# Questrade vs Virtual Brokers



## kreyszig (Jan 16, 2013)

Now that Questrade offers no-fee ETFs share purchase, is there any advantage in practice to go with Virtual Brokers? VB does not allow Gambitting while Questrade does, which can make a big difference. Trading fees for selling ETFs are the same when selling >= 495 stocks, although they can be capped to $6.49 with VB with the "Per Trade" commission structure. I could see VB to be a better deal if I was only holding Canadian currency in my TFSA and Margin account, but I think this will not be the case, since taxation does not make it advantageous for me to use all my available RRSP room, so I will want to buy some US and international ETF shares with my TFSA and Margin accounts... Obviously the trading fees will only affect me when I will be selling shares, either for rebalancing or Gambitting.

I have been trying to get started with VB since the end of November, and they still have not gotten their act together... Right now all I have with VB is $2500 worth of VSB shares in a TFSA, so it would be easy to sell and EFT to my bank account at the end of the year, and then transfer the money to Questrade with minimum penalty fees. If I start funding my VB Margin account though, it might be more difficult to move out without incurring larger fees... Right now I only have an RRSP account with Questrade and it works smoothly compared to VB. With VB, very simple operations require human intervention and it takes forever to get done (e.g. I have been waiting for over a month to have my mailing address fixed)

Thanks


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## bettrave (Jan 10, 2013)

I'm very much interested in a no-fee ETF share purchase.
Any insight on Questrade would be wonderful!


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## the-royal-mail (Dec 11, 2009)

Do your homework on this company before the spin doctors get here:

http://canadianmoneyforum.com/showthread.php/10814-Questrade-tax-slips/page3

http://canadianmoneyforum.com/showthread.php/11133-OK-but-was-is-the-bad-news-with-Questrade-TFSA

Remember it's always a good idea to google for problems before sending money or dealing with any company.


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## Four Pillars (Apr 5, 2009)

I really wish the mods would get rid of the Royal troll. Worst troll on here - at least he doesn't show up much anymore.

As for the OP - the difference in trading costs between the two brokers is negligible. I wouldn't even consider that as a factor unless you are a heavy trader.

Questrade recently cranked up their currency exchange costs, so doing a gambit is a big definite money saver. If VB doesn't allow it, then I can't see why anyone who is cost-conscious and buys US securities would use them.

I'm planning to do a review on VB soon, so maybe you can add some of your thoughts.


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## andrewf (Mar 1, 2010)

I don't find TRM that bad. I disagree with him a lot of the time, but I don't think he's trying to be a troll.

Again, I disagree with him here. Some people have had bad cust service experiences with Questrade, but then again, someone here was griping about getting screwed over by TDW, one of the 'gold standard' discount brokers for service. If you're a passive investor who doesn't put much stock in 'research' (sell-side marketing), Questrade is just fine.

I wouldn't go to Questrade for the free ETF buy commissions, though. Some of the other factors mentioned are more important. Forex costs will usually swamp anything one might pay in commissions if you hold foreign ETFs/stocks.


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## Four Pillars (Apr 5, 2009)

andrewf said:


> I don't find TRM that bad. I disagree with him a lot of the time, but I don't think he's trying to be a troll.


I think the term is 'inadvertent troll'. 



andrewf said:


> I wouldn't go to Questrade for the free ETF buy commissions, though. Some of the other factors mentioned are more important. Forex costs will usually swamp anything one might pay in commissions if you hold foreign ETFs/stocks.


Agreed. At this point, if you have $50,000 to invest (ie qualify for $10 trades at the banks) and are not a trader, I wouldn't worry about trading fees very much.


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## kreyszig (Jan 16, 2013)

Four Pillars said:


> Agreed. At this point, if you have $50,000 to invest (ie qualify for $10 trades at the banks) and are not a trader, I wouldn't worry about trading fees very much.


Just to make sure, are you suggesting to go with a bank rather than Questrade if I have $50k to invest? Is there any advantage with a broker such as TDW besides better customer service? I guess in my case TDW would not be a good idea, because of their restriction with US currency in their RRSP accounts

My plan is to invest in RRSP, TFSA and taxable account index + short bond ETFs once or twice a month, and rebalance every quarter if necessary. I would like to save as much as possible (maybe ~$40k/year, and I already have saved $65k) to purchase a house in 3-4 years, so I would probably go 50-50 between index and bond ETFs to reduce risk. I don't want to have much more than $40k in the RRSP ($25k home buyer plan + $15k), so I don't get hit by a higher tax bracket when I will withdraw the money for the house. After contributing accordingly to my RSP, I fill my TFSA every year and then put the balance in a taxable account. So my money will be spread quite a bit. My RSP will be split 50-50 between short Canadian bonds and US+international index ETF, my TFSA will be mostly short Canadian bonds and my taxable account will hold Canadian index ETF, plus some US and international index ETF.


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## Four Pillars (Apr 5, 2009)

kreyszig said:


> Just to make sure, are you suggesting to go with a bank rather than Questrade if I have $50k to invest? Is there any advantage with a broker such as TDW besides better customer service?


No. What I mean is that for non-traders, once your trading fees are $10 or lower, it doesn't matter that much if they are $5/$10 or even free (for some purchases). At that price point, I think other factors should have a higher priority such as currency exchange costs (or a decent workaround). Some people like different interfaces for their discount brokerage or maybe using the brokerage owned by their bank is more convenient. Some brokerages offer more research reports than others. 



kreyszig said:


> My plan is to invest in RRSP, TFSA and taxable account index + short bond ETFs once or twice a month, and rebalance every quarter if necessary. I would like to save as much as possible (maybe ~$40k/year, and I already have saved $65k) to purchase a house in 3-4 years, so I would probably go 50-50 between index and bond ETFs to reduce risk. I don't want to have much more than $40k in the RRSP ($25k + $15k), so I don't get hit by a higher tax bracket when I will withdraw the money for the house.


Why would you contribute to your RRSP if you are going withdraw and pay taxes on the money? I would only contribute to the RRSP to use the HBP in that case and any extra goes to the non-reg account. Of course, the TFSA should be maxed first in this scenario.


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## kreyszig (Jan 16, 2013)

Four Pillars said:


> Why would you contribute to your RRSP if you are going withdraw and pay taxes on the money? I would only contribute to the RRSP to use the HBP in that case and any extra goes to the non-reg account. Of course, the TFSA should be maxed first in this scenario.


Because of the gain due to tax deferral (i.e. growth of gross income money rather than after tax money) and the fact that it will allow me to avoid the US witholding taxes. Obviously it only works if I withdraw within the same tax bracket as when I invest. This is why I only want to invest $15k over the HBP in my RSP.


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## Four Pillars (Apr 5, 2009)

kreyszig said:


> Because of the gain due to tax deferral (i.e. growth of gross income money rather than after tax money) and the fact that it will allow me to avoid the US witholding taxes. Obviously it only works if I withdraw within the same tax bracket as when I invest. This is why I only want to invest $15k over the HBP in my RSP.


Debatable. I think the fact that you are burning the rrsp room is a big negative, unless you are in a situation where you won't use it all anyway.


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## andrewf (Mar 1, 2010)

Sounds like your lifetime savings may be such that you run out of RRSP room. I'm not sure it makes sense to withdraw anything before you retire.

Also keep in mind that if you withdraw the entire balance in one year, you may face a higher marginal rate.


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## kreyszig (Jan 16, 2013)

Four Pillars said:


> Debatable. I think the fact that you are burning the rrsp room is a big negative, unless you are in a situation where you won't use it all anyway.


Ok, maybe I should investigate this more then. So you are saying that RRSP room does not get recovered the next year after withdrawing? So this part does not work like a TFSA?


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## kreyszig (Jan 16, 2013)

andrewf said:


> Sounds like your lifetime savings may be such that you run out of RRSP room. I'm not sure it makes sense to withdraw anything before you retire.
> 
> Also keep in mind that if you withdraw the entire balance in one year, you may face a higher marginal rate.


See my question in my previous message. Yes I will be running out of RRSP room, because of public service pension plan.

About the marginal rate, as I said I will make sure that I stay within the same tax bracket...


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## Four Pillars (Apr 5, 2009)

kreyszig said:


> Ok, maybe I should investigate this more then. So you are saying that RRSP room does not get recovered the next year after withdrawing? So this part does not work like a TFSA?


No, it doesn't. You can't recover contribution room in an RRSP.


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## andrewf (Mar 1, 2010)

RRSP contribution room is not recoverable after withdrawals like TFSA.

If you 'make sure' you stay in the same tax bracket, you may have to wait years to be able to withdraw all your money. You need it to be liquid to be able to buy a house.


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## kreyszig (Jan 16, 2013)

Four Pillars said:


> No, it doesn't. You can't recover contribution room in an RRSP.


Ok, so this was a bad idea then. Thanks A LOT for the info, I should have looked this up instead of assuming it. I have about $19k in my RSP right now. I will only invest $3k this year, so I have about $25k in a few years.


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## dsaljurator (Jan 12, 2012)

andrewf said:


> RRSP contribution room is not recoverable after withdrawals like TFSA.
> 
> If you 'make sure' you stay in the same tax bracket, you may have to wait years to be able to withdraw all your money. You need it to be liquid to be able to buy a house.


HBP is a 'sort of' exception to this. It lets you remove money from your RRSP without paying tax on those funds, provided that you put them back in over the next 15 yrs.


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## Eclectic12 (Oct 20, 2010)

kreyszig said:


> ... Yes I will be running out of the RRSP room, because of public service pension plan.
> 
> About the marginal rate, as I said I will make sure that I stay within the same tax bracket...


All the more reason IMO to only use the HBP for the RRSP withdrawal amount. The HBP is the exception that allows the money to be put back, over a 15 year period.


As for the marginal rate - are you sure this is going to be achievable? 

In the year you withdraw the $15K, the RRSP withdrawal is reported as an extra $15K of income. 

At that point your total income = whatever your income has grown to + your taxable account investment income (ex. dividends) + the $15K RRSP withdrawal - any tax deductions (ex. charitable donations, political party contributions).


Then too, depending when some of the taxable account investments were sold, there may also be some capital gains taxes to pay as well.


Cheers


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## kreyszig (Jan 16, 2013)

Eclectic12 said:


> All the more reason IMO to only use the HBP for the RRSP withdrawal amount. The HBP is the exception that allows the money to be put back, over a 15 year period.
> 
> 
> As for the marginal rate - are you sure this is going to be achievable?
> ...


Thanks. Well it is a non-issue now that I know that RRSP contribution room cannot be recovered. It is obvious that I should hold to my contribution room since the pension plan currently corresponds to about 14% of my gross income and will soon pretty much reach 18% because of increased employee contributions. Obviously I can only estimate what my income could be in a few years...


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## Eclectic12 (Oct 20, 2010)

kreyszig said:


> Thanks. Well it is a non-issue now that I know that RRSP contribution room cannot be recovered...


Good choice.




kreyszig said:


> ... Obviously I can only estimate what my income could be in a few years...


True ... however, the estimate will make for a better idea of whether it will work. It might not be dead on but it will illustrate the big picture.

Usually, the way it might make sense is where there is a huge drop in income such as quitting a well paying job to go back to school (i.e. RRSP contribution while tax rate was high, withdrawal when the tax rate is much lower).


BTW - you can quote the bits needed to remind people what you are commenting in and have a smaller post than quoting everything.


Cheers


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