# Thread: TD Waterhouse charges 2.8% for DRIP of US\$ RRSP holdings

1. ## TD Waterhouse charges 2.8% for DRIP of US\$ RRSP holdings

I recently heard TDW charges hidden double currency conversion fees to drip stocks traded in US dollars inside registered accounts so I took a look at my latest dividends.
(This was inside my RRSP but I assume it works the same way with a TFSA or RESP at TDW).

Here's my numbers;

325 US\$ in dividends
219 US\$ stated cost of dripped shares

106 US\$ is what should have been left over and converted to CDN\$ before double currency conversion fees are considered, right?

106 X 0.9645 (TDW's cost to convert to CAD)
= \$102 CDN
Actual dollars left in my account after the drip was \$96 CDN

\$102-\$96= \$6

So six bucks is what it cost me to let TDW drip my US holdings that day.

219 X 0.9645 would have been \$211 CDN more in my account if I had not dripped.

\$6 divided by \$211 = 2.8%

So TDW is charging me 2.8% more to drip those shares than if I would just let them ding me just once and convert 100% of the dividends to Canadian dollars!

I didn't want TDW to do any currency conversion for me at what they charge, but until they get their trading software fixed my only other alternative would be to go elsewhere, and who's to say there won't be issues with the next discount brokerage I try.

2. \$6 divided by \$211 overestimates the charges.

You received 325 US\$ in dividends. They converted the entire amount to CAD (and charged you forex fee to do it):

325 x 0.9645 = \$313 CAD

They converted \$211 CAD back to USD to drip shares (and charged you another forex fee to do it).

Your total cost was \$6. It covers both conversions.

Average amount converted: (313 + 211) / 2 = \$262 CAD

\$6 / \$262 = 2.29%

Still outrageous. We discussed this issue before, many times. I don't DRIP my US shares in TDW RRSP, so I only pay one forex fee.

who's to say there won't be issues with the next discount brokerage I try.
Use a broker who offers USD RRSP accounts. For example, RBCDI. There should be no issues with conversions.

3. That's the reason why I switched out of TDWH. Not only are they so antiquated that they failed to provide USD RRSP accounts, they're also charging you a fee for dripping in USD. They're great with everything else though.

4. Originally Posted by GoldStone
Your total cost was \$6. It covers both conversions.
I don't think so...The first cost was in their exchange rate of 0.9645, when according to globeinvestor.com, the exchange rate closed at 0.9832.

So right there I did lose about 6 dollars on the initial \$325 conversion, or 1.9%

Then, when they converted back the money they needed to make the 219 US\$ they took 313-96= \$217 CDN.
Dividends @ \$219 X 0.9832 = \$215 CDN, so another 2 bucks there, this is confusing.

Still getting ripped off no matter which way I look at it.

edit: correction: (0.9832 - 0.9645) divided by 0.9832 = 1.9%, not 1.87%

5. pincer, goldstone is right. Do not ever drip US dividends in tdw rrsp or any other broker - cibc for example - that does not have a true USD rrsp.

brokers w true USD rrsp: bmo, ry, apparently questrade.

brokers w out: everybody else.

btw part of what tdw charged you when they FX'd you twice on the dividend was the normal, fair, wholesale USD/CAD exchange rate. Everybody has to pay this.

what is worth avoiding, whenever possible, is the FX fee that brokers charge on top of the wholesale exchange rate. In large measure this FX fee is imposed by their related bank.

it's plain by now that tdw has raised its FX rate considerably in recent years, especially on smaller amounts such as US dividends. The rate used to be (1.90%/2) for a one-way trip. It's now (3%/2) one-way.

the big green didn't increase commissions. Instead it sought more revenue \$\$ in FX transactions that are more concealed ...

another place to prevent FX on dividends in non-registered accounts is preventing FX on *canadian* dividends that happen to be dividends paid initially in US dollars. There are easily 20 or more big canadian companies that issue dividends in USD only. Brokers including bmo, ry etc will charge FX fees on these dividends when these stocks are kept in canadian accounts. The solution is to keep these stocks in US accounts.

this point has also been discussed numerous times in cmf forum. Here's an excellent recent article about this issue on Canadian Capitalist blog. Article includes a working list of such companies.

6. I've been poring over CMF posts for almost a year now and I don't know how I missed this one until fairly recently, but I thought I'd bring this issue up front and center again now that I have concrete numbers.

With luck maybe it will have some small influence on how soon or if TDW will fix their software to address this problem (not holding my breath).
Aside from this one issue I like dealing with TDW.

If globeinvestor.com's spot rate for the dollar on Sept 28 is correct, then TDW is actually charging me 1.9% for the one way trip to CDN\$ and then more for the ride back.

And yes I will definitely cancel US\$ DRIPs for the RSP.
I assume the same thing would happen in my TDW TFSA?

edit: never mind, dumb question, of course they do.

7. TFSA is the worst place to hold your US equities anyway. TFSAs are not exempt from 15% US withholding tax, unlike RRSPs. You have no way to recover the tax.

8. You received \$325 USD in dividends.

\$219 USD got reinvested.

You were supposed to get \$325 - \$219 = \$106 USD cash, converted to CAD.

Assuming the spot rate is 0.9832 as per globeinvestor.com:

You were supposed to get \$106 * 0.9832 = \$104.22 CAD

You got \$96.

The amount you lost: \$104.22 - \$96 = \$8.22 CAD

The amount you lost in USD: \$8.22 / 0.9832 = \$8.36 USD

\$8.36 / \$325 = 0.0257 or 2.57%

That's what they charged you for two-way conversion. 1.285% each way.

9. the big green would be charging a rate that is a combination of basic exchange rate plus their FX fee.

no one can escape the basic foreign exchange rate. It's what the giant global moneycentre banks are paying each other. The mid-point in moneycentre transactions is what XE.com reports every minute. It's what the bank of canada reports as first the noon rate & subsequently the closing rate. We will all pay those rates.

in addition, there are FX fees imposed on clients by every financial institution. Both the underlying FX rate & the FX fee are combined into one figure, the so-called exchange rate that is quoted/charged to clients. This is what you are seeing.

to get a picture of the pure FX fee that tdw or any broker is charging, ask for both their buy & sell rates for the same amount at the same time. For a small amount under 10,000, tdw rates should be about 3% apart, perhaps a farthing less.

it's the FX *fee* that investors can sometimes work around or teach each other how to avoid or mitigate. There's a lot of such smart teaching in the form of tips & examples here in cmf forum. Gambitting plus how-to-manage-your-FXed-dividends are 2 issues that are well taught here.

but the basic moneycentre FX rate is a fact of life. BTW i have no idea what globeinvestor displays, but they should be taking their figs either from the bank of canada or else from XE.com.

10. Sure, 2.57% (or whatever) includes TDW forex costs + TDW vig.

From investor's point of view, it's the total that matters. How far are you from the spot rate.

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