I’m moving investments to an online broker. Will they cover my fees?

Q: I have a few hundred thousand dollars in mutual funds in my RRSP at a large investment firm. I want to move this money into a self-directed RRSP at an online brokerage. Can they charge me a fee for taking my money elsewhere? If so, is it normal for the brokerage receiving the new money to reimburse these charges?

– Bill

A: Just about every investment dealer charges fees to transfer registered accounts, such as RRSPs and TFSAs. The typical fee is $135 to $150, plus taxes, per account.

Since you’re a departing client, the firm has no real incentive to make you happy, so it is unlikely you’ll be able to negotiate on these fees. The good news is that many brokerages will reimburse these fees when you open a new account and transfer a significant amount of money. But do your research beforehand, because every brokerage has a different policy, it may not be consistent, and they may not advertise it openly.

Bill, the fact that you have a six-figure sum to transfer puts you in a good position. Most brokerages require a minimum of $15,000 to $25,000 in new assets before they reimburse transfer fees, but if you’re moving much more than that you might qualify for a more generous promotion. So I suggest calling the brokerage you’re considering and asking them what they will offer. Some, for example, will offer you a certain number of commission-free trades in your new account. That might allow you to build a new ETF portfolio at no cost.

If you’re doing some comparison shopping before transferring your account, Sparx Trading is a useful website that regularly updates its list of online brokerage promotions, including those that apply to reimbursing transfer fees.

You will likely be asked to provide a statement showing the amount you paid in transfer fees, so be prepared. Reasonably, the brokerage may require you to maintain your account for a certain period before they reimburse your fees or trading commissions.

There’s another more insidious charge you should be aware of if you’re transferring your account from a large mutual fund dealer. Some funds carry deferred sales charges (DSCs), which kick in if you sell them before a certain date. DSCs can be as high as 5% or 6%, and they may not expire until six or seven years after you purchase the funds. Unfortunately, once you’re locked into a DSC schedule there’s no way to get out without selling the fund and paying the penalty. However, you may be able to transfer the funds “in kind” to an online brokerage, where you can hold them until the DSCs expire.

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