The RRSP deadline is getting closer and investors are rushing out to make their 2011 contributions in time. With so many discount brokers out there, how do you know which discount broker is best for you? You can see our comparison of Discount Broker for RRSP and TFSA if you want a quick overview of your options. Below we’ll discuss what questions to ask which can help you with your decision.
Does the discount broker require a minimum amount before you can open an account? If so, how much is the requirement? Often discount brokers do not require any minimum amounts to open an account, however you may receive discount on trading costs or have your annual fees waived if you pass a certain threshold.
Fees can be a heavy burden on small investors; besides the usual trading fees brokers may also charge other fees. Some fees include annual RRSP fees, withdrawal fees, transfer fees and data fees. Not all brokers have these fees and some fees can be waived if you surpass a minimum threshold or are considered an “active” trader.
With virtually all online brokers you can trade any stock that trades on the TSE, NYSE or NASDAQ, however not all brokers allow you to hold US stocks in your RRSP. Often the USD funds are converted into CAD, which can eat up a chunk of your investments. If you are planning on holding USD in your RRSP account, make sure to check for details.
If you find yourself holding a large amount of cash in your brokerage account often, you should look into the interest rate the discount broker pays on those funds. Of course, holding a large amount over a longer period can cost you a lot in the long run. On the other hand, if you hold only a small percentage of cash and/or don’t leave your cash in the brokerage account for a long time then this will not matter.
If you like dividends, I know I do, and want to participate in dividend reinvestment plans (DRIP), where you reinvest the dividend back by purchasing the same company’s shares, then pay close attention to the brokers’ DRIP initiatives. Most discount brokers now offer free DRIPs you can participate in, however not all of them do.
What other criteria do you look at for your RRSP brokerage account? Who is your current broker?