Wow, "great advice" from Simplii | Simplii Financial | Discussion forum

pooreva said
Tell me, honestly, how many people are actually aware of Other FI than big5 which pay SOME interest on your savings instead of 0.XX% ???
And how many of those trust some virtual bank having web site or being in some other province?

Thus offer to move money form account paying 0.05 to account paying 0.20% sounds FANTASTIC to them...  

I’m thinking that the majority of Canadians don’t even have savings and nothing grows.

Vatox said

I’m thinking that the majority of Canadians don’t even have savings and nothing grows.  

I am not so sure about that but I do agree with Pooreva the majority are not likely looking outside their brick and mortar offerings whether the Big 6 or their local CUs.

That said, Home Capital said in their most recent quarter that their Oaken retail offering is about 27% of their deposit base. That is a pretty good uptake.

AltaRed said

I am not so sure about that but I do agree with Pooreva the majority are not likely looking outside their brick and mortar offerings whether the Big 6 or their local CUs.

That said, Home Capital said in their most recent quarter that their Oaken retail offering is about 27% of their deposit base. That is a pretty good uptake.

That is good for Home Capital's goal of diversifying from their deposits through the deposit broker and advisor channels. But, it is only about $3.7 billion.

In contrast, CIBC has $187 billion in deposits through its Canadian personal and business banking side, without having to pay anywhere near what Oaken pays on deposits.

With that reality, there is no incentive for CIBC to match the rates of someone like Oaken.

I recall that, a few years ago, perhaps five years?, the experts were saying that the virtual banks would never have more than about 3% of the retail market. To me, that seemed too low, as "ever' is a long time.
I wonder what it is now.

Why would the DBRS rating matter, unless you are planning on putting more than CDIC limits into the FI or buying their bonds or shares? There is a potential risk, with GICs, that if the FI went under, your GIC would be terminated early and you would lose your premium rate, but that isn't too likely in most cases and is not worth the difference between, say, 0.05 to 0.20% and 1.75%.

DBRS debt ratings matter because they open the door to large depositors out there who have way more funds to deposit than the $100,000 CDIC limit. For example, the large pension funds, like CPP, and large employers who have $5 million payrolls every two weeks.

If a financial institution gets a long-term rating of AA or a short-term one of R-1, then a large depositor, like CPP, could come along and offer to deposit $100 million for 30 days for just ½% per annum.

With those kinds of depositors knocking at the door, the financial institution will have a hard time caring much about sub-$100,000 deposits from us retail depositors.

As AltaRed wrote, those, like the big banks, with such a strong debt rating do have the last laugh in the deposit taking game in which they can pay 1/5 or less for deposits than others.

Loonie said

… There is a potential risk, with GICs, that if the FI went under, your GIC would be terminated early and you would lose your premium rate, but that isn't too likely in most cases and is not worth the difference between, say, 0.05 to 0.20% and 1.75%.

It is not a problem for someone if the GIC were terminated early and one receives the principal back early. However, there could be a serious problem if there is a default and the principal or interest is late.

Rob Carrick warned about that during the Home Capital turmoil that resulted in market leading GIC rates.

Someone who buys a 5-year GIC, with the interest compounded until maturity, can likely tolerate the principal and interest being a few days or a few weeks late in five years time should there be a default around then.

Not so when someone buys a 5-year GIC and has the interest paid out monthly to cover living expenses. A default could result in a late monthly payout of interest.

Unlike CMHC mortgage insurance, CDIC deposit insurance does not guarantee timely payment of interest. CDIC guarantees eventual payment of the interest. So, the risk of default, estimated by DBRS, S&P, and Fitch debt ratings, matters in such cases.

rhvic said
Got this from Simplii:
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Set it and forget it! You can put your savings on autopilot with Simplii Financial recurring transfers no matter what your saving goals are. With even a small monthly transfer from your No Fee Chequing Account to your High Interest Savings Account or Tax-Free Savings Account you could see a big difference.

Easy, flexible recurring transfers
• The more you save, the more interest you earn – and the more your money grows!
• Weekly, monthly or every quarter. Choose how much money to transfer, and how often.
• Get set up in 2 simple steps with online or mobile banking.
1. Select “Transfers” or “Transfer Funds” on the left menu once you’ve signed on
2. Complete the transfer by filling out your transfer details, including the amount and how often.

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Just imagine, I can automatically move funds from their chequing account (at 0.05%) to my HISA account (at 0.20%). Who wouldn't leap at such 'attractive' rates for a "big difference"?

Are they really this naive?

Instead, my money simply left Simplii for an FI which pays much higher interest rates.  

HeHe, I got that email and was thinking of posting EXACTLY what you said.
You virtually took the words out of my mouth.

I miss the old PCFinancial days, at least they had a decent interest rate.