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Carrick on money

Hey, aren’t GICs supposed to be stress-free investments? Add to ...

These are worrying times for people who put money into savings accounts and guaranteed investment certificates sold by subsidiaries of troubled Home Capital. Clients have pulled millions of dollars out of savings accounts from Oaken Financial and Home Trust, but GIC assets remained largely untouched as of early this week.

Both savings and GIC deposits at Oaken and Home Trust are protected for up to $100,000 by the Canada Deposit Insurance Corp., a federal crown corporation. But while savings are easily transferrable to another financial institution, non-cashable GICs cannot easily be redeemed. Expect penalties and to forfeit at least some interest if you’re able to break a GIC.

Here are two suggestions to ensure your GICs are as worry-free as possible. They come from Brandon Brot, a principal at GIC Wealth Management, a deposit broker offering GICs from a variety of issuers.

Mind the limits
For banks and trust companies that are members of CDIC, the limits are five years in term and $100,000 in combined principal and interest. “If you’re worried about an institution, don’t invest $100,000 and think you’re going to get your interest back,” Mr. Brot said. “If you’re doing a compound interest GIC, you should do significantly less than $100,000 to ensure you’re covered.”

Credit unions have their own provincial deposit insurance plans, some with higher limits than CDIC. However, not all provincial plans have government backing like CDIC. The Deposit Insurance Corp. of Ontario is a provincial agency. The Deposit Guarantee Corp. of Manitoba says on its website that there is no legislated requirement for it to be backstopped by the provincial government.

Organize your accounts
You can have multiple GICs at the same CDIC-insured institution, each covered to $100,000, if you set up your accounts properly. “We have a lot of clients who have $300,000 in coverage – they have accounts for themselves, for their spouse and a joint account,” Mr. Brot said. Registered accounts are also covered separately.

Mr. Brot said that even with CDIC coverage, people worry about their money being tied up and unavailable if their GIC issuer collapses. He’s attended conferences where CDIC officials have offered assurances on this matter. “They made us feel comfortable with how quickly they would handle things if, God forbid, something were to go wrong.”

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Home Capital and its mortgage customers
Mortgage lending is what Home Capital does with the money it takes in from GICs and savings accounts. Do mortgage clients have any worries if the company were to collapse? An experienced mortgage expert offers a definitive no.

Should you renovate your house to get a better price?
A blogger goes over the pros and cons of putting a shine on a home before selling. Real estate agents I’ve spoken to say you only recover a fraction of the cost of these upgrades in the selling price.

How online shopping makes you a sucker…
An eye-opening read for those who think online shopping gets you the best deal. In fact, retailers are looking at your buying habits and tailoring prices to maximize profits.

…And the same may apply to bargain travel websites
Travel aggregators are convenient for comparing airfares and hotel rates, but they may not offer the best deals. So try contacting airlines and hotels directly.

Today’s featured financial tool
Deposit brokers are an option for GIC buyers looking for help finding good rates and ensuring they are fully covered by deposit insurance. Start with the website of the Registered Deposit Brokers Association if you want more information about deposit brokers.

Ask Rob
The question: “A lot has been written about investment fees and disclosure recently, so I’m wondering what we’re paying in fees on the Canada Pension Plan? What’s the management expense ratio on Canada’s largest fund?”

My reply: The Fraser Institute quoted a fee of 1.07 per cent for the CPP in a report from 2016, the highest of the six pensions considered. The most popular Canadian, U.S. and international equity mutual funds would be in the area of 2 per cent or more, bonds funds somewhat less. Exchange-traded fund MERs can be as low as 0.06 per cent.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.

What I’ve been writing about
– Despite heavy borrowing in recent years, our credit scores are in very good shape overall.

– Home Capital is a reminder of the risks of reaching for higher interest rates (for Globe Unlimited subscribers)

Featured Video
Good news in the housing market: the upward pressure on mortgage rates has evaporated.

More Carrick and money coverage
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