[Terry]

I have both RRSP and RRIF accounts with Manulife and was surprised to discover recently that the MER on my RRIFs was slightly higher than on the same funds in my RRSP. Is this usually the case? If so, why - because RRIFs require more effort on the part of the company?

Thanks.

 

[Preet]

If they are the exact same fund and class of units, there will be no difference no matter which account you hold them in. The fund doesn't care where it's held. My guess is that if you are sure that you hold the same fund, you must be holding a different class of units (i.e. class A versus class B - which could be DSC versus Front End, or corporate class versus unit trust class, etc.).

Let us know what you find out...

 

[Terry]

If they are the exact same fund and class of units, there will be no difference no matter which account you hold them in. The fund doesn't care where it's held. My guess is that if you are sure that you hold the same fund, you must be holding a different class of units (i.e. class A versus class B - which could be DSC versus Front End, or corporate class versus unit trust class, etc.).

Let us know what you find out...

Preet, it was actually Manulife that drew my attention to the difference in IMF for the same funds held in RRSP and RRIF. What I had noticed at first was that the funds had different unit values and I inquired about that. I was then informed about the difference between the IMF. Since the management fee is deducted from the unit value on a monthly basis, the larger fee on RRIF funds naturally causes the unit value to decrease relative to the same fund in the RRSP.

Case in point. The ML MMF Monthly High Income fund has an IMF of 1.9 in my RRIF but only 1.448 in my RRSP. Today, the value of a unit held in my RRSP is 10.194 but it is only 10.08 in my RRIF.

I was very glad to have made this discovery when I did. Once I turned 65, although under no obligation to convert to RRIF, I opened a small RRIF and started monthly payments in order to generate some income that qualifies for the tax credit on pension income.

I get a discount of .25 on IMF for funds held in an RRSP when the account is over $60,000. I had begun to think that I should increase the funds in my RRIF in order to get the advantage of the IMF discount. Thankfully, I discovered the IMF difference in time, before making that transfer.

This is what prompted my other question about Etraded funds in a RRIF account. I am happy to have heard that this is no problem. Once I reach the age when all of my RRSPs must be converted to RRIF, I will give very serious consideration to transferring my registered retirement funds to an Etraded account, in order to avoid the higher IMF costs with Manulife.

 

[Preet]

Interesting, so the discount on the RRSP funds due to a balance threshold does not account for the entire difference in IMF. Did they give a reason for the rest of the difference?

I had never used Manulife funds before, and had never seen anything like this before (different fees for different accounts, not discounting based on assets). Mind you, there are what, 10,000 funds out there in Canada or something?

 

[Terry]

Preet, I have not learned of the reason for the difference. I assume it has to do with heavier administration duties in connection with RRIFs because of monthly payouts and regulations to follow etc.

My question has triggered little response. I'm guessing that this may be due to the fact that few people participating in the forum are into RRIFs yet. I'm still curious whether Manulife's practice is normal but this forum may not be a good place to find out whether or not this is so.

 

[retired2]

Not there yet but closing in fast. Interesting facts. Please keep us posted on future developments.

 

[Preet]

Well, I can tell you that this is not normal. Are you able to give us the fund codes? Can you verify if they are the exact same fund codes in each account?

 

[Terry]

Well, I can tell you that this is not normal. Are you able to give us the fund codes? Can you verify if they are the exact same fund codes in each account?

Yes, Preet, the IMF varies on exactly the same funds - same name, same number.

Here are 5 examples. The IMF is listed by RRIF w/out discount /RRSP w/out discount /RRSP w/ discount for over $60,000 in account

3132 (Money Market) 1.6 / 1.3 / 1.048

4191 (Bond index) 1.6 / 1.55 / 1.298

4161 (Fixed Inc Fund) 1.9 / 1.7 / 1.448

5132 (Balanced Fund) 1.9 / 1.7 / 1.448

7132 (Can Equity Index) 1.6 / 1.3 / 1.048

The key comparison is between the first two numbers which compare "apples and apples" - the same funds, in RRIF and RRSP, without any discount for the size of the account. The difference varies from just .05 to .3.

 

[Preet]

Are these directed accounts? Or Self-directed? Are you using an advisor? Sorry for all the questions, just never seen anything like this before. Annual account administration fees? I'm hoping not...!

 

[Terry]

Are these directed accounts? Or Self-directed? Are you using an advisor? Sorry for all the questions, just never seen anything like this before. Annual account administration fees? I'm hoping not...!

Preet, I direct the accounts myself. No annual administration fees.

Incidentally, I sent a few questions to Manulife yesterday and am waiting for reply. Since then I have realized that I have another question I want to pursue but I'll wait until getting the first ones worked on. I know that ML pays financial advisors some sort of cut and I suspect that the assumption that this will be necessary is built into the MERs. Some time ago, on the phone, I asked if it would be possible to have that amount credited back to me, since ML does not have to pay it to anyone else. My question was dismissed rather lightly but I suspect that I was dealing with someone very low in the hierarchy. I want to see if I can pursue that matter more seriously.

I suspect that ML is too large to make any special arrangements with someone like me but it is worth a try. I have indicated that I am considering TD E-series and ETFs and have asked what fees would be charged for moving my funds from ML. I'd rather not do it, really, but I need to assess all my options seriously.

One thought that has occurred to me, to simplify a move, is that I could just move the RRSP accounts. Then I could let the RRIFs with ML exhaust themselves through monthly payments and open new RRIFS with the new bank/broker. My main reluctance right now is that I now how simple it is to move money around within my ML accounts and to move some from RRSP to RRIF when I need to. I have looked at other sites and get no sense at all of just how all that happens with them. I certainly don't want to make a move to save money and then discover that I have made investment management much more difficult for myself.

 

[spirit]

Great post

My husband will be 70 this year and so I am learning all I can about the joys of asset allocation vs asset devolution. Please keep this topic going. Thanks