Brokerage Wars – Millennial Revolution

I don’t know if you’ve noticed, but there’s a lot of financial companies in Canada eyeing your RRSP like a starving hyena these days.

It’s a trend initially started by WealthSimple, a Toronto-based FinTech company that got it’s start as a robo-advisor, and it’s been so successful that now other companies are doing it too.

The offer is simple: Transfer your account into our company and we will pay you cash money as a percentage of the assets transferred. WealthSimple is currently offering a 2% cash-back for RRSP transfers, and 1% for everything else. Questrade, the brokerage we use, is now running a promotion where you get 3% for the first $10,000 of transfer-in, and then 1.5% for anything above that. Even major banks are getting involved, with TD and Scotiabank offering cash-back bonuses for transfers to select clients.

These are all very tempting offers, but let’s stop for a minute to ask ourselves, does it make sense to move your money in?

The Hazards of Brokerage Hopping

I’ve gotten a few emails asking if it makes sense to brokerage-hop, meaning moving your investment accounts around to take advantage of these promotional offers, then transferring out to take advantage of the next offer.

Admittedly, I constantly move my cash around between different banks to take advantage of promotional interest rate offers. It’s a process I like to call HISA-hopping, and I wrote an article about it here.

Here’s the thing. Moving your cash into a HISA to take advantage of a promotional interest rate is pretty easy. All you have to do is open an account and transfer your cash in. As long as the bank is covered by CDIC, which insures your deposits up to $100k, your risk is basically zero as long as you stay underneath that coverage limit. So, you may as well just keep moving any uninvested cash into whatever bank is offering the highest promotional savings rate. You don’t have to lock up your money, you can withdraw at any time, and you aren’t taking on any risk since they’re all backed by the same regulatory framework.

Brokerage-hopping is a little different.

I’ve now transferred accounts between brokerages 3 times, and every time, it’s a lot of paperwork. It takes weeks for the transfers to go through, and come tax time you’ll have to deal with twice the amount of tax forms because they’ll be split between the two companies.

So moving between brokerages isn’t nearly as simple as a savings account. There is work involved, so you should be aware of that before you dive in.

Another thing you need you need to be aware of is that you don’t get the money right away. In both WealthSimple and Questrade’s cases, your cash-back is paid out over the course of 24 months, meaning you need to keep your money with them for 2 years to get your full reward.

This is to prevent people from moving their money into the platform, collecting their reward, and then moving it right back out. They want you to stay long-term customers, which is totally in their right, but you should be aware that if you take advantage of this offer, you should expect to stay with them for some time.

None of this is to say that you shouldn’t do it. A 1-3% return on your portfolio is pretty sweet, and if you were thinking of transferring over your accounts but haven’t gotten around to it, now is the time to do it.

Your Money Deserves a Good Home

So what do we think about these fintech disrupter brokerages that are offering these incentives? Personally, I think they’re great!

Questrade is the brokerage that we’ve been using for years, and the bulk of our net worth (>$2M) is invested on their platform. We’ve been such happy clients of theirs that we promote them in our Investment Workshop, and will continue to do so.

They’ve also recently changed their commission structure to $0 per trade. Previously, buying was free and selling cost money, but now both buying and selling is free, so they are now a commission-free brokerage!

WealthSimple is also a company I’ve used in the past, and have been impressed with. WealthSimple started off as a robo-advisor, but now they’ve developed their self-directed investing side of their business into a mature offering in its own right, complete with $0 commissions and USD trading.

Both companies are protected by the Canadian Investor Protection Fund (CIPF) that protects you from the brokerage company going bankrupt, same as the Big 6 banks, so no worries there. And both companies will reimburse your transfer fees, so even if your outgoing bank charges you, you will get your money back.

In short, both companies would be excellent homes for your portfolio, especially if you’re currently using a brokerage that makes you *gasp* pay a commission to trade.

No Time Like The Present

If you’re considering moving your accounts over to Questrade (which I highly recommend), just know that the 3% cash-back promo is only running until Feb 28, 2025, so if you’re going to do it you should start now.

Note that the Feb 28 deadline is for opening the account and submitting your transfer paperwork. The actual transfer will take a week or two to actually go through, but as long as you started the process before Feb 28, your bonus will be locked in.

And if click this offer link, you’ll be eligible for an additional $50 cash-back to your account, because who doesn’t like free money! Plus, your generous click helps us keep this site free, so it’s greatly appreciated.

All details of their cash-back offer can be found here.

And if you’re interested in WealthSimple, be sure to check out their promo page here.

That’s it! Happy Transferring everyone!

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