An irritating little problem for online brokerage clients is how hard it is to get your hands on guaranteed investment certificates paying top-of-the-market rates.
There is always a gap between the best rates in the marketplace and the highest rates offered through online brokerage GIC inventories. But if you’ve been reluctant to consider GICs for your portfolio as a result of this rate gap, it’s time for a second look. The level of competition in GIC-land seems to have improved enough that online broker clients are getting very close to the best rate.
Cannex.com shows the best five-year GIC rate as of late July was 3.51 per cent at Motive Financial and 3.5 per cent at Oaken Financial and EQ Bank. A quick look at the GIC order screens for three online brokerage firms found two options for getting 3.29 per cent – B2B Bank and Laurentian Bank. A rate of 3.28 per cent was available through Home Trust, while 3.26 per cent was available from Canadian Western Bank and HomEquity Bank.
I’ve noted in previous columns that there’s particularly good value these days in one-year GICs. Oaken offers 2.8 per cent for this term, and EQ offers 2.76 per cent. Online brokers aren’t as competitive on one-year rates as they are for the five-year term, however. The best one-year GIC rates available in late July were 2.31 per cent from Equitable Bank, 2.3 per cent from Home Trust and 2.29 per cent from ICICI Bank Canada.
Online brokers prefer to offer GICs from issuers that pay a commission to investment dealers selling their products. If you don’t see a particular GIC-issuer’s products in your broker’s inventory, it could be because it doesn’t pay these commissions. One solution is to deal directly with a high-rate GIC issuer such as Oaken or EQ. Basically, your GIC money is in one place and the rest of your investments are elsewhere.
Prefer the convenience of having everything in one place? Investors seeking short-term GICs may not want to buy through their online brokerage firm, but five-year GIC rates from brokers are looking quite competitive. The little you give in yield is a fair exchange for the convenience of having all your investments housed together.