RDSP – Change of Financial Institution

As the readers of my site know, I am a big proponent of the Registered Disability Savings Plan (RDSP). It’s a generous savings plan for our disabled children. Depending on your income level and contribution, the government will add up to $4,500 per year to the account which accumulates tax free.

I have held my son’s account with the Bank of Montreal (BMO) since the RDSP was introduced. The staff at the bank have been friendly and the administration has been a piece of cake.

The problem is the investment choices at BMO (typical of most of the banks offering the RDSP) are severely limited. You could invest in:

  • A savings account (with minimal interest rates)
  • A BMO only GIC (with below market rates)
  • BMO mutual funds (with excessive management fees)

None of the above options appealed to me, so I made the move to transfer to TD Waterhouse. The options there are endless including:

  • Stocks
  • Bonds
  • GICs
  • Options and
  • A wide variety of mutual funds

To open and transfer the account, there was a mountain of paperwork. For the most part, I just sat there and let the staff do all the work and signed the documents at the end. The process however was very straightforward and the staff very helpful. 45 minutes later and we were done.

The transfer takes a few weeks to complete and you will receive a letter with your new account number. It then takes a couple of simple phone calls to set up your WebBroker passwords to view your account online. One of the quirks of this account is that you can’t buy or sell online. You must complete your trades over the phone. This however is easily done.

Personally I believe in simplicity when it comes to investing. I constructed a portfolio based on the advice of the Canadian Couch Potato using his Model Portfolio and the  TD “E” Class funds as shown below.

The cheapest index mutual funds in Canada are TD’s e-Series, but these are only available to investors who open an online account with TD Canada Trust, or through a TD Direct Investing discount brokerage account. The total annual cost of this portfolio is 0.44%:

Canadian equity 20% TD Canadian Index – e (TDB900)
US equity 20% TD US Index – e (TDB902)
International equity 20% TD International Index – e (TDB911)
Canadian bonds 40% TD Canadian Bond Index – e (TDB909)

The funds are no-load (i.e. there is no cost to buy or sell) and the only caveat is that you must hang onto the funds for at least 90 days to escape penalties. This is no problem for me as I intend to only re-balance the portfolio once a year after my contribution and the government grants have been deposited.

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