“For retirement brings repose, and repose allows a kindly judgment of all things.” – John Sharp Williams
For a United States Senator, Williams provides valuable insight into Canadian retirement—although it may be best to judge which Registered Retirement Savings Plan (“RRSP”) option is right for you well before you reach retirement. Before we discuss two different account types, it’s important to address a common misconception: RRSPs are not products; they are accounts with specific tax structures. When you invest in your RRSP, you are investing in products within the account, whether they are mutual funds or individual securities.
Self-Directed RRSP
Self-directed accounts are held by the client themselves, and the investment resides at the financial institution they opened the account with, as securities for this account structure cannot be held in your own name.
This does come with drawbacks, as the responsibility for ongoing management of the account would fall on your shoulders, meaning you would have to make educated decisions on what to invest your savings in and their performance thereafter.
While these accounts typically yield the most individual choice for investors, they also require more paperwork, research, and work. It’s important, and often difficult, to keep in mind various economic factors when choosing your investments, as they can significantly impact your account’s performance.
If you were to open RRSPs at several different institutions, your estate situation may become convoluted, as your Executor would need to settle your estate at each and every one of those institutions.
Nominee RRSP
Nominee RRSPs take a different approach, where you elect a third-party manager to handle your account activity. The nominee is typically a trusted financial institution or an experienced financial advisor.
The adage “convenience is king” rings true: your account is overseen by someone else, and the responsibility for the day-to-day management is taken off your plate. Advisors bring years of experience to the table and are more likely to understand the nuances of investment management. By understanding the finer points, they can help you make the best decisions to grow your RRSP and secure your retirement. Along the way, they can often provide advice or guidance on a variety of different topics related to retirement savings.
This model does come with the added expense of having a financial expert manage your investments, but working with a professional typically yields better investment results, overshadowing the increased costs.
When it comes time to settle your estate, only one set of documents needs to be submitted for your nominee account. Remember, even if you have hundreds of investments, they all reside in the same account.
Which is Better, Self-Directed or Nominee Accounts?
There is no right answer since it ultimately depends on your financial situation, personal goals, and available time.
If you are an active, engaged, and well-informed investor capable of juggling the time and dedication required to manage your own account, a self-directed account may suit your needs. If you are hoping to maximize the potential of your retirement savings as conveniently as possible with the help of a third-party expert, nominee accounts may be a better fit.
With a Bellwether Family Wealth Advisor, your RRSP will be managed with an extended degree of care and detail.
Our advisors and portfolio managers are fiduciaries. The concept of being legal fiduciaries is what ties it all together: they must legally and ethically always act in your best interest. With the added benefit of discretionary control, they can make changes to your account without needing your confirmation. For busy investors or out-of-town clients, this can be much more convenient. Further, investment opportunities can be capitalized on more frequently due to not requiring your sign-off every time.
With a Bellwether Family Wealth Advisor, your investments are always working for you.
