I received a query from a reader about how to open a no-fee (or low-cost) RRSP account that provides a good selection of mutual funds. I thought I would expand my answer into a blog post.
If you want the flexibility to trade stocks and bonds, a RRSP account can be opened with any of the discount brokerages (Check out an earlier post on Best Canadian Online Brokerages for some options). They typically charge an annual fee for smaller portfolios (for example: RBC Action Direct charges a $50 fee for accounts less than $25,000). Opening an online RRSP account is as simple as visiting the brokerage webpage and clicking on the Open an account link.
If you want to buy mutual funds from various fund companies, you might want to consider ING Direct Funds. Please note that actively managed funds charge high fees that would make administration fees seem very small by comparison. (Example: on a $10,000 account, a $50 administration fee translates into an annual expense of 0.5%. On the other hand, the average mutual fund in Canada charges a fee of 2.1% and the vast majority of them have also underperformed their benchmark indices).
You can also open a RRSP account at your local bank branch or with an independent mutual fund company like Investors Group. But, your options will usually be limited to the in-house mutual funds. Note, that these mutual funds also have a high MER and you might have to pay a fee to move the RRSP account to another institution.
In my opinion, the best choice for small portfolios is TD eFunds. The index funds offered have a MER ranging from just 0.31% to just 0.48%. You would be able to quickly create a fairly diversified portfolio like I described in an earlier post. Opening an account is a fairly easy process and can be done online.
Disclaimer: I am not a financial advisor. No post (including this one) should be construed as financial advice.
