[Canuck]

Soooo I had no idea that i could withdraw cash from my T.D waterhouse account to do whatever I like with it.

I was always under the impression that a margin account could only be used to purchase stocks, etf's, bonds etc. Basically anything that I could buy through T.D that is held in that T.D account.

for example- If I wanted to buy a studio apartment for $300,000, I could just transfer that amount out of my Canadian margin account into my Vancity account to purchase the condo, and I'd only be paying an interest rate of 3% on my margin.....who knew!

 

[Canuck]

You might want to read the fine print before buying that condo.

ah is there a catch?

besides an obvious margin call, but I'd only ever use maybe 20% of my available margin

 

[Canuck]

"Margin loans can have some pricing advantages over mortgages and other more traditional loans. Borrowers pay no closing costs, no property appraisal is required and there are no prepayment penalties."

plus if i buy an investment property all my interest is tax deductible.

 

[Canuck]

Are you sure you are allowed to take the money out of the account? That's not really a margin loan if that's the case.

How would they do a margin call?

I'm positive. Well if I'm to believe the T.D rep that i spoke to. I was just looking to transfer a very small amount of cash out and wondered if i could do that, and he said "of course, you can transfer your entire margin amount out if you wish"..."for anything you like, buying car, going on a holiday".

I'm not seriously thinking of buying an apartment on margin, but I thought it was interesting that I could if I wanted to.

I spoke at length about it, and he broke down the interest I'd pay ( President's account)

0-$25,000 -4%
$25,000- $100,000 - 3.75%
$100,000 - limit - 3%


there is nothing stopping them from still doing a margin call, i have much more equity than i do margin

 

[humble_pie]

pillars the broker always holds back enough collateral to cover the margin debt. They update continually. Some brokers update margin levels to the minute.

amounts over & above the debt level, the client is free to withdraw & spend on mumbletypegs.

keep in mind that if he does that - withdraw to the max - & then there is a margin call (because the collateralized securities have just dropped in value) then the broker is going to liquidate up to e.v.e.r.y.t.h.i.n.g.

PS when $300k is 20% of margin, that's about $1.5 million in margin. That's a pretty big account, somewhere around $3 mil, extremely roughly speaking. Not chump change.

 

[blin10]

that's how rich get richer :> people with money can borrow at much lower rates

 

[Canuck]

pillars the broker always holds back enough collateral to cover the margin debt. They update continually. Some brokers update margin levels to the minute.

amounts over & above the debt level, the client is free to withdraw & spend on mumbletypegs.

keep in mind that if he does that - withdraw to the max - & then there is a margin call (because the collateralized securities have just dropped in value) then the broker is going to liquidate up to e.v.e.r.y.t.h.i.n.g.

PS when $300k is 20% of margin, that's about $1.5 million in margin. That's a pretty big account, somewhere around $3 mil, extremely roughly speaking. Not chump change.

$300,000 was just an example, I don't have $1.5 in margin, but i do have an available margin of $804,000. Again, the most I'd ever go in margin for anything (including stocks) would be about $150,000. Honestly, I rarely even use it, but I owe a chunk of cash to the CRA, hence the phone call....damn tax time.

 

[humble_pie]

Well if I'm to believe the T.D rep that i spoke to. I was just looking to transfer a very small amount of cash out and wondered if i could do that, and he said "of course, you can transfer your entire margin amount out if you wish"..."for anything you like, buying car, going on a holiday"

a big problem at the TD is that they closed the edmonton call centre a while back & laid off 140 experienced representatives, some highly-trained, highly experienced & presumably more highly-paid.

then when clients complained too much about long wait times on phones because not enough staff, the TD hired 100 new rookies with zero experience. Of course the broker saved itself $10k-$15k a year, per representative, with this outsourcing-in-canada shuffle, but the service went to hell in the proverbial handbucket.

the rookies began saying the most stunningly awful stupid things to clients. None of them knew how to take complex orders or even had option licenses, in the beginning, which was a few months ago.

i'll be the first to say the rookies are improving, but quite a few are still saying the most stunningly awful stupid things. Like this quoted remark :biggrin:

of course, the remark could have been exaggerated by the poster

 

[Canuck]

a big problem at the TD is that they closed the edmonton call centre a while back & laid off 140 experienced representatives, some highly-trained, highly experienced & presumably more highly-paid.

then when clients complained too much about long wait times on phones because not enough staff, the TD hired 100 new rookies with zero experience. Of course the broker saved itself $10k-$15k a year, per representative, with this outsourcing-in-canada shuffle, but the service went to hell in the proverbial handbucket.

the rookies began saying the most stunningly awful stupid things to clients. None of them knew how to take complex orders or even had option licenses, in the beginning, which was a few months ago.

i'll be the first to say the rookies are improving, but quite a few are still saying the most stunningly awful stupid things. Like this quoted remark :biggrin:

of course, the remark could have been exaggerated by the poster

Are you saying the broker was wrong? I'm not exaggerating that is what he told me.
Also, being in the President's club, I was given a different phone number to call, ensuring that I was always speaking to an experienced licensed broker when i did call, plus 0 wait time, which is usually the case.

 

[humble_pie]

canuck they do *not* have any presidents' account dedicated lines any more. The PA desks were broken up & stopped last november. November 2nd 2013 if i'm not mistaken.

calls are taken by anybody & everybody now. Your pickup could be the most highly-trained & most experienced representative in the whole of canada. Or could be a rookie. One never knows.

what betrays your callee as a rookie, though, is not that he was wrong. It's true that you can borrow up to your margin limit. The problem is that what he said - assuming you are quoting 100% accurately - was inappropriate.

he went beyond stating the margin limit terms & began encouraging you to borrow for anything you like, buying car, going on holiday. There's a line that he crossed. He should have remained more responsible, less swashbuckling. Instead of exhorting to buy car, travel etc, he should have directed you to a sober warning text discussion of margin debt implications, which doubtless exists somewhere in the TD account disclaimer language.

there are actually many stories of former PA clients calling & hearing responses from rookies that are far more astonishing than yours. All of these stories are highly entertaining. Some of the rookies would even hang up when they got a question that was too difficult for them to handle. Although i believe that practice - hanging up on a challenging call - has been stopped by now.

 

[Canuck]

canuck they do *not* have any presidents' account dedicated lines any more. The PA desks were broken up & stopped last november. November 2nd 2013 if i'm not mistaken.

calls are taken by anybody & everybody now. Your pickup could be the most highly-trained & most experienced representative in the whole of canada. Or could be a rookie. One never knows.

what betrays your callee as a rookie, though, is not that he was wrong. It's true that you can borrow up to your margin limit. The problem is that what he said - assuming you are quoting 100% accurately - was inappropriate.

he went beyond stating the margin limit terms & began encouraging you to borrow for anything you like, buying car, going on holiday. There's a line that he crossed. He should have remained more responsible, less swashbuckling. Instead of exhorting to buy car, travel etc, he should have directed you to a sober warning text discussion of margin debt implications, which doubtless exists somewhere in the TD account disclaimer language.

there are actually many stories of former PA clients calling & hearing responses from rookies that are far more astonishing than yours. All of these stories are highly entertaining. Some of the rookies would even hang up when they got a question that was too difficult for them to handle. Although i believe that practice - hanging up on a challenging call - has been stopped by now.

Gotcha, thanks for explaining. I've been with them for years and have only had to call maybe 5 times, i did however have one absolutely crazy conversation with someone that was unbelievably clueless, I asked to be transferred to someone else and I mysteriously got disconnected altogether.

So that whole President thing is pretty much a farce, besides I guess the .25% savings i get on margin loans?

 

[humble_pie]

Gotcha, thanks for explaining. I've been with them for years and have only had to call maybe 5 times, i did however have one absolutely crazy conversation with someone that was unbelievably clueless, I asked to be transferred to someone else and I mysteriously got disconnected altogether.

So that whole President thing is pretty much a farce, besides I guess the .25% savings i get on margin loans?

gotcha, thank you for confirming.

your first-mentioned callee - the one who was clueless - must have been the rookie. He or she probably hung up on you. Hangups were not uncommon esp last november & december, esp from markham call centre :biggrin:

ottawa & montreal were behaving slightly better though

i think it would be fair to say TD is passing through an excruciating cost-cutting transition period now & nobody knows where or how they will end up. They might become more profitable as a division for the parent banksters, but they've lost the flagship leadership position they always used to enjoy. Sic transit gloriae mundi.

may i say that i'm always impressed with the high quality of the individual TD trainee representatives. For that matter, also the high quality of the BMO representatives, where i have a backup account. They all work as hard as they possibly can. They are all very bright, very talented, very motivated, eager to learn, often straight out of university. In 2-5 years they will become as expert as the crowd of skilled & experienced PA representatives who were let go when the TD closed edmonton office.

in the meantime, though, there can be big surprises & even hardships for former PA clients who wish to arbitrage, short, negotiate commish or margin, because the newbies can't do any of this. For a while there - last november & december - the poor kids couldn't even find a senior representative to help them, because the place was in such a mess. Even today, i'm not sure to what extent they can find help when they need it, i've come to dread contacting the big green & i am trading the backup account far more actively these days.

there are still some PA advantages. Better margin loan rates, the statements are supposed to be prettier, if you have a difficult trade for example a multi-legged option combo & if you luck out when a former PA rep answers the phone, you can still be excellently served. Not sure what else, maybe there's something i'm overlooking?

publicity-wise, it was a most unwise time for the big green to switch to lower service, right in the middle of the never-ending-no-USD-rrsp débacle.

 

[Canuck]

gotcha, thank you for confirming.

your first-mentioned callee - the one who was clueless - must have been the rookie. He or she probably hung up on you. Hangups were not uncommon esp last november & december, esp from markham call centre :biggrin:

ottawa & montreal were behaving slightly better though

i think it would be fair to say TD is passing through an excruciating cost-cutting transition period now & nobody knows where or how they will end up. They might become more profitable as a division for the parent banksters, but they've lost the flagship leadership position they always used to enjoy. Sic transit gloriae mundi.

may i say that i'm always impressed with the high quality of the individual TD trainee representatives. For that matter, also the high quality of the BMO representatives, where i have a backup account. They all work as hard as they possibly can. They are all very bright, very talented, very motivated, eager to learn, often straight out of university. In 2-5 years they will become as expert as the crowd of skilled & experienced PA representatives who were let go when the TD closed edmonton office.

in the meantime, though, there can be big surprises & even hardships for former PA clients who wish to arbitrage, short, negotiate commish or margin, because the newbies can't do any of this. For a while there - last november & december - the poor kids couldn't even find a senior representative to help them, because the place was in such a mess. Even today, i'm not sure to what extent they can find help when they need it, i've come to dread contacting the big green & i am trading the backup account far more actively these days.

there are still some PA advantages. Better margin loan rates, the statements are supposed to be prettier, if you have a difficult trade for example a multi-legged option combo & if you luck out when a former PA rep answers the phone, you can still be excellently served. Not sure what else, maybe there's something i'm overlooking?

publicity-wise, it was a most unwise time for the big green to switch to lower service, right in the middle of the never-ending-no-USD-rrsp débacle.

I don't think you're missing anything. It would have been nice had they lowered the trade commission a few bucks for PA members when they lowered the commission for all members.

 

[Four Pillars]

I deleted my posts since they were so far out in left field...

I didn't understand what was happening - I thought C was talking about using the the account like an LOC ie even with no securities was able to borrow from it.

 

[kelaa]

Can someone explain to me when does the margin borrowing costs come due?

In my case, I moved 100 shares of BNS from my cash account to a new margin account. On October 10th, I withdrew 1,700 to cover some expenses. I paid 1,700 back to the account October 15th. I've have yet to see any interest or borrowing charges.

 

[humble_pie]

Can someone explain to me when does the margin borrowing costs come due?

In my case, I moved 100 shares of BNS from my cash account to a new margin account. On October 10th, I withdrew 1,700 to cover some expenses. I paid 1,700 back to the account October 15th. I've have yet to see any interest or borrowing charges.

here's my understanding: normally interest charges on a margin account would appear on end-of-month broker statements.

in your case, you borrowed a relatively small amount ($1700) for only a short period of time (5 days). Most brokers do not charge for interest amounts of $5 or less.

your broker could not be charging more than 6% interest on margin accounts, so you could guesstimate a theoretical maximum interest charge of $1.40 for your $1700 5-day loan. This is less than the threshhold $5, so no interest was charged.

note that the tally resets every month. In other words, you have a little window of opportunity each month - a few days, a few dollars - to run a small overdraft without any cost.


that's the good news. The bad news is that, during those 5 days in october, the broker was free to borrow your BNS shares. No notifications are given intramonth, so you would not have known, you will never know, if your shares were borrowed or not. In any event, when you repaid your loan in full by injecting cash on october 15, the broker had to return any shares it might have borrowed.

 

[Money172375]

here's my understanding: normally interest charges on a margin account would appear on end-of-month broker statements.

in your case, you borrowed a relatively small amount ($1700) for only a short period of time (5 days). Most brokers do not charge for interest amounts of $5 or less.

your broker could not be charging more than 6% interest on margin accounts, so you could guesstimate a theoretical maximum interest charge of $1.40 for your $1700 5-day loan. This is less than the threshhold $5, so no interest was charged.

note that the tally resets every month. In other words, you have a little window of opportunity each month - a few days, a few dollars - to run a small overdraft without any cost.


that's the good news. The bad news is that, during those 5 days in october, the broker was free to borrow your BNS shares. No notifications are given intramonth, so you would not have known, you will never know, if your shares were borrowed or not. In any event, when you repaid your loan in full by injecting cash on october 15, the broker had to return any shares it might have borrowed.

Why is that bad news? Are there negative impacts to me if my shares are borrowed?

 

[kelaa]

Thanks for sharing your knowledge, Humble_pie.

Money172375, I have a vague sense that if your shares are borrowed and shorted by someone else, 1) there is a question of voting rights, 2) someone else would be receiving qualified dividends and hence your own dividend tax status would change, 3) in the event of insolvency by the borrower or brokerage, recovering your actual shares might not be possible or be much more complicated.

 

[Eclectic12]

... 2) someone else would be receiving qualified dividends and hence your own dividend tax status would change ...

??? ... maybe for a dual US - Canada citizen?

For a Canadian I am aware of "eligible", "non-eligible" and "foreign" dividends.
Assuming the dividends paid were "eligible" - not receiving them would cut one's income but AFAICT, does not change one's dividend tax status.


Cheers

 

[kelaa]

Yes, "eligible" is the right word. It had escaped me at the time.

Take the following example, Eclectic12:

Party A's 1 share of BNS was borrowed to Party B, who shorted it by selling to Party C. Party C rightly expects their eligible dividend from BNS. Party B has to pay something to Party A with respect to the dividend payments. It doesn't make sense for Party A to also collect an eligible dividend; this would have created new eligible dividends out of thin air. I'm don't know what happens in practice, but from an abstract point of view, the payment Party A receives is not an eligible dividend.