4% 1yr GIC - should I lock in or wait some more? | Page 4 | EQ Bank | Discussion forum

Agit, since you disagree, what is your 'canary/coal mine' test?

5-yr rates for:

2.70% Scotia
3.50% RBC
4.30% BMO
4.55% TD

Found those rates here:

https://whatbank.ca/gic-rates-arent-high-enough/

Herman, the site obviously does not poll brokers then, only directly from the 'banks' themselves. It is incomplete.

AltaRed said
Herman, the site obviously does not poll brokers then, only directly from the 'banks' themselves. It is incomplete.  

True, but until I started visiting this forum, I did not even know the existence of brokers. I would have simply called banks to see their best rate offers.

I am not suggesting folks should have an interest in opening a brokerage account. Only that sometimes better rates from the same institution are available through alternative channels. Just like Oaken rates direct to consumer are better than Home Trust rates are via the brokerage channel.

It depends on where an FI wants to market its products and what they need to offer to compete with others in that particular market. To each their own.

It is pretty clear 4.5-5% is the current competitive rate for 5 year GICs either through digital 'banks' or via brokers.

You ask, why should it be the same for direct customers.
I ask, why shouldn't it be the same or better?

If all I want is a pound of butter, i can go to No Frills and pay less for it. If all I want is a GIC, I will get a worse deal at the No Frills equivalent, direct to customer than at the Loblaw-equivalent brokerage.

I guess the brokerages are worried about how they will hang onto the dollars that have left and will be flowing out of other markets as we move into recession, so they have negotiated some favourable rates. I don't think it's just a matter of what the issuers are offering.

In any event, there are lots of choices out there and those who don't want an iTrade account etc with attendant fees and account minimums can take their money somewhere else. For anyone who, for some reason, really wants to deal with one of these banks and doesn't want or need a brokerage account, I suggest negotiating the rate at a branch. Most people on this forum appear to be well beyond the $1000-$5000 GIC range. Bring evidence of brokerage rates.

Loonie said

I guess the brokerages are worried about how they will hang onto the dollars that have left and will be flowing out of other markets as we move into recession, so they have negotiated some favourable rates. I don't think it's just a matter of what the issuers are offering.

In any event, there are lots of choices out there and those who don't want an iTrade account etc with attendant fees and account minimums can take their money somewhere else. For anyone who, for some reason, really wants to deal with one of these banks and doesn't want or need a brokerage account, I suggest negotiating the rate at a branch. Most people on this forum appear to be well beyond the $1000-$5000 GIC range. Bring evidence of brokerage rates.  

Discount stock brokerages like TD Direct Investing or Scotia iTrade are order takers. Their GIC offerings (and rates) are what the issuers want to list there, subject to the brokerage willing* to carry that product. The negotiation behind the scenes is the commission the brokerage wants/needs to receive from the issuer to carry the GIC. It is all pretty simple. The brokerages have no input into the published interest rate of the GIC the issuer wants to pay, but it is pretty obvious many issuers want to be competitive with what the other issuers are also offering. Hence my example in post #64 of 4.6% for 5 years.

They really don't care much about the GIC business. They exist for stock and bond investors. GICs appear to be a sideline for completeness, perhaps at the insistence of customers. Some independents don't even offer GICs on their platforms.

There is no reason to denigrate the DIY stock brokerages for their lists of GIC offerings. Sometimes the issuer rates are higher on the brokerage platform than customer direct as in current times. Most often, they are lower by 15-30bp because of the underlying commission being paid by the issuer to the brokerage to carry them on their platform. For example, on Scotia iTrade right now, Home Trust 5 year is 4.55% and Equitable Bank is 4.50%, somewhat less than what Oaken Financial and EQ Bank are currently offering direct to customer. The primary benefit via a discount brokerage is one-stop shopping.

Account minimums for zero account fees are pretty low at discount brokerages. Any Googling for "2022 review of Canadian discount brokers" will provide hits for sources of summary information, e.g. by Rob Carrick of G&M, MoneySense, etc, etc. Some have account minimums at $25k (total across all accounts), some at $15k (total across all accounts), some independents perhaps zero though I have not researched it. There are virtually no hurdles (barriers) to entry these days if that is what one wants. Buying GICs through a discount brokerage is just another platform/opportunity to do so.

* Brokerages obviously vet who they are willing to carry in their listings for their own reputation. Generally, all issuers must be CDIC insured and of investment grade quality. At least some of the discount brokerages took Home Trust GICs off their offerings during the Home Capital crisis in 2017 and only brought them back in months or maybe a year or so later. I don't recall exactly.

I love big bank discount brokerages, main reason I've been able to garner my wealth so well, decades of all sorts of minimal-fee transactions (never paid a penny in account or other fees) I otherwise could/would not have done, gics played almost zero role in my use of discount brokers and that's likely typical of their clients. Those who are virtually 100% in gics, probably not worth opening a brokerage account.

Maybe big banks and their brokerages are worried about hanging on to dollars, but I've read they're awash in deposits due to lack of consumer spending due to pandemic, etc, e.g. TD is happy to offer almost zero rate in their HISA these days.

You may be confusing a GIC broker with DIY discount stock brokerages, because the posted rates at the discount brokerages, which is what I have been talking about, are the rates. Take them or leave them. The discount brokerage does not set GIC rates offered by the issuer. They just provide the platform to buy and hold the GICs. I looked at BMO Investorline, RBC Direct Investing and Scotia iTrade this morning. They all post 4.6% for 5 year big bank GICs plus a few others like Versa Bank. I don't know why that is hard to understand. All 3 of those discount brokerages have a list of 20 or more issuers on their websites this morning, some of them of course being the multiple entities of a big bank.

I find it surprising the big banks are offering so much for GICs since their primary cost of capital such as GoC 5 year bonds is generally so much less (about 3% these days). It defies explanation.

All 3 discount brokerages I am familiar with have issuers with offerings as low as $1k and at the same rate as any other higher denomination. Some minimums are as high as $5k. I believe it has always been that way as long as I've been with discount brokerages (over 20 years).

Oaken Financial doesn't offer GICs through discount brokerages. That is left to Home Trust and it is fact at least some brokerages dropped Home Trust during their capital crisis because their credit rating fell below investment grade, i.e. BB+ or lower. It is not surprising they wouldn't want to be associated with a potentially failing company.

There are no fees to buy and sell GICs within discount brokerages. There are always fees to transfer assets out however, and in the case of registered accounts, also fees to transfer cash out. That is not surprising either. Most people remain with their discount brokerages for many, many years for a host of reasons, including where they hold all/most of their investment assets. As Bill said, most receiving institutions will cover those fees depending on what is being transferred.

As Bill said, discount brokerages are not for everyone but they are a big part of investment portfolios for a great number of investors.