Man holding credit card while online shopping

How To Use Your Tax Refund

You were a good citizen. You were organized, gathered all of your tax forms, receipts and filed your taxes promptly.

As a result, you are now the recipient of a nice chunk of change from Justin and the Premiers in the form of your tax refund!

Your tax refund might feel like free money, but it is not. In actuality, this is the repayment of an interest-free loan that you gave the government without even knowing it. Throughout the year, you either make periodic remittances if you are self-employed (or otherwise required) or you have tax taken off each paycheque by your employer. Your tax refund is the return of overpayments that you made relative to the income tax that you actually owed at the end of the year. Hence, this is why it is called a refund. Your tax refund was indeed your money all along.

But now, the big question is, “How should I use my tax refund?”

Before you buy that new iPad or fly to Jamaica, here are a handful of recommendations.

How You Should Use Your Tax Refund

1. Pay Down Consumer Debt

Consumer debt is debt related to consumption, instead of debt that is tied to an asset that can appreciate.

This is priority #1. This would likely be priority #1 on any list for that matter.  Paying down your consumer debt is so important that it should likely be #1, #2 and #3 on this list.

This prolonged low-interest rate environment that we have lived in seems to have lulled many Canadians into a false sense of security around carrying consumer debt. According to the 2018 BDO Affordability Index, 46% of Canadian households don’t earn enough income to live debt free.

But not all debt is created equal. The largest area of concern is high-interest debt.  High-interest debt generally comes in the form of credit cards (up to 20% APR), payday loans (>100% APR and upward), and high-interest lines of credit (10% APR or more).  Rates mentioned are illustrative and not a minimum threshold for concern.

If you are carrying high-interest debt, paying it down will almost always be the best use of your funds. You should focus on paying down your debt with the highest interest rate first.

In essence, consumer debt is what you owe for the material things or that you already have or the experiences that you have already had. To put it another way, instead of using your tax refund to buy an iPad, you still need to pay for the iPad that you purchased years ago.

2. Open An RESP For a Family Member

Education costs are continually on the rise.  A year of post-secondary education at a Canadian university can cost up to $20,000. Starting to save early in a child’s life is prudent given the rising costs.

RESPs are an excellent way to save for a child’s education for a few reasons.

  • Free Money!

The Government of Canada matches 20% of your contributions, up to a maximum of $500 per year. This is called the Canada Education Savings Grant (CESG).

There is also lifetime maximum for CESG contributions that the government will make of $7,200.

  • Tax-deferred investment growth

Money held within an RESP grows tax-deferred. Similar to an RRSP, all of the growth of the funds within the RESP has the benefit of tax-deferred compounding. Tax-deferred investment growth has been proven to be a winning wealth builder.

  • Taxed in the hands of the beneficiary

Unlike an RRSP, contributions made by yourself into the RESP are not deductible from your income. As such, you will be contributing after-tax dollars into the account, similar to a TFSA.

However, the CESG amounts and the investment income are then taxed in the hands of the beneficiary (i.e. your child or niece/nephew) upon withdrawal. This can provide significant tax savings. Students are typically in a low-income period of their lives during schooling, and they should generally be in a lower tax bracket than the contributor during this time.

These advantages should be capitalized on early and often in the life of the beneficiary to maximize the CESG and tax deferral. Use your tax refund to start an RESP and take the free money!

3. Contribute to your RRSP/TFSA

If you don’t require the free CESG money for a family member, you can shift your attention to your personal savings.

Whether you contribute to your TFSA or your RRSP will vary based on your individual situation. I prepared a rundown on things to consider when answering the question, “Is an RRSP contribution right for me?

When making your determination of where to put the money, the primary question that you should ask is “When will I need the money?”

Funds in your RRSP are intended for your retirement, but they could also be withdrawn to buy a home using the Home Buyers Plan or to go back to school via the Lifelong Learning Plan.

Another perk of an RRSP contribution is that it can increase your tax refund for next year if you deduct it against your 2019 income.

If you need this money for the near term (other than for purchasing a home or for going back to school), TFSAs provide added flexibility around withdrawals. This is an ideal place to keep your emergency fund. If you do not have an emergency fund in place, then bump this up ahead of the RESP plan in terms of priority.

If you have questions around what option is best for you, you should speak with a financial planner.

4. Mortgage Paydown

The market is sending mixed messages about where interest rates are going in the intermediate term. However, we know that we have been experiencing a prolonged low-interest-rate environment.

The party should come to an end sooner-or-later, and rates could rise.

There are a few key benefits to paying down your mortgage:

  • Defence against rising rates

As rates rise, so will your mortgage payments on a variable mortgage. Even if you have a fixed rate mortgage, it will come up for renewal inevitably, and all else being equal, your payments will increase along with the interest rate.

  • Guaranteed rate of return

Let’s assume that you have a mortgage rate of 3.5%. By paying down a portion of your mortgage, you have just achieved a guaranteed after-tax return on your investment of 3.5%! I challenge you to find a guaranteed investment that will pay you that rate of return after-tax.
This guarantee, however, doesn’t contemplate foreclosure risk, or any of the other risks associated with homeownership. That said, paying down your mortgage is an excellent way to achieve your long-term financial goals.

  • Lower monthly payments

As you lower your outstanding balance, your monthly payments become lower.  Some mortgages implement these changes immediately, while others will update the payments a set interval.  In either case, when you have less to pay back, you can pay less each month.

  • Mortgage renewal flexibility

A lot of digital ink has been used lately discussing the challenge that some are facing renewing their mortgages.

The Government of Canada introduced rules to stress-test an individual’s ability to afford their mortgage payments when rates rise. As interest rates rise, so does the benchmark rate for the stress-test.

By paying down your mortgage, your outstanding balance and future payments will be reduced, and this will ease the challenge of meeting the stress test.

When deciding whether or not to use your tax refund to pay down your mortgage, you should investigate the repayment terms before making your decision. Some are flexible, while some are stringent and may come with fees or penalties. Speak with a professional to understand the implications of making a pre-payment against your mortgage.

5. Get a Fee-Only Financial Plan

Naturally, this is a self-serving recommendation, but I wouldn’t be doing my job if I didn’t mention it.

A financial plan is an investment in your overall financial well-being.  Having a solid financial footing sets you up for success in all other aspects of your life.

A good financial plan can help you better understand your spending, ensure that your investment mix matches your risk tolerance, identify if your current savings will allow you to reach your goals, assess your risk management, or map out how to make your savings last through retirement. And let’s face it, if you are reading this article, then you probably have questions about how to optimize your financial situation.

A financial plan can also help you assess each of the above options for the use of your tax refund based on your individual situation.

An additional benefit is that many of Novel’s clients have been able to achieve significant savings on their investments by executing a Novel Fee-Only Financial Plan. This ultimately means that, depending on your current investment products, the cost of a fee-only financial plan can pay for itself, even in the first year!  Investment options that can pay for themselves tend to be few and far between in this day and age.  Taking steps to secure your financial well-being is an excellent use of your tax refund.

The Brass Tacks On Using Your Tax Refund

Don’t be so quick to spend that tax refund. After all, it was your money to begin with, not the government’s. There are several things that you can do to put that money to work for you.  Each of the options have pros and cons, and they may not all be appropriate for your situation. Resist the urge to spend it frivolously and instead use your tax refund wisely. Then again, sometimes you just need to go to Jamaica.

If you would like to schedule a free consultation to discuss your options for maximizing the use of your tax refund, please contact us.


RRSP Contributions should be planned to maxmize your nest egg

Beware of RRSP Season

By any chance, have you been off the grid for the last month or so?  No?  Then I am certain that you have seen an advertisement for RRSPs during that time.

This is a big season for the average bank, fund provider, asset manager and just about anyone else involved in the investment or financial services industry.

The reason that this is such an important RRSP sales time is simple.  RRSPs stay invested – for a long time.

Let’s use a simple example.  In this example, you invest $10,000 in an average mutual fund within your RRSP.  You are 30 years old when you contribute and plan to retire at the age of 65.  Let’s say this mutual fund has a 2% Management Expense Ratio (MER) and grows at a rate of 5% a year.   By the time you reach retirement, the mutual fund will have earned $10,326 in fees over that 35-year period.  $10,000 of income, from a single contribution!  In addition, you will keep your funds invested throughout your retirement as you withdraw from your RRSP as a source of income.  This example doesn’t contemplate admin fees, transaction fees, or management fees paid to your advisors.  These fees would be over and above the MER for the mutual fund.

As you can see, RRSPs are BIG business for the industry.

The problem with the sales cycle that we experience during the early part of the year is that it doesn’t contemplate the most important factor.  YOU!

Blindly contributing to your RRSP is not a winning financial strategy.  When deciding whether you should contribute to your RRSP, you should take into consideration your individual financial situation. 

Isn’t Saving For Retirement A Good Thing?

Absolutely!  Start saving.  Right now.

According to a study by BDO, nearly two-thirds of Canadians say that they don’t have much, or anything, saved for retirement.  A key statistic from the report is that 47% of millennials have no retirement savings.

Saving for retirement helps to solidify your financial future.  Of the people surveyed in the study, 75% of those who haven’t retired yet expect to work longer than their parents did. 

Saving for your retirement is critical and I encourage you to do so, but blindly contributing to an RRSP is not the only way to achieve either your retirement or your broader financial goals.

Is An RRSP Contribution Right For Me During RRSP Season?

There are several considerations to take into account when determining your tax and retirement strategy.  RRSPs are an integral component of both.  Here are a few of the key items that you should keep in mind.

  1. Am I carrying credit card debt?

Not only is it RRSP season, but it is also the time of year that we have to pay off our credit cards from the December spending spree.  Paying down high-interest credit card and other types of debt should be prioritized over contributing to your RRSP.

  1. Do I have an emergency fund?

Retirement is a long way away for some.  You need to get there first.

An often-overlooked area for most, an emergency fund is requisite to weather the ups and downs of life.  Identity theft, cracked foundations, leaky roofs, unexpected medical expenses, job loss, serious injury, elderly parents in need of care, vehicle breakdown or a surprise baby on the way.  These are just a sampling of the reasons that you should ensure that you have an adequate emergency fund at the ready.

  1. Can I lock these funds in until retirement?

An RRSP isn’t a typical savings account.  When you put money into one, the expectation is that you will keep the money there until it is time to fund your retirement.  As such, you won’t have access to the funds without penalty.  Funds that are withdrawn early experience 2 major consequences.

First, the funds withdrawn have a withholding tax applied against them.  The Federal withholding tax rate is 30% for amounts over $15,000.  This means, that if you will need access to $10,000, you need to withdraw roughly $14,285 in order to be left with the cash that you need after federal withholding tax.  When you file your tax return for the year of withdrawal, the $14,285 would be included in your income.  If you have a marginal rate below the 30%, you should receive a refund for the difference, but you have just given the government an interest-free loan for the period between your withdrawal date and when your tax refund gets paid out.

Second, you lose the RRSP contribution room forever.  Unlike a TFSA, when you make a withdrawal from an RRSP, you do not get to put the withdrawal back in.  With a TFSA, you can re-contribute the amount that you withdrew in the following year.

  1. What is my marginal tax rate, and what will my tax rate in retirement be?

This is the money maker when it comes to using RRSPs.  The best use of an RRSP is when you contribute money at a higher marginal tax rate than your planned marginal tax rate in retirement.  In a simple example, if you contribute at a 30% tax rate, but withdraw at a 35% tax rate, you will be paying more tax than you would have saved on the contribution.

That being said, the tax-deferred treatment of the investments within an RRSP can still result in a positive outcome despite the above tax rate scenario.  This will depend heavily on investment performance and the length of time the funds are invested.  Whether or not this will make sense for you will depend on several factors, however.

  1. How much tax do I have to pay this year?

One of the main benefits of an RRSP is that it reduces your tax payable in the current year.  If you contribute too much in the wrong year, you may be wasting some of the taxation magic that an RRSP contribution can provide. 

  1. How much contribution room do I have?

Unfortunately, the benefits of an RRSP are not unlimited.  You accrue 18% of your employment income as RRSP contribution room every year.  If you have a limited amount of contribution room, you may be better served by using it in a later year when your marginal tax rate is higher.

  1. Do I already have enough in my RRSP?

There is also the possibility that you don’t need to make any contributions.  If you have a workplace defined benefit pension, this may satisfy your retirement income needs by itself.  This is not a typical scenario, however.  In another scenario, if you have ample RRSP savings already, with additional contributions you could put yourself in a position where when you convert the RRSP to an RRIF you will end up in too high a tax bracket.  If this is the case, TFSA, non-registered accounts or Spousal RRSP contributions are more appropriate for your situation.

Buyer Beware: RRSP Loans

Another tactic that the financial industry likes to use is the offering of RRSP loans.

The general idea is that you take out a loan to contribute to your RRSPs, and then pay off as much of the loan as you can with your tax refund.

The major problem with this approach is that when you borrow money to invest in an RRSP, the interest that you pay on the loan is not tax deductible.  In addition, as with most loans, there is an inherent risk.  The risk here is that unforeseen events could arise, or you simply get invited to go on a great spring break trip, and you may not pay the loan off in full.  All the while, you can’t deduct the interest because it was used to fund your RRSP.  Not a winning play.

Your Bonus & RRSP Season

Another item to consider is that this also happens to be when many employee bonuses are paid out.  If your employer offers a savings program, such as a Group RRSP, then typically your employer will provide you with the option of having your bonus paid straight into your workplace RRSP plan.  In addition to the items mentioned above, there are additional considerations to keep in mind around this option.

  1. What is the timing of the bonus payment?

This is critical from an RRSP perspective.  If the bonus will not be paid until after March 1, 2019, then it won’t be eligible for your 2018 tax year filing.  If this is paid prior to March 1, and you elect to contribute it to your Group RRSP, then you would have the option to apply it to either the 2018 or 2019 tax year. 

A word of caution here – your bonus will be taxed as income in 2019.  If you contribute it and elect to use the RRSP deduction for the 2018 year, you would have to pay the income tax on it in 2019, as you wouldn’t have the deduction available following its use for 2018.  As such, this would not be a generally recommended approach. 

  1. What are the fees associated with my Group RRSP?

This is one that you will have to do some research around.  Mind you, this is research that I would recommend you perform no matter what.  Gaining an understanding of the investment products that are offered as part of your employer-based savings plans, and their fees will help piece together the overall cost of your portfolio.  While the fees associated with the products offered can vary, there may be an offsetting benefit to utilizing the savings plan, such as an employer savings match.  For example, if you contribute 5% of your savings each month into the plan, they may offer to match this 5%.  A 100% match of your money will offset the increased fees that they may offer. 

However, when it comes to your bonus, there won’t be an accompanying match on your contribution.  High fees may make this option an unattractive one.

  1. Do I need the cash from the bonus payment for another purpose?

If you do not contribute your bonus to the savings plan, this will be paid out just like your normal paycheque.  However, there will be one key difference.  When the bonus gets paid out, there will typically be a withholding tax at a fairly high marginal rate, along with CPP and EI deductions.  Similar to the early RRSP withdrawal example above, this means that some of your money may be tied up until you file your tax return in 2020, for the 2019 tax year, and get your refund.

The Brass Tacks

RRSPs are powerful financial tools. 

The financial industry is full of intimidating salespeople.

This can result in some unwise decisions being made.

In order to determine whether contributing to your RRSP is the right thing for you, there are a number of important factors to consider.  You shouldn’t simply blindly contribute to your RRSP like the salespeople would like you to.

To discuss your tax and RRSP strategy for the coming year as part of a Fee-Only Financial Plan please contact us.

Did you find this blog post helpful?  Anything else you think that we should include?

Please let us know in the comments below.


Self-Directed Brokerage Screen

How To Execute a Stock or ETF Trade

This guide will help you execute a trade through your self-directed brokerage account. 

This walkthrough will show specific screens from the current Questrade platform, but the steps are relevant for any self-directed brokerage account that you may have.  For additional visual help, Questrade has a video showing how to execute a trade.

  1. Open and Fund your account.

We have prepared a guide on how to open a self-directed brokerage account.

  1. Log in to your account and select the account that you want to make the trade from (i.e. TFSA/RRSP/Non-Registered)

  1. Access the Trading Screen

To do so, you can either select the ‘Trading’ icon from the drop-down menu from the top-left of the screen, or you can click the ‘Trade’ button in the top right.

Questrade Account Screen

 

  1. Determine the amount that you can invest on the trading screen

When you reach the trading screen, you can see your current balances in the account:

      • Cash
        • The amount you are currently holding in settled Cash in this account.
      • Market Value
        • The current market value of your investments in this account.
      • Buying Power
        • This is the maximum amount that you are able to invest on your next trade.
        • This amount will be reduced by any buy trade that you execute.
        • See below FAQs for an explanation around buying power vs. cash
  1. Lookup the security that you want to trade

In the top right corner of the screen, look up the security that you want to trade by entering either the symbol or the proper name, and select it from the drop-down that appears.  In the example above, we have looked up XIU, which is the symbol for the iShares TSX 60 ETF.  This security is traded on the Toronto Stock Exchange (TSX), which is why the symbol includes the trailing ‘.TO’ in the name shown in the drop-down menu.

Questrade ETF Lookup

  1. Enter your trade details

NOTE: ONLY PLACE TRADES DURING MARKET HOURS.

After hours trading is risky and is not recommended.  For reference, the TSX is open from 9:30 – 4:30 EST.

On the order entry screen, you are given the current quote information for the security.

NOTE: Quote information is usually delayed by 15 minutes.

Questrade ETF Order Entry

      • Last Price
        • The price paid on the last trade for this security
      • Bid Price
        • The current price being offered on open buy orders
      • Ask Price
        • The current selling price being requested on open sell orders
      • Bid Size
        • The # of units of the current bid order
      • Ask Size
        • The # of units being offered at the current ask price

When buying an ETF, we recommend that you offer as close to the ask price as possible.  When selling, offer as close to the bid price as possible.  If you are trading index ETFs, the spread between the bid and ask will generally be nominal.

In this example, we placed a limit price of $22.37 per unit, which was $0.01 higher than the bid price.  Across the 100 units that were being bought, this was $1 total more than the current ask price for this ETF.  This is a nominal amount to ensure that you should be able to have your trade filled.  If you were to offer only at the bid price, your trade may not be able to be filled by the broker.

Once you determine the price to be offered, you will enter the parameters of your trade and Click “Buy” or Sell”

      • Quantity
        • The number of units/shares to purchase or sell
      • Order Type
        • Only ever execute Limit trades
        • This dictates a maximum price for a buy order and a minimum price for a sell order.
      • Price
        • The price that you are willing to pay for the security (close to Ask on Buy, close to Bid on Sell).
        • Ensure the bid and ask price are close together.
      • Duration
        • How long you want the trade to be open for.
        • As prices are dynamic, there may not be a buyer or seller at the price that you enter at the exact moment that you make your trade.
        • As such, the trade will stay open for the duration you indicate
        • Only execute trades that are open for the Day duration
  1. Confirm that the details of the trade are accurate

A splash screen will appear for you to confirm the details of your trade.  You will see the total trade cost and your updated buying power.  If the details are accurate, click ‘Send Order’.

Questrade ETF Buy Confirmation

  1. Check the status of your order

You will be shown a pop-up with the order details.

In the screen below you see the status as ‘Executed’.  This means that the trade has been filled.  It was filled at $22.36 per unit (the Fill Price), which was less than the limit price we submitted at $22.37.

Questrade ETF Order Details

If the status is showing as ‘OPEN’, then your trade has not been filled.

If the unit price moves higher than your limit price on a buy order, then you may have to raise your limit price by modifying your order.  The opposite is true on a sale, where if the price moves lower you may have to lower your asking price to have your trade fulfilled

After you close the Order Details pop-up, you will be returned to the Trading screen.  Go to the Orders screen by clicking on ‘ORDERS’ in the upper left menu on the Trading screen.

Questrade Order Menu

 

On the Orders screen, you will see the order that you just placed.

Questrade Orders Screen

Select the trade and adjust the limit price if the bid/ask price moves after you have placed your order.

Once the trade has been filled – you are done!

Congratulations!  Understanding how to make a trade puts you in a position to take control of your finances and manage your own investments.

Trading FAQ

Trading (3)

After you place a trade, the transaction is in what is known as the settlement period.  What this means is that there is a period where the brokerage works to move the securities and cash between the accounts of those parties involved in the trade (i.e. cash out, stock in or vice versa).

The day that you execute the trade, to either buy or sell, is the trade date.  The settlement date is typically trade date + 3 days (i.e. T+3).  Your buying power is measured on a trade date basis, where your cash balance is on a settlement basis.  If you execute no other trades, your cash and buying power will be equal after the trade has settled.

This is an instruction to the brokerage.  When you place a market order, the broker will make the trade at any price that the market will bear.  When you place a limit order, they can not go above (on a buy order) or below (on a sell order) the price that you provide.

Your hope is to place orders that are fulfilled very quickly.  A lot can change from day-to-day in the market, and leaving trades open longer than a day is not recommended.  Other duration options are:

  • GTD – Good-Till-Date
    • Expiry date specified by the user, but cannot be open longer than 90 days
  • GTC – Good-Till-Cancelled
    • Expires only if cancelled by the user, or 90 days, whichever is sooner.
  • GTEM – Good-Till-Extended Market
    • This means that the trade will be active in extended trading (until 5:30 pm for Canada exchanges), which is not recommended due to added risk.
  • FOK – Fill or Kill
    • This is a trade that is executed immediately and completely or not at all. This trade type is useful for active traders who trade large volumes of securities.
  • IOC – Immediate or Cancel
    • Similar to FOK, the trade must be executed immediately, but the IOC trade will allow for a partial # of the securities of the order to be fulfilled.  FOK is all or nothing.

Load More


Account Opening Form

How To Open a Self-Directed Brokerage Account

Opening a self-directed brokerage account is an essential step toward taking control of your finances.  This forms an integral component of the Execution phase of the Fee-Only Financial Planning Process.  A self-directed brokerage account allows you to buy and sell stocks, ETFs and other securities.

In order to open an account, you will need some information accessible before you begin, as it will be required as part of the process:

  • Government-issued Photo ID
    • Driver’s License or Passport
  • Current account information if you will be transferring funds into your new account
    • Account #s for each account (RRSP, TFSA, etc.)
    • Institution name and address

The below walkthrough is specifically for our recommended brokerage Questrade, but the steps will be similar for any self-directed brokerage.  This process should take you about 30 minutes to complete but can be done in phases.

Note: We only recommend that you open an account if you will be transferring $5,000 or more.  When you have $5,000 or more, you will not be charged fees for inactivity in your accounts.

Self-Directed Brokerage Account Opening Steps:

  1. Go to questrade.com

  2. Click on “Open An Account” in the top right portion of the landing page

  3. Select the accounts that you wish to open.

Our recommendation is to open an Individual Margin, RRSP, and TFSA account.  These are the 3 basic account types that are appropriate for all Canadians.

Select the Self-Directed account options, not the Questwealth options. Questwealth accounts charge management fees for pre-packaged portfolios.  We have covered elsewhere how management fees negatively impact your portfolio

Questrade Account Opening Selection Screen

On the right-hand side of the screen, you will have the opportunity to enter an offer code.

If you enter the code “uajekubi” you will receive a $50 trade commission rebate.  This is offered as part of the Questrade affiliate program. To understand more, please read our affiliate policy.

  1. Create a user ID and enter your basic personal information

The name that you enter on this screen must match the government issued photo id that you will upload as part of the account opening process.

  1. Build Your Profile

Next, you will expand on the personal information provided in the previous step.

The questions that you answer in the next steps are standard procedure when opening an account with a financial institution.  These questions help to prevent money laundering and sanctions avoidance.  This is a good thing.  You can refer to the Questrade Privacy Policy if you have any questions or concerns.

You will have to enter information in 4 different categories:

      • Personal Information
      • Employment Information
      • Financial Information
      • Citizenship Information

Questrade Build Your Profile Screen

  1. Account Opening Questions and Documents.

For this next step, you have to complete some paperwork and answer questions for each account that you are opening.

From the account summary screen, click on an account to complete the setup.

Questrade Account Setup Selection Screen

There are a separate set of questions for each account, as well as paperwork that must be signed and submitted prior to being able to open your account.  It is during this step where you must upload the copy of your photo-id to the website.

Questrade Account Questions and Documents

  1. Fund your account

Now it’s time to put some of that hard-earned money of yours into your new account.

You have a few options at your disposal.

Questrade Account Funding Options

If you are transferring an RRSP or TFSA to your new accounts, you must use the ‘Transfer account to Questrade’ option.  Any other form of funding would result in a contribution to your account, which may put you over your contribution limits for either your RRSP or TFSA.

When transferring accounts, they can only be transferred into the same type of account (i.e. RRSP into an RRSP).

For a limited time, if you are transferring an account of $25,000 or more, you may be eligible to have your transfer fees that are charged by your current institution (the transfer out) covered up to $150 by Questrade.

If you are transferring your account, you will have 3 options available to you. 

      • Transfer in-kind
      • Transfer in cash
      • Partial

Transferring in cash means that your stock/ETF positions will be liquidated by your current institution and converted to cash.  This can have some unintended consequences, such as incurring brokerage trade commissions, or tax bills for realized gains (or losses) in your non-registered accounts.

Transferring in-kind means that you are moving your stocks and ETFs over while keeping your adjusted cost base/book values intact for tax purposes.  This is the recommended option.

A partial transfer would be for only a portion of your account, as opposed to the full value.  A cash transfer is appropriate if you are holding securities, such as mutual funds, which are unable to be held in your brokerage account.

Account transfers can take up to a month or more, depending on the financial institution.

Minimum initial funding in order to buy stocks or ETFs is $1,000 per account.

 

And that’s it!

Once your accounts are funded, you are now able to trade stocks, ETFs and other securities.

We have prepared a guide on how to execute a stock or ETF trade  for your reference.

Was this guide helpful?  Are there other guides that you would find useful? Let us know in the comments.