I already have an RRSP, TFSA, and non-registered account with another institution. How easy is it to transfer my accounts to ModernAdvisor?
It’s quite easy to transfer your existing investment accounts to ModernAdvisor. The first step is to open all of the account types you are interested in (ex. RRSP, TFSA, RESP, and non-registered) with ModernAdvisor. We will then pre-fill the necessary transfer forms and email them to you to sign. Once we get the signed transfer forms back we will look after the process until the transfer is complete.
Many Canadians’ first experience with investing, is opening a mutual fund account with an advisor at their nearest bank branch. For many years, mutual funds were one of the easiest solutions for people getting started with investing. Unfortunately, mutual funds are one of the most expensive investment options available. The average mutual fund fee in Canada as of 2014 was 2.41% per year.
ModernAdvisor uses Exchange Traded Funds (ETFs) which charge much lower fees (most of our portfolios cost less than 0.20%). At 0.20%, after adding ModernAdvisor’s fee, the most you would pay is 0.70%; for larger accounts the all-in cost could be as low as 0.55%. That could save you 1.71% to 1.86% per year. That might not sound like much, but when compounded over 20 years that adds up to serious money. And you would need serious money before your fee is that low at any wealth manager.
That is the response of many Canadians when they first learn how much they are paying in mutual fund fees. How much free time do you have at the end of the day to monitor your investments, research new investments, rebalance, read market updates and other reports to know what is going on in the economy and financial markets? Most people just don’t have the time or the inclination to manage their own investments. Wouldn’t you rather have a professional with decades of experience managing your investments for a low fee?
The accounts of all clients of ModernAdvisor are held at Credential Qtrade Securities Inc. (“Credential”). Credential is Canadian-owned; the Provincial Credit Union Centrals own 50%.
Many investment dealers and credit unions use Credential to hold their clients’ investment accounts, execute trades, provide tax reporting and other back-office account administration. Credential safeguards over $20 billion for Canadian financial institutions and is a member of the Investment Industry Regulatory Organization of Canada IIROC and the Canadian Investor Protection Fund CIPF
As ModernAdvisor is not licensed as a broker-dealer, we need a firm licensed to clear trades for our clients and we also need an independent firm to safely hold our clients’ investment accounts.
All ModernAdvisor accounts will be held at our independent custodian, Credential Qtrade Securities Inc. As Credential is a member of CIPF, your account is insured up to $1 million by CIPF. Note that this is not insurance against trading losses, CIPF covers your account if Credential runs into difficulty and is forced to shutdown. For comparison, bank accounts in Canada are insured up to $100,000 by the Canada Deposit Insurance Company (CDIC).
Before you begin, it will be helpful if you gather the following information:
- Your social insurance number (SIN)
- Your beneficiary’s SIN (if applicable)
- Images of the front and back of a piece of governmenissued photo ID
- An image of a recent bank account statement or screenshot from your online banking
- Your bank account information (a cheque is the easiest)
We will ask you a few questions to determine an appropriate risk profile for your account. You will then be presented with a recommended portfolio based on the information you provide. If you feel that our recommended risk level is too high or too low for you, you will be able to adjust it slightly to better suit you.
ModernAdvisor is registered as a Portfolio Manager with the securities commissions of all provinces in Canada. You can check the registration of investment managers here.
One of the steps in opening an account at any financial institution is to verify the client’s identity. In many cases, since ModernAdvisor is not meeting you face-to-face, we cannot look at you and your photo ID. One of the government approved ways to verify your identity online is confirming your bank account.
You can send a bill payment from your bank account to Credential. To do so, add Credential Qtrade Securities Inc. as a payee, and use the account number of the account you wish to deposit the funds to. You can find your account number on your ModernAdvisor dashboard.
Alternatively, you can send a cheque to Credential as follows:Credential Qtrade Securities Inc.
800 – 1111 West Georgia Street
Vancouver, BC V6E 4T6
Make the cheque payable to: Credential Qtrade Securities Inc. Include your account number in the memo line of the cheque, or enclose a note providing instructions on which account to deposit the cheque to.
We keep your deposits in cash until your account balance reaches $1,000.
If your account balance is already $1,000 or more, new deposits will be invested the next day provided the cash balance in your account is more than $250 or more than 5% of your account balance.
To withdraw funds from your account, you can submit a request right from your ModernAdvisor dashboard. Select the account you wish to withdraw from, enter the amount and click Confirm.
Please make sure that you submit the request at least 5 business days before you need the funds. It takes 3 business days for the sale of an ETF (or stock) to complete and electronic funds transfers can take up to 2 business days to show up in your bank account.
We can direct the custodian, Credential, to send the funds to your bank account which you provided when you opened your ModernAdvisor account.
Alternatively, we can have Credential send you a cheque. And if it is very urgent, we can have the funds sent by wire payment, but please note that Credential charges a $30 fee for wire payments.
ModernAdvisor never holds any of your money, it is held at our independent custodian, Credential. Credential is a fully licensed member of the Investment Industry Regulatory Organization of Canada (IIROC) and a member of the Canadian Investor Protection Fund (CIPF). In the unlikely event that ModernAdvisor ceases operations, your account will remain with Credential. Since many other investment advisors use Credential it would be a quick process to transfer your account to another advisor, or liquidate it for cash at any time.
Our management fee is quoted on an annual basis (0.35-0.50%). We calculate our fee based on the end of day value of your account and deduct the total amount for the month a few days after the end of the month.
Our management fee may be tax deductible. If you have a non-registered, taxable account, the fee on your account is tax deductible.
I have an RRSP, TFSA and a non-registered account. Is my fee rate based on the total of my accounts?
Yes. The fee will be based on the total value of all of your accounts.
When any one of the investments in your account is more than 5% away from their target weight we will automatically sell enough of those investments to get back to their target weights. We will then use the proceeds to buy more of the investments that were below their target weights. You don’t have to call or e-mail us, everything is taken care of automatically.
When you file your taxes every year, Canada Revenue Agency (CRA), calculates your RRSP contribution room and reports in on your notice of assessment. Generally, your contribution room for the current year is 18% of the previous year’s earned income, plus any unused contribution room from previous years, less contributions to pension plans (other than CPP). Note that your contribution room is for any and all RRSP accounts you have. If you have an RRSP at another financial institution you will need to keep track of the total amount contributed to all accounts.
Anyone over the age of 18 who is a resident of Canada with a valid SIN can contribute to a TFSA. When the TFSA was introduced in 2009, the annual contribution limit was $5000. For 2013 this was increased to $5500. In 2015 the annual contribution limit was increased to $10,000.
|Annual Contribution Limit|
Any withdrawals you make from a TFSA during the year are added back to your contribution room for the following year. For example, say you had contributed the maximum every year and your TFSA has a value of $45,000 at June 30, 2015. If you withdrew $10,000 on July 2, 2015, your allowable contribution for 2016 would be $20,000.
Note that your contribution room is the total for all TFSA accounts you have. If you have a TFSA at another financial institution you will need to keep track of the total amount contributed to all accounts.
No. All ETFs we recommend are commission free and we believe in complete transparency especially when it comes to fees. New rules that came into force in July 2016 under CRM2 will require all brokers and dealers to report the fees they received for recommending investment products, including mutual funds, to you.
If you decide that ModernAdvisor is not meeting your needs, you can transfer your account to another firm. ModernAdvisor doesn’t charge a transfer out fee, but the custodian that holds your account, Credential, does charge a transfer out fee.
There is no minimum account size at ModernAdvisor.
While we don’t have a minimum account size, we’ll wait until your account reaches $1,000 before we invest your money.
Currently, we offer RRSP, TFSA, Individual RESP, Family RESP, LIRA, RRIF, Spousal RRSP and joint and individual taxable accounts through our website. Contact us for corporate accounts and we will open one for you manually.
We believe that the key to long term portfolio performance is attributable to asset allocation. Our portfolio engineering process is used to calculate expected returns for each of the asset classes we include in our portfolios. By making strategic asset allocation decisions, we are able to properly diversify a portfolio to reduce risk and maximize returns for individual needs.
Exchange traded funds (ETFs), like mutual funds, pool the assets of many investors into a single fund for better efficiency and lower costs. Typically, these funds hold over 100 or even up to 3000 different securities.
Unlike mutual funds, exchange traded funds (as the name implies) are listed on the stock exchange. This means you can buy and sell them in any brokerage account at any time during the day. On the other hand, mutual funds are priced at the end of the day and you buy and sell at that fixed price (also referred to as net asset value or NAV price). Of course, being able to trade an ETF every minute of the day isn’t that important for most investors, but is simply a function of being listed on the exchange.
Two of the biggest differences between ETFs and mutual funds are:
- ETFs have lower operating expenses than actively managed mutual funds
- They have no investment minimums or sales fees.
Each risk level has a different sample investment portfolio assigned to it. Higher risk portfolios have more invested in stocks and less in bonds. Lower risk portfolios have more invested in bonds and less invested in stocks.
Safeguarding our client’s information is of paramount importance to us. We use the same security measures as banks to keep your data secure. These measures include:
We encrypt all the data sent between our servers and your browser using the highest level security keys available.
Your personal information will always be password protected. No one, not even our engineers can see your password.
The servers where your data is stored are in high-security data centeres. Think Fort Knox for computers.
Regular Security Audits
Our software and systems are regularly audited by third-party security experts to ensure your data remains safe.
An asset class is a group of securities that have similar risk and return characteristics, and behave similarly under changing macro-economic environments. Asset classes fall into four main categories: cash and cash equivalents, equities (or stocks), fixed income (or bonds), and alternatives.
Equities can be further categorized based on factors such as geographical location, size, industry and sectors. Fixed income securities can further be categorized based on geographical location, creditworthiness of the issuers, time to maturity, and other factors.
Assets that do not fit in the cash, equities or fixed income categories are frequently called Alternatives. Alternatives assets can include hedge funds, commodities, infrastructure and real estate.
Asset allocation refers to the proportionate size of assets inside an investment portfolio, and is one of the most important aspects of any investment plan. The idea behind asset allocation is to diversify your investment portfolio among different asset classes to achieve the highest possible return for each risk level. Research shows that asset allocation is much more important compared to security selection in determining an investment portfolio’s risk and return.
Responsible (or social) investing is an umbrella term that encompasses several investment strategies, including ESG (environment, social, governance) investing, green investing, impact investing and values-based investing. ModernAdvisor offers responsible investment options via ESG portfolios, as well as Canadian and emerging market government bond ETFs and real estate investment trusts.
Companies who qualify for ESG investment have had their impacts assessed by an independent third party in three areas:
- Environmental (carbon footprint, air and water pollution, energy efficiency, and other environmental reporting)
- Social (labour standards, community involvement, product safety, human rights)
- Governance (executive compensation, board accountability, shareholder rights, and quality of disclosure)
Depending on your selected risk level, 75-95% percent of their portfolio is eligible for responsible investing.
For certain goals, choosing the right account type is easy. For example, if you want to save for your child’s or grandchild’s post-secondary education, RESP without a doubt is the most suitable account type. But it’s not always as easy to pick between a TFSA, RRSP, or an individual (taxable) account.
TFSAs are extremely flexible and allow you to save for any goal. TFSAs allow you to invest your money tax free, but unlike RRSPs the contributions don’t provide a tax deduction. The amount you can contribute is set every year by the Canadian government and also depends on what year you turned 18.
Any amounts withdrawn from a TFSA can be re-contributed in the following calendar year. Since the TFSA is a tax-free account there is no tax to be paid when you make a withdrawal. Any income, dividends or capital gains realized within a TFSA are also tax-free.
RRSPs were primarily designed to help Canadians save and invest for their retirement. Any amount that you contribute to an RRSP reduces your taxable income for the year it is deducted, often resulting in an income tax refund at tax time.
RRSPs are less flexible than TFSAs. Any amount you withdraw from an RRSP cannot be re-contributed except in certain circumstances (HBP and LLP). Since you do not pay income tax on the contributions to an RRSP, when you make a withdrawal the amount withdrawn is added to your income tax that year.
RRSPs are most beneficial for those who are in the highest tax brackets. For most people that make less than $50,000 per year, a TFSA is actually a better way to save for retirement than an RRSP.
To get the most out of an RRSP, you want to contribute to it during your highest income years and withdraw when your income is lower.
A taxable account, is just a regular investment or savings account that has no special tax advantages like a TFSA or RRSP. You pay income tax on interest and dividends when they are received and any capital gains are taxed when you sell an investment.
For most people, taxable accounts should be contributed to last.
I Still Don’t Know Which to Choose
Ask yourself this question: What am I saving for?
If the answer is not “retirement”, then choose a TFSA. Once your TFSA contribution room is used up, then choose a taxable account.
If you answered retirement, then look at your annual income.
If you make less than $45,000 per year, you would want to contribute first to a TFSA, then to an RRSP and finally to a taxable account.
When your trial account period ends, you will receive an email from us letting you know that your trial has ended and what your gains are.
To be eligible to claim the gains on your trial account, you must open a real account (RRSP, TFSA, RRIF, RESP, taxable, or joint account) and deposit at least $1,000 within 30 days of your trial account ending. After your real account has been open for 90 days (and your net contributions were not less than $1,000 during that time), we will transfer your trial account gains to you.
If you have more than one real account, you will be able to choose which account will receive your trial account gains.