# Cash in investment accounts



## Saniokca (Sep 5, 2009)

We have about $100k sitting in cash across various investment accounts (RRSP/LIRA/TFSA/Non-reg). Is there anything I could do with them to be readily accessible and earn something that can't go down? Even 0.5% would mean $500/year.

We are with Questrade if it makes any difference.

P.S. This is about 11% of our portfolio.


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## AltaRed (Jun 8, 2009)

There are ISA accounts sold like mutual funds that deliver 0.75% typically interest. Not sure which ones Questrade will carry, but start looking here (data is out of date) http://www.canadiancapitalist.com/high-interest-savings-accounts-at-discount-brokers/

And also look here http://www.finiki.org/wiki/High-interest_savings_account#Fund-based_investment_savings_accounts

They typically have a 90 day hold minimum to avoid fees/charges.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> There are ISA accounts sold like mutual funds that deliver 0.75% typically interest. Not sure which ones Questrade will carry, but start looking here (data is out of date) http://www.canadiancapitalist.com/high-interest-savings-accounts-at-discount-brokers/
> 
> And also look here http://www.finiki.org/wiki/High-interest_savings_account#Fund-based_investment_savings_accounts
> 
> They typically have a 90 day hold minimum to avoid fees/charges.


I seem to remember reading that Questrade charges $9.95 commission for HISA (mutual funds). I wonder if that's true. If so, that would have to be considered as a no go situation, since the multiple deposits into the HISA would eat up any return.

ltr


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## OhGreatGuru (May 24, 2009)

Why would you need that kind of liquidity in RRSP and LIRA, which (usually) are long-term investments?
TFSA?- maybe, depending on what you are saving for, and the liquidity you have in your non-registered accounts.


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## james4beach (Nov 15, 2012)

That does seem like too much cash to keep around in the investment accounts. How fast does one really have to act, anyway? Why not just keep the cash in a bank savings account or credit union where it earns higher interest and is perfectly safe and do a funds transfer when needed?

If you really want to keep the funds inside the investment accounts, then consider these options but beware there is no CDIC insurance and these are riskier than bank deposits. If there was a credit or banking crisis, you might experience losses with these.

CMR - a "money market" ETF, 0.45% yield
PSA - a savings account ETF, 1.0% yield

Some more info on PSA,
http://canadianmoneyforum.com/showthread.php/19041-Purpose-High-Interest-Savings-ETF-(TSX-PSA)


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## james4beach (Nov 15, 2012)

PSA looks like a good option as long as you have cheap/zero ETF trading costs, and if you can buy/sell at reasonably good prices (this is thinly traded so the bid/ask spread may not be great).

Internally, it holds deposits with a variety of banks. Mostly they are holding cash deposits with Manulife and National Bank at around 1.0%, and then they boost the yield a little bit by holding some 1 to 2 year GICs with some credit unions.

The only downside is that these deposits are not CDIC insured. There *is* a risk of loss.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> There are ISA accounts sold like mutual funds that deliver 0.75% typically interest. Not sure which ones Questrade will carry ... They typically have a 90 day hold minimum to avoid fees/charges.


That's where investigation is required. 

Where the broker is related to as well as prefers a particular MF ISA be used, there may be no hold period involved. Where there is no relationship, then likely there will be.




james4beach said:


> That does seem like too much cash to keep around in the investment accounts. How fast does one really have to act, anyway? Why not just keep the cash in a bank savings account or credit union where it earns higher interest and is perfectly safe and do a funds transfer when needed?


Good questions ...




james4beach said:


> ... If you really want to keep the funds inside the investment accounts, then consider these options but beware there is no CDIC insurance and these are riskier than bank deposits. If there was a credit or banking crisis, you might experience losses with these.
> 
> CMR - a "money market" ETF, 0.45% yield
> PSA - a savings account ETF, 1.0% yield ....


I can see where the PSA yield at 1.0% is bigger than the 0.75% that a CDIC eligible ISA MF pays so maybe it makes sense.

CMR makes no sense to me. Why would an investor choose CMR that pays 0.45% which is less than the 0.75% that is CDIC eligible?
This suggestion seems to be worst of both considerations.


Or is there something in the way Questrade operates for the ISA MFs that changes the playing field versus a Big 5 broker where a preferred ISA MF can be bought/sold for free with no holding period?


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> Or is there something in the way Questrade operates for the ISA MFs that changes the playing field versus a Big 5 broker where a preferred ISA MF can be bought/sold for free with no holding period?


That is what we don't know about Questrade. AFAIK, it does not have an affiliation with any ISA provider. Hence my 90 day holding period comment (WAG). 90 days would be the minimum for the brokerage to collect a trailer fee. Unless someone here with a Questrade account knows otherwise, it will take a phone call to Questrade to sort it out.

Added: An old thread from Reddit https://www.reddit.com/r/PersonalFi...373yc/what_to_do_with_cash_at_questrade_hisa/ suggests buy/sell commission which would be a killer.

and a more recent one at RedFlag https://forums.redflagdeals.com/better-returns-parked-cash-questrade-2085692/


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## birdman (Feb 12, 2013)

I use Achieva Savings account which pays 1.70%. Its a credit union and as such is not CDIC insured but is insured through the Deposit Guarantee Corp of Manitoba Cr. Its on line only and simple to transfer funds to other linked accounts.


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## AltaRed (Jun 8, 2009)

frase said:


> I use Achieva Savings account which pays 1.70%. Its a credit union and as such is not CDIC insured but is insured through the Deposit Guarantee Corp of Manitoba Cr. Its on line only and simple to transfer funds to other linked accounts.


Not applicable to registered accounts of course. You'd want to keep cash inside the accounts for use when needed.


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## james4beach (Nov 15, 2012)

This is Questrade, so ETF buy trades are commission free. That's pretty amazing and really makes PSA stand out as a good option here, especially for infrequent selling. Buying PSA is free, you'll accrue 1.0% interest (or whatever rates change to), then will pay a regular fee to sell the shares.

You might want to run a calculation to figure out how much you'll lose on the sell side. For example, say you have 20K that you will keep as cash for one year. You'll buy 20K of PSA for free. After a year you will have received $200 of interest paid out as distributions. Then you sell, paying a $5 fee. The result is a net (20,000 + 200 - 5) / 20,000 = 0.98% yield, not bad at all.

The ISA vehicles are not mutual funds, but they trade through the mutual fund system. I believe Questrade charges $10 for both the buy and sell trades of the ISAs. So if you go the ISA route your trade fees will be $20 total for one buy, one sell.

Overall, both PSA (ETF) and the ISA options are available to Questrade investors. To decide which one makes most sense, you will have to figure out the fees you will incur based on the pattern you expect to buy/sell.


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## lonewolf :) (Sep 13, 2016)

Money in investment account not lent out earning interest is one of safest places to keep money in a deflationary crash. Real estate, stocks, bonds will be cheaper when we get another 2008 style market only this time to a larger degree cash will be worth more.


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## birdman (Feb 12, 2013)

AltaRed said:


> Not applicable to registered accounts of course. You'd want to keep cash inside the accounts for use when needed.


While I have a RIF and a non reg savings it seems that the high interest savings rate of 1.70 also applies to registered accounts. Am I missing something?
http://achieva.ca/high-interest-savings-and-gics/high-interest-savings/rrsp


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## AltaRed (Jun 8, 2009)

frase said:


> While I have a RIF and a non reg savings it seems that the high interest savings rate of 1.70 also applies to registered accounts. Am I missing something?
> http://achieva.ca/high-interest-savings-and-gics/high-interest-savings/rrsp


Not missing anything but how do you move money in a non-registered Achieva savings account to/from a RIF at, for example, TD Direct Investing without triggering taxable events? Another example: Your TFSA spins off income from investments and you want to get something for that cash while you ponder your next TFSA investment. Do you remove that cash from the TFSA to put it in Achieva (recognizing you cannot put that same money back into the TFSA in the same calendar year)?

There is no convenient way to hold RRSP, RRIF or TFSA cash 'outside' those registered accounts....so you need to invest it from within those accounts. A non-reg account has no such restrictions.


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## My Own Advisor (Sep 24, 2012)

As other commenters have mentioned, ~$100K is a lot of cash. Why so much, especially in registered accounts?

If you want to make more money off this consider 1) holding less cash and investing it for income and/or 2) use a 'high' *cough* interest savings account.


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## birdman (Feb 12, 2013)

AltaRed said:


> Not missing anything but how do you move money in a non-registered Achieva savings account to/from a RIF at, for example, TD Direct Investing without triggering taxable events? Another example: Your TFSA spins off income from investments and you want to get something for that cash while you ponder your next TFSA investment. Do you remove that cash from the TFSA to put it in Achieva (recognizing you cannot put that same money back into the TFSA in the same calendar year)?
> 
> There is no convenient way to hold RRSP, RRIF or TFSA cash 'outside' those registered accounts....so you need to invest it from within those accounts. A non-reg account has no such restrictions.


Totally agree and clearly we are talking different things. I was simply pointing out a 1.70% savings rate which could be easily used to purchase a GIC with the same institution or transferred out to another institution albeit the latter takes some time to complete.


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## AltaRed (Jun 8, 2009)

frase said:


> Totally agree and clearly we are talking different things. I was simply pointing out a 1.70% savings rate which could be easily used to purchase a GIC with the same institution or transferred out to another institution albeit the latter takes some time to complete.


Indeed. But to me, cash scattered around investment accounts (which can add up with several investment accounts) is exactly that....fluid cash that grows from monthly investment income (or an asset sale) and is re-deployed on an asset purchase on one-two day's notice. Clearly cannot transfer funds within registered accounts that quickly. OTOH, with a non-reg account, moving money around is fast and simple.


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## janus10 (Nov 7, 2013)

AltaRed said:


> Indeed. But to me, cash scattered around investment accounts (which can add up with several investment accounts) is exactly that....fluid cash that grows from monthly investment income (or an asset sale) and is re-deployed on an asset purchase on one-two day's notice. Clearly cannot transfer funds within registered accounts that quickly. OTOH, with a non-reg account, moving money around is fast and simple.


That's exactly why we have such a large cash component in our accounts. When situations arise, like last month's almost 50% VIX spike in one day, we use that cash strategically and there is no time to waste.

(UVXY for example peaked at almost $17 on May 18th and it since plummeted more than 40% in less than a month. We certainly didn't make 40% on our trades but more like 12%.)


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## james4beach (Nov 15, 2012)

Here are the "liquid cash storage" options I see and their 1 year returns:

ISA fund, 0.75%
PSA, 1.01%
XFR, 1.17%

I forgot about XFR earlier, floating rate bonds. It acts somewhat like cash (because it has a very short duration) but has more risk of decline/volatility than the other options.

The CDIC-insured ISA is my top choice due to ultimate safety, and PSA is the next best choice.


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## agent99 (Sep 11, 2013)

AltaRed said:


> But to me, cash scattered around investment accounts (which can add up with several investment accounts) is exactly that....fluid cash that grows from monthly investment income (or an asset sale) and is re-deployed on an asset purchase on one-two day's notice.


That''s just where we are now. Not quite $100k, but in same ballpark. Mostly in registered accounts. Cash resulted from maturing bonds and one called convertible. This should go back into fixed income of some type to maintain FI allocation. BMOIL has very little in investment grade corporates. GICs barely covering inflation rate  More split preferreds? Another Convertible? Need some inspiration.


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## mikeyrofl (Jul 12, 2016)

So are there fees to use questrade to buy mututal fund like ALT5000 and then sell it as a way to park cash??? thx


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## james4beach (Nov 15, 2012)

mikeyrofl said:


> So are there fees to use questrade to buy mututal fund like ALT5000 and then sell it as a way to park cash??? thx


It isn't a mutual fund, but it uses the mutual fund order system to make the trades happen. So I am pretty sure Questrade will charge the mutual fund transaction fee, which is pretty high. You should just inquire with Questrade and clarify but I am pretty sure it will incur their standard mutual fund fees.

I think PSA is probably your best bet since buying ETF shares are free, and you only pay a trade fee when you sell.


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## james4beach (Nov 15, 2012)

Out of curiosity, thought I would check up on the year-to-date returns of these cash-like ETFs, for those people who don't have ISA access:

CMR: 0.82%
XFR: 0.90%
PSA: 1.00%

XFR and PSA are still looking pretty good.


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## humble_pie (Jun 7, 2009)

james4beach said:


> Out of curiosity, thought I would check up on the year-to-date returns of these cash-like ETFs, for those people who don't have ISA access:
> 
> CMR: 0.82%
> XFR: 0.90%
> ...



have not checked, but isn't PSA said to be currently yielding 1.90%?


PS don't rely on yield quotes to be accurate for current yield for MMFs or stuff like PSA. Everything depends on what time frame the yield calculator is using.

if a longish time frame, say a year or even YTD (8 months), the reported yield will be lower. If a short time frame, say 3 months, the reported yield wlll be higher. Me i see data bases with conflicting yields all the time.

out of curiosity, i recently re-calculated what 2 MMFs with conflicting yield data are, in fact, currently paying. It turned out that both are paying the higher yield on very current basis.

all this makes good sense, don't be fooled by a reported low yield. Check deeper.

.


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## AltaRed (Jun 8, 2009)

Indeed. I always check what the last 2-3 actual distributions are, rather than use the calculated yield as presented by financial sites. 

A little off-topic but on a similar theme: I did a similar thing when looking at short term bond ETFs, e.g. XSB (that my ex holds). I look at the last few years of actual monthly distributions to see what direction it is trending. Indeed, just 2 days ago, I helped her take some equity off the table from XWD (near all time high and more than doubled since she bought it) and put it in XSB (near all time low) as part of an opportune time to re-balance a skewed equity/FI balance. I saw that XSB monthly distributions have stabilized and are/will be trending up, now that the near term part of the yield curve has started to increase. XSB price AND distributions will both trend up over time.


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## humble_pie (Jun 7, 2009)

james4beach said:


> PSA: 1.00%




i've questioned the PSA 1% return above, am repeating because it's a great example of how various d-bases & the brokers that use their data are managing to mislead investors - although certainly not intentionally - as to current yield of various money market instruments at present.

after checking, i discovered that PSA's current yield is actually 2.11%, although d-bases with expanded longer-term fields of data are reporting yield at 1.37%.

at the TD, it's possible to find both low yields - longer-term data - as well as high yields - recent data as interest rates move higher.

unfortunately the majority of quote avenues on the big green website are leading to the low yields, which are very misleading to the increasing numbers of investors right now who are hauling down sails, trimming ship & going into park-money mode for the time being.

here's a tip for big green clients who are increasing HISA type holdings & would like accurant yield figures: ask a registered representative. All have access to better thomson reuters quotes than we are given as clients; all reps can easily obtain current hi-yield figures from reuters; however there are some newer reps with limited experience who do not understand about the calculation field difference & cannot perform here, so be careful.

there is a way to navigate through webBroker to arrive at the accurate current hi-yield quote, but it's a tricky navigation. Alas most of the time webBroker will show a year-old low yield quote.


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## james4beach (Nov 15, 2012)

Those are good points humble_pie.

This time I'm looking at a different comparison from two different places. I looked up year-to-date cumulative returns in Morningstar. Then I looked it up on stockcharts, which tracks share price plus distributions. Both showed exactly the same YTD returns, over 291 days:
XFR 1.09%
PSA 1.23%

This number also agrees with the 'growth of $' chart, for the YTD, shown on the Purpose web site. It seems PSA is doing pretty well as a high interest savings vehicle. The interest rate has ticked higher during this year, and the web site shows that it's currently 1.9% yield, much higher than say TDB8150 at 1.35%.

Some other notes from the PSA financial statements as of June 30, 2018

Here is where the deposits of the fund are stored, as % of total assets:
67.9% Manulife Bank of Canada
9.7% First Calgary Financial
7.2% Prospera Credit Union
5.6% BlueShore Financial Credit Union
4.3% First West Credit Union
2.9% Coast Capital Savings
2.2% Westminister Savings

Here are the terms of their deposits, by months to maturity:
liquid cash: 68%, all at Manulife
0 to 6 months term deposits: 8%
6 to 12 month term deposit: 24% <---- _I presume these are not liquid_

*There are a couple important things to note here*: first, the majority of deposits are with Manulife, as cash (not term deposits). That's probably a good move as Manulife is bigger and probably safer than the smaller credit unions. The second thing I'd note is that a pretty large amount of the assets, 1/4, are in term deposits longer than 6 months.

That's how the fund is boosting the yield. Strictly speaking, PSA assets are not entirely in cash that's available to withdraw at an instant's notice. I don't fully understand the implications of this, but there is probably a remote risk of a "run on the bank" if too many PSA shares are redeemed. In such a scenario, the cash would be returned up to the 68% deposited with Manulife. Beyond that, things probably get interesting.

To illustrate it another way, PSA kind of does this: 68% is cash, 32% is in GICs. But the shares trade as if each one represents cash. It's a reasonable structure, but an investor should keep in mind that there is liquidity risk in this scheme.


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## AltaRed (Jun 8, 2009)

My inclination is to never trust the returns on any platform (including discount brokerage platforms) except the provider's website, albeit Morningstar seems to get almost everything right and is a 'go to' source for me.


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## agent99 (Sep 11, 2013)

AltaRed said:


> My inclination is to never trust the returns on any platform (including discount brokerage platforms) except the provider's website, albeit Morningstar seems to get almost everything right and is a 'go to' source for me.


A common error I have seen, is when a company pays say two dividends per year and the first one is lower than the second one. The on-line sites and even on-line brokerages base the yield they quote based on 2x the last dividend, so they are always wrong!


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## james4beach (Nov 15, 2012)

Is PSA still banned by TDDI?

Out of curiosity, I pulled up a quote for PSA on the TD platform. When I tried placing an order, I saw a message: "This order cannot be placed electronically. Please contact TD Direct Investing"

Does this mean they permit it, by only through a phone rep?


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## kcowan (Jul 1, 2010)

Many orders including PNKs must be called in because they must determine that you are of sound mind and not an out-of-control gambler! I did a few of those back in my active trading days.


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## humble_pie (Jun 7, 2009)

james4beach said:


> Is PSA still banned by TDDI?
> 
> Out of curiosity, I pulled up a quote for PSA on the TD platform. When I tried placing an order, I saw a message: "This order cannot be placed electronically. Please contact TD Direct Investing"
> 
> Does this mean they permit it, by only through a phone rep?



i don't know if TD's policy has changed recently but certainly in 2018 the big green was blocking agent-handled phone orders to buy PSA as well as online orders.

there was quite a discussion in cmf. I remember posting a link to a july/18 rob carrick article in the globe & mail that described how all the brokers were refusing to let their clients buy 3rd party HISA securities. Carrick was saying that, among brokers, TD & roybank were the most draconian of all.

jas4 if you're pursuing this & if the TD has changed its policy, could you please update the forum.

other brokers are less rigid than the big green. At the time - 2018 - i went over to the backup broker & discovered that, although officially they had a rule requiring clients to first buy $100,000 of their own in-house HISA brand, nevertheless in practical terms they were willing to negotiate. I ended up with a Purpose HISA security at the backup broker.


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## james4beach (Nov 15, 2012)

humble_pie said:


> jas4 if you're pursuing this & if the TD has changed its policy, could you please update the forum.


Out of curiosity I phoned an agent. He typed in the symbol and said -- "well that's surprising, that's pretty rare". I didn't pursue it because I clearly needed another agent, and I'm not placing this trade on my own account anyway.

Here's why I ask. In a situation where someone is (temporarily) storing large cash, and there's so much cash sitting that they have already hit the 100K CDIC coverage limit, _including_ on all 4 issuer names of the TD ISAs... in other words, the four TD ISAs covering 400K are insufficient to fully cover the amount. I thought that perhaps one could use up the 4 TD ISAs and then buy some PSA on top.

Another option for the spillover is to buy something like RBC Premium Money Market Fund (RBF447) which also reaches a reasonable yield. I briefly considered ultra short term bond ZST but found that it has sufficient volatility and drawdown that it's too risky for a couple months of holding.

The other option would be to put more than the CDIC covered amount in TDB8150, perhaps a sum like 200K to 300K. Personally I don't believe that's terribly dangerous as TD Bank would have to fail, but I was considering options. Does anyone here think it's dangerous to put 300K into TDB8150, beyond the CDIC limit?


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## OnlyMyOpinion (Sep 1, 2013)

I currently and reguarly hold more than 100k in TDB8150. I have no concerns.
Holding a multitude of accounts/products is a nonstarter.


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## james4beach (Nov 15, 2012)

OnlyMyOpinion said:


> I currently and reguarly hold more than 100k in TDB8150. I have no concerns.
> Holding a multitude of accounts/products is a nonstarter.


Thanks. I guess we'll just hope that TD doesn't fail 

And by the way, you don't need multiple accounts to split among TD sub issuers. You could buy 100k each of these, all in the same brokerage account, to cover up to 400K. Each is a different subsidiary of TD with separate CDIC coverage, as I understand it.

TDB8150
TDB8155
TDB8157
TDB8159

https://www.td.com/ca/en/asset-management/additional-solutions/


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## OnlyMyOpinion (Sep 1, 2013)

^ yes I know. I just use TDB8150 though. If TD gets in trouble I've got bigger problems with their common shares.


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## james4beach (Nov 15, 2012)

OnlyMyOpinion said:


> ^ yes I know. I just use TDB8150 though. If TD gets in trouble I've got bigger problems with their common shares.


Ah, I see. So you're saying you'd rather not deal with the headache of the multiple vehicles, and just stick with 8150 for simplicity?

Managing the multiple vehicles is a bit of work. The non primary issuers actually have 150K maximums (not CDIC but total $ allowed) so it can get tricky to manage huge amounts.


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## humble_pie (Jun 7, 2009)

oddly enough i do think a circumstance where a client had booked $100k of each of TD's CDIC insured HISA products AND client still had extra cash he wished to invest in HISA products ... rare though this circumstance might be, i think it would be an occason where the big green would be obliged to permit outside purchases.

probably such a case could be argued all the way to the IIROC & win. Brokers in canada, after all, are never permitted to act with their own interests first & foremost. A client's right to full CDIC protection takes precedence et patati et patata.

it was probably in mindfulness of a potential IIROC ruling that the backup broker had a somewhat wishy-washy rule that a client "must" buy $100k of its house HISA first, after that a client would be allowed to buy a 3rd party HISA vehicle.

but who's going to argue with the big green? they are famous for being more stubborn than pit bulls when they make up their teensy green minds on an issue, it's a lot easier to just whiff a high interest seeking deposit somewhere else without saying a word.

as for loading any one instrument higher than the insurable $100k, i'm sure that's fine. OnlyMO has the right point when he says if Things Break Down So Bad that TD's bank deposits are in trouble, then a whole lot much worse has been visibly going on in stock markets for quite some time.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Another option for the spillover is to buy something like RBC Premium Money Market Fund (RBF447) which also reaches a reasonable yield.


But TD has always had a Premium Money Market Fund TDB165 with a minimum deposit of $100K for those with large amounts of cash to store.. There's no upper limit as far as I know and I see it pays around 1.5%.

ltr


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## humble_pie (Jun 7, 2009)

for months if not years CIBC's premium CAD money market fund has paid a tad higher than that standard TD HISA issue, whatever its number is. And the big green allows rival MMF purchases, it's only HISA accounts where the brokers get so uptight.

one who is not too stuck in rut should also keep an eye on tangerine, the citrus likes to waft around fairly high 6-month promo offers such as current 2.75% for both CAD & USD with no minimum amount, from time to time.

alas other HISA e-accounts such as simplii, e-bank etc, are never available in quebec. We izz poh & deprived.


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## james4beach (Nov 15, 2012)

What would your thoughts be on using the TD Premium Money Market Fund, or RBC Premium Money Market Fund (RBF447) ... both available at TDDI... for someone who has depleted the 100K limit guarantees on the ISAs?

The MMF are not guaranteed by anyone either. I suppose the question is: is it wiser to put 100K uninsured into TDB8150 (big bank ISA) or RBC Premium Money Market Fund?

Perhaps there's no real difference in risk once you're already in uninsured-land?


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## humble_pie (Jun 7, 2009)

like_to_retire said:


> But TD has always had a Premium Money Market Fund TDB165 with a minimum deposit of $100K for those with large amounts of cash to store.. There's no upper limit as far as I know and I see it pays around 1.5%.



for some reason the RBF premium MMFs are paying higher than the TD premium equivalents. Both currencies. Same keystrokes to buy either inside one's TD account. Why take the TD vehicle if it pays less?


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## james4beach (Nov 15, 2012)

humble_pie said:


> for some reason the RBF premium MMFs are paying higher than the TD premium equivalents. Both currencies. Same keystrokes to buy either inside one's TD account. Why take the TD vehicle if it pays less?


Are you talking about the RBC Premium Money Market Fund (RBF447) ?

What is the correct yield on that? I see conflicting numbers in different places.


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## humble_pie (Jun 7, 2009)

james4beach said:


> What would your thoughts be on using the TD Premium Money Market Fund, or RBC Premium Money Market Fund (RBF447) ... both available at TDDI... for someone who has depleted the 100K limit guarantees on the ISAs?
> 
> The MMF are not guaranteed by anyone either. I suppose the question is: is it wiser to put 100K uninsured into TDB8150 (big bank ISA) or RBC Premium Money Market Fund?
> 
> Perhaps there's no real difference in risk once you're already in uninsured-land?



jas u should look at their holdings pages ... all of em. They're pretty much the same & they're all pretty much a hoot.

garbage. Total garbage interspersed with decent issues. Loan companies you have never, ever, ever heard of. I suppose they are lendiing money to ex-convicts & god knows who. Except when you google their names - these unheard-of loan companies do have websites, i'll say that for em - it turns out that they are owned by canada's Big Five Chartered Banks. All of em owned by the Big Five. They are the dark underbelly of visibly oh-so-dignified canadian banking.

the shadowy stuff is interspersed with decent loan vehicles. The only "safety" i can see is that the managers - at td, at cibc, at rbc - have diversified hugely so there is some protection against an isolated blowout or two. 

when it came to the US premium MMF i could not tell how or why royBank is able to consistently offer slightly higher yield. However its inventory of holdings looked fairly disciplined. A garbage holding, then a US dollar interest bearing paper issue from a canadian province or a canadian hydro authority or well-known crown corporation, then another garbage holding, then another gummint paper. More stripes than a zebra.

it's the shadowy stuff that is paying the extra high yield, of course.

.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Are you talking about the RBC Premium Money Market Fund (RBF447) ?
> 
> What is the correct yield on that? I see conflicting numbers in different places.


Yeah, it's a morass of information, but the RBC MM Fund appears to pay current about 1.6%, so not so different than TD. If the funds are at TD, I like to stick close to home and use their product.

ltr


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## humble_pie (Jun 7, 2009)

james4beach said:


> Are you talking about the RBC Premium Money Market Fund (RBF447) ?
> 
> What is the correct yield on that? I see conflicting numbers in different places.



sorry i've never followed anybody's CAD premium MMF other than CIBC's, which has paid the highest in recent years.

in US MMF i've often posted in cmf forum that royal bank's RBC USD premium MMF has the highest yield, currently north of 2% but trending slightly down these days of course.

there is confusion about MMF yields on broker websites & even among broker reps, i've also posted about that ...


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## humble_pie (Jun 7, 2009)

like_to_retire said:


> Yeah, it's a morass of information, but the RBC MM Fund appears to pay current about 1.6%, so not so different than TD. If the funds are at TD, I like to stick close to home and use their product.



premium MMFs pay higher than regular MMFs - 100k threshholds - so it's certainly worth inspecting them


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## james4beach (Nov 15, 2012)

I'm probably splitting hairs here on the "risk" question but I'm leaning towards keeping the deposit with TD, though its uninsured. I think it's more likely that commercial paper blows up than a big 5 bank actually defaults on deposit liabilities... currently I feel like the (premium) MMFs are riskier than the ISA.

But I'm still torn and undecided. humble_pie, I thought you were a fan of the RBC Premium MMFs? You correctly point out that they have some really sketchy looking commercial paper holdings.

In practice I suspect the risk of loss with either one is close to zero


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## humble_pie (Jun 7, 2009)

james4beach said:


> I'm probably splitting hairs here on the "risk" question but I'm leaning towards keeping the deposit with TD, though its uninsured. I think it's more likely that commercial paper blows up than a big 5 bank actually defaults on deposit liabilities... currently I feel like the (premium) MMFs are riskier than the ISA.
> 
> But I'm still torn and undecided. humble_pie, I thought you were a fan of the RBC Premium MMFs? You correctly point out that they have some really sketchy looking commercial paper holdings.
> 
> In practice I suspect the risk of loss with either one is close to zero



sometimes it's a good idea to split hairs. You are saying i believe that an ISA from such as the TD has CDIC insurance for at least a part of its holdings? 

me i've never looked so i am relying upon yourself & your well-known research competence. Are you sure that the original CDIC insurance that was extended to TD bank for its deposits, does carry through to the secondary beneficial owners such as TDDI clients who buy bits of such ISA in dribs & drabs? IIRC there was concern about CDIC flow-through when ISAs first appeared but perhaps this has resolved nicely?

still i am left thinking that in order to obtain that high yield, the bank ISAs have to be including at least some shadowy high-yielding paper from the unknown loan companies, which in fact are high-risk loan subsidiaries of the banks themselves ...

i agree that MMFs don't have any insurance so a buyer is reliant upon the MMF manager's ability to handle risk.

it is actually quite hard to split hairs i think. In the event of a total global financial collapse - which is what would be necessary to bring down something like the TD - would even the CDIC still be left functioning? would the canadian parliament continue to back CDIC via the canadian treasury?

PS not to distort my words though. What i said is that *all* the premium MMFs had holdings pages that were hoots. All of em contained some shadowy stuff - because that's where the high yield comes from - plus some decent stuff.

.


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## humble_pie (Jun 7, 2009)

BTW the regular MMFs with lower minimum threshholds always contain the same shadowy paper interspersed with the same kind of slighty better stuff

alas there's no escape


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## james4beach (Nov 15, 2012)

humble_pie said:


> me i've never looked so i am relying upon yourself & your well-known research competence. Are you sure that the original CDIC insurance that was extended to TD bank for its deposits, does carry through to the secondary beneficial owners such as TDDI clients who buy bits of such ISA in dribs & drabs? *IIRC there was concern about CDIC flow-through* when ISAs first appeared but perhaps this has resolved nicely?


I had some concerns about this in the past. The broker does pool all deposits and sends them off to the depository bank (commingled) which does raise some worries, yes. Then I found out that the CDIC actually publishes guidelines on how brokerages can do this properly. This is described in:

https://www.cdic.ca/app/uploads/guidance-for-cdic-coverage-of-brokered-deposits.pdf
https://www.cdic.ca/financial-commu...ing-alpha-numeric-identifiers-for-disclosure/

The above PDF presentation was updated just a week ago. I am encouraged by the fact that the CDIC seems to have thought about this process of brokered deposits. I'm going to make a wild guess that this is in response to the massive amounts that are deposited with ISAs.

The key part here is that it is the brokerage's job to supply proper beneficiary information. If the broker fails to do this, then you really can't figure out who has what deposit, and what's insured for how much.

The primary risk that I see with brokerage ISAs is about record keeping. If someone goes wrong at the brokerage side (error? *fraud?*) and the records are inaccurate, then CDIC coverage will be a bloody mess to figure out. However, I have a gooda mount of trust in TD to do this properly.



> still i am left thinking that in order to obtain that high yield, the bank ISAs have to be including at least some shadowy high-yielding paper from the unknown loan companies, which in fact are high-risk loan subsidiaries of the banks themselves ...


I don't think it's like that at all. The ISAs are deposit accounts. They become bank deposits, so they sit on the bank's balance sheet as a deposit liability, the same as any other deposit. In one sense, they are not backed by anything (specific). Rather, they are backed by the good credit of the bank, and the bank's solvency and ability to tap liquidity.


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## james4beach (Nov 15, 2012)

We had a brief discussion previously about brokered deposits in general (GICs or ISAs)
https://www.canadianmoneyforum.com/...-coverage-of-deposits-in-a-discount-brokerage

I don't think we arrived at any answers, other than, this appears to be complicated lawyer-speak.


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## AltaRed (Jun 8, 2009)

I consider my ISAs to either be client name or in trust with me as beneficiary... for the simple reason that the T5 is issued by the issuer, e.g. ADS Canadian Bank for DYN5000 or Bank of Nova Scotia for DYN6000, and not by the brokerage. How would they have my address and SIN without that having been disclosed by the brokerage?

P.S. Thanks James for digging out that PDF in post #51. That is helpful info to all of us.


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## james4beach (Nov 15, 2012)

AltaRed said:


> P.S. Thanks James for digging out that PDF in post #51. That is helpful info to all of us.


No problem. Can I ask your opinion as well, about exceeding 100K (per issuer) on ISAs. If you had, say, 600K and you already used up all ISAs you could get your hands on (to 100K levels) within your brokerage, what would you do?

e.g. would you just put more, such as 200K into DYN5000 ? Or would you move the rest into alternative money market mutual funds or even short term bond funds, despite the problems with each of those (such as volatility) in the latter.


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## AltaRed (Jun 8, 2009)

I'd most* likely stick with DYN5000 or more likely DYN6000 with the BNS name attached to it. If any of the big 5 are going insolvent, we have way bigger issues.

* When I was an ex-pat, I think I had more than half a million (of Cdn house money) in one bank account for all that time, waiting to be deployed in another house when I returned. Of course that was about 15 years ago when other options were not clearly available.


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## james4beach (Nov 15, 2012)

Thanks. I think there's the added consideration that CDIC would have a tremendous difficulty paying out in such a scenario anyway. Or in other words, CDIC insurance is probably most meaningful for the scenario of smaller, sketchier banks.

If a big 5 fails and defaults on deposit accounts, we've got a whole new realm of problems that CDIC cannot address. My guess is this would force federally assisted and heavily BoC assisted mega mergers of banks, similar to Wachovia & friends.


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## james4beach (Nov 15, 2012)

Here's what I'm thinking. Obviously, if you're within the 100K limit, then the ISA is a no-brainer. However with larger amounts I think it's worth the effort to spread the money around a bit. The ISA structure is an innovation of recent years spurred by the ultra low interest rate environment. It hasn't been tested during a banking crisis. There are unknown aspects of the brokerage/banks/CDIC record keeping. Deposits are very likely commingled by the brokerage, and that kind of practice has had problems in the past in other countries.

I'm not concerned about big 5 bank solvency itself. If I was depositing *directly* at Scotia, TD, etc then I really wouldn't be bothered by putting 400K in a single account. But, that's a genuine bank account, without the additional layers of middle men.

In a brokerage, I think I'd use the ISAs available with different issuer names, to 100K each. Perhaps after using a couple of the sub issuers, and depending on the total amounts, I would diversify into the following for liquid cash, short time horizon:

RBC Premium Money Market Fund (RBF447)
ZST - BMO Ultra Short-Term Bond ETF

Why take on the (very slight) risk of the MMF and its commercial paper holdings, or the (slightly higher) risk of ZST and its potential losses? In my eyes, the risk of all of these things are negligible. But because I don't have 100% faith in the ISA structure, I just think a bit of diversification is worth the effort.


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## james4beach (Nov 15, 2012)

After discussing this information with the account holder I'm helping out, and voicing my (mild) concerns about ISAs, we arrived at the following plan. They are storing a very large amount of cash for a relatively short time period, so it must be cash-like. I'll share the plan we came up in case it helps anyone else. This is at TDDI but should work the same way elsewhere.

Imagine layering cash in 100k blocks. Starting with the first place to park cash, then continuing to more blocks, in order:


*Fund**Description*TDB8150broker ISA issuer #1RBF447RBC Premium Money MarketTDB8155broker ISA issuer #2ZSTBMO Ultra Short-Term Bond ETFTDB8157broker ISA issuer #3RBF447RBC Premium Money MarketTDB8159broker ISA issuer #4...keep repeating ZST, RBF447

The idea is to alternate ISA & MMF as the balance increases, to spread over multiple issuers and not concentrate completely in the ISAs. Yield should be similar in all of these, except ZST provides a bit more yield, with possibility of small loss over < 4 months. If you don't like that tradeoff you can swap another money market fund instead. TD Premium Money Market is another suitable one.

Consider 700K stored like this:
* 400K in TD ISAs, theoretically fully CDIC guaranteed
* 200K in paper under RBC management
* 100K in slightly volatile paper under BMO management


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## james4beach (Nov 15, 2012)

Clarification #1: the intent ^ of this table is that you move downward in 100K blocks as needed. If you're dealing with 100K total cash, just put it in TDB8150. If there's 200K total, then it's TDB8150 and RBF447.

Clarification #2: my main concern with ISAs is not a bank collapse, but rather the relatively new & untested practice of this style of brokered deposit, and how brokerages (and the underlying depository bank) handle it. If someone had $700,000 to store, I think it would be risky to pack it all into ISAs all under the same institution. I just don't like that kind of concentration in new & untested things.

Depending on how much you trust the ISA infrastructure, one might even want to limit themselves to a couple ISA sub-issuers (stopping at TDB8155 perhaps) and put *all* the rest into MMFs.


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## AltaRed (Jun 8, 2009)

I think this is a case of looking for spooks around every corner. At least with the big 5, they've staked their corporate reputations on the branded versions. It would be a permafrost day in hell they'd allow branded ISAs to be at risk. In your post #58, I would stick it all in the TBD versions and be done with it. If I made that complicated proposal to anyone I know, their eyes would glaze over and they'd simply put it all into their brand name bank savings account at their bank branch.

If I was putting away $1M for a short period of time, e.g. a year or less, in Scotia iTrade, I'd put $100k in DYN5000 (ADS Canadian Bank) and $900k in DYN6000 (BNS branded ISA) and not lose ANY sleep over it.


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## james4beach (Nov 15, 2012)

I can see that perspective too AltaRed, but I just wouldn't be comfortable placing 500K or $1M entirely in ISAs when this whole style of brokered deposit is brand new and has never been stress-tested. Deposits at big 5 banks are solid, yes. But the ISAs add layers around that, including pooling deposits and earmarking which $ belongs to who.

_They are a new kind of financial product_. A new product which has only existed for a few years and has never been stress-tested in a bear market or crisis should always be viewed with some suspicion, IMO.

Diversifying into money market funds has just about no downside other than a few extra clicks. The yield will be the same. Discount brokerages give us the ability to easily allocate money in different places like this -- what's the harm in doing it? There's the additional benefit of peace of mind from actually staying within CDIC limits on each ISA, too.


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## AltaRed (Jun 8, 2009)

Out of interest, I have asked Scotia iTrade specifically how they handle their ISAs based on that CDIC document on brokered deposits. Will report when/if they reply.


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## seh (Nov 10, 2014)

james4beach said:


> I can see that perspective too AltaRed, but I just wouldn't be comfortable placing 500K or $1M entirely in ISAs when this whole style of brokered deposit is brand new and has never been stress-tested. Deposits at big 5 banks are solid, yes. But the ISAs add layers around that, including pooling deposits and earmarking which $ belongs to who.
> 
> _They are a new kind of financial product_. A new product which has only existed for a few years and has never been stress-tested in a bear market or crisis should always be viewed with some suspicion, IMO.
> 
> Diversifying into money market funds has just about no downside other than a few extra clicks. The yield will be the same. Discount brokerages give us the ability to easily allocate money in different places like this -- what's the harm in doing it? There's the additional benefit of peace of mind from actually staying within CDIC limits on each ISA, too.


Any thoughts if the approach is any different for USD deposits, given that everything is uninsured anyway? e.g. if I've got USD short term gics sitting at RBC, is there any scenario where RBC would default on a matured gic, but one of the other big 5 is still solvent? I suspect not, so what (if any) point is there in diversifying gics across the big 5 banks? (same would apply to ISAs)


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## james4beach (Nov 15, 2012)

Interesting question seh. As you say, all USD deposits are uninsured anyway.

My concern is mainly about the ISA vehicle, not about big 5 bank solvency. I don't think RBC or TD will ever default on (real) deposit accounts or GICs, whether they are in CAD or USD. The point I was making above is that ISAs are not real/direct deposits.


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## MrMatt (Dec 21, 2011)

At $500k or $1M, taking a few minutes to ensure it's properly insured is a good idea.

Or you could put it in appropriately risked government bonds, but they're not always competative with GICs.
But it is important to note there are GICs which are NOT CDIC insured, particularly from Credit unions, and it's not clear how robust that insurance is.

I assume CDIC is going to be fully backed by the federal government if there was an issue. Though they might put a cap on it, I think it would be political at that point.
I don't see a lot of political will to have people lose their bank accounts, but I also see a political disaster if people get millions in payouts (which is why I think they're holding back on raising that $100k limit)


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## like_to_retire (Oct 9, 2016)

MrMatt said:


> .... I also see a political disaster if people get millions in payouts (which is why I think they're holding back on raising that $100k limit)


I suppose that's true.

Myself, I find the $100k limit a pain in the butt. I would love it if they raised that limit to $250k. 

With TDDI you only have about 10 providers, so CDIC coverage is limited to only a million in GIC's. Not that much.

Once you reach the 10x $100k CDIC limit on your fixed income you have to move to fed bonds and unfortunately they don't pay near what GIC's do.

ltr


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## james4beach (Nov 15, 2012)

MrMatt, I agree with you that it could get political, but they will absolutely make good on the 100k guarantee. I really don't feel comfortable assuming more. And you're right that government bonds are an easy way to safely store much larger amounts. For example one could buy a t-bill maturing December at 1.61% yield before fees & spread. You could buy millions of $ of that, which will keep you relatively liquid, perfectly government-backed, at a reasonable yield.



seh said:


> Any thoughts if the approach is any different for USD deposits, given that everything is uninsured anyway? e.g. if I've got USD short term gics sitting at RBC, is there any scenario where RBC would default on a matured gic, but one of the other big 5 is still solvent? I suspect not, so what (if any) point is there in diversifying gics across the big 5 banks? (same would apply to ISAs)


I thought about your question some more. I am not too concerned about GICs held through brokerages. They've been around a long time, even before the 2008 crisis. For example, I bought GICs issued by other banks through TD Waterhouse in early 2007. At least we know they existed before the crisis, and I'm willing to bet that the brokerages and CDIC got plenty of questions about them through those years.

My concern is really specifically about the ISAs, just because they're very new. I feel more confident about GICs.



like_to_retire said:


> Once you reach the 10x $100k CDIC limit on your fixed income you have to move to fed bonds and unfortunately they don't pay near what GIC's do.


How about moving to bond funds past that amount? XBB (avg 10 year maturity) and XSH (avg 3 year maturity, more corporate) will provide GIC-like returns, though with volatility.


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## AltaRed (Jun 8, 2009)

AltaRed said:


> Out of interest, I have asked Scotia iTrade specifically how they handle their ISAs based on that CDIC document on brokered deposits. Will report when/if they reply.


FWIW, Scotia iTrade's response to me was that the DYN ISAs are held in trust with the client as beneficiary. Given the response was soft rather than confidently stated, I've asked for that to be confirmed.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... _They are a new kind of financial product_. A new product which has *only existed for a few years* and has never been stress-tested in a bear market or crisis should always be viewed with some suspicion, IMO.


OOH ... it is likely valid that ISAs have not been stress tested (at least to early 2009 levels).

OTOH ... is it a lack of research or hyperbole to describe ISAs as "only existing for a few years?

There's the Canadian Coach Potato website Oct 2010 that list a range of ISAs. https://canadiancouchpotato.com/2010/10/12/parking-cash-in-your-portfolio/
Royal Bank's version has a listing of historical rates back to July 2009. 

Call me crazy but I doubt many would think a product on the market for what looks like over ten years is all that new.




james4beach said:


> ... Diversifying into money market funds has just about no downside other than a few extra clicks. The yield will be the same.


IIRC, the articles describing ISAs were highlighting how MMFs had been crap for a long time where the ISAs were more profitable. This relatively recent article seems to be of the same view.
https://www.theglobeandmail.com/glo...better-way-to-park-your-cash/article19058090/

A quick check of MorningStar.ca shows something like 1.8% of the 527 MMFs beating TDB8150. These are lots of zero yield, 0.04%, 0.20%, 0.34%, 1.12% etc. 
If there's a long enough time before the cash might be needed then maybe, if one picks a top MMF then it might be okay. If not, for some having the ISA seen as cash or being able to be sold without a holding period may be of more value.




james4beach said:


> ... The point I was making above is that ISAs are not real/direct deposits.


So who is going to sue or get media attention to the lies being printed?

When I bought the fund info sent said it was a deposit and not a mutual fund.
Why does the Terms and Conditions talk about the dealer having asked TD to open an ISA, including stating that "The Bank is a member of Canada Deposit Insurance Corporation(CDIC) and the TD ISA is a "deposit" within the meaning of theCanada Deposit Insurance Corporation Act"?


The potential issue seems less about being a deposit or real and more about whether CDIC's requirements for them to directly payout coverage.


Cheers


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## AltaRed (Jun 8, 2009)

Per my post #68, of the 3 methods ISAs can be held by brokers, if indeed ISA funds are held in trust for client as beneficiary (as in Scotia iTrade's assertion), ISTM these are true deposit accounts. How else can they qualify for CDIC coverage? 

With the kind of coin that is now in these things ($80B or so and likely climbing), and having been around circa 10 years, I doubt there is anything ulterior, i.e. not disclosed properly, in these things when they are clearly advertised as qualifying deposits for CDIC coverage. As I also mentioned earlier, the T5 slip for these things also comes directly from the issuing institution, not the brokerage itself with the issuing institution and my name and address printed right on it. About as real as possible I think.


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## james4beach (Nov 15, 2012)

Thanks for the Scotia iTrade info, AltaRed. That's really good info.

With TD, the T5 slips come from TD Asset Management, even though the deposit is supposed to be with TD Bank (or TD Canada Trust). So the TDDI case does not seem to correspond directly to what you see at iTrade, where the T5 comes directly from the depository institution.


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## like_to_retire (Oct 9, 2016)

james4beach said:


> Thanks for the Scotia iTrade info, AltaRed. That's really good info.
> 
> With TD, the T5 slips come from TD Asset Management, even though the deposit is supposed to be with TD Bank (or TD Canada Trust). So the TDDI case does not seem to correspond directly to what you see at iTrade, where the T5 comes directly from the depository institution.


Well, I think it's the same situation with TDDI. I get two T5 slips from TDDI. 

One for everything I have with the brokerage, and then a separate one for TDB8150 ISA is mailed directly from TD Asset Management who are a wholly-owned subsidiary of TD Bank, and the Fund name in that separate T5 shows as TD INV SAVINGS ACC. That tells me it's with TD Bank.

ltr


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## agent99 (Sep 11, 2013)

Replying to a


ireneduncanjji said:


> I wanna make sure we are on the same page and our price range is compatible with what you are looking for. What is your budget?


 Replying to someone in a very old thread?


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