Tag Archives: costs

How Do I Start Getting $9.95 Trades at RBC Direct Investing Now I Have $50 000?

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UPDATE: This article is historical, from 2013. I no longer invest with RBC Direct Investing.

While on the phone asking where my money is, since it left ING Direct on November 7 and it still isn’t in my RBC DI account on November 14, I asked a more important question: “How do I start getting the $9.95 trading commission fee given that I will have $50,000 in my account.”

I remember several years ago when we set up accounts at BMO InvestorLine that we had to wait till month-end after reaching the minimum qualifying balance to get the reduced trading fee. (I suspect you can now phone them and ask to get the fee applied immediately once you qualify, but I’m not sure.) I wasn’t sure if we would have to wait with RBC DI as well or not.

When Will You Usually Get the Reduced Trading Commission Fee Rate at RBC Direct Investing?

The support person told me that generally the computer system will spot new qualifiers. The check is made once a month on the 22 nd day. It checks what the lowest balance was during the previous month. [Which is not what the website says. The website says it will check the asset balance on the last day of the previous month.] If the lowest balance was $50,000 then the account will be upgraded to $9.95 trade status.

Can You Get the $9.95 Rate Immediately at RBC Direct Investing?

Yes. Once you have the $50,000 minimum in your account you can phone RBC Direct Investing support and request a change. They should be able to update your account quickly. (They didn’t tell me *how* quickly, but the implication was it would happen overnight.)

I guess if my money ever arrives in my account I can test this!
UPDATE: It did; I can; and I did. The update was made over night. So the day after I phoned in, when I placed a test trade, the trading commission correctly reported as $9.95.

What Happens If the Market Value of my Portfolio Drops Below $50,000?

While I’m sure your stocks, ETFs and Mutual Funds will always go up in value, mine don’t. In fact, I tend to buy things right before they plummet in value.

So I sent a Secure Message to RBC DI to ask whether the $50,000 qualification applies to the Book Value (when I bought my stocks) or the Market Value (what they’re worth today). I waited with bated breath for their reply.

To my surprise and dismay, they replied “In order to qualify for preferred pricing of $9.95 you must hold $50,000 in market value on the last day of every month.”

That’s right: the *Market* Value of the account must be $50,000 or higher on the last day of every month to qualify for the $9.95 trading fee! So if your stocks take even a temporary dip on the last day of the month you will be back to $28.95 trading fees. It appears that changes in the fees, up or down, occur on the 22 nd of the month after the month-end balance went below or above $50,000.

Frankly, I’m not impressed.

Can I Get the $50,000 Discount by Adding Up My Accounts with my Spouse’s?

Yes. You can ask RBC DI to add up the assets in various accounts held by members of the same household such as you and your spouse. You have to phone them to ask them to do this. It is not automatic.

Where Do I Get $50,000 to Qualify

Of course the hardest part is coming up with the $50,000 to invest in the first place. That’s a lot of packed lunches and skipped designer coffees. With time and patience, though, you may get there sooner than you think.

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Did you get caught paying an excessive brokerage fee because you thought you’d get the better rate immediately once you qualified? Please share your experiences with a comment.

What’s the Most Expensive Way to Add US Dollars to my BMO InvestorLine USD RRSP Account?

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Once you have a US dollar sub-account within your RRSP or other investment account at BMO InvestorLine, the next question is how do you fund it. There are two obvious methods: you can exchange Canadian dollars into US dollars; or you can buy an inter-listed stock on the Canadian exchange and sell it on the American exchange. (There are also a few less obvious methods.) Which is the most expensive (not the cheapest) way to add USD to your InvestorLine account?

How to Check the Foreign Exchange Rate at InvestorLine

You can check the foreign exchange rate BMO is offering very easily at InvestorLine. (It’s not so easy at Investor’s Edge: there you have to phone and ask.)

  1. Sign in to your InvestorLine account.
  2. From the Trading tab, select Foreign exchange.
  3. If  you want to see how many US dollars you can buy for 1 Canadian dollar,
    in the Action: area select the radio button beside Sell
    In the Amount $: field, type: 1
    In the Currency: area select the radio button beside CAD
    Click on the Calculate button
  4. The system will respond with
    an Approximate Rate (in this example: 1.055)
    and
    a Total: (in this example: $0.95 USD)
  5. If you then select the radio button for USD in the Currency: field
    change the Amount $: to 0.95
    and click the Recalculate button
  6. The system will respond with
    1.023
    and
    0.97 CAD.

Beware of the Foreign Exchange Fee Built Into the Foreign Exchange Rate

“Wait a minute!” you exclaim. “How come if I change 1 CAD to US I get 0.95 USD but if I change that straight back to CAD I only get 97 cents!”

That’s because there is a built-in foreign exchange fee on top of the actual exchange rate. You get fewer USD than you’d expect for each CAD you spend, and you get fewer CAD for each USD you spend. The bank gets a bit of the money each time you change it.

You can see on this exchange and exchange back, you have paid the bank 3 cents on 1 Canadian dollar, or about 3% in fees.

It may not seem fair, but it’s true.

Testing it with a more practical amount of 1000 CAD:
1000 CAD gets $947.87 USD
and $947.87 USD gets $969.67 CAD

That’s a loss of 30.33 or 3.033%. Ouch.

You can see why investors started looking for a way around these fees!

So How Bad Is It Really to Pay This Foreign Exchange Fee to InvestorLine

Some readers may be thinking, ya ya I have to pay a fee. So what? How bad is it, really?
Well, I guess it depends on how much money you are converting whether it FEELS bad (The loss is actually the same as a percentage.)

If you convert You lose
$1 $0.03
$1 000 $30.33
$10 000 $303.30
$100 000 $3 033.00 $2 181 **

** InvestorLine’s automated exchange rate improves for amounts in this range. When I actually tested the available exchange online, it cost only $2181, rather than the 3033 I had estimated based on the rates offered at 10,000 and lower. The screen message also said they would phone me to discuss the rates: in other words, they will reduce the commission if it will keep you investing with them. Thanks to Michael James on Money for pointing out this error!

Or to put it another way, would you pay a 3.033% MER on a mutual fund that just replicates the index? Then why would you pay this fee for even less service?

Using the Automatic Foreign Exchange Offering at InvestorLine is the Most Expensive Way to Convert Cash

In conclusion, the most expensive way you can convert cash in an InvestorLine account is to use the automated foreign exchange feature under the Trading menu.

Since I prefer to save money, not spend it needlessly, the next article will discuss some other methods to exchange currencies that cost less than this.

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Have you ever got caught by a horrible foreign exchange fee? Did you buy something on a credit card and get dinged with an extra 2.5-5%? Did you buy something online only to find that they billed you in USD at some terrible exchange? Please share your experiences with a comment.