Log In
Register
Home
Topic RSS
Facebook
Twitter
Email this10:00 am
November 3, 2022
Offline
The discussion about RRIFs and GIC management in another thread has caught my attention to the possibility of shifting my future GIC holdings, or at least part of them, to my self-serve brokerage account with Qtrade. I can see the advantage of having one "dashboard" with GICs and ISAs to optimize laddering and cash flow, especially when it comes time to set up a RIF.
On Qtrade, there is currently a mix of Credit Unions and other FIs with reasonable GIC rates. The best of these, currently, is a one year term with Meridian CU at 5.53%.
As a BC resident, I wonder if Meridian's deposit insurance would apply to me in the same way as if I bought the GIC directly from them (which I can't, I don't think)?
Brokerages seem to sell GICs from banks and CUs across several provinces, so I am wondering how the insurance coverage works when one holds a mix of these GICs?
11:28 am
March 30, 2017
Offline
Rail Baron said
The discussion about RRIFs and GIC management in another thread has caught my attention to the possibility of shifting my future GIC holdings, or at least part of them, to my self-serve brokerage account with Qtrade. I can see the advantage of having one "dashboard" with GICs and ISAs to optimize laddering and cash flow, especially when it comes time to set up a RIF.On Qtrade, there is currently a mix of Credit Unions and other FIs with reasonable GIC rates. The best of these, currently, is a one year term with Meridian CU at 5.53%.
As a BC resident, I wonder if Meridian's deposit insurance would apply to me in the same way as if I bought the GIC directly from them (which I can't, I don't think)?
Brokerages seem to sell GICs from banks and CUs across several provinces, so I am wondering how the insurance coverage works when one holds a mix of these GICs?
From what i understand, GIC brokerage is exactly what the name says they are: they are just a broker. The GIC is under your name, so deposit insurance is direct and straight forward. However I will 100% NOT buying cross province GICs even if the broker confirms you (the buyer) is eligible, especially if the credit union offering the GIC is province specific. The extra yield and whatever is simply NOT the hassle nor risk, no matter how small that risk may be.
Just remember before Lehman went down, NOONE would think Lehman will ever go under, not Buffet, not Greenspan, not anyone, period.
11:40 am
April 14, 2021
Offline
savemoresaveoften said However I will 100% NOT buying cross province GICs even if the broker confirms you (the buyer) is eligible, especially if the credit union offering the GIC is province specific. The extra yield and whatever is simply NOT the hassle nor risk, no matter how small that risk may be.
Why is that so? Do you not believe that you will be covered by insurance, even if it is clearly stated in the terms and conditions that out-of-province members enjoy the same rights as provincial members?
11:48 am
March 30, 2017
Offline
HermanH said
savemoresaveoften said However I will 100% NOT buying cross province GICs even if the broker confirms you (the buyer) is eligible, especially if the credit union offering the GIC is province specific. The extra yield and whatever is simply NOT the hassle nor risk, no matter how small that risk may be.
Why is that so? Do you not believe that you will be covered by insurance, even if it is clearly stated in the terms and conditions that out-of-province members enjoy the same rights as provincial members?
An extra 10-20 bps etc is simply NOT worth it in my mind, whether its in the T&C or not. GICs are the risk free part of my portfolio, and 100% risk free is my goal for that section. I take much bigger risk via stocks and options in my non fixed income portfolio. I just dont take these ultra low deltas risk for that extra tiny bit of return.
1:51 pm
October 27, 2013
Offline
Generally speaking, a discount brokerage holds your GICs in nominee name which CDIC considers as a 'deposit held in trust', as a separate category (except those already in trusts in their own categories such as RRSPs, TFSAs, etc.). Some may hold GICs directly in client name. Ask your brokerage.
See https://www.cdic.ca/financial-community/for-brokers-and-other-financial-professionals/
7:48 pm
April 6, 2013
Offline
savemoresaveoften said
From what i understand, GIC brokerage is exactly what the name says they are: they are just a broker. The GIC is under your name, so deposit insurance is direct and straight forward. …
That would be "client name" deposit brokerage. CDIC refers to such deposits as brokered deposits in a client’s name.
There's also "nominee name" deposit brokerage. Such brokered deposits are owned by a nominee, like the investment dealer, in trust for the client.
I think Qtrade would be the best to explain how they place deposits with Meridian CU.
As AltaRed described, Scotia iTRADE and BMO InvestorLine do "nominee name" deposit brokerage. That local deposit broker who placed some of my RRSP GIC's years ago did "client name" deposit brokerage.
8:40 pm
May 11, 2023
Offline
savemoresaveoften said
However I will 100% NOT buying cross province GICs even if the broker confirms you (the buyer) is eligible, especially if the credit union offering the GIC is province specific.
So if you were in BC, you would not buy from a Manitoba CU?
And if you were using QTrade, Itrade, Dominion Securities or the like you would not buy a Concentra Bank CDIC covered GIC?
Personally it should be up to the bank to refuse serving you based on on your province of residence.
OP. The one thing to check....lets say you use your brokerage and buy a $75,000 BMO non registered GIC and you bank with BMO for day to day needs and you have $35,000 cash on deposit. I would say not to do and choose any bank you like other than BMO to buy from off or your brokerage account and set a max principal amount to deposit like $90,000. And if you are doing same for spouse choose another bank.
I would say you are on the right train of thought....just make sure your brokerage has and will have competitive rates. I used to have iTrade and their rates were crappy. They kind of turned me off of online brokerages. But I am re thinking that too.
8:59 pm
October 27, 2013
Offline
As I understand it, if that BMO GIC is in nominee name in the brokerage, it is in a separately CDIC insured bucket called 'deposit held in trust'.
9:11 pm
May 11, 2023
Offline
But wasn’t there an issue brought up here years ago about PC Bank and CIBC .... CDIC coverage wise. Different case?
I have no issues with PC bank or Canadian Tire bank....it easy... I wouldn’t use them.
9:58 pm
April 6, 2013
Offline
Yes, that case is different because President's Choice Bank and CIBC are actually two different banks. "President's Choice Bank" is not a marketing brand name used by CIBC.
So, if one has both a GIC issued by President's Choice Bank and a GIC issued by CIBC, then one has GIC's issued by two different CDIC members:
- Issuer: President's Choice Bank, Owner: Alice
- Issuer: CIBC, Owner: Alice
Now, if Alice bought a BMO GIC through a BMO branch and then bought a BMO GIC through a "nominee name" deposit broker, like Scotia iTRADE, she would have two GIC's that would have separate CDIC coverage:
- Issuer: Bank of Montreal, Owner: Alice
- Issuer: Bank of Montreal, Owner: {broker's nominee} in trust for Alice
Through a "client name" deposit broker instead, she would have two GIC's that shared CDIC coverage:
- Issuer: Bank of Montreal, Owner: Alice
- Issuer: Bank of Montreal, Owner: Alice
10:50 pm
October 21, 2013
Offline
@OP: Good question! I can't provide a definitive answer. I suggest you look for an answer in writing from FSRA and also from Meridian, and see if answers are same and acceptable. If they can't give you a straight answer, then that tells you something too.
I believe you would be covered.
However, if push comes to shove...
Meridian is the largest CU in Ontario. If it were to fail, that would be a huge cost to the insurer. Similar to CDIC, its piggy bank would not be large enough to cover all insured deposits. It's conceivable that Ontarians would be paid first. They might come up with various payout schemes; who knows? At some point, withdrawals might be restricted, as has happened in other countries during crises.
But that's all in my imagination. Any insurance scheme that has to reimburse more money than it actually has or can get hold of might come up with plans to spread that out or whatever.
I actually doubt any of this would happen, short of financial system collapse. More likely a merger would be arranged with Alterna CU.
@savemoresaveoften: There is no such thing as 100% risk free. Be aware that even with fully insured GIC with highly rated FI, there is currency risk, inflation risk, financial system risk, insurance adequacy risk etc.
I don't like it either but we have to accept that nothing is risk-free. It's the most compelling argument for diversification.
8:24 am
March 30, 2017
Offline
Loonie said
@savemoresaveoften: There is no such thing as 100% risk free. Be aware that even with fully insured GIC with highly rated FI, there is currency risk, inflation risk, financial system risk, insurance adequacy risk etc.
I don't like it either but we have to accept that nothing is risk-free. It's the most compelling argument for diversification.
I will rephrase my "100% risk free" to "0% name risk". Thats what i am aiming for in my GIC that are not big 5 or Tangerine.
There are simply many issuers out there with competitive rates to cover my total deposit size. For example each ON CU is good for 250k. I dont chase the last 10bps or whatever that may be.
9:20 am
November 3, 2022
Offline
Thanks for the many informative replies to my query!
I have contacted QTrade and they confirm that all GICs purchased through their channel are held in "nominee name".
Now what does that mean for insurance coverage, since they will be holding many hundreds of times above the CDIC or provincial insurance limits in GICs?
9:47 am
October 27, 2013
Offline
It does not matter with CDIC insured deposits. Look at the link I provided in post #5. Qtrade could hold $10M in GICs from Home Trust, in trust for 100 clients @ $100k each and each would be individually covered. The key is "deposit held in trust for client A", "deposit held in trust for client B", etc., each of which is an individual trust.
I have no comment and no knowledge as regards CU deposit insurance.
9:56 am
November 3, 2022
Offline
AltaRed said
It does not matter with CDIC insured deposits. Look at the link I provided in post #5. Qtrade could hold $10M in GICs from Home Trust, in trust for 100 clients @ $100k each and each would be individually covered. The key is "deposit held in trust for client A", "deposit held in trust for client B", etc., each of which is an individual trust.I have no comment and no knowledge as regards CU deposit insurance.
Thanks again for pointing me to the CDIC information on GICs held in trust through nominee names.
Unfortunately, there is some uncertainty left in the CDIC's following language:
It is important to note that for deposits placed in nominee-name, there are specific requirements set out in the CDIC Act and By-laws that a nominee broker, as trustee, must meet to ensure their clients’ deposits are protected by CDIC.
Does QTrade meet these requirements? Probably. But is there a way for me to verify that? Probably not.
It's just enough to give direct purchase of GICs from FI's an edge for me, at least until it's time to manage an RIF down the road.
10:07 am
May 11, 2023
Offline
@Rail Baron
I am in BC.
BC Credit union has limitless coverage as does Manitoba.
Unless you have millions to invest why not invest $90,000 per bank and CU. I would verify CU coverage in other provinces. When I finalize my decision on how I go to Dominion Securities. I personally plan to stick with CDIC coverage banks and CU’s and BC CU’s only.
Unfortunately sometimes the rates or minimum required amounts have a bearing what you will choose.
10:15 am
October 27, 2013
Offline
I still do not understand why you continue to speak of Dominion Securities. Do you want to pay an advisor for GIC business, either on a commission basis, or a % of AUM basis? What does Dominion Securities offer you (beyond a middleman) than any one of a dozen other discount brokerages cannot offer you?
10:19 am
November 3, 2022
Offline
Pewter said
@Rail BaronI am in BC.
BC Credit union has limitless coverage as does Manitoba.
Unless you have millions to invest why not invest $90,000 per bank and CU. I would verify CU coverage in other provinces. When I finalize my decision on how I go to Dominion Securities. I personally plan to stick with CDIC coverage banks and CU’s and BC CU’s only.
Unfortunately sometimes the rates or minimum required amounts have a bearing what you will choose.
Good advice! I already have multiple $90,000 deposits with CDIC institutions, and plan to make more of them.
The uncertainty of whether Qtrade has met every jot and tittle of the CDIC's requirements for insuring nominee named GICs will keep me buying direct from Tangerine, People's, Oaken, and MAXA and Hubert in Manitoba. At least until it's time to set up a RIF/LIF.
10:27 am
May 11, 2023
Offline
AltaRed said
I still do not understand why you continue to speak of Dominion Securities. Do you want to pay an advisor for GIC business, either on a commission basis, or a % of AUM basis? What does Dominion Securities offer you (beyond a middleman) than any one of a dozen other discount brokerages cannot offer you?
I like their GIC selection. Most online brokerages hide what they offer. I used to be with iTrade and their selection, at the time, was poor. I have found BMO investorline and not great either.
What way I go is undecided .... full line or online.
I am in contact with 2 full line offices and one has pretty much answered my questions and there is absolutely no charge for their services for a GIC only account.
I have a friend that deals with one and he too says....no charges.
So what am I missing?
10:42 am
May 11, 2023
Offline
Rail Baron said
Good advice! I already have multiple $90,000 deposits with CDIC institutions, and plan to make more of them.
The uncertainty of whether Qtrade has met every jot and tittle of the CDIC's requirements for insuring nominee named GICs will keep me buying direct from Tangerine, People's, Oaken, and MAXA and Hubert in Manitoba. At least until it's time to set up a RIF/LIF.
Interesting.....we have some same FI’s.
People's, Oaken, and Hubert in Manitoba.
Keep in mind if you have a spouse, do not use same FI. If you use one FI for both then limit your deposits to $45,000 or less, each.
As healthy as you feel today you never know what condition you will be tomorrow.
I just, stupidly, discovered that my successor set ups leads to a successor with over $100,000 in an specific account type at an FI or two. And you don’t want that. I never took that into account. It appears after a letter and some forms that Oaken will fix for me. Only because they have two banks. Next, I have to approach People’s.
Please write your comments in the forum.