Investing

TD GICs: misleading advertising on their website

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  • Dec 2nd, 2019 10:08 am
[OP]
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Nov 22, 2019
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TD GICs: misleading advertising on their website

I recently purchased a GIC from TD Bank through their website and was lead to believe that it was 5% per annum guaranteed and up to 12% overall. However, what I actually purchased was less than 1% per annum and maximum 12% for *five years*. This is the "TD Canadian Top 60 GIC". If this is the case none of their promoted GICs are worth it.

What's really concerning to me is this is not some fly by night scammer mortgage corporation its TD Mortgage Corporation who I would think would make more of an effort to be clear in their wording.

Needless to say I'm going back to the bank tomorrow to get out of this - and probably move all my money elsewhere.

I wanted to warn people about this - it really is too good to be true.
17 replies
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Oct 7, 2007
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YurtG8230 wrote: I recently purchased a GIC from TD Bank through their website and was lead to believe that it was 5% per annum guaranteed and up to 12% overall. However, what I actually purchased was less than 1% per annum and maximum 12% for *five years*. This is the "TD Canadian Top 60 GIC". If this is the case none of their promoted GICs are worth it.

What's really concerning to me is this is not some fly by night scammer mortgage corporation its TD Mortgage Corporation who I would think would make more of an effort to be clear in their wording.

Needless to say I'm going back to the bank tomorrow to get out of this - and probably move all my money elsewhere.

I wanted to warn people about this - it really is too good to be true.
Thanks for sharing your post.

I don't know HOW MANY TIMES I have seen these types of products (if I have it right) where the big banks market these stock-market related GIC's where they do NOT make it clear that the % returns are overall for the term and not per annum. I mean, who talks like that when expressing a rate of return? If the norm is to talk % per annum than use the same units. But if they did that the return wouldn't even compete with what is currently on the market. Misleading for sure! Good eye and thanks for sharing.
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Jul 1, 2007
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A couple lessons here, thankfully learned only by underwhelming returns and not by an actual loss.

1) Market-linked GICs are garbage. All of them. They should never ever ever find a way into your investment portfolio, ever.

2) Until you think rationally about investments, you will be at risk of falling victim to a scam. The risk free rate is in the neighbourhood of 2% (the rate you get on a savings account or GIC for taking no risk). Any investments that promises more than that has some level of risk. So, what that means is if some mortgage or land investment scam is promising 10% and saying it's "guaranteed", obviously: run. That is an extremely risky investment. If a stock is paying a 6% dividend yield also: don't run, but understand that it comes with a reasonable risk of loss of principal, otherwise if it were risk free everybody would be pouring their money into it and the markets would have bid up its price and the yield would be 2%. Lastly, as the case was with this GIC: you should have been questioning how/why a bank would offer a 5% annual minimum guarantee on something, and after questioning you might have read the fine print below.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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I kinda see what you mean. For me though, whenever I seethe little number superscript, you definitely click On it. And the first sentence says minimum return, but not minimum return per year. The sentence after sounds like it is annual return, but is rather saying an annual rate Is being applied.

For these kinds of GICs, I would never expect 5% guranteed return so i wouldnt think this would be offered.
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Last edited by xgbsSS on Nov 23rd, 2019 12:29 pm, edited 1 time in total.
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Thalo wrote: A couple lessons here, thankfully learned only by underwhelming returns and not by an actual loss.

1) Market-linked GICs are garbage. All of them. They should never ever ever find a way into your investment portfolio, ever.
Agree for the most part. There are a couple exceptions.

Quebec Stock Bonds are not terrible as the return is 100% the index. But 10 year term :(

ATB Financial used to offer 5 year GICs that were also 100% tHe index return. They got rid of these unfortunately. As a young teenager, I got over 100% return on one.

I agree that they are mostly garbage. It is important to read the fine print.
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Yes it is a bit misleading if you just look at the description without clicking through to the details.
Term and Rate: 5 years
Guaranteed Minimum Interest Return is 5.00%3. Interest rate is per annum.
Maximum Return2 is 12.00%
So somehow they expect investors to understand the difference between "Guaranteed Minimum Interest Return" and "interest rate"

But if you click on notes 2 and three (which I bolded above) the following is revealed:
2 Equivalent to the total return over the term of the investment (i.e. not an annualized rate)
3 Actual return is 0.9816% per annum, compounded annually, payable at maturity (equivalent to 5.00% total return)
For further details on how the interest return is calculated, please refer to the TD Canada Trust Market Growth GICs Disclosure Statement.
Then when you click through to the disclosure statement you can read:
Market Growth GICs Total interest return consists of: 1) Guaranteed Minimum Interest Return and 2) Bonus Interest Return, if any. Total Interest Return shall not be greater than the Maximum as set out in the Confirmation and shall not be less than the Guaranteed Minimum Interest Return. 1) Guaranteed Minimum Interest Return is set out in your Confirmation 2) Bonus Interest Return You may receive a Bonus Interest Return at Maturity, which is calculated by multiplying: · the Principal; by · the Return, as set out below, if such Return is greater than the Guaranteed Minimum Interest Return; and · subtracting the Guaranteed Minimum Interest Return; and · if applicable, subtracting any Guaranteed Minimum Interest Return previously paid For all TD Canada Trust Market Growth GICs except the TD Canadian Banking & Utilities GIC, for the purpose of calculating the Bonus Interest Return, "Return" is the difference, if any, between the Closing Level (CL) and the Opening Level (OL) of the applicable index. The OL is the closing level of the applicable index two business days after issue date. For greater certainty, if the applicable exchange for a non-Canadian index is not open for trading or settlement on the second business day after issue date, the preceding day on which such non-Canadian exchange was open for trading or settlement shall be used for the purpose of determining the OL of that particular index. The CL is the closing level of the applicable index two business days prior to maturity date.
This highlights a couple of things:
1) Potential investors need to read all the notes and arcane details, even if they are in a disclosure document rather than on the web page. I've never bought one of these things but I'd imagine the purchase process includes the investor certifying that they read the disclosure statement before buying.

2) These are not good "investments" since they are returning the price change only (difference between the opening level and closing level), not the total return of the index (i.e. dividends are excluded). And some of them only return 50% of the price change. The guaranteed minimum interest rate is slightly less than 1% per annum for the 5 year, which compares badly with TD's 5-year GIC rate of 2% and very badly to Oaken at 2.85%. So with the Oaken GIC you are guaranteed to get 15% (1.0285^5) compound total return for 5 years, whereas with this TD GIC you are guaranteed to get 5% compound total return and you might get 12% total compound return.

3) The return is considered interest for tax purposes, and does not qualify for preferred tax treatment of dividends or capital gains.

But somehow risk averse people love these turkey products. :(
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Mar 7, 2011
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Always read the fine print. If it's too good to be true, it likely is...especially with the big banks.
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xgbsSS wrote: Quebec Stock Bonds are not terrible as the return is 100% the index. But 10 year term :(
This got my attention as I thought it could be a nice investment for someone who doesn't need the liquidity.
I read the fine print and it's not great. Your capital is guaranteed 100%, but the return excludes dividends. Looks to me like another garbage product.

https://epq.gouv.qc.ca/en/products-offe ... dex-bonds/
"The Stock Index Bond is not a direct investment in the constituent securities of the IREC Indice Québec IQ‑30™. Accordingly, the yield to maturity is determined excluding the dividends paid on such securities."
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gparadis01 wrote: This got my attention as I thought it could be a nice investment for someone who doesn't need the liquidity.
I read the fine print and it's not great. Your capital is guaranteed 100%, but the return excludes dividends. Looks to me like another garbage product.

https://epq.gouv.qc.ca/en/products-offe ... dex-bonds/
"The Stock Index Bond is not a direct investment in the constituent securities of the IREC Indice Québec IQ‑30™. Accordingly, the yield to maturity is determined excluding the dividends paid on such securities."
None of them include dividends. That is the case for these fixed income products. However for someone that needs cash and where Interest rate doesnt really matter, it might not be a bad option.

The thing is most of us here need equity investments in general, hence why this product is not appropriate for most of us here
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[OP]
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Nov 22, 2019
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To follow up: I went to the bank and got out of it. For these if you change your mind before 10 days you can revert.

I agree with the other posters that I should have read the "fine print" more carefully. The issue is that they are a big public institution and this looks really bad. With other banks that I use (Simplii, Tangerine) they are much more up front about what the product actually is.

Needless to say I've moved the money elsewhere and will be more careful with how I invest it.
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I wouldn't say market linked GIC are garbage. They're targeted to risk averse clients who don't want to "see negative return". Obviously we prefer actual index funds and ETFs as they will outperform these GICs but there's no principal protection which many people want.

Like the BMO Select GIC. It gives return of 0-12% but BMO advertises it as Total return for the term so no misleading here. Follows the banks index which has been outperforming more than 12% in 3 years. That's about rounded return of 4% a year. Pretty good for a GIC. Obviously if we invested directly into the banks index we get better returns but people want principal protection.
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bomber17 wrote: I wouldn't say market linked GIC are garbage. They're targeted to risk averse clients who don't want to "see negative return". Obviously we prefer actual index funds and ETFs as they will outperform these GICs but there's no principal protection which many people want.

Like the BMO Select GIC. It gives return of 0-12% but BMO advertises it as Total return for the term so no misleading here. Follows the banks index which has been outperforming more than 12% in 3 years. That's about rounded return of 4% a year. Pretty good for a GIC. Obviously if we invested directly into the banks index we get better returns but people want principal protection.
I would call them garbage, but reasonable people can disagree on this.

If an investor wants principal protection, there are better ways to do it yourself:

https://canadiancouchpotato.com/2012/06 ... cted-note/
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bomber17 wrote: I wouldn't say market linked GIC are garbage. They're targeted to risk averse clients who don't want to "see negative return". Obviously we prefer actual index funds and ETFs as they will outperform these GICs but there's no principal protection which many people want.

Like the BMO Select GIC. It gives return of 0-12% but BMO advertises it as Total return for the term so no misleading here. Follows the banks index which has been outperforming more than 12% in 3 years. That's about rounded return of 4% a year. Pretty good for a GIC. Obviously if we invested directly into the banks index we get better returns but people want principal protection.
I have never been a fan of these but my parents invested in these and have received the MAXIMUM advertised return on these types of products on more than one occasion. Because it is my parents, I believe them about their return BUT I still feel that somehow I wouldn't be so fortunate.
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choclover wrote: I have never been a fan of these but my parents invested in these and have received the MAXIMUM advertised return on these types of products on more than one occasion. Because it is my parents, I believe them about their return BUT I still feel that somehow I wouldn't be so fortunate.
It happens periodically especially since equity markets have outperformed. Of course had your parents actually invested in the same equity assets, they would have more money.

There are some cases where these products might be appropriate. For the majority here who are investing long term, not so much.
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CheapScotch wrote: I would call them garbage, but reasonable people can disagree on this.

If an investor wants principal protection, there are better ways to do it yourself:

https://canadiancouchpotato.com/2012/06 ... cted-note/
I agree with you but there's too many ppl that aren't going to be buying actual bonds.

These people care too much about principal protection and BMO is trying to take advantage of them. They just released a new GIC called money multiplier. It's a 5-10 year GIC, makes 0.5% annum and on the 5th year, they see if the banks index has increased by 50% since your entry point. If it does, your initial investment doubles and GIC matures. If it doesn't, it automatically rolls over for another year and on anniversary date, it checks again. It keeps rolling over until the 10th year and if it doesn't hit then, then you did a 10 year GIC that paid 0.5% annum LOL.

On the site, first bullet point is principal protection.
https://www.bmo.com/main/personal/inves ... multiplier
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