Switching to RBC Direct Discount Brokerage

by Mike Holman

As some of you have already heard, Canadian Capitalist broke the news last week that RBC Direct discount  brokerage (read a review of RBC Direct) is offering a 1% payment for any assets transferred from another investment institution.  There are limits to the rebate but they are quite generous  ($2500 per account type).
I’m a big fan of passive low-cost investing which is why I’ve been using Questrade discount brokerage – they have  the lowest trading costs bar none.  I’ve been happy with their service and trading platform and wouldn’t hesitate to recommend them.  However, as my primary criteria for a discount brokerage is cost – the 1% rebate (non-taxable by the way) from RBC changes the equation dramatically so that it makes far  more sense for me to switch to RBC and get the rebate than it is to stay with Questrade even though their trades are cheaper.

Should you switch to RBC as well?

I plan to address this question more definitely next Tuesday (so check back).  There are a number of factors to consider – this RBC deal does not make sense for everyone.   I’ll come up with some better guidelines next week but the short answer is that for most people, it is not worthwhile to switch to RBC unless you have total assets of $100k (by household) because the higher trading costs ($29 if your assets are less than $100k) will negate the rebate.  If you are a frequent trader ie more than 50 trades per year then you might need even more than $100k to make it worthwhile.  Another factor is how long you keep the money at RBC – if you plan to move to a cheaper broker once the rebate money is paid out (next June) then you don’t need as many assets to come out ahead.
The big question which I hope to try to answer is “Should I move to RBC Direct or should I move to Questrade” – right now, those two brokers are the best deal in town depending on your situation.

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