The idea of comparing brokers on how they serve investors looking at GICs would have seemed silly as recently as 18 months ago.
Guaranteed investment certificates paid nearly no interest and seemed antithetical to the higher risk, higher reward style of DIY investing that digital brokers focus on. Today’s high rates have revitalized GICs, and many investors are including them in their portfolios.
Most brokers offer GICs to clients, but there are some key differences in areas such as minimum investment, the terms available and the number of third-party issuers offered. A broker with a strong GIC offering can help clients simplify their investing. It’s easier to buy GICs from the dealer where your main investments are than it is to have your investments in one spot and your GICs in another. The accompanying chart compares brokers in some key areas related to GICs. Here are a few notes to help frame this information:
GIC issuers
Brokers may offer GICs from the same bank family, but they also offer a selection of products from third-party issuers. If you spot a GIC issuer with a top rate, don’t automatically expect your broker to offer it. Some GIC issuers sell direct to the public only.
Minimum investments
This is a major point of comparison between brokers, with some as low as $500 or $1,000 and others as high as $20,000 in limited situations.
Deposit insurance
The third-party GIC issuers you’ll find in your broker’s inventory are typically banks that are members of Canada Deposit Insurance Corp. CI Direct Trading, Qtrade Direct Investing and Questrade are among the brokers that offer credit union GICs as well. Credit unions in each province have their own deposit insurance plans.
Current rate environment
No broker stands out for having the best rates. As noted in the chart, a sample rate comparison this week found a difference of a mere 0.1 of a percentage point in the best one-year GIC rates. With all brokers, expect a wide variation between the best and lowest rates for any particular term. Example: One broker had a top one-year rate of 5.65 per cent on offer at midweek, and a bottom rate of 4 per cent. As a general rule in fall 2023, it should be possible to earn more than 5 per cent for terms of one through five years. Try the GIC rate comparison chart on HighInterestSavings.ca for a survey of best GIC rates.
What happens when your GIC matures
Expect principal and interest to be deposited in your account.
Redeeming cashable GICs
Some brokers allow you to do this online, but most require a phone call.
Interest
It’s pretty much standard for GIC investors to offer the option of having interest paid monthly, semi-annually, annually or compounded annually and paid at maturity.
Equity-linked GICs
A few brokers offer access to this subcategory of GICs, where returns are tied to the performance of a stock index, a sector or a basket of stocks. This comparison does not include equity-linked GICs because they are a superfluous product at a time when you can get between 5 per cent and 6 per cent from a traditional GIC.
Website navigation: Some brokers have taken steps to make their GIC platforms more visible and easier to find, usually as an option under the “Trade” link on their client websites. Some brokers continue to treat GICs as an option for fixed income investing, along with bonds and T-bills.
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Rob Carrick