# PACC for iShares funds vs e-series for small investor



## purple.platypus (Dec 10, 2012)

Hi, all! As you might know from other threads, I'm just at the point where I want to set up an investment account of some sort. I've given myself until the end of January though I'd really like to do it toward the end of this week.

For someone who is:

new to investing
has only fairly small amounts available to invest for the time being, but could make monthly or quarterly contributions
interested in an index-based strategy
there seem to be two broad categories of attractive options:

mutual funds, of which TD's e-series seem to be the consensus best-of-breed, or
ETF investing via PACC.
The latter option is available, for no brokerage fees, through a small but increasing number of discount brokers, which now include Questrade (who I gather did not offer this service as recently as a few months ago). At the moment it can only be used in conjunction with certain iShares ETFs, but those seem sufficient to build an initial portfolio from.

I'm fairly new to this world and feel I only partially understand the advantages and drawbacks of each option. The main thing keeping me away from ETFs was brokerage fees but if there's a way to avoid that problem, even when investing only relatively small monthly or quarterly amounts, they become much more interesting again. And I gather it's a bit of a pain to get signed up for the e-series. On the other hand the MERs on the e-series are actually _lower_ than on these ETFs, though both are very good (well under 1%) by Canadian standards.

What do people feel I should do here (including any third options you feel I might be overlooking), and most importantly, why?


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## purple.platypus (Dec 10, 2012)

No responses? I can't imagine it's because no-one is interested in the topic!

I plan on giving Questrade a call to find out a bit more about how the PACC option works and make a decision based on that. Anyone else who has advice is also still welcome to offer it. Maybe this thread can slowly morph into me answering _my own _initial questions - certainly I'll post anything I find particularly interesting here.


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## Jungle (Feb 17, 2010)

E-series because:
Cheaper mer
No fees to buy

Anytime there is a human interaction doing something at Questrade, there is a good chance they will screw it up.


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## 44545 (Feb 14, 2012)

Have a read of this article: http://canadiancouchpotato.com/2012/11/22/virtual-brokers-becomes-the-etf-leader/

...and this one: http://canadiancouchpotato.com/2012/07/30/comparing-the-costs-of-index-funds-and-etfs/

The factor that made the e-Series mutual funds more cost efficient with small portfolios was the trading commissions on the comparable ETFs. Eliminating those, and in the absence of other fees (such as account maintenance fees) the ETFs start to look attractive for people with modest portfolios.

Full disclosure: I use e-series funds and will continue to do so.


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## purple.platypus (Dec 10, 2012)

As far as I can see, they (Virtual Brokers, subject of one of those articles) don't offer PACCs and charge prohibitive (at my small scale) fees for the not-quite-DRIPs they offer, both deal breakers or close to it. Of course, it is possible I'm another victim of unclear information on their site (also not confidence-inspiring, but less bad), something several people complained about in the comments on one of those articles. If anyone knows anything contrary to what I just said, now's the time...


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## mrPPincer (Nov 21, 2011)

When I was choosing a brokerage I did look into the various commission-free etfs available and I found that almost all of them had higher mers than I was willing to pay, and I think some of those more specialized ones could possibly have lower liquidity than one would like.

I went with TDW and am very happy that I did because I've found that the support staff is very knowledgable, professional, helpful and efficient.
If you go with VB you have to pay that monthly fee for them to drip, and it will be a market drip so you will lose out on any discounts you would get with a treasury drip.
With TDW I will always get a treasury drip if it's available, which means a +/-3% discount in some cases.
Another thing, with VB you can't do a Norbert's gambit, because they will not journal inter-listed stocks between your US & CDN accounts.

I would suggest the e-series.
IMO they are the best place to start and I wish they'd been available when I was in my early accumulation phase.

It's not that difficult to open an e-series MF account.
The easiest way is to open a regular account at a local branch and have them immediately send in an application to have it converted into an online one for you.


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## pnky (Jul 16, 2012)

What a co-incidence ! I just downloaded the TD eSeries Application form from their site (one tip: dont try to fill in and then print, the formatting just screws up) and will probably mail in the application today itself.

One question: I intend to make regular purchases (like say $500 from every paycheck) - should I setup the PPP or do it myself using the online option ? Is there any cost difference (there shudnt be, but I really may not know enough) ?


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## Barwelle (Feb 23, 2011)

@platypus: If your regular contributions are small, one option is to use *both* ETFs and the e-Series index funds. Dollar-cost-average into the e-Series funds, and once you have a significant amount in the fund, sell them and transfer that to the equivalent ETF (but continue the dollar cost averaging into the e-Series funds, and continue transferring each time you've built up a significant amount). That way, you can take advantage of the commission-free mutual funds so that small, regular contributions can be made often, while being able to use the low-MER ETFs in the long run.

You could pick an arbitrary amount for when to switch: Say, when each fund has reached $2,500 in value. Or, when the whole e-Series account reaches $10,000. You could also work out the breakeven point for when moving a lump sum into ETF would save more money on MER in a year than the commission would cost.

Or you could just do the transfer once a year.

@pnky: There is no "cost" difference whether you set up the PPP, or do the fund purchase manually each time. But there is a minimum amount: When you do it manually, you have to purchase at least $100 worth of each fund you buy. The minimum for the PPP is $25.


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## purple.platypus (Dec 10, 2012)

Looking at the application form for the e-series, they do not appear to offer TFSAs as an option! That can't be right, can it?!? If it doesn't, that's pretty much a dealbreaker.


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## Barwelle (Feb 23, 2011)

They do, platypus. They just don't make it easy.

You have to open a regular TFSA mutual fund account (as in, not e-Series), then once it is opened, send in a form that converts the TFSA mutual fund account into the e-Series flavour.


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## Barwelle (Feb 23, 2011)

further info:

*Step 1:* Use this form to apply for the non-eSeries TFSA Mutual Fund account. 

Are you an existing TD customer? If you aren't: it says "This application can be used by existing TD Canada Trust customers to open a TD Mutual Funds Tax-Free Savings Account" at the top, which implies that you can't use the form if you aren't already with TD. 

But, in Section 3, it says "Please attach a void cheque if you do not have a bank account with TD Canada Trust. If an account application is being mailed and you do not have a TD Canada Trust bank account or TD Mutual Funds account, a cheque payable to TD Investment Services Inc. MUST accompany the application along with your first purchase instructions" So, do that, and you'll be fine. 

For "first purchase instructions"... you _might_ be able to just say no initial purchase or something similar... not sure though. Can somebody else comment? I applied a different way (see Alternative below).

*Step 2:* Once you recieve notice that the account is open, send in this form, which will convert the account into e-Series.

*Alternative to Step 1 *(which is what I did): Go to the nearest TD branch, and open a TFSA mutual fund account. Don't let them sell you any of their high-fee mutual funds!!! Make sure all they do is open the account, and link your banking info. You don't even have to put any money in the account. Don't believe them if they tell you that you do. (You will also have to complete an Investor Profile Questionnaire, whether you apply via mail or in the branch.)

Complete Step 2 at home. (Apparently they cannot do the conversion to e-Series in a branch.) _edit:_ As per mrPPincer's post below, they can do the eSeries conversion form at the branch, but they have to send it to HQ to process it.


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## purple.platypus (Dec 10, 2012)

Guess I'll do the alternative since that's what I've seen others recommend as well. Silly that they make you jump through this many hoops, though.


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## Barwelle (Feb 23, 2011)

It is silly. 

Most likely, they do it so that people get confused or intimidated by the application process, so that they call in or go to a branch, so that TD can steer them away from eSeries and try to sell them the high MER funds instead! I am glad that they provide these index funds at all though. It's a unique offering here in Canada.


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## mrPPincer (Nov 21, 2011)

I opened my TFSA in one visit to the branch.

They can do all the paperwork for the conversion to the online account right there for you, but it does have to be sent in to HQ to complete the process and there is a waiting period, but I've not had them try to steer me into the higher mer products.

I think letting your local branch set it up is faster than doing it online; I remember my earlier accts (RRSP and non-registerd) taking quite a bit longer when I signed up online.


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## pnky (Jul 16, 2012)

In hindsight, I think I should have gone in for the alternative approach (Open MF account then convert to eSeries).

I called them yesterday but they said they will take up to 2 weeks to let me know if they accepted my form. And they dont call you if something is missing - they just reject and mail your forms back to you. I guess I will have to wait until I hear from them either ways.


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## Barwelle (Feb 23, 2011)

mrPPincer said:


> I've not had them try to steer me into the higher mer products.


You had a different experience than I did. The guy was constantly pushing the Comfort Portfolio. Not aggressively, but he was always subtly trying to steer me away from the e-Series since I'd told him upfront that's what I was going to do.


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## purple.platypus (Dec 10, 2012)

Okay, I went in on Friday to get this set up in the way several people have suggested. The advisor didn't try to second-guess my choices or anything, she had no issues at all with setting me up for e-series, and was aware that the easiest way to do this was to open up a regular MF account then send in the paperwork to change it over.

However, there is a hitch. In order to do anything with your e-series account, you need to register for their EasyWeb access, and thanks to some recent changes, the only way to do that is to have a TD client card and the only way to do _that_ is to have a chequing account with them, which I currently don't. Not the end of the world, but a hitch I wasn't expecting. I'll check for an account with little or nothing in the way of fees that I can set up just for the sake of having the card.


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## Barwelle (Feb 23, 2011)

purple.platypus said:


> the only way to do _that_ is to have a chequing account with them


This in particular sounds odd to me. I did have to get a client card with them (you need the number on the card to be able to log into EasyWeb) But: I did not have to open a chequing (or savings) account with them.

I looked into this a while ago... I think all of TD's chequing accounts have monthly fees unless you hold a minimum balance ($1,500?) in them. But regardless, I think you should get a second opinion before opening the chequing account (maybe call TD's customer service line or whatever). It seems ridiculous that you would have to open up a chequing account and pay the monthly fee on it in order to get a TD card so that you can have a mutual fund account with them.

A savings account might work too (i.e. you might not be limited to just a chequing account)... they might have one that is no-fee with no transactions. Still seems silly though. It is possible to link your main chequing account at a different banking institution directly to your TD mutual fund account, so why would they require you to have a chequing account with them as well?

Maybe you didn't link the new MF account to your main bank when you opened the account, so she figured she'd need you to open up one with them?


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## purple.platypus (Dec 10, 2012)

I agree that it seems ridiculous, and I can only assume this won't last long - as I said, it's a recent change - but for now that's the policy. Try signing up for an EasyWeb account and you'll see what I mean. Trust me, this is *NOT *a matter of overlooking something simple like linking my main bank account.

I hope your suggestion of using a savings account instead proves workable. That's the one aspect of this I'm not sure about. I just spoke to the same advisor over there and she doubts it, but off the top of my head I don't see why it wouldn't work - in Canada there's not a lot of daylight between chequing and savings accounts, unlike the US where there's all sorts of legal rules around the distinction. Then again, just because the law doesn't say the difference is important, doesn't mean TD can't say the difference is important.

EDIT: Worst case scenario, I suppose I could probably sign up for their cheapest chequing account for a brief period, then change it over to some savings account. I assume the card would remain valid.


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## mrPPincer (Nov 21, 2011)

It does seem strange.
I suppose you could open up a chequing account to get the client card number if you have to, and then close the account.

I have a TD e-fund mutual fund account and a TDWaterhouse account and I don't have any bank accounts with TD 
(because they don't have any competitive products that I'm aware of, and I see no reason to pay service fees or keep any of my hard-earned money locked up and not working for me).

This seems like a pretty lame attempt to force us to use their inferior products if this really is a new bank policy and not just something that the advisor came up with.


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## Barwelle (Feb 23, 2011)

mrPPincer said:


> something that the advisor came up with.


This is what I'm suspicious of... that she told platypus that there is this new policy about a chequing acct at TD being required, when in fact there isn't. (Whether it was intentional deception or an honest mistake.)


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## Spudd (Oct 11, 2011)

TD's website says you need to have a chequing or savings account to get the "new enhanced access card", but that customers who do not qualify for this will get the "standard TD access card". I think if you go to the branch and ask them to give you a standard access card for use with your investment account, they should be able to manage it.


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## purple.platypus (Dec 10, 2012)

Spudd said:


> TD's website says you need to have a chequing or savings account to get the "new enhanced access card", but that customers who do not qualify for this will get the "standard TD access card". I think if you go to the branch and ask them to give you a standard access card for use with your investment account, they should be able to manage it.


This could be very useful. Link?


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## Spudd (Oct 11, 2011)

http://www.tdcanadatrust.com/produc...ing/access-card/access-card.jsp#faqs-glossary

Click on the 2nd question (Can everyone get a new enhanced TD access card?).


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## purple.platypus (Dec 10, 2012)

Thanks! Printed that off and will bring it when I next go to TD regarding this (possibly this afternoon, if not Wednesday around lunchtime).


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## 44545 (Feb 14, 2012)

You can link a savings account to a TD Mutual Fund account.

Also: if you have Waterhouse accounts, they can be added as bill payees at other financial institutions.


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## purple.platypus (Dec 10, 2012)

I went to TD yesterday afternoon. They were quite surprised by the printout, but maintained that you do need a chequing account. They said they had attempted to issue cards for people with only savings account and their computer system simply would not let them do it. Multiple people verified this, not just the advisor I had previously spoken to.

I emphasize again, this is by all accounts a very recent change. What anyone else's experience six months or a year ago was isn't in question, but things have apparently changed (for the worse) since then, probably with the introduction of their new cards with the visa debit feature.


Also:


CJOttawa said:


> You can link a savings account to a TD Mutual Fund account.
> 
> Also: if you have Waterhouse accounts, they can be added as bill payees at other financial institutions.


I was aware of all that, but once again, none of it is relevant to the issue on the table. The problem is *not *with linking my existing account to the TD MF account (for the second time), I did that with no problems, nor is it with using it in conjunction with another financial institution as I have not reached the point where that even _could_ be an issue. The problem is with setting up an Easyweb account on TD's site, without which I can't (for example) assign any money I put into that account to specific mutual funds. Any advice that might make that work is welcome. Suggesting things I've already done, not so much, especially when I've clearly stated that I've already done them.


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## Barwelle (Feb 23, 2011)

Platypus. You posted on here asking for help, and that's what people are trying to do. So what if someone missed part of the story? No big deal.


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## Barwelle (Feb 23, 2011)

If you're still interested in my opinion, and if you still would rather not open a chequing account, my last suggestion is to call TD HQ (not the branch). Talk to the mutual fund people probably and ask them what is required for a MF account.

This is just in case the whole branch you were at is misinformed. A person coming in and wanting just a mutual fund account and nothing else might be an unusual occurrence for them. 

Yes, policies may have changed, but it doesn't hurt to check it out if it could mean fewer fees.


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## purple.platypus (Dec 10, 2012)

Barwelle said:


> If you're still interested in my opinion, and if you still would rather not open a chequing account, my last suggestion is to call TD HQ (not the branch). Talk to the mutual fund people probably and ask them what is required for a MF account.


The advisor in question promised to make a few calls and sit down with me again on Wednesday. If that doesn't produce a satisfactory answer, your suggestion would seem to be the next logical step (but of course, might just be equivalent to what she's already doing - still, I don't see how it can hurt to try).

She did say that signing up for a chequing and savings account then dumping the former after a little while would probably work as far as she knew, so worst case scenario, that sounds like an option.


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## purple.platypus (Dec 10, 2012)

*Bank Account Needed for e-Series Account - What You Need to Know*

Okay, here's the deal.

I sat down with the same advisor today just before lunch and she told me that she, like me, had found conflicting information on exactly how these new cards of theirs work. So she decided to just try and set it up with a savings account rather than a chequing account, and it worked - as long as she set up the savings account as the "chequing" account on the card, in the sense that if you go up to an ATM with it and hit the "chequing" button, it's the savings account you're actually accessing. So as far as she and I can figure it, you need a "chequing" account set up on the card, but that doesn't actually have to be a chequing account, if you follow what I mean.

So to summarize *(here's what anyone opening an e-Series account needs to know* - if you've followed a link from elsewhere to this post, you can ignore the above paragraph and just read this part):

To make any use of your e-series account, you need an EasyWeb account
Assuming you're not already a TD customer, you need the new-style TD card to get that EasyWeb account
You need a bank account at TD to get the card, and that account must be set up as the "chequing" account on the card, in the sense of being the account you access when you hit the "chequing" button on an ATM or debit machine
That account does NOT, however, actually need to be a chequing account; there are at least some types of savings accounts that it's allowed to be instead. In this regard, I can vouch for the TD Every Day Savings Account for certain.
So there _is _an extra hoop to jump through now, but it's not a particularly onerous one, and in particular, it does _not_, as it initially appeared, require you to pay a monthly fee to TD (or have $1500 or more sitting uselessly in a TD chequing account to avoid the fee). You can simply open an Every Day Savings Account (other types might work too but I cannot guarantee this), deposit a token $10-20 just to keep it open, and call that your "chequing" account. So this is at most a mild annoyance and not the dealbreaker it appeared that it might be.


*As noted below, this might not be the only way to do this.* However, I suspect it will often prove to be the path of least resistance. Further feedback on this topic remains welcome.


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## Barwelle (Feb 23, 2011)

I still think the gal at the branch is misinformed. Two things: 

*One:* I sent an email to TD, specifically mentioning the card:

And here is the response:


*Two:*



purple.platypus said:


> So she decided to just try and set it up with a savings account rather than a chequing account, and it worked - as long as she set up the savings account as the "chequing" account on the card


Did you get the standard access card as per Spudd's link above, or the enhanced one? And did she even attempt to set up a card for you that has only the MF account linked to it, with no access to any account if you were to use it in an ATM? Sounds like she assumed it's not possible, so she didn't even try.

For further reading, an interesting post about one woman's experience with getting an e-Series account. Not specific to the card issue, but proof that they aren't exactly up to snuff when it comes to being informed about their own products:

http://canadiancouchpotato.com/2010/09/23/more-fun-with-the-e-series-funds/

snip:



> “Finally, I couldn’t take it anymore. I broke down and said I only wanted to open the account so I could buy the e-Series funds. A hush fell over the entire bank.
> 
> “When the supervisor could speak again, she said she that if I was going to purchase those funds, I had to go through TD Waterhouse. I explained that the rep on their hotline had told me I didn’t have to open an account with TDW. Luckily I’d printed off his email and brought it with me. The supervisor didn’t believe me, but I think she could tell that I was going to walk if she insisted.


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## purple.platypus (Dec 10, 2012)

Well, all I can say is that I can vouch that the procedure I describe above *definitely *works, and with a great deal less stress than that person went through!

It's possible that it's not the _only _thing that works, and if it's not, I think that's great. However, at least for me, what I described proved to be the path of least resistance, and this might be the case for others as well even if there are other methods that would also work.


I will say that, unlike that person, I was up front about what I wanted and cooperative about things like the investor profile. I wasn't there so I can't say for sure, but I can't help but suspect her own attitude contributed to the negative experience she had. On the other hand, it helped that I had an advisor who - whatever you think of her knowledge of the ins and outs of TD's products - was familiar with the e-series and didn't try to fight me on that point.

Two other things I want to mention in light of that story:

I think most people reading this will already know this (though it sounds like the person in that story did not), but let's be clear on this: You can't just directly set up an e-series account at a branch. You can do it by mail for some kinds of e-series accounts, but the better option in all cases and the ONLY option in some (for example, mine, because I wanted a TFSA) is to set up the basic account at a branch and then have an advisor at the branch send in the paperwork to convert it to an e-series account, then simply wait for it to switch over - you'll be notified by e-mail when this happens. (They tell you to allow up to two weeks for this, but in my case it took slightly less than _one _week.) It's possible some advisors might not be cooperative about this, though mine was.
You do not, repeat, _not_ need to invest any money up front to set up the basic account. You can just set it up with an initial balance of zero, then transfer money in from whatever account you linked it to after it switches over to e-series. (Among other things this means your answers to the investor profile questions are irrelevant, or as I prefer to look at it, advisory rather than coercive. You will still need to do the profile, but that's just as true if you set up your account by mail!)


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## purple.platypus (Dec 10, 2012)

Barwelle said:


> I still think the gal at the branch is misinformed. Two things:
> 
> *One:* I sent an email to TD, specifically mentioning the card:
> 
> And here is the response:


I was just reviewing this thread (might be discussing the e-series with my sister soon), and I noticed something about this post I didn't address earlier. In the messages reproduced above, you ask if you need a bank account to open a mutual fund account. *That's the wrong question.* At no time was I under the impression that this was a requirement. It's the *EasyWeb account* that requires this, not the mutual fund account itself. Since the EasyWeb account is the only way (that I know of, anyway) to do transactions on an e-series mutual fund account, it is a _de facto_ requirement for using the e-series, but it is not the same thing as the mutual fund account itself. Therefore, the information given in the first half of the post above does not conflict with anything I said.


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## dsaljurator (Jan 12, 2012)

TD used to have a 'call me back' thing on their website that you could also use with an eseries account, and actually talk to a human being. I used this to rebalance my couch potato portfolio 3 or 4 years ago because the amounts i wanted to change were smaller than easyweb would let me move.


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## Barwelle (Feb 23, 2011)

EasyWeb isn't really an account. It is a way to access your accounts. It's online banking.

So you can open a bank account... then sign up online to be able to access it through the TD website.

Or, you can open a mutual fund account, then sign up online to access it through the website. (And yes, since the e-Series account is online only, you _have_ to sign up online for EasyWeb when you convert it to e-Series.)

You don't need both (though obviously you _can_ have both)... you just need one. EasyWeb doesn't require that you have a *bank* account... just *an* account.


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## purple.platypus (Dec 10, 2012)

If there's a way to sign up for EasyWeb without entering a card number, I haven't found it and neither could anyone at the TD branch I did this through. And none of them knew of any way that still works of getting the "standard" card mentioned above, nor did they have any handy in any case... piles and piles of the newer cards, though.


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## sisco (Oct 18, 2011)

I can't help but wonder - now that Questrade offers free ETF purchases, would the end result of this discussion change? Fees would be incurred upon sale of your assets, and potentially while re-balancing, but free ETF purchases would significantly reduce the cost of investing for someone who was doing monthly contributions.


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## J Watts (Jul 19, 2012)

purple.platypus said:


> Looking at the application form for the e-series, they do not appear to offer TFSAs as an option! That can't be right, can it?!? If it doesn't, that's pretty much a dealbreaker.


TFSA's are registered with the federal government, so they need to be done in person. Once you've opened the TFSA, you fill out the paperwork to convert that TFSA into e-Series.


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## purple.platypus (Dec 10, 2012)

J Watts said:


> TFSA's are registered with the federal government, so they need to be done in person. Once you've opened the TFSA, you fill out the paperwork to convert that TFSA into e-Series.


....

Yes. Which I did. Over two months ago. And the thread reflects that.


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## purple.platypus (Dec 10, 2012)

sisco said:


> I can't help but wonder - now that Questrade offers free ETF purchases, would the end result of this discussion change? Fees would be incurred upon sale of your assets, and potentially while re-balancing, but free ETF purchases would significantly reduce the cost of investing for someone who was doing monthly contributions.


That was already the case when I made my decision. At my small scale, it would still be awkward with the inability to buy partial shares. The medium-term plan is to accumulate in the e-series and eventually get into ETFs as my assets reach a point where it makes sense to do so.


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