Now that the RRSP season is officially over, although technically there is no RRSP season, I want to focus on a subject that many people wonder about. How to transfer your RRSP to another financial institution.
At first glance, making the switch may appear difficult, but it’s 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!
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.
How your current financial institution is handling your money is a reasonable concern, but is it really enough to justify a move?
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).
When should you transfer your RRSP?
There are a variety of reasons why you would want to transfer your RRSP, but most people reading this article are likely doing to reduce their fees or to move their RRSP from a current or former employer.
Paying high fees for your RRSP can eat away at your savings so it’s a pretty good reason to make a switch. Some people will want to manage their accounts by themselves, while others will want to work with a robot advisor since it’s a hands-off approach with minimal fees.
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. Why pay 2.5% in mutual fund fees when you can get a balanced portfolio for less than 1%? What’s great about robo advisors is that they’re transparent and don’t require any effort on your end.
If you want to become a sustainable investor, it’s worth checking out RBC InvestEase as they ESG portfolios that may appeal to you.
How to transfer your RRSP
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.
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.
Once your money is in your new account, you can start investing. Alternatively, your new institution can start investing on your behalf.
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.
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.