What looks like a subtle form of ageism can be found in how some online brokers treat clients who are seniors.
A strong majority of brokers have for years offered U.S.-dollar registered retirement savings plans, which are a must-have for investors who invest in stocks listed on U.S. exchanges. But a small sub-set of these brokerage firms haven’t extended this feature to registered retirement income funds. RRSPs must be converted into RRIFs by the end of the year in which you turn 71.
My latest ranking of online brokers shows that BMO InvestorLine, CIBC Investor’s Edge, Qtrade Investor, Questrade, RBC Direct Investing and Virtual Brokers offer U.S.-dollar RRSPs and RRIFs. Brokers with U.S.-dollar RRSPs, but not RRIFs included Desjardins Online Brokerage, National Bank Direct Brokerage and TD Direct Investing. TD is the market share leader in online investing and has been promising for years to add U.S.-dollar RRIFs. The most recent word from TD is that this feature will be added in the fourth quarter of this year.
U.S.-dollar registered accounts are a way to reduce the foreign exchange fees of 1.5 per cent or more that brokers apply when you move money in and out of Canadian and U.S. dollars. In a regular RRSP or RRIF, the proceeds from the sale of a U.S. stock are automatically converted into Canadian dollars. The same applies to dividends paid by a U.S.-listed company. A U.S.-dollar registered account can hold U.S. dollars in cash, thereby reducing your foreign exchange cost.
There are work-arounds if you hold U.S. stocks in a regular RRSP or RRIF. For example, you may be able to keep U.S. cash in a U.S.-dollar money market fund. You may also be able to “wash” your trades, which means selling U.S. stocks and reinvesting the proceeds on the same settlement date as if there are no currency conversion costs. Without washing, there would be a charge to have the proceeds from the sale of your U.S. shares converted into Canadian dollars, and then another charge to have the Canadian dollars converted back into American currency to buy more U.S. stocks.
Neither U.S.-dollar money market funds nor wash trades are a substitute for a U.S.-dollar registered account, which add a higher level of simplicity and convenience to your investing in the U.S. market. So why the lack of U.S.-dollar RRIFs, even at firms that offer U.S.-dollar RRSPs? It kind of looks like ageism.