There is a lot of buzz today around your RRSP and what can and can’t be done as far as investing. You have heard that there are alternatives however the misinformation has you confused. Here is an effort to clarify and a couple of tips to avoid the bank’s fees along the way.
Can I Do This Through My Bank?
The answer in a nutshell is yes – with a number of caveats. You need to understand first and foremost that your bank’s mandate is to produce profits for their shareholders. Leaving room for any other answer here is delusion. With this in mind you need to know that self directed investing with your bank will be costly and limited to their sanitized instruments. The cream will be scooped for those on the inside and you will be left with disappointment.
I just got a call the other day from a Realtor in Toronto who has assisted her clients with self directed investments through a trust company for many years. She explained that this same trust company had recently become a bank. To her surprise – all of a sudden she received a revised fee schedule that brought a gasp of exasperation to her lips. She was quite upset by the changes and is now advising her clients to do business elsewhere.
You also need to know that on top of the rules that CRA has put in place that govern Self Directed RSP Mortgages – the banks can have their own additional restrictions that make what you desire not always an option.
Can I Hold My Own Mortgage With My RSP
Again the answer is yes. Most banks can assist you with this process at a cost to you. A mortgage held within a self directed RSP operates the same as a regular mortgage held outside of a self directed RSP – however there is an annual fee to administer the account, a set up fee, and the mortgage has to be insured by CMHC. When you add all of this up – the cost far out weighs the benefit and you have to jump through a lot of hoops to make this work based on CMHC’s mortgage qualifications.
More importantly – to what end are you working? If your wealth creation plan is based on the difference between the return you receive on your GICs and today’s mortgage rates – you are setting yourself up for more disappointment. We are in a cycle of low interest rates that is perpetuated by global events and the concerns are not going away any time soon. If you want to get wealthy by owning your own mortgage to ‘save’ paying the bank 3% – it will take until your grandchildren are your age before any significant progress has been made.
How Can I Avoid The Fees My Bank Charges
Well the obvious answer here is to find an solid institution that does not charge the hefty fees. I work with a number of non deposit taking trust companies in Canada who have been in business for many years and work only and always on a fee per service schedule. In monitoring the way they do business – the cost to you the investor has generally only risen based on inflation and not a corporate directive for additional profits. For a quick example – one company has raised the account set up fee only once in the past 18 years (and by only $25 I may add)! Compare that to the amount of mail you have received from your bank stating changes to the fees you are subject to on an ongoing basis.
We do need to understand that there is always a cost associated with doing business and those facilitating need to get paid to complete their part – however you always have the choice of shopping around to get the best bang for your buck.
Grow That RSP Without Fees
So here is one way to grow that RSP without the fees! As one of my investors have recently remarked to me – “I have never paid you a penny for your services – how do you make money?” It is a good question and one I am proud to answer. When we work together to discover suitable investments for you – I only get paid once we find a match and always by the borrowing party. This means that if I assist you facilitate 10K or 10M you will have never paid me a commission or a fee of any kind. This is rooted in my firm belief that as an investor you should be rewarded for lending out your hard earned money and not penalized.
What is even better is that the costs associated with any investment vehicle – be it a Self Directed RSP Mortgage, Syndicated Mortgage Investment, or direct investment in cashflowing Real Estate through RSPs are all covered by the borrower for you the investor as well. This is effectively a “fee free investment experience”. How very refreshing.
To have a chat about your specific situation, the options available to you, and how to begin the education process of genuine Self Directed RSP investing – reach out to me below and let’s blow the socks off of your return on investment in the coming years.
