Have you ever wondered how to transfer your RRSP to another financial institution? It’s a legit question and you may want to do it for a variety of reasons. Some people may prefer to have all their finances with a single bank while others are likely tired of fees or lack of returns from their current advisor/financial institution.
At first glance, making the switch may appear difficult. If you’re not careful, you could end up making the wrong move which could trigger taxes. You would also likely have to pay a fee when you close your accounts. That said, porting your RRSP to somewhere else is a surprisingly easy process. Generally speaking, all you really need to do is sign one form with your new financial institution and they’ll take care of the rest; it’s that easy!
How to transfer your RRSP
- Open a new RRSP at another financial institution or discount brokerage
- Fill out the paperwork and have the new financial institution request an RRSP transfer from your old financial institution
- Choose between transfer in kind or transfer in cash
- Initiate the transfer
- Wait for the funds to arrive at your new financial institution
To get your RRSP transferred to another financial institution or discount brokerage, all you need to do is fill out the paperwork to authorize them to move the funds over. This sounds simple enough, but there are a few other things you should do to prepare for the transfer.
First, grab the most recent statement from your investments and bring it to the new financial institution. They’ll basically want to know if you want to do a transfer “in kind” where you can literally just move your investments to them as is (when available) or if you want them to “sell” all your investments so you can start fresh with the “cash” from the sale.
This in kind or in cash transfer is arguably the most important part. Since the new financial institution is requesting a transfer from your old RRSP to your new RRSP, no taxes will apply. What that means is, you can’t just withdraw things on your own and then redeposit it into your new accounts. There’s a specific process that needs to be followed.
Now the institution you’re leaving won’t be happy once they find out you’ve triggered the transfer, but they really have no say at this point. What they can do is charge you a transfer fee which should be posted on their website. The good thing is that the receiving institution will usually cover that fee for you up to a certain amount so ask them about it before you sign.
The transfer can take some time but you still want to ask your new financial institution about when you should expect your funds to arrive. Monitor your account and if your money hasn’t arrived by the time they said it would; make a follow-up call. While rare, your old financial institution may be holding things up.
Once your money is in your new account, you can start investing. Alternatively, your new institution can start investing on your behalf.
Should you transfer your RRSP?
People who are seriously considering transferring their RRSP (or any investments for that matter) usually aren’t satisfied with how their money is currently being handled. Making a switch just because your investments haven’t been performing well is probably a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan).
Admittedly, changing financial institutions just to lower your management expense ratio (MER) is often worth it. For example, let’s say you’re paying an average MER of 2.5% for a mutual fund. If you switched to an all-in-one ETF, the MER is usually below .50%. That’s a 2% savings that could translate to tens, if not hundreds, of thousands of dollars over the course of your investment life.
Questrade’s entire marketing campaign is based around lower fees, and I admit, it’s probably worth making the switch. That said, you need to have the right mindset before you make any changes. Switching just because your investments haven’t been performing well in the last few months a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan). However, if your investments are constantly performing below market averages, then you should switch.
Another instance where you may need to transfer your RRSP is when you’re changing employers. If you were part of their group plans, you likely won’t have access anymore if you leave the company. This would require you to move your money out.
When should you transfer your RRSP?
Let’s assume that you’ve already decided you want to switch. There’s really no reason to delay things. Don’t try to time the market so you’re selling high and then buying low after the switch. Just stick to your investment plan whatever that may be.
One thing that might hold you back are any fees associated with transferring out your funds. Some mutual funds have deferred sales charges which will cost your a percentage of your portfolio when you make the transfer. There’s no denying that these fees suck, but the amount you’ll save in the MER difference could pay for itself after a few years.
If you’re switching from an employer plan, you may have a set deadline to move things out, which is why you don’t want to delay things.
Before you make the switch, you’ll need to decide where you’re sending the money. Is your goal to use a robo-advisor since it’s a low maintenance, no fee solution? Justwealth has become one of the most popular robo advisors in Canada and they’ll even give you up to $500 for free if you sign up with my referral link. Wealthsimple gives people $50 when they sign up. What’s great about robo advisors is that they’re transparent and don’t require any effort on your end.
Some people will prefer to manage their finances on their own, but that will require you to know what you’re doing. This may sound intimidating, but if I learned to manage my finances on my own, so can you.
When not to transfer your RRSP
In a few situations, you might not want to transfer your RRSP or you might not be allowed to at all.
If your employer offers some kind of RRSP matching program or has a group rate for investments, there’s a good chance that you’ll be forced to keep your money invested with a specific financial institution or brokerage. This may be annoying, but considering you’re getting a match or access to funds which cost less; I think you’re actually coming out ahead.
As mentioned above, you shouldn’t transfer your RRSP just because you’re disappointed with the performance. I did this years ago before doing my research and ended up with an advisor with a financial institution that put me in overpriced mutual funds.
Finally, if you recently purchased investments that have a holding period, you shouldn’t make a transfer right away. Just wait for the holding period to end so you can avoid paying any additional fees. For example, with the Home Buyers Plan, you need to have your money in your RRSP for at least 90 days for it to qualify. If you need that money, you’re better off leaving it in.
Transferring your RRSP to another financial institution is simple; you just want to make sure you’re doing it for the right reasons. Once you’ve committed, take the time to ensure that everything is the way you want it to be so you don’t end up switching again in a few years. Note that if you’re looking to transfer your TFSA to another financial institution, it works in a very similar way, but you have a few additional options.