On the other hand, if you aren’t happy with any of these options, do some research, says Ulmer. “Talk to people who you think are financially savvy and ask them for referrals. Then consult with three different advisors to see what’s the best fit for you.”
Approach the provider you want to transfer to—not from
Thankfully, you don’t have to have a big meeting or emotional “break-up” conversation to initiate an RRSP transfer. Instead, contact the provider you want to transfer the funds to with the request to move over the specified accounts. They will need the names of the financial institutions where you have your other RRSPs and the account numbers to fill out the appropriate form (CRA T2033, Transfer Authorization for Registered Investments), which they will send to you to sign and return. Some providers even handle all of this online. “They’re in the business of increasing assets under management, so they want to make it easy to transfer your money to them,” says Trahair.
Opt for “in kind” transfers, where possible
The provider you’re going with will ask you if you want to move the assets over “in cash” (which means all your investment holdings will be sold before they are transferred) or “in kind” (which means all your investments go over exactly as is). Both Trahair and Ulmer say to transfer your investments in kind, so long as the receiving institution can hold those investments. (Some proprietary mutual funds, for example, may not be available to other providers.)
There are a couple of reasons why experts prefer in-kind over in-cash transfers. First, the timing may not be in your favour. If, for example, you happen to liquidate your investments right after a downturn, that money could be out of the market for a few weeks before it gets transferred and reinvested and you could miss the market rebound. In other words, you could end up breaking the first rule of investing by selling low and buying high. Second, selling your investments could trigger “back-end” fees, as explained below.
Be aware of possible deferred sales charges for “in cash” transfers
Some investment funds incur deferred sales charges (DSC) if you sell them within a specified number of years (typically seven) from the date of purchase. Those fees can be quite hefty and really add up, so you’ll want to avoid them if at all possible. Find out if you have any DSC funds and, if so, what the redemption schedule is. If you’re beyond that period, you can sell your holdings with no strings attached. If not, you can sell up to 10% of the fund every year without paying the fee, says Trahair.
“An advisor should think to check for deferred sales charges when you transfer investments to them,” says Ulmer. Otherwise, it’s a red flag that they’re failing to protect clients from unnecessary fees.
DSCs will be less of a concern in the future—Canadian regulators banned the sale of mutual funds with DSCs on June 1, 2022. However, the redemption schedules for any existing DSC mutual funds still apply.
Ask about account closing fees
Although there shouldn’t be any fees to transfer your RRSPs, you might need to pay $50 to $100 to close each old account. Make sure to ask the receiving institution if it will cover all or part of those fees. It may be willing to do so to gain your additional business.
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