Registering your investments
Investments and shares generally need to be registered in either the name of their beneficial owner or registered under the name of a nominee. Most new investment accounts that are being opened today have the individual securities being registered in nominee name.
Registered In Client Name
More common in the past, investors had investments registered in their own name. Many investors today still have share certificates in their name either from recent transactions or holding certificates they acquired in the past. Client requests to receive the physical share certificate are becoming less common. Such requests generally result in an administration charge of approximately $35 per share certificate. Holders of share certificates not only have to monitor the quality of their investments but now have the added responsibility of securing their investments as well.
Some investors may feel that holding the share certificate is more tangible. Share certificates are generally decorated with intricate artwork which is why collectors of defunct stock certificates tend to hang on to them. When investments are registered in client name the dividend and interest cheques are mailed directly to the registered owner. As an investor registering in client name, you have more to deal with in regards to the administration of holding, buying and selling the shares.
What has changed?
Life has become more complicated. Capital markets have expanded. Fortunately, computers have made the tasks of shareholder registry and transfers more efficient. In addition, financial institutions provide a nominee service that also assists in expediting transactions.
Registered In Nominee Name
The majority of investors today are registering their securities in nominee name. This essentially means that the securities in your investment account are not registered in your name but in the firm’s name or the name of another person or company holding the securities on your behalf. The issuers of the securities may not know your identity (beneficial owner) as your account is in nominee name. You may choose whether you object to or would rather not disclose your personal information as beneficial owner to the issuers of the securities. In addition, securities law permits you to decide if you would like to receive security holder material such as annual reports and financial statements. If you object to the disclosure of your personal information and still wish to receive security holder material there may be costs associated for the financial institution to send you this information.
Nominee accounts take the majority of the administration out of your hands. Although your securities may be registered in the financial institution’s name as nominee, you maintain beneficial ownership. The nominee generally may not act unless instructed by you.
The following are some of the benefits of registering your securities in nominee name:
- Interest and dividends on your securities are paid into your investment account versus having cheques mailed to you for each security you own
- Online access listing your investments
- Monthly transaction histories and statements enable you to keep track of your investment and better monitor their value
- Flexibility to sell a partial position or to transfer a security in-kind within investment accounts
- You will receive consolidated tax slips for each non-registered investment account each year
- Efficient management of cash flow with all incoming income deposited into your account; the ability to customize outgoing payments, most of which may be automated
- Flexibility with respect to adding savings into the investment account
- Efficient settlement occurring normally within three days if held in nominee name with minimal paperwork
- Timely notification and advice with corporate actions and reorganizations such as rights issues, takeover offers, conversions of subscription rights, etc.
- Positions held in nominee name through a financial institution help to create a more organized estate
10 Questions to Consider
Individuals with physical stock certificates should consider the following:
- What are the benefits for holding your individual share certificates in your name versus nominee name?
- What happens if your share certificates are lost or stolen?
- Do you know how to transfer your share certificates to another individual?
- Do you feel the executor of your estate will be able to find all of your share certificates?
- Do you have old share certificates that are defunct that you are still holding onto?
- Do you have share certificates that you are unsure of their value?
- Are you aware of the added administrative burden your executor may encounter by having share certificates registered in your name?
- Are you aware that transfer agents may charge fees to your estate even when proper documentation is provided?
- When do you plan to dispose of your shares?
- How did you plan to dispose of your shares?
The answers to the above questions may show investors that there are few reasons to hold investments in their own name. You will find that the costs to your estate may be significant. If the costs are not a concern then consider the longer delays and greater paperwork that you are essentially asking your executor to do for you. Registering your investments in nominee name ensures completeness, ease of administration and less overall risk of something being overlooked.
Estate Planning Tip
A basic estate planning measure that we recommend for individuals with share certificates is to open an investment account and have them registered in nominee name. This will ensure that your investments are fully accounted for and safeguarded. At the same time you are reducing estate costs and saving the executor you have appointed a lot of paperwork.
The benefits of holding investments in nominee name are many, especially when it comes to estate planning. For some, it may be more important to consider the consequences of not registering your securities in nominee name. We recommend that if you have share certificates registered in your name that you meet with a financial advisor to determine if the certificates have value and if you should consider registering the securities in nominee name.