How to Choose a Self-Directed TFSA Brokerage Account to Minimize Fees and Costs

Tax Free Savings Accounts, or TFSAs, first began in 2009 with a maximum annual contribution of $5000 for a Canadian who was 18 years of age or older. With that low an initial contribution level, they didn’t really offer much scope for self-directed investing. In each of 2010, 2011, and 2012, another $5000 in contribution room was added. Starting in 2013 $5500 per year in annual contribution room has been added. So a person who was 18 or older in 2009, and who has been a Canada resident every year from 2009 to the present, can now contribute or have contributed up to $31 000 $25,500 to a TFSA, not including any re-contribution of withdrawn funds. With $31 000 $25,500 plus earnings to manage, it makes sense for some investors to keep their TFSA in a self-directed brokerage account. When choosing a brokerage account, one aspect to consider is the fees and costs for holding and using the account. Here’s a review of which accounts have minimal or no fees and which accounts have high costs and commissions.

Please note there are actually two types of Tax Free Savings Accounts brokerage accounts, and those that can only hold a very limited number of investment choices which I call standard Bank TFSA accounts. For more information on the fees for basic bank TFSAs, please see the article How to Choose a Standard Bank Tax Free Savings Account, TFSA, with Minimal or No Fees.

Fees, Costs and Commissions for Self-Directed TFSA Brokerage Accounts

How to Choose a Self-Directed Tax Free Savings Account, TFSA, Brokerage Account with Minimal or No Fees

Some investors have a non-registered emergency savings account with 3-12 months income worth of cash and liquid assets, a topped up work pension plan, and a topped up RRSP. They often consider the TFSA as another long-term investing tool. These investors usually set up a self-directed TFSA brokerage account. They intend to buy stocks, bonds, ETFs and mutual funds from a wide variety of issuers. The self-directed account gives them the investing flexibility and diversity they demand.

* InvestorLine has a minimum contribution to open any type of account of $5000. This appears to apply to TFSA accounts.

UPDATE: FEBRUARY 2014
In January and February of 2014, RBC Direct Investing, TD Waterhouse Direct Investing and BMO InvestorLine all removed the minimum balance requirement for accounts to qualify for $9.95 online trades. I expect CIBC Investor’s Edge and ScotiaBank iTrade will eventually reduce their requirements also but it hasn’t happened quite yet. Please check their websites for up-to-the-second details.

UPDATE: JULY 2016
CIBC Investor’s Edge offers $6.95 trades to all customers regardless of account size.

NOTES:
Generally you should expect to review your account statements online if you do not wish to pay any additional fees.

By Transfer Fee I mean the cost to transfer the TFSA to another financial institution. Generally transfers within an institution, for example from BMO InvestorLine to BMO, do not incur a fee.

Unfortunately fees and costs may be changed at almost any time. Before actually opening an account, contact the financial institution to confirm all costs. I’d hate to cause you a costly mistake if the brokerage raises its fees just after I issue this report!

Sources for the 2014 February Update

• BMO InvestorLine: https://www.bmoinvestorline.com/public/pdf/schedule_en.pdf
• CIBC Investor’s Edge: https://www.investorsedge.cibc.com/ie/benefits/fees-and-commission/fees.html
• Qtrade: http://www.qtrade.ca/investor/en/aboutus/services/fees.jsp
• Questrade: http://www.questrade.com/pricing/admin_fees
• RBC Direct Investing: http://www.rbcdirectinvesting.com/commissions-fees-schedule.html
• Scotia iTrade: http://www.scotiabank.com/itrade/en/0,,3694,00.html
• TD Waterhouse Direct Investing: http://www.tdwaterhouse.ca/document/PDF/forms/521778.pdf
• Virtual Brokers: https://www.virtualbrokers.com/contents.aspx?page_id=12

Related Reading

• How to Choose a Standard Bank Tax Free Savings Account, TFSA, with Minimal or No Fees
• For information on some RRSP fees, also see: RRSP Strategies Part 1: How To Best Get your RRSP Money Contributed Before the Tax Deadline
• Examples of TFSA Portfolio Fees and Commissions Using InvestorLine and Investor’s Edge

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Do you have brokerage TFSA? Did any costs come as a surprise? Please share your experiences with a comment.