In a recent post, I shared a reader’s story about how difficult it was for her to open a TD e-Series Mutual Funds account. That elicited responses from dozens of readers who had similarly unpleasant experiences, as well as several who weren’t sure what all the fuss was about.

I contacted TD about the issue and received a response from Maria Leung of Corporate and Public Affairs, TD Bank Financial Group. Her explanations should help clear up some of the confusion surrounding these otherwise excellent index funds.

Many people who commented on the original post said they tried to open an e-Series account at a TD branch, only to encounter staff who had little or no idea what the e-Series funds were. So my first question was about that unfamiliarity:

While TD Mutual Funds offers a broad range of investment solutions, not all are actively promoted in each of our distribution channels. For our TD e-Series Funds, customers purchase the funds online, either through TD Canada Trust’s EasyWeb site, or if they are TD Waterhouse Discount Brokerage customers, online using WebBroker (discount brokerage accounts can be opened at any TD Canada Trust bank branch or TD Waterhouse Investor Centre across the country). The efficiencies of purchasing the funds online, combined with the low management fees of index funds allows us to pass the savings on to our customers in the form of lower MERs.

Bottom line for investors, then, is simply to avoid visiting a TD branch if you want to open a TD e-Series Mutual Funds (EasyWeb) account. Instead, go straight to the online application page. If you prefer to purchase the e-Series funds through a TD Waterhouse account, then you can do that either online or at a branch.

It’s entirely reasonable for TD to require customers to open an e-Series account online, but I would maintain there’s no good reason why branch employees should be unaware of their existence. It would be a simple matter to train staff to say, “Sorry, we don’t do that at the branch, but here’s a brochure with a link to the website where you’ll find the application.”

The risk-tolerance questionnaire

My next question was why it is necessary to fill out a rather lengthy risk-tolerance questionnaire when buying e-Series funds through a TD Mutual Funds account, but not if you’re buying the same funds through TD Waterhouse.

Customers who prefer not to work with advisors, but decide to purchase the funds online on TD Canada Trust EasyWeb are required to complete a thorough application process for a few different reasons:

When opening an account on TD Canada Trust EasyWeb, customers are in fact opening a mutual funds account with TD Investment Services Inc., the mutual fund dealer affiliate of TD Canada Trust. Each Canadian bank has a mutual fund dealer affiliate that offers mutual fund products to Canadian customers. The Mutual Fund Dealers Association of Canada’s (MFDA) rules require mutual fund dealers, including TD Investment Services Inc. to use due diligence to ensure that each order accepted or recommendation made for any client’s account is suitable for the client and in keeping with their investment objectives.

In addition, complete know-your-client (KYC) information is required when opening an account and before trading on behalf of clients. This process is consistent for all investment accounts opened with TD Investment Services Inc. The MFDA rules apply to all mutual fund dealers that are affiliated with Canadian banks, so a similar account opening process is in place amongst these types of financial services firms across Canada.  The MFDA Rules however, do not apply to dealers that allow customers to purchase stocks, such as in a discount brokerage platform.

Customers who choose self-directed relationships and who hold an account with suitability-exempt discount brokers, including TD Waterhouse Discount Brokerage, are not required to complete a suitability questionnaire. In these types of accounts, the investor is responsible to ensure their investment decisions are consistent with their investment objectives and risk tolerances.

So there you go. That’s the reason for the risk-tolerance  questionnaire. If this part of the process seems daunting, remember you can always adjust your asset allocation later, once the account is up and running.

Many thanks to Maria Leung at TD for providing clear and complete answers.