Most people never think about how their investment fees get paid. The money just comes out of the account. But which account it comes out of matters, and for a TFSA it matters a lot.

The problem

Your TFSA is a tax-free bucket. Every dollar in it grows without tax, forever. When your advisor’s fee is taken out of the TFSA, that money leaves the bucket for good. You do not get the room back, and the growth that money would have earned is gone too.

The fix

Ask to have your TFSA fee paid from a different account. Usually that means your non-registered investment account or your bank account. The fee is still the same. The only difference is which pocket it comes from.

When you do this, the full TFSA keeps working for you.

What it is worth

Say you have $100,000 in a TFSA and pay a 1% fee. That is $1,000 a year. If that $1,000 stays in the TFSA each year instead of leaving, and the account grows at 6%, you end up with roughly $37,000 more inside the TFSA after 20 years. All of it tax free.

The bigger the TFSA and the longer the time, the bigger the number.

Is this allowed?

Yes. For a few years there was confusion about this, and some firms worried CRA would penalize it. In 2019 the Department of Finance and CRA confirmed that paying registered account fees from outside the account is fine. Most investment firms now allow it. You just have to ask.

What about my other accounts?

  • RRSP: the opposite advice. Let the fee come out of the RRSP. You are paying with money that has never been taxed, so it is the cheapest dollar you have.
  • RESP: same idea as the TFSA. Pay the fee from outside and keep the grants and growth working for your kids.
  • Non-registered: the fee for this account is tax deductible. Paying your TFSA fee from this account does not make the TFSA fee deductible, but it does not hurt anything either.

What to do

Send a quick note to your advisor: “Can you set up my TFSA and RESP fees to be paid from my non-registered account?” That is it. One email, and more of your money keeps growing tax free.

If you are not sure how your fees are set up right now, ask. You might be surprised.

This is general information, not advice for your specific situation. Talk to your advisor or accountant before making changes.

Share This Story, Choose Your Platform!