CONSOLIDATE YOUR RRSPs INTO ONE SIMPLE ACCOUNT
How many RRSP accounts do you have? How can you keep track of a bunch of small accounts squirrelled away in different financial institutions?
KNOW ASSET MIX
Simplify your life. Why not consolidate all your RRSPs into one self-directed RRSP? It’ll be easier to manage a diversified portfolio with a self-directed plan. You can readily see how much you hold in bonds versus equities, and the percentage of foreign securities you hold.
Having separate RRSP accounts with various banks is not a very efficient way to achieve safety through diversification. By consolidating and using just one self-directed RRSP, you can hold marketable bonds, ETFs or GICs issued by any number of banks, trust companies or credit unions. You can have as much diversification and CDIC coverage as you want. Savings in mutual fund management fees from consolidating can more than offset your self-directed RRSP administration fee.
Besides making it easier to monitor asset mix, consolidating has some other advantages.
HELP YOUR EXECUTOR
When you die, think about the chore your family will have in dealing with numerous financial institutions. If you lose mental capacity in your old age, whoever has your power of attorney is going to want to consolidate accounts anyway.
How about consolidating all your RRSP, TFSA and non-registered accounts under one roof?
If you have your own RRSP plus a spousal RRSP ask your financial adviser if you can combine them.
SMALL PENSION
Do you have a small pension plan account? Ask if it is possible to unlock and consolidate small lockedin retirement accounts (LIRAs) and defined contribution pension accounts and transfer the funds tax-free into your RRSP.
If you have a small defined benefit pension with a former employer, can those funds be commuted and transferred to a LIRA held by the same institution where you are consolidating your investments?
LESS PAPER
Aim to reduce the amount of paper you receive in your mailbox. Why not have just one statement per month?
If you are keeping track of GIC maturities at half a dozen different institutions, you may have a chore converting your RRSPs into registered retirement income funds (RRIFs). By consolidating accounts, you can streamline the transition from RRSP to RRIF.
The Canada Revenue Agency charges a penalty for accidentally failing to report a tax slip that gets buried in a stack of mail. You reduce the chance of incurring such a penalty by reducing the number of tax slips.
Maybe you have already decided to go paperless by asking to have all your tax slips issued electronically. How can you keep track of all the passwords, websites and security questions? Consolidating accounts reduces the chance of forgetting to retrieve electronic tax slips.
TRANSFER COSTS
Let the receiving institution look after the paperwork to ensure RRSPs and TFSAs are transferred tax-free. Ask about transfer-out fees, deferred sales charges and capital gains triggered on nonregistered investments if you sell investments at the same time as you consolidate.
MORE ATTENTION
You’ll receive more attention when you have a larger account. For most wealth management firms, increasing the assets under administration means lower fees and more access to premium pricing options.
TAX-EFFICIENT MIX
You can expect better advice, fewer meetings and fewer papers to sign when you have one adviser. Ensure that your financial adviser sees the big picture. By knowing what you have in all your accounts, your adviser can design a tax-efficient asset mix.
For example, you could hold interest-bearing investments inside of your RRSP and TFSA. Growthoriented, dividend-paying securities can be held in your non-registered account where dividends and capital gains get favourable tax treatment. Terry McBride, a member of Advocis, works with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James Ltd. Information is from sources believed reliable but cannot be guaranteed. This is provided for information only. We recommend that clients seek independent advice from a professional adviser on tax-related matters. Securities offered through Raymond James Ltd., member of the Canadian Investor Protection Fund. Insurance services offered through Raymond James Financial Planning Ltd., not a member of the Canadian Investor Protection Fund.