“Help! My RRSPs are all over the place”

While in some sense this falls into the category of good problems to have—the more you sock away in retirement savings, the better—it might not be in your best interest to leave those funds fragmented across various providers. “When we talk about diversification, we mean diversifying by asset class. But diversifying by institution can actually be detrimental,” says Morgan Ulmer, a financial planner in the Calgary office of fee-for-service firm Caring for Clients.

To start, there could be a cost issue. “Many RRSPs have a flat annual administration fee of anywhere from $25 to $200,” she says. If you have multiple accounts, you’re likely paying that fee several times over. Similarly, depending on your provider’s compensation structure, you might be eligible for a discount when you have a larger asset load invested—a benefit you could be missing out on if you divvy up your RRSPs.

Second, it’s hard to take control of your retirement investing strategy—ensuring you have the right balance of equities and fixed-income investments to match your preferred level of risk—when your RRSPs aren’t all under one roof. “It’s too unwieldy,” says David Trahair, CPA, CA, a personal finance trainer and author of six books, including The Procrastinator’s Guide to Retirement: How to Retire in 10 Years or Less. “Are you going to make a consolidated spreadsheet to see how much you’ve got in stocks and bonds so you can retain that desired asset allocation across the board?” Obviously, when you have just one account, it’s easy to see your portfolio breakdown.

Finally, amalgamating your RRSPs may just make your life a little simpler. “In today’s busy society, any time you can lighten your mental load is a win—especially if the complexity you’re ridding yourself of isn’t offering any benefit,” says Ulmer.

Having said that, there are some situations in which in might be advantageous to keep your RRSPs spread out:

• If you are a GIC investor. GICs, available from banks, credit unions and other financial institutions, are investments that guarantee the return of your principal plus interest. The Canada Insurance Deposit Corporation (CDIC) will insure deposits up to $100,000 against the bankruptcy of its member institutions. So, if you have RRSP GIC holdings over $100,000, it would be wise to keep them in different accounts, says Ulmer.
• For specialized investments. Even if you have an advisor you like and trust, they may not be licensed to provide you with all the assets you want. In that case, you might also use a separate broker to purchase those specific investments in a different account.
• To test out different providers. Say you’ve been considering a robo-advisor or going full DIY to get the lowest fees with a discount brokerage. Before you commit to transferring your full portfolio, open an account with a small amount to give it a try, suggests Trahair. “I’m all for a bit of experimentation, especially with younger people,” he says.

Once you’re ready to simplify your investments—and your life—by bringing all your RRSPs under one umbrella, here’s how to go about it.

Take stock of your RRSPs

Dig out the latest statements for all your RRSP accounts. Disclosure rules require that these statements clearly show what you’re paying in fees as well as your personal weighted rate of return over the past year, three years, five years and since opening the account. If one of the accounts has been offering better rates of returns and lower fees than the others, that may be the one to consolidate to, says Trahair. 

On the other hand, if you aren’t happy with any of these options, do some research, says Ulmer. “Talk to people who you think are financially savvy and ask them for referrals. Then consult with three different advisors to see what’s the best fit for you.”

Approach the provider you want to transfer to—not from

Thankfully, you don’t have to have a big meeting or emotional “break-up” conversation to initiate an RRSP transfer. Instead, contact the provider you want to transfer the funds to with the request to move over the specified accounts. They will need the names of the financial institutions where you have your other RRSPs and the account numbers to fill out the appropriate form (CRA T2033, Transfer Authorization for Registered Investments), which they will send to you to sign and return. Some providers even handle all of this online. “They’re in the business of increasing assets under management, so they want to make it easy to transfer your money to them,” says Trahair.

Opt for “in kind” transfers, where possible

The provider you’re going with will ask you if you want to move the assets over “in cash” (which means all your investment holdings will be sold before they are transferred) or “in kind” (which means all your investments go over exactly as is). Both Trahair and Ulmer say to transfer your investments in kind, so long as the receiving institution can hold those investments. (Some proprietary mutual funds, for example, may not be available to other providers.)

There are a couple of reasons why experts prefer in-kind over in-cash transfers. First, the timing may not be in your favour. If, for example, you happen to liquidate your investments right after a downturn, that money could be out of the market for a few weeks before it gets transferred and reinvested and you could miss the market rebound. In other words, you could end up breaking the first rule of investing by selling low and buying high. Second, selling your investments could trigger “back-end” fees, as explained below.

Be aware of possible deferred sales charges for “in cash” transfers

Some investment funds incur deferred sales charges (DSC) if you sell them within a specified number of years (typically seven) from the date of purchase. Those fees can be quite hefty and really add up, so you’ll want to avoid them if at all possible. Find out if you have any DSC funds and, if so, what the redemption schedule is. If you’re beyond that period, you can sell your holdings with no strings attached. If not, you can sell up to 10% of the fund every year without paying the fee, says Trahair. 

“An advisor should think to check for deferred sales charges when you transfer investments to them,” says Ulmer. Otherwise, it’s a red flag that they’re failing to protect clients from unnecessary fees.

DSCs will be less of a concern in the future—Canadian regulators banned the sale of mutual funds with DSCs on June 1, 2022. However, the redemption schedules for any existing DSC mutual funds still apply.

Ask about account closing fees

Although there shouldn’t be any fees to transfer your RRSPs, you might need to pay $50 to $100 to close each old account. Make sure to ask the receiving institution if it will cover all or part of those fees. It may be willing to do so to gain your additional business.

Read more about GICs as a good investment:

• The benefits and flexibility of family RESPs
• How to ladder your GICs in Canada
• Is now the time for retirees to sell stocks and buy GICs?
• Annuity vs. GIC: What makes sense for retiring?