Greater scrutiny required for transfer of funds

Years ago, investors could bring cash into a brokerage firm and have it deposited into their investment account.  Those days are gone and the movement of funds is all electronic. 

One of the requirements when opening an investment account is to provide banking information.  We ask new clients to provide a void cheque for two primary reasons – to support that you are resident and to set up an electronic link between your investment account and your bank account.  

We have clients who have different bank accounts linked to different investment accounts.  As an example, Mr. and Mrs. Smith each have registered accounts with us and they have linked them to their respective individual bank accounts.  Mr. and Mrs. Smith also have a non-registered joint with right of survivorship account that they have linked to a joint bank account. 

We can link your investment accounts up to any financial institution.  There are a few advantages to having your bank and investment accounts at the same place, including one card and password to see everything.   

The electronic process is both done automatically and manually.  To illustrate we will use Mr. White and Mrs. Brown.  Mr. White is required to withdraw $24,000 from his RRIF account during the year.  He has requested payments of $2,000 are sent to his bank account automatically at the end of each month.  Mrs. Brown is planning a vacation with her grandchildren and would like $5,000 as a one-time transfer.  This transfer is an example of a manual process of a one-time transaction.  In both cases, the amounts are transferred electronically to the account linked to the specific investment account when the account was opened. 

If your bank account changes it is important to notify your financial institution so they can update your information accordingly.  Although the above payments to Mr. White and Mrs. Brown were electronically executed, they were both verbally confirmed by the advisor.  This part is important to stress as financial advisors can not take instructions to amend banking information, or transfer money, by email for security reasons.    

We often have clients who want us to send money to children, family members, or other third parties.  Similar to personal requests, and changes to banking information, third party requests for transfer of funds can not be done by email.   These types of requests require both verbal confirmation and a signed letter of direction providing details of the transfer request.   This is to protect client accounts against unauthorized email instructions, known as spoofing, and fraud.  The letter of direction can instruct us to issue a cheque payable to another individual.  The letter of direction may also provide wire transfer instructions.

Clients are often surprised to learn that we can purchase many different foreign currencies and do so quite frequently. 

We have clients who wish to purchase certain currencies throughout the year when exchange rates are favorable.  These same clients may maintain bank accounts in different countries, the most common being the United States.   In other cases, they have intentions to wire transfer the funds to assist family members living abroad. 

If we have purchased euros, British pounds or pesos for a client then these funds can be wired in the same currency if they provide the recipient’s banking information including, name, address, bank name, account number, routing platform (also known as ABA Number, IBAN or SWIFT), routing number, bank address, bank city, bank region, and bank country.

Clients who have a discretionary investment account set up with a Portfolio Manager results in the ability for the Portfolio Manager to use their discretion to buy and sell investments.  This discretion does not extend to transfers in and out of the investment account, or transfers between accounts.  In some cases, we have clients that wish to fund their annual Tax Free Savings Account (TFSA) by transferring either cash or securities from their non-registered account to their TFSA.   This type of transfer would require the client’s verbal permission prior to execution. 

Advisors can send money to your bank account but we are not able to transfer money out of your account even if we have your verbal permission.  The only exception to that is if you have set up, and signed, a Pre-Authorized Contribution (PAC) form that instructs us to withdrawal a certain amount at set dates.  As an example, Mrs. Grey contributes $500 every month into her RRSP account through a PAC.  At the end of every month, $500 is transferred from Mrs. Grey’s bank account to her RRSP investment account.

With online banking it is often possible for you to transfer money between accounts.  As an example, you can move money from your savings account to your investment account relatively quickly, especially if your bank is related to your investment firm.  We caution people to double check amounts prior to moving funds into an RRSP and TFSA account.  There are strict penalties for over-contributions.   Even if your investment accounts are at a different institution, most provide the ability to set another financial institution up as a payee (similar to a bill payment) to facilitate transfers.

When clients sell a home or a major asset, the proceeds from this sale may result in you receiving a cheque from a law firm or the buyer.  If the cheque is in your name and you wish to deposit this immediately at a financial institution then the cheque would be considered a third party cheque.  Investment institutions may still be able to deposit these cheques; however, there is greater risk as the issuer of the cheque is not you.  Financial institutions should ask the reasons for the third party cheque and where the source of the funds are from.  An alternative to providing this information is for you to request that drafts, certified cheques, and regular cheques be made payable directly to your financial firm and in the memo field you can provide instructions to have “In trust for” and your name and account number entered.  Another alternative is to deposit the third party cheque into your own bank account and write a personal cheque directly to your financial institution.