The federal government has unveiled draft rules aimed at preventing banks from imposing fees when customers transfer their investment accounts to other financial institutions.
This proposed regulation would affect registered accounts such as RRSPs, TFSAs, and RESPs, in addition to non-registered investment accounts held at Canadian banks.
According to a regulatory impact analysis released by the Department of Finance on Wednesday, these fees usually amount to $150 per account.
Although the proposed ban would remove the flat administrative fee for transferring accounts, it would not eliminate product-specific fees — such as trading commissions, penalties for early redemption on GICs, or mutual fund sales charges — that may apply if investments are sold or liquidated during the transfer process to another bank.
If the new regulations are enacted, they will fulfill the commitment made by Ottawa in the 2025 budget to ban fees associated with the transfer of investment and registered accounts. The government is expected to present its latest federal budget later today.
An official from the department mentioned that a consultation period lasting 30 days will commence after Saturday.
However, fees related to personal chequing and savings accounts will remain unaffected.
Li Zhang, a financial literacy expert and director of social impact at Chartered Professional Accountants of Canada, noted that removing transfer fees for investment accounts will motivate Canadians to explore banks and financial institutions that align better with their requirements.
As concerns about privacy and security escalate, several of Canada’s largest banks are restricting the use of personal AI agents by clients, with many outright prohibiting them.
Zhang remarked, “We often find ourselves in committed, long-term relationships with our financial institutions, which can have certain disadvantages, especially as we evolve and progress through our financial journeys, our requirements change.”
“What we required at 15 years old is not what we need at 20, and it definitely isn’t what we will need at 40. Therefore, it is vital to assess your financial ecosystem and consider, ‘Am I receiving adequate support?'”
Michael Katchen, CEO of Wealthsimple, commended the government’s initiative to abolish what are referred to as “exit fees.”
The Toronto-based fintech company has a significant interest in the removal of these fees, as its primary offering is a widely-used app that provides commission-free trading, automated investing, banking, and tax services.
Katchen stated in a LinkedIn post on Wednesday, “This year alone, Canadians have incurred $73 million in exit fees simply to transfer their savings to Wealthsimple.”
“Every financial institution in Canada could choose today to cease these unnecessary fees and eliminate this tax on choice. Regulation is not needed to do what is right.”
Zhang added that such a move would particularly benefit less affluent Canadians and smaller, emerging financial institutions that compete with the larger Canadian banks.
-
BMO, CIBC, RBC, TD Bank block personal AI agents, citing safety and security
-
Video
Bank of Canada hikes interest rates amid inflation fears
“This change will make it simpler for smaller financial institutions to attract larger institutional clients, as often, if individuals possess a certain level of net worth, competing or newer institutions will cover their transfer fees,” she explained.
It will also provide advantages to lower-income Canadians, “because that $20, that $150, or whatever the fee may be, represents a significant burden for those who are struggling with affordability.”
The Canadian Bankers Association (CBA) stated that it is currently reviewing the proposed regulations and intends to collaborate with Ottawa regarding their possible implementation. This industry organization includes over 60 domestic and international banks operating in Canada.
CBA spokesperson Nathalie Bergeron expressed in an email on Thursday, “We believe reforms should facilitate efficient account transfers across the broader market.”