Consolidate investment accounts?

Some of us might have investment accounts such as RRSP, TFSA, Margin accounts, etc. with different financial institutions. To simply it and save time in the long run, we might want to consolidate them under one brokerage firm at least for the same types of accounts. 

Moreover, some brokerage is more expensive. Transfer the accounts to a more affordable one can save money too. For example, TD Direct Investing charges $9.99 per trade while Questrade charges minimal for buying ETF. Although we try to minimize trade, there are still monthly or bi-weekly contributions for dollar cost averaging. Sometimes, we need to rebalance the portfolio when good selling and buying opportunities present themselves.

I just did a transfer request to Questrade. It was so user-friendly and quick. It only took a few minutes. I still remembered that I had to visit one of these big banks’ branch in person to fill out a few pages form with the financial advisor to make a transfer account request.  Besides, Questrade will compensate up to $150 other financial institutions charged for one transfer.

However, I do have a concern. Should we also diversify brokerage firms? What if they go out of business? It would be such a blow. Of course, there is Canadian Investor Protection Fund insurance. Its websites listed the coverage limit below for individuals.

For an individual holding an account or accounts with a member firm, the limits on CIPF protection are generally as follows:

• $1 million for all general accounts combined (such as cash accounts, margin accounts and TFSAs), plus
• $1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs), plus
• $1 million for all registered education savings plans (RESPs) combined where the client is the subscriber of the plan.

There still be a process.  God knows how long it would be. Of course, we should have cash reserve and emergency fund in another financial institution.  I would still prefer to put a different types of accounts in a separate brokerage. For example, I would put RRSP, TFSA and margin accounts in brokerage A while put Locked-In RRSP with brokerage B because it is not allowed to combine RRSP with Locked-In RRSP thanks to different rules.

When retirement comes, will convert the Locked-in RRSP to LIF and keep it in brokerage B. The RRSP in brokerage A will be converted to RIF staying in brokerage A. If I need to withdraw in kind from RIF, I will put it into TFSA or margin account in brokerage A. If there is withdrawal in kind from LIF in brokerage B, I will just open a TFSA and margin account in brokerage B. I will just need to keep track of the total TFSA contribution in order not to exceed the contribution limit of the year. Totally doable.

I still remembered the days when Lehman Brother went bankrupt and Bernie Madoff’s scam news broke. How unnerving it must be for all those impacted. Canadian financial system is a bit more conservative and regulated than the US, but it doesn’t hurt to be a more careful when it comes to money especially retirement savings.