Saturday, November 24, 2012

TD e-Series Post Follow Up

This post got me some personal attention from TD after I posted a link on Twitter. Their social game is pretty good. They ask me for some contact info and after a few days someone in the e-Series group contacted me. She was very nice and we had a chat about the process as it stands and how it could be better.

It turns out I used the wrong form altogether. The 11 page one that I've spent so much time on is for opening a new account. There is a much shorter one for converting an existing account. Big, big sigh. I'm really not sure how I missed that. Now that I go looking for the forms I see that there is always a link for both cases. Maybe having not worked at CIBC since February my form-fu has gotten rusty.

According to the person I spoke to, there are a couple of interesting reasons TD doesn't offer the e-Series index mutual funds on all mutual funds, making the extra steps necessary:
  • Due to mutual fund regulations enforced by the Mutual Fund Dealers Association these funds shouldn't be offered by fund advisers due to their "do it yourself" nature. I'm not totally convinced this is a major factor because TD, like the other banks, offer a range of index funds through advisers, but with higher management expense ratios (MERs).
  • Fund advisers get commissions from selling mutual funds, which is why even normal index funds have surprisingly high MERs. They can't sell the e-Series because there is no compensation structure, hence the lower MERs. To me, this is the primary reason.
I made a few suggestions about the process, like somehow pre-filling the forms with information after you've logged in to online banking. Another was to just make the e-Series funds available to everyone all the time. I understand that they can't be sold through a branch, but I'm not sure what would prevent making them available to everyone online only, I didn't ask. Perhaps some compensation happens even when you buy mutual funds online that needs to change.

I'm happy that someone from TD listened to my suggestions, and seemed to understand that the process could be better. She offered to help speed up the process by having me fax the forms to her, which is very nice. But I still have a bit of a bad taste left in my mouth having had to try this 3 times for the same account. It's made me very curious about potential alternatives.

All Canadian banks suffer from process problems. So far President's Choice Financial has been the lowest friction one I've dealt with, because of their online nature. If ever foreign banks are allowed to  compete seriously in Canada the current banks will have to adapt very quickly. Things still feel like they're stuck in a time before the internet.

Friday, November 23, 2012

My Investment Plan - Index and Ignore

The last few times I've set up investment accounts at TD I've had to sit through their "Investor Profile" quiz. I imagine most banks do this, too. They ask you a series of questions to see if how you think of yourself in terms of investing matches how you'd react to certain situations. For example, if you say you want a highly risky, all-stocks portfolio, but couldn't stomach a 5% loss in a year, then you're inconsistent. If you are consistent then they will recommend a portfolio that better matches your true risk tolerance.

However, if your plan is to stick to a certain asset allocation year after year, not changing it for any reason, they have no clear way to accommodate you. As I recall it, there is yet another form that explicitly absolves them of any differences between your answers and what you do with your money. It's all about identifying potential liabilities in the form of people whose portfolios don't match their risk tolerance. The assumption is that everyone needs help investing from the mutual fund salesperson. Oh, did you not realize everyone in the branch is a salesperson, including the tellers? Opening an account gets someone some money, and getting you into specific mutual funds is very valuable.

Doctors don't scan your thyroid for potential cancer activity because there is so much weird stuff in thyroids that there's no point in acting on the findings. And so it goes for index investing. My plan is to follow a strategy of investing in very low cost index funds, rebalancing to a particular asset allocation yearly with a net deposit. This is called couch potato portfolio investing because it involves so little effort. I pay no attention to what's going on with my money because there is no information on which I would act. Up 15%? Whatever. Down 30%? Don't care. (Actually, if I knew this I'd pile in more money because it's like stuff's on sale.) Index investing addresses the two biggest impacts to investing: 1. the fees in the form of the management expense ration (MER) and 2. the damage done by investors selling when things are low and buying when things are high.

As a math geek I can envision myself tracking the daily value and yearly return of my (still small) portfolio, just because I know how. However, the information is as meaningless to me as the standings in the NFL. I'm happy to let that which doesn't matter truly slide, as Tyler Durden does.

Sunday, November 18, 2012

A Letter to TD Canada Trust on their Abysmal e-Series Application Process

I recently applied to be able to buy TD's e-Series mutual funds in my daughter's RESP account. These are index mutual funds with very low expense ratios, and are a great alternative to exchange traded index funds for small portfolios.

I've been through the process 3 previous times with our other investing accounts (2 RRSPs, son's RESP). It's ridiculous, and getting more so every year. You go to a branch, fill in forms, answer questions and they open your new mutual fund account. Except you can't access the e-Series yet. You have to fill out something that looks just like a new mutual fund account application. It's really not obvious that this will result in the funds being available for purchase in your existing fund account.

TD sent my application back because of some missing information, so I'm including this note with my response. At least they sent a prepaid envelope in which to return it.

To Whom It May Concern:

You, TD Canada Trust, have made the process of being able to buy your e-Series index mutual funds in an existing account about as hard as possible. There is no reason to require so much information that you already have. You already know my and my wife’s name, employment information, SINs, banking information, and investment profiles. We gave it when we opened the mutual fund accounts that we already own. Another bank is going to create a very similar line of products, put a simple sign up process in front of it and will eat your lunch, if they haven’t already. I just want the funds to appear in the drop down list on the website. Why does it require 11 pages of documentation? It verges on the level of a tax return. And I can file that online!

This is the fourth time we have been through this ridiculous process, but it has never been this bad. I will not forget this experience. I will have a hard time recommending the e-Series funds to others because of it. MoneySense magazine often recommends them, but I will be writing a letter to the editor to let them know just how onerous you have made the process. I plan to research alternatives to these mutual funds for my future investing needs.


James McLachlan