How to move my TFSA to an online brokerage – Reader Q&A

Over the last few weeks I’ve received a number of emails from readers asking about Tax Free Savings Accounts (TFSAs).  Here is one example, paraphrasing and quoting where I can:

Hi, thanks for your blog.  I’m new to the investment scene, and “I’ve had my TFSA sitting in a bank account earning very little $$$.” Can you recommend any resources that will provide directions on how to move my TFSA to an online broker?

Thanks for your email.  Based on what little I know about this reader’s situation, today’s post will back things up a bit and provide the reader with a few considerations before making any big moves.

“I’m new to the investment scene…”   Step 1. Take your time

I can appreciate you’re anxious to get to your new account.  Based on my experiences, I can only suggest you take some time to understand why you are investing in the first place and what this new online brokerage account is for.  If you need some help to answer that, I suggest you speak to a financial advisor.  Here are some free-of-charge preliminary questions to consider:

  • What am I saving for?  A house down payment?  A car down payment?  Something else?
  • How soon will I need to access this money?  In a couple of years?  In a couple of decades?
  • In case of an emergency, do I have access to any other money?

I’m convinced short-term savings are just that, these are not investments to me.  Saving up for a house, a car or even a vacation is not money I would tie-up in an investment product (stock, bond or ETF), so I’d be cautious about using an online brokerage TFSA for just cash.  If “I was new to the investment scene” (your approach may vary), I would be inclined to keep any money to be spent in the short-term (maybe a few months, maybe 1-2 years) in a high-interest TFSA; just in cash.  Just be aware interest rates for savings inside the high-interest TFSA are not fixed, they are not high right now, and can be changed according to market conditions.  Most brick and mortar and online banks offer this high-interest tax-free account to you, but you already know that based on your question.

Step 2.  “…how to move my TFSA to an online broker?”

Once you’re convinced your account should be moved to an online broker, consider opening a self-directed TFSA.  This type of self-directed account will allow you to hold more than cash inside the account, investment options include:

  • Guaranteed Investment Certificates (GICs),
  • Bonds,
  • Mutual Funds,
  • Exchange Traded Funds (ETFs),
  • Stocks.

Before you make the move, be sure to find out if your current financial institution doesn’t already offer a self-directed TFSA or direct investing TFSA as part of their brokerage arm.  It might make your move easier to stay within the company.  If not, a quick Google search of “self-directed TFSA” or “direct investing TFSA” should give you a few names to check out.

To make the move, visit a bank branch or phone them.  Tell them you are looking to move your high-interest TFSA into a self-directed TFSA or direct investing TFSA at their bank.  They want your money, they should listen to you.  Ask a bunch of questions, there are no stupid questions.  Consider moving your cash over without buying any new products at this time.  There are key steps to plan your portfolio.  While TFSAs with online brokers offer flexibility and diversity (see investment choices above) make sure you know what you’re getting into – meaning – some self-directed TFSAs have account minimums and commission fees.  Here are just a few examples:

  • TD Direct Investing TFSA, you will pay $9.99 for each Canadian and U.S. equity buy or sell transaction with no minimum balance required.  More details and FAQs here.
  • RBC Direct Investing TFSA, you will pay $9.95 for each Canadian or U.S. equity trade with no minimum balance or trading activity required.  There are administration fees if you do not hold at least $15,000 of assets across all RBC Direct Investing accounts.  More details here.
  • With Questrade, you can buy any Canadian or U.S.-listed ETFs within your TFSA and pay $0 commission fees.  There’s no minimum holding period and you only pay their standard commission fee when you sell the ETF.  Something to consider.

You can also check out BMO, CIBCScotiabank and other companies that offer self-directed TFSAs.  I suggest you call a few companies and compare the answers they tell you – they might be different and you’ll learn more this way.  Alternatively leave a comment to this post or email me if you want.   I will help you where I can or I’ll write another blogpost about your issue.

The TFSA is a gift to all Canadians.  It can be used for emergency funds, short-term savings and much more as part of your long-term retirement plan.  Once you know what you’re saving for, for how long, consider doing some reading about various accounts available to you and what terms and conditions are associated with those accounts to narrow down your options.

Got a question for me?  Add a comment below or contact me and let me know what you’re thinking about.

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're inching closer to our ultimate goal - owning a 7-figure investment portfolio for semi-retirement. We're almost there! Subscribe, join the journey to learn how I'm getting there and how you can get there too! Follow my on Twitter @myownadvisor.

8 Responses to "How to move my TFSA to an online brokerage – Reader Q&A"

  1. Interesting timing, I would have thought the questions would be about RRSPs with the deadline being today. Personally I use Questrade and would recommend them for anyone starting out because it’s easy to use, they have a mobile app (most others do as well but Questrade is rated highly for ease of use) and their commissions are lower than all the big banks – definitely a huge consideration for someone just starting out investing with smaller amounts or for higher frequency traders

    With that being said, I would avoid equities entirely if the money will be needed in a shorter time frame as you mentioned (ie. 1-3 years)

    Reply
    1. Yeah, I’ve had a mix of TFSA with the RRSP questions of late. I covered a few RRSP questions in the other posts last month.

      Commission-free ETFs are great and lower commissions on stocks are a great deal, definitely a benefit for buy and holders like ourselves and many other DIY investors.

      I know when we were saving for our home over a couple of years, we avoided stocks and ETFs with our capital and I’d do the same again.

      Mark

      Reply
  2. Tall_Gal_in_Toronto · Edit

    Good information! The actual ‘how to’ is quite simple. Go to or contact the institution you want to go end up with and fill in the Transfer forms. Some have the forms online. The new institution will then handle contacting the present institution, and will transfer the funds over. One decision you have to make is whether to transfer the funds “in kind” meaning exactly the way they are invested today, or ‘in cash”. If you want a cash transfer, you have to contact your present institution and give them instructions to sell the investments so that you only have cash in your TFSA account. You have the option of selling only part of you investments, Transfers take a few weeks to complete..

    Reply
    1. I think so Tall Gal…the new institution should handle all the details for an investor. The key is to fully understand the account you need and take your time with selecting investments for the account, definitely avoiding all high-priced products in the process!

      Reply
  3. I have 108,000 invested in a TFSA (my spouse passed and his account was transferred to me). The bank invested it all in ETFs almost 2 yrs ago. It’s not doing as well as I expected. I do not need the funds, but I would like to have access to tax free dividends to supplement my monthly retirement income. I have an online trading account with another bank that pays me over 400/mo in dividends, but I have to declare it as income. How can I move the initial investment in the TFSA (108,000) to atrading account without losing TFSA advantage?

    Reply
    1. Hi Liz,

      A complex question that unfortunately I cannot answer directly due to many reasons. However, maybe some clarification would help.

      If you have ($108,000) inside your TFSA, that is already tax-free money. Potentially you are asking about owning a self-directed TFSA? You might already have one (to own stocks, ETFs, bonds, etc.) if you own ETFs inside that account already.

      If you are asking about moving your TFSA money to a trading account, you would lose the advantages of the TFSA in doing so. Why do you want to do that? Curious.

      Cheers,
      Mark

      Reply
  4. Really great insights! This article is showing us how important it is to have broker for fast trading high impact news and events, proper execution, with no lags during heavy order flow.. This will be a very great help for new traders. It’s definitely worth looking further into it.I will recommend this source to others especially to those who are beginners that are willing to learn to be a professional trader, thanks for the info!

    Reply

Post Comment