GIC rates offered by brokers - Advise of decent rates? | GIC discussions | Discussion forum

I doubt there is enough variation between brokerages to make it worthwhile. I look at both BMOIL and ITrade regularly and for the same issues, the rates are the same.

AltaRed said
GIC rates change regularly on discount brokerage sites, often weekly, so I don't know how helpful that would be. During times of more rapid interest rate changes, I've seen more than one change a week at Scotia iTrade.

Some discount brokerages such as Scotia iTrade and RBC DI have more issuer offerings than others, and that might provide an anomaly where Scotia could have an issuer with a marginally higher GIC rate than its competitors (I've seen this from time to time over the past several years), but it is not common.

Of the big 5 banks, I think it is only RBC DI, Scotia iTrade and BMOIL have fully automated online purchasing of GICs. None of the brokerages above charge the buyer a commission to purchase GICs in any kind of account (non-reg or registered). The commission is buried in the rate at 25bp (what is shown online is what the buyer gets). That is one reason why, for example, a Home Trust GIC at a discount brokerage has a lower yield than an Oaken Financial GIC directly online.  

Agreed, though with regard to deposit broker commissions, if they're being paid to the likes of Scotia iTRADE, that'd have to be disclosed on the Annual Performance and Fee Statement Scotia iTRADE is obligated to provide. The fact that Scotia iTRADE's Home Trust GIC rates match the published Home Trust deposit broker rates suggests they're not taking a cut; Home Trust just benefits from lower interest expense due to the ease of raising deposits in the brokerage channel.

For the most part, what I've observed from Questrade's, Scotia iTRADE's, RBC DI's, and Virtual Brokers' brokerage GIC rates, they charge no premium to the published deposit broker rates available on CANNEX. I see no need to replicate the good work that CANNEX does (though, if Peter does add a "Resources" page, he could link to their deposit rates page in the relevant section(s), perhaps). Sure, CANNEX doesn't provide detailed GIC rate histories, but that's time consuming and serves no purpose other than satisfy our personal fascinations!

What would be more useful, also volunteer-maintained and ideally on a "Resources" page would be an occasionally updated list of GIC issuers at the major discount brokerages. From there, we can then evaluate which DB consistently offers the most fulsome listing of GIC issuers and, of which, which ones have typically the best rates. In short, we can look at the volunteer-maintained GIC issuer spreadsheets then look to CANNEX for up-to-date rates.

Cheers,
Doug

AltaRed said

Doug said

Agreed, though with regard to deposit broker commissions, if they're being paid to the likes of Scotia iTRADE, that'd have to be disclosed on the Annual Performance and Fee Statement Scotia iTRADE is obligated to provide. The fact that Scotia iTRADE's Home Trust GIC rates match the published Home Trust deposit broker rates suggests they're not taking a cut; Home Trust just benefits from lower interest expense due to the ease of raising deposits in the brokerage channel.

 

And they are disclosed in the Annual Performance and Fee Statement.

https://www.moneysense.ca/columns/ask-moneysense/why-am-i-paying-a-commission-when-i-invest-in-gics/ is a good article on this subject.  

Ah, interesting, AltaRed. Thanks. I was wondering whether or not they were being paid a commission. Since I've never bought a GIC through them, I didn't have "proof". It's too bad it wasn't more transparent (i.e., you could see the rate they offer you versus the Home Trust deposit rate, let's say), but nonetheless, I'm fine with it. It's the price of convenience and it sounds like you use GICs heavily with Scotia iTRADE. Would you say that most of your GIC assets tend to be held through a brokerage or directly with individual FIs? (Another advantage: one's future executor(trix) will thank you if most of your assets are in one place.)

Was looking at the BMO Discount Bond ETF...do you ever scour its holdings for potential fixed income ideas, if they fit your duration and credit risk profile, for buying bonds trading at or at a discount to their par value? The objectives of the ETF state that the fund will buy bonds trading at 1.2, 1.0, or less times their yield to maturity.

Cheers,
Doug

Regarding GIC commissions: I often use a deposit broker for GIC purchases. The reasons are as follows.

1. Some institutions, for whatever reason, do not want to sell GICs directly to the public. They would rather download the effort to the broker and pay them a commission to do it. If the GIC rate is good, I'll take advantage of it. The broker ensures that you receive your interest payment and final principal payment on time.

2. Sometimes the institution actually goes against conventional thinking and offers a better rate through the broker than direct to the consumer. This has happened with some credit union offerings. If you notice this, as I have, you could speak to the FI directly to see if they will match or better the rate. They often will match and sometimes do a little better. There are actually 2 different philosophies here. Do you wish to go to the trouble to become a credit union member and possibly share in the profit sharing some offer or do you just want to participate in the GIC interest benefits as an outsider, with no strings? Whatever works for you.

I have, on a couple of occasions, chewed out credit unions for offering better rates through brokers than direct to their members. After all, credit unions advertise the "personal touch" as a selling point to attract new members. It's not very personal to offer better rates to outsiders. They have said that they understood my point and offered me the same rate as the broker, sometimes a little better. Never hurts to speak your mind, in a polite way.

gicjunkie said
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I have, on a couple of occasions, chewed out credit unions for offering better rates through brokers than direct to their members. After all, credit unions advertise the "personal touch" as a selling point to attract new members. It's not very personal to offer better rates to outsiders. They have said that they understood my point and offered me the same rate as the broker, sometimes a little better. Never hurts to speak your mind, in a polite way.

The staff and physical branch to provide that "personal touch" are not free. In addition, there is the cost of parking the funds at a loss until the funds can be lent out.

All that can cost the credit union and other small financial institutions more than the customary ¼%-per-GIC-year commission paid to a deposit broker.

I don't think having an online-only rate special for the GIC will do it. The credit union is still on the hook to pay the branch staff and for the branch itself, even when the GIC is booked online.

With the deposit broker, the financial institution only needs to pay the broker as needed. I think that ¼% deposit brokerage commission is supposed cover some of the deposit broker's overhead. I don't think it actually costs anywhere near $50,000 x ¼% x 3 = $375 to accept the paperwork and cheque for a 3-year, $50,000 GIC.

Sticky deposits are not always welcome. If the mortgages and loans that were funded by the deposit have been paid off or transferred out, then it would be preferable for the deposit to also leave. Otherwise, the money would have to be parked at a loss until it could be lent out again.

Cross selling sounds good. But, I don't think it really works out that way. People coming into a branch for a GIC are annoyed to be pitched for a credit card, mutual funds, or insurance. Loonie's story My little chat with the TD branch financial planner is indicative of what the customers feel about the cross selling.