

[ayeung]

When I say 5-star funds, I mean their 5-star balanced funds (which I believe are a balanced of GIC, bonds, equities etc). The rep told me it's The Star or Morning Star that gave them that rating. As there are GICs, Bonds etc in the balanced fund, I don't think I can lose ALL the money as the rep told me.

Not that I've no problem losing all my money, but I already get the $500 gov't grant in the RESP, so I think I should go a more secure investment route, hence, I picked the pre-selected managed portfolio.

[Thalo]

Ayeung, if your child is very young and you have more than a 10 year investment time horizon you should be taking more risk. The mutual fund rep should have told you this.

4.4%/a sounds like a garbage return. I don't know which of the managed funds this is, I thought the most conservative one even did more than 5%. The only difference between the managed wrap funds (like the one you got) and the individual balanced funds are that the managed funds are more globally diversified and rebalance daily. The individual balanced funds are still very heavy in Canada (from days when RRSPs were required to be no more than 30% foreign) but their returns have been far better and MERs are lower. There is no risk with an individual balanced fund that you would lose your entire principal, at least not more so than with the managed funds.

The Morningstar ratings gauge an investment among its peers and the index. Higher stars = outperforms peers, lower stars = underperforms, 3 stars = average.

That rep sounded like they had no clue what they were doing. I would bring this up with the branch manager and have a close look at the investment she put you in, once you get the prospectus, and consider exercising "right of withdrawal" (you have 2 business days from receipt of prospectus in which to do this).

Note, in regards to the managed funds, there are also managed index funds with lower MERs that almost always outperform the regular managed funds.

[ayeung]

Ayeung, if your child is very young and you have more than a 10 year investment time horizon you should be taking more risk. The mutual fund rep should have told you this.

No, she didn't and I brought my 6-month-old daughter with me too. But anyhow, I would not choose the aggressive portfolio.

The one I got is based on the computer survey - Managed Income & Moderate Growth with avg annual compounded return over its life time (9 yrs) 4.4%. In fact, all of their managed portfolio are around 3.5-4.6% over 9 years. Now that I got home and am thinking even a plain GIC can give me that kind of rate.

However, the 5-star balanced funds that they offered all have significantly higher return - 5.6-10.7%. But then she told me that they are not managed by a manager and I may lose all my money.

I don't see I'll put more than 25K in RESP in the near future to warrant fees waived at TDWaterhouse so I think I'll stay with TDIS. But for RRSP, probably go with TDWaterhouse once I can consolidate all the scattered RRSP money and gain some more knowledge re mutual fund.

Thanks for all your replies.

[Thalo]

The balanced funds are still managed, the difference is that there is only one level of management (the manager invests your money in stocks, bonds, etc) as opposed to two levels of management (the MAP manager invests in individual funds, which each have managers that invest in bonds, stocks, etc). MAP funds aren't that bad though, when you said 4.4% I thought that was over 5 years, which would have been really bad. Over 9 years you have to take into account the huge decline in stocks earlier this century. The big benefit in an RESP is you don't have to do much to rebalance. You start with aggressive growth when the child is young for better growth then move a step more conservative every couple of years until you're in the most conservative portfolio when the child is in their late teens.

I definitely wouldn't recommend the TDW RESP. Not only is there a fee but it's also a lot more complicated getting money in and out.