As I mentioned last week, RBC Direct has a promotion going on where they will pay anyone 1% of assets moved to RBC Direct from another broker. Since I am a huge fan of low-cost investing (and getting paid a rebate certainly lowers the costs!) I was pretty excited about this deal since it appears to be free money.
Will I save money by moving to RBC Direct?
At first, it seems obvious that getting a 1% rebate for moving to RBC should be quite profitable for anyone but the problem is that the trading fees are more expensive at RBC than at Questrade. Questrade charges $4.95 for all trades whereas RBC charges $28.95 per trade for investors with less than $100,000 in assets (calculated by household) and $9.95 per trade if the household assets are more than $100,000. Regardless of how much you have in assets, the difference from higher trading fees at RBC will reduce the benefit from the 1% rebate.
The factors to consider when thinking about this move are as follows:
- How much moola do you have? There is a huge difference in the trading costs at RBC if you have more or less than $100k.
- How long will you stay at RBC – if you have $100k and receive a rebate of $1,000 but you stay with RBC for the next 40 years then you have probably paid a lot more in trading costs.
- How active a trader are you? If you don’t trade much then the different trading fees are not as relevant.
My analysis
I did some playing around on a spreadsheet to try to determine how much money you need to have to make the move to RBC worthwhile. Since most readers never look at the spreadsheets (I don’t blame you), I decided to put the detailed commentary in the spreadsheet itself and keep the general conclusions in the post.
My recommendations
I would recommend that you don’t move to RBC unless you have the $100k (or very close to it) necessary to qualify for the lower trade costs. As I’ve shown in the spreadsheet, it is very possible for someone with less than $100k to move to RBC, collect the rebate and then move to Questrade but the problem is that if you don’t move the account from RBC within a reasonable amount of time then the whole procedure will end up costing you money. If you are an active trader then even $100k won’t be enough – plug in your own number in my spreadsheet (or your own) to see if it is worthwhile.
My second recommendation is that if you do the move – once the rebate is paid then you should take a new look at your investing costs and act appropriately. If you are really happy with RBC then you might choose to stay there but if low costs are your primary concern (like me!) then you should consider moving to Questrade as soon as possible to get the lowest commissions.
And one more thing
Another thing to keep in mind is that RBC ran this promotion before in 2006. I can’t guarantee that they will do it again in a few years but it might be an idea to move the money from RBC after the rebate is paid in order to be eligible in case the 1% deal is offered again.
If you are planning to move back to Questrade then read about the Returning to Questrade deal on transfer fees.