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rob carrick

It's all over between a woman we'll call Sandra and her investment adviser.

"I still have him, but I haven't given him any money in the last couple of years," the 49-year-old teacher said. "And he hasn't called me."

Sandra (that's a pseudonym – she asked to remain anonymous) wants to start managing her $243,774 portfolio of mutual funds herself and convert to either exchange-traded funds or individual stocks. But she's stumped on one key detail: How, exactly, should she go about moving accounts that include a registered retirement savings account and locked-in retirement account from her adviser of 10 years to an online brokerage firm?

Precise instructions on how to make the jump to do-it-yourself investing are coming right up. But first let's take a quick look at why Sandra wants to move.

Partly, she believes she'll be more vigilant in managing her money than any adviser. But there's also a sense that she's been paying too much in fees in relation to the services she's received from her adviser. What services might those be?

"Nothing really, except for buying and selling mutual funds. I'm paying all of these huge fees and not really getting anything."

Sandra already has experience buying dividend stocks for a tax-free savings account she set up for herself to run. Let's look at the steps to take control of the rest of her investments. One final note: Sandra can take care of this transfer herself without having any dealings with the adviser.

1 Open an online brokerage account

Sandra already has an online brokerage account, but she's not sure she's getting the best deal on trading commissions. Two resources for comparing brokers are my latest online brokerage ranking and this online tool called scorChoice for matching investors with the right broker.

After choosing a broker, download the application from the firm's website and fill it out. Don't send it in before completing Step 2. With assets of close to $250,000, Sandra won't have to pay annual administration fees for her registered accounts, and she'll qualify for sub-$10 online stock trades at almost all firms. The usual threshold for avoiding annual admin fees for registered retirement accounts is $15,000 to $25,000, and $50,000 is the account size at which low trading commissions tend to kick in.

2 Fill out an account transfer form

It's standard for these forms to be available online. If you can't find one, just Google your brokerage's name and the phrase "account transfer form." In filling out the form, you'll be asked whether you want to make a partial or full transfer. Sandra will transfer everything.

The next question you must answer is whether you want to transfer the contents of the account in kind, which means without selling them first; in cash, which means your old firm will sell them before the transfer; or, a mix of the two. An in-kind transfer is preferable because it gives you full control over the way in which your old investments are sold.

The transfer form will ask to provide the account types and numbers for your current holdings, and the name of the institution where they're held. Even so, don't forget to include a copy of the most recent statement for your existing account to help expedite the paperwork.

3 Deal with transfer fees

Advisory firms may charge as much as $125 to $150 plus HST to process an account transfer to another company. When Sandra chooses a brokerage firm, she should call in to ask if it will reimburse her for the amount of the transfer fee. With close to $250,000 in assets, she's got an excellent chance of her new firm agreeing.

To claim the reimbursement, she'll have to send her new broker a copy of the final statement from the old firm that shows the transfer-out fee.

4 Wait for the account transfer to be completed

The Investment Industry Regulatory Organization of Canada has set a standard that says a client's old firm must respond within two business days of receiving transfer documents to confirm that they're in good order. The transfer itself should be completed within 10 business days after that. Do not regard this as a guarantee – transfers can take longer.

5 Liquidate the fund portfolio

A complication for Sandra is that some of the mutual funds she bought through her adviser have a deferred sales charge. Mutual funds bought on a DSC basis have a redemption fee that typically starts at 5.5 per cent and declines to zero over seven years. Sandra's holdings include seven DSC funds.

The redemption fee schedule on DSC funds follows an investor from one account to another. So Sandra will have to decide whether to sell her entire holding and pay the applicable fees or gradually extricate herself by taking advantage of the fact that most fund firms allow clients to redeem roughly 10 per cent of their holdings in a DSC fund per year at no cost. Sandra can contact her fund companies directly to find out how close she is to her DSC fees falling to zero. (Investment statements do not tell you how close you are to your deferred sales charges disappearing.)

When it comes time to sell a fund, Sandra can log into her online brokerage account and view her holdings. Most brokerage firms provide a "trade" link beside each security that gives clients the option to sell all or part of what they own, or buy more. Click the link and you'll jump to the mutual fund order screen, where you'll choose a sell order and specify "all" under the menu labelled Amount. This means you're selling the entire holding, and not just a specific dollar amount or number of fund units.

Fund trades are processed at end-of-day prices. If you put your trade in before mid-afternoon, you'll get that day's price. Later trades will use the next day's closing price.

6 Build your new portfolio

Sandra said she's considered individual stocks ETFs for her portfolio. Questrade and Virtual Brokers charge nothing to buy ETFs (regular sell commissions apply), and Qtrade and Scotia iTrade have waived commissions entirely on a limited number of funds.

Transfer Tips

Here are some tips for making sure an account transfer goes smoothly, from Rob MacLachlan, managing director of operations at Scotia iTrade.

  1. Check your account numbers: “If you put the wrong account number on the form, it will be rejected from the other side, and we have to contact the client.”
  2. Include a copy of a recent statement from the account you’re transferring: “That’s something we really appreciate getting,” Mr. MacLachlan said. “It can help us find errors and speed things up.”
  3. Understand how the transfer process works: “All of the timing is based off the time we receive the physical transfer form with a signature. On average, it’s about five to seven [business] days.”
  4. Pick either in-kind or cash transfer, and pick full or partial transfer: “Clients can, have and will tick all the boxes. At that point, we have to call them.”
  5. In-kind transfers are smoother: “You don’t have to wait for settlement [of the trades to sell your investments] and the cash to be sent over. You, the client, are in control of your assets.”
  6. Be sure you’re got the right account set up at your new firm before starting the transfer: “With registered accounts, if you have a spousal account at the delivering institution and at our place you’ve set up a regular RRSP, that would stop the transfer.”
  7. Keep enough cash in your account to cover the transfer-out fee: “The other institution will say they can’t transfer an account because it doesn’t have the fee.”

For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).

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