A Canadian's random thoughts on personal finance

Feb 23, 2009

The auto bailout: wrong in so many ways

Michael James hit the nail on the head today in his comments regarding the auto bailouts. I've made the same point about boosting EI rather than writing a vast cheque to a mismanaged company that makes inferior products.

It's importat to realize that the Canadian government is indebted to the EI system (at least morally, if not fiscally) to the tune of $51 billion anyway, so it seems perfectly fair for them to pay out an extra few billion in EI benefits to auto workers to tide them over until new jobs arise. It would also seem reasonable to fund re-training for the auto workers, and tax incentives for successful manufacturing companies (say, Japanese auto makers) to set up plants in Ontario.

All of this would seem more likely to succeed than to deliver billions of buckets to the crew of the Titanic.

I'd like to add that the way the Canadian bailout was determined also shows a startling lack of leadership. Queen's park decided ahead of time that they would pay 20% of whatever figure the US government arrived at, thereby abdicating our nation's fiscal sovereignty on one of its largest expenditures. This is just the latest in a string of actions since parliament was prorogued against all logic in December, all of which show that the current federal government is a rudderless ship.

Feb 1, 2009

ETrade's inactivity fees

I'm not happy with ETrade. I opened trading accounts there a couple of years ago, but until recently I only used the self-directed RRSP account. The regular trading account that you get along with the RRSP account sat idle.

Then, in October, Pizza Pizza (PZA.UN) shares dropped to the point that the distribution yield hit 14%. Now, the percentage yield is only interesting if it's a percentage of a large number, or if it's compounding; but at 14%, it meant I could buy 100 shares (for $640, which I had lying around) and the monthly distribution would be more than enough to buy one additional share every month. I transferred the cash, put in the order, activated the synthetic DRIP, and by the end of the year, the three distributions I had received had already covered the (rather pricey) $20 trading commission.

When I checked the account in January, I was in for a surprise: they had charged the account a $25 "inactivity fee". I thought at first there was some sort of mistake, but it turns out they charge regular accounts (not registered accounts) $25 each quarter in which you make fewer than two trades. There is an incredible irony in charging me an inactivity fee the very first time I used this account.

I was not impressed. At this point, I think my letters to ETrade speak for themselves:


You have charged my cash trading account a $25 "low-activity admin fee". I would like it to be refunded immediately please. My account ID is XXXXXX.

I find it absurd and infuriating that you charge me $25 specifically for providing me with no service. Your trading fees and currency exchange rates are already among the costliest in the industry, and they are only tolerable because I don't trade frequently. If you insist on charging me $25 per quarter to do nothing for me, I will be closing my accounts, transferring my holdings to a brokerage with a sane fee structure, and publicizing my displeasure as widely as possible.

I don't mind paying for service, but I refuse to pay for a lack of service, and I suggest you take a moment to reflect on the wisdom of surprising your customers with this mean-spirited, punitive fee.

Out of respect to the service agent, I won't name him or post his reply, but perhaps you can infer what was said from my response:

Dear Xxx,

Thank you for your reply, but I'm afraid it doesn't stand to reason. Why does ETrade need to charge this fee if I make one trade, but not if I make two? Why does ETrade encounter these back-office expenses if I have $4999 in my account, but not if I have $5000? It is absurd. I think the real explanation is that ETrade wants to guarantee themselves a minimum revenue stream from each customer regardless of the level of service provided. This is what happens when you let accountants run your business.

More to the point, other discount brokerages don't charge this fee. I would rather part with $125 for closing my account than get hit with this infuriating fee every quarter, or pay $160 every year for trades I don't want to do.

I think ETrade needs to consider carefully whether they want to lose people like me as customers. Certainly, my account balance is tiny now, since most of my assets are elsewhere, and I am at the start of my investing career; but I'm looking for a broker to use for the next three decades until my retirement, and I'm not going to choose one who charges me for nothing.

I will not pay this fee again. It is up to you whether that is because you have waived it, or because I have closed my account.

As expected, they did not waive the fee, and the service agent seemed to become somewhat personally affronted by my emails, which prompted me to say this:

Dear Xxx,

I didn't mean to accuse you personally of setting the policy. I made an effort to refer specifically to "ETrade" separately from yourself, but if I wasn't clear enough, I apologize.

Nonetheless, the inactivity fee is unacceptable to me. I am aware of a number of discount brokerages that have no such fee, so charging me a fee for no service is not only unethical: it also puts ETrade at a disadvantage relative to its competitors. I will be exploring my options before the time comes that ETrade can charge me that fee again.

I do not want to switch brokerages (partly because I don't want to pay the $125 ransom to get my assets back) so I would sincerely appreciate it if you could find a way to help me get this "fee for nothing" waived.

Naturally they were unable to waive the fee. What I have done is open a TFSA at ETrade and move my shares there. The TFSA is a registered account and is not subject to the inactivity fee. With any luck, that $25 fee is the last money I'll be paying ETrade for a very long time.

What do you think? Am I being unreasonable?