What happens when you transfer out?

When looking into a new investment firm to handle your portfolio, many consumers will take the time to find out what fees they will be paying, even if this information isn’t openly displayed — as it’s supposed to be.

But what happens when you decide to leave that firm and transfer out?

Most investors don’t bother reading the fine print on transferout procedures and fees, even though they really should. The transfer-out practices and fees of many investment firms are getting worse, and this is not something that many people realize.

How long should it take for the firm to transfer your money out?

In this day and age of electronic transfers, you would assume that your money should reach your chosen destination within a couple of days at most, right?

Well, many financial institutions don’t seem too willing to give you your money all that quickly, and a recent study found that the average length of time it took for a transfer was 19 days.

The same study found certain big banks took even longer, with the average time for a transfer as high as 24 days (BMO) and 22 days (TD). This in itself is pretty disturbing when a transfer of funds really should only take a day or two at most.

From personal experience, I can tell you many transfers take a lot longer than that still, when bank transfer-out departments conveniently “lose” the transfer forms you’ve sent in or find some inane reason to send the transfer form back and ask you to resubmit.

We have a pending transfer request out right now with one of the big banks that was submitted (correctly) almost two months ago and still hasn’t arrived.

So when your money does finally get sent out to your chosen destination, what is it going to cost?

The study mentioned above found that the average transferout fee is around $100 per account, but they do seem to be going up lately. Moving your RRSP account from TD Bank will set you back at least $75 (but it could be a lot more if the broker decides to charge you to sell each investment in the account). The same RRSP account would incur a $150 fee if moved away from ScotiaBank.

Why do they charge twice as much to conduct the same transaction? Good question.

Scarier still is what some “smaller” institutions can and will charge you.

A recent transfer request sent to Canadian Western Bank for two accounts (RRSP and Spousal RRSP) was met with shock when they came back saying they would charge a total transfer-out fee of $682! That is absolutely ridiculous, if you ask me.

When are Canadians going to stand up for themselves and say that enough is enough with this gross over-feeing?

My hope is that this happens soon and that financial institutions are forced to bring their fees down to more reasonable levels.

Yes, they do need to charge some fees in order to cover their costs and make a profit, but it has gotten completely out of control. So what should you do? When evaluating a switch to a new investment advisor, make sure that you not only ask what initial and ongoing fees you will be paying, but also what it will cost you to leave if you need to withdraw your money or decide to move elsewhere.

It’s your money and you should never be forced into keeping it somewhere that you don’t like by excessive transfer-out wait times and fees.

Brett Millard is the owner of SPEIR Wealth Management in Kelowna. Reach him by email at brett@speirwealth.com.