# Question re investment protection



## mrbizi (Dec 19, 2009)

Hi all,

I understand CIPF covers investments for up to $1M per institution. Should you then hold your investments in more than one brokerage if you anticipate it to grow to more than $1M in the future?

Thanks in advance.


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## OhGreatGuru (May 24, 2009)

Do you understand what CIPF covers and doesn't cover? https://www.cipf.ca/Public/CIPFCoverage/WhatDoesCIPFCover.aspx


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## AltaRed (Jun 8, 2009)

mrbizi said:


> Hi all,
> 
> I understand CIPF covers investments for up to $1M per institution. Should you then hold your investments in more than one brokerage if you anticipate it to grow to more than $1M in the future?
> 
> Thanks in advance.


With the caveats provided in the link by OGG, it depends on how much you trust your brokerage. My view is the brokerages owned by the big banks are as safe as the big banks are themselves. Why? Because of the unrecoverable reputational damage that would be incurred by the likes of RBC, BNS, etc. if they allowed their brokerages to go into insolvency AND did not keep their clients whole. Of course if there is a 'black swan' event and the big banks go insolvent themselves, then we need guns, ammo and a bunker to survive.

Bottom line: I'd have no issue having multi-millions in any one of the big 5 brokerages, but I am not nearly as confident about the independently owned brokerages/institutions which could go insolvent and the principals behind them could simply walk away.


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## mrbizi (Dec 19, 2009)

AltaRed said:


> With the caveats provided in the link by OGG, it depends on how much you trust your brokerage. My view is the brokerages owned by the big banks are as safe as the big banks are themselves. Why? Because of the unrecoverable reputational damage that would be incurred by the likes of RBC, BNS, etc. if they allowed their brokerages to go into insolvency AND did not keep their clients whole. Of course if there is a 'black swan' event and the big banks go insolvent themselves, then we need guns, ammo and a bunker to survive.
> 
> Bottom line: I'd have no issue having multi-millions in any one of the big 5 brokerages, but I am not nearly as confident about the independently owned brokerages/institutions which could go insolvent and the principals behind them could simply walk away.


Thanks for your input. I understand that the CIPF protects you in case a brokerage becomes insolvent, but not from investment losses etc. I also understand that the 5 big banks and their associated brokerages are about as solid as the canadian government. That said, I don't think a lot of people expected companies like Lehman Brothers to have a near death experience in 2008.

I never gave this much thought before, but I was just recently playing with the numbers, even using a conservative rate of return, I should easily surpass the $1M milestone when I reach my target retirement age. Ah, the magic of compound interest.


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## AltaRed (Jun 8, 2009)

True, but Lehman Brothers was first and foremost an investment bank. From Wiki....


> Lehman Brothers Holdings Inc. (former NYSE ticker symbol LEH) /ˈliːmən/ was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch), doing business in investment banking, equity and fixed-income sales and trading (especially U.S. Treasury securities), research, investment management, private equity, and private banking. Lehman was operational for 158 years from its founding in 1850 until 2008.[2]


Quite different from our Cdn banks although had they been allowed to merge as they wished at one time, I suspect they would have been highly exposed in investment banking too during the financial crisis. Nothing is for sure..... Regardless, I've been over the CIPF top for years at a big 5 discount brokerage and I don't lose any sleep over it. That said, I wouldn't do the same thing with an independent.


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