Investor Economics

Tax-free savings account (TFSA) assets reached $80 billion, in more than 10 million active accounts. Investor Economics’ retail deposit clients have hinted that TFSAs are a zero-sum game, as growth acts to cannibalize taxable account holdings. A study published by the Department of Finance Canada (http://www.fin.gc.ca/taxexp-depfisc/2012/taxexp1202-eng.asp#toc346014054) noted an 8% drop in the share of adult taxfilers reporting taxable interest and dividends between 2008—pre-TFSA introduction—and 2011.

Tax-free savings account (TFSA) assets in bank branches and branchless institutions reached $52.7 billion at December 2012. Savings deposits ceded 4.2% share of the product mix in 2012; mutual funds gained 2.4% and accounted for 20% of TFSA assets in the retail banking channels.

Complex rankings of TFSA assets in the branch channels saw BMO Financial Group surpassing ING Direct Asset Management and moving into the sixth spot. Four of the top five TFSA competitors are Big Six banks.

The newly-minted budget included a significant TFSA development—an increase in the annual contribution allowance for 2013 to $5,500. TFSAs were introduced in 2009 with an annual contribution allowance of $5,000. Further contribution limit increases will be mandated inOttawa(in $500 increments), as dictated by changes in the consumer price index (CPI).

For more information on TFSAs, please refer to the upcoming edition of our Deposit and Fixed Income Advisory Service http://investoreconomics.com/issue/deposit-and-fixed-income-advisory-service-2. Posted by Andrew Dranfield Andrew@iei.ca.

Mutual funds continue to be the investment of choice in Registered Disability Savings Plans (RDSPs). RDSP assets ended 2012 at $961 million, with mutual funds accounting for 59%. Savings deposits lagged the overall 19% growth of the RDSP segment and ceded 2% share in 2012.

Nearly seven thousand RDSP accounts were opened in the second half of 2012. RDSPs differ from other registered savings plans in that the beneficiary is limited to one account and lifetime contributions are capped at $200,000. According toOttawa, roughly 28% of Canadians who claimed the Disability Tax Credit have opened an account, a fact that suggests further room for the segment to grow.

For more information on RDSPs, please refer to the upcoming edition of our Household Balance Sheet Report http://investoreconomics.com/issue/household-balance-sheet-report-3. Posted by Andrew Dranfield andrew@iei.ca.

The Toronto-based independent online/discount brokerage (ODB) firm Questrade has announced that it will offer buy-side commission-free ETF trading on all North American-listed ETFs. The offer is available to clients using the firm’s IQ trading platform. Questrade becomes the fourth Canadian online/discount broker to offer commission-free trading on ETFs and the first in Canada to include a full stable of North American-listed ETFs. The lone caveat is that the ETFs will be commission-free exclusively on the buy-side, while peer firms like Scotia iTRADE, Qtrade, and Virtual brokers offer round-trip commission-free trading, albeit on a select group of ETFs.

The ETF trading pricing concessions signal that online/discount brokerage firms are keen to capitalize on the vehicles' growing popularity among do-it-yourself (DIY) investors. In recent years ETFs have been among the fastest-growing investment vehicles on the online/discount brokerage platforms. Preliminary data from the final quarter of 2012 suggests that this trend remains in place.

On a partially unrelated note, and bucking the trend set in the second and third quarters of 2012, ODB trading volumes in the closing frame of the year were once again on the rise. Growth was partially driven by the pre-RRSP season ramp-up. Despite the bump, early indications are that transaction levels will remain near four-year lows. Stay tuned over the coming weeks for a fourth quarter wrap-up for both the online/discount and full-service brokerage channels. 

For more information and up-to-date statistics on retail brokerage channels, please refer to the upcoming edition of our Retail Brokerage and Distribution Advisory Service http://investoreconomics.com/issue/the-retail-brokerage-report. For more information on ETFs, please refer to the upcoming edition of our ETF and Index Funds Report http://investoreconomics.com/issue/insight-etf-and-index-funds-report. Posted by Matthew Goldstein Matthew@iei.ca.