Switching to RBC Direct Discount Brokerage

by Mike Holman

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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.

Questrade Democratic Pricing - 1 cent per share, $4.95 min / $9.95 max

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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{ 8 comments… read them below or add one }

1 Million Dollar Journey

Thanks for the mention. When I contacted RBC, they told me that I required a RBC chequing account in order to get money in and out of the RBC direct. Did you factor the chequing account fees into your calculations?

2 Canadian Capitalist

RBC is our primary bank but I imagine there should be ways to fund the account other than having a chequing account with them (that sounds like a ridiculous requirement).

3 Four Pillars

MDJ – I just got off the phone with RBC – you don’t need a RBC account for funding. You can do a bill payment from your normal bank and eft out which is pretty standard for a discount brokerage.

We won’t be doing very many transactions in these accounts so it doesn’t matter to us – someone who is doing a lot of transaction in or out should probably consider opening up a regular chequing acct – which is probably the case for most discount brokerages at a bank.

4 guinness416

FT, didn’t you report that TD told you the same thing (you need our chequing) about buying e-funds? Some shady bank reps you guys have out in Newfoundland!

I will be looking out for your next post on the subject, 4P. We have enough $ to justify TD, and in typical conservative Hickey fashion (I’ve fallen in love with their customer service) I’m reluctant to leave them.

5 Four Pillars

Guinness – if you have over $100k and you don’t trade that much then you should switch to RBC.

Think of it as a bonus $$ opportunity – it shouldn’t take more than about 2 hours (max) of work to make the transfer happen and get set up with the new brokerage. If you get a rebate (tax free) of $1000 or more then you’ve just made yourself $500 per hour. If you want to move back to TD after the bonus is paid then that will be another couple hours of work which brings the ‘bonus’ down to $250 per hour (or more depending on your assets).

I think it’s worthwhile.

6 guinness416

Hang on, you’re right. I somehow totally misread (through my idiocy, not his writing) the earlier post at CC’s site as being a $250 fixed bonus. $1,000 or more is definitely real money.

*sigh* I’m allegedly being paid for my attention to detail ….

7 Four Pillars

That’s ok Guinness – CC has pretty small font. *rolls eyes* :)

8 Canadian Capitalist

guinness: I really like TD Waterhouse much better than RBC Direct. But, I’m also a greedy pig and the 1% is too juicy to give up. My paper work is in the mail. Hope the market doesn’t go down the tubes on the transfer date!

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