Would You Like Fees With That?

I’ve grown used to the antics of mutual fund companies and commission-based fund hawkers who criticize index investing. It’s predictable, pathetic and unlikely to change. What really disappoints me, however, is when the antics come from an investment company that I thought was one of the good guys.

Readers of this blog and my work in MoneySense know that I have often recommended the TD e-Series index funds for Couch Potato investors. They have the lowest MERs of any retail funds in the country, a long record of low tracking error, and the added benefit of being available online without a discount brokerage account. But this week I got an alarming email from Shannon, an investor in western Canada who is untangling herself from a large and notoriously expensive financial services firm. Shannon has decided to get started with index investing and, having read about the e-Series funds, gave TD a call. Here’s how she described the bank’s behaviour:

“First, we were encouraged to invest in regular TD mutual funds. When we said no, we wanted the e-Series index funds, we were told that the I-Series were just as good and could be bought at the branch. Again I said no, we want the e-Series because the MERs are lower, and they said they’re not that much different.  I said every bit counts, and they asked what were we paying on our other investments. I said between 2.75 and 3%. They said they had mutual funds with lower MERs than that, and higher returns than the index funds, so why didn’t they have a wealth management specialist call me?”

Sure enough, a TD rep called the next day and explained to Shannon that index funds simply aren’t a good a good investment, and that she should instead choose from TD’s lineup of actively managed funds, which carry fees between 1% and 2.7%.

It was classic upselling, like you’d get from a fast-food restaurant: Would you like any muffins or donuts with your coffee? Would you like to super-size your fries? Can I get you some fees with those mutual funds?

Amazingly, the TD rep failed to mention that the TD Canadian Bond and TD Canadian Equity funds failed to outperformed their e-Series equivalents over the last five years. (To be fair, they were neck and neck.) Or that the TD U.S. Blue Chip Equity Fund couldn’t even beat a lowly S&P 500 index fund over the last decade. I’m sure it slipped his mind.

“Why wouldn’t TD champion their own e-Series funds?” Shannon asks. “I get why they want me to pay higher MERs on their funds, but should it be this hard?” Of course it shouldn’t be this hard. And yet a search through other Canadian finance blogs suggests that Shannon’s experience is hardly unique:

  • Youngandthrifty.ca reports that it took her six weeks to set up an e-Series account “mainly because when you walk into any TD branch, no one knows what the heck you’re talking about.”
  • Million Dollar Journey related a similar story: “There was some resistance when I mentioned the e-Series account. Even though it is a TD product, it is an online product only, and the personal banker wouldn’t even talk about it. I suspect it’s because they receive no commission or recognition for selling the TD e-Series products.”
  • Learn Save Invest says, “I had to actually direct the staff to the web page on TD’s site to explain to them what I wanted.”

It would seem that the easiest way to open an e-Series account is to fill out the online application and mail it in. If you do want to deal with your local TD branch, a number of bloggers suggest telling them you want to open a regular TD Mutual Funds account. Once you fill out the paperwork and get your signature on file with the bank, then you can go home and convert your regular account to an e-Series account. That will at least help you sidestep the bank employees who try to talk you out of it.

If you’ve had a good or bad experience opening a TD e-Series account, please post a comment and share it with other readers.

114 Responses to Would You Like Fees With That?

  1. Nicholas May 1, 2016 at 6:15 pm #

    I went in today to look at e-series. The associate was very good. She knew that since I asked for e-series funds in the first place, that I am knowledgable in investments, and not interested in actively managed funds. She cut straight to the chase and gave me exactly what I wanted!

  2. Beverly May 3, 2016 at 8:31 am #

    It’s now month 2 and I’m still working on the final setting up my e-series account. Just waiting to get actively managed mutual funds brought over from another institution. Endless series of bungles and a mutual fund rep at the TD branch who relentlessly refused to understand what I wanted and needed though I couldn’t have been clearer. He may have done well at charm school, less well at investment school. I never quite sorted out how much was cunning and how much was incompetence on his part.

    Anyhow, I’m almost there. Finally asked to see his manager and she’s much more on the ball and accommodating. The phone helpline people were crucial to the process and at one point emailed the bank rep to tell him what he needed to do. Told the TD manger that it had been the worst banking experience of my life.

    Had my fingers crossed that I’d be one of the lucky ones who came out saying it had been easy, painless. But that just wasn’t to be.

  3. Canadian Couch Potato May 3, 2016 at 4:52 pm #

    @Beverly: Thanks for sharing your experience. In this case it sounds like one person’s incompetence rather than any systemic problem at TD. Of course, that doesn’t make it any less frustrating for you.

  4. jules July 13, 2016 at 3:12 am #

    Hi there 🙂 I was told I need a TD webbroker account. I am not sure that is true. Could I buy e-series through a TD webbroker account? I was with a bank employee and she did not seem well trained. She also told me that any investments that I hold in a TFSA will be taxed unless it is a high interest TFSA. At this point I decided to leave the appointment because I knew this is not true. I am stil not sure about the webbroker account though…

  5. Canadian Couch Potato July 13, 2016 at 7:27 am #

    @Jules: It’s possible to get the e-Series funds through a TD Mutual Funds account, which would be accessible through EasyWeb rather than WebBroker. But a better solution is to open accounts with TD Direct Investing, which would be accessible via WebBroker.

  6. Emily August 24, 2016 at 8:28 am #

    I live in BC. It was very complicated to open the TD e-series fund. The first branch I went to, the adviser had no clue what the e-series fund was. The second branch I went to, the same thing occurred. I had to explain what it was to the adviser and then showed her the TD’s e-series fund page on her computer. She proceeded to sell me TD’s actively manage fund by stating that “I’m bound to limited options for the E-Series fund,” as opposed to the more options with their actively manage fund. I opened a mutual fund account with them that day. I have submitted the conversion form and now am waiting for my account to convert. Financial bloggers are right about the TD e-series fund, it is quite hard to open one, especially when the employee does not know what the hell it is.

  7. Canadian Couch Potato August 24, 2016 at 9:01 am #

    @Emily: Sorry to hear about this experience. This is why I generally recommend opening an account with TD Direct Investing instead. All of the bank employees know how to do that, and you don’t have to tell anyone what you plan to use the account for, so there is no opportunity for them to try to steer you towards actively managed funds.

  8. Eemjay August 24, 2016 at 3:23 pm #

    Hello Dan,, Appreciate if you can please write something about RDSP options! Some of us who opened initially with likes of BMO etc. please if you can provide some insight within available providers currently; what best can we do?

    As you know for families having member with disability this is great tool but not much flexibility.

    Thanks Dan.

    Eemjay

  9. David E August 24, 2016 at 3:44 pm #

    Eemjay – the following web page has a lot of information about RDSP’s especially with TD. http://www.canajunfinances.com/rdsp/ As far as I’m aware, TD is the only brokerage that supports self-directed RDSPs.

  10. Canadian Couch Potato August 25, 2016 at 12:18 pm #

    @David E: Thanks for sharing your experience here. Eemjay, looks like TD Direct with the e-Series funds would be an excellent option for the RDSP.

  11. Mitch September 1, 2016 at 8:42 pm #

    @Mr. Potato – why do you recommend a TD direct investment account that has fees instead of a e-series mutual fund account that does not have fees as far as I can tell? They might be annoying to open, but it doesn’t seem that bad once you know what to do. I prefer regular small contributions over less frequent but substantial contributions.

  12. Canadian Couch Potato September 2, 2016 at 7:57 am #

    @Mitch: TD Direct accounts have no fees as long as they are above $15,000. They are also much easier to open than a TD Mutual Funds e-Series account, and they are much more flexible, because you can also purchase ETFs, GICs and other investments in the same account.

  13. craig September 7, 2016 at 9:29 am #

    TD now charges $75 + tax to transfer funds out of TD.

    This hidden fee was not in place when I opened my RRSP, but they moved the goal posts in 2015 and refused to refund the money.

  14. Eemjay September 7, 2016 at 11:12 am #

    @David E: Thanks, yes i know that blog but i doubt TD-e supports RDSP. I have RESP/RRSP with TD-e but not RDSP as it was not supported. I will check with them again.
    Sadly,There is complete lack of interest in RDSPs from these big Banks.

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