Wealthsimple asks Canada to review rising bank transfer fees

An app screenshot for Wealthsimple is seen on a smartphone in a photo illustration made in Toronto, Monday, June 17, 2024. THE CANADIAN PRESS/Giordano Ciampini.

Canadian online bank and brokerage Wealthsimple asked Ottawa this week to review rising bank exit fees, in an annual consultation for the government’s budget, the company said.

Exit fees for Canadians moving their Registered Retirement Savings Plan or Tax-Free Savings Account at major Canadian banks have risen to as much as $150 (US$108.99) per savings account from as low as zero to $75 in the early 2010s.

Canada’s six big banks, including Royal Bank of Canada and TD Bank, are some of the best capitalized financial institutions among the G7 countries and control over 90 per cent of the banking sector.

Wealthsimple and other digital banks are attracting young clients looking to spend less on banking fees and increase their savings.

The bank offers to reimburse new clients for some of the cost of moving their funds from other banks.

“If the government were to take action, it would make it easier for clients to overcome that friction,” Jessica Oliver, Wealthsimple’s head of government and regulatory relations, said in an interview on Wednesday.

In its submission for the budget consultation on Tuesday, Wealthsimple asked the Financial Consumer Agency of Canada to review practices related to transfers between banks and government to amend the Income Tax Act and related regulations to contain exit and transfer fees on registered accounts.

FCAC said it cannot comment on pre-budget consultations. The parliamentary finance committee said the brief has not yet been distributed to members for review.

Wealthsimple said its clients have been charged nearly $30 million in exit fees to move their savings to its platform.

“There is no reason why financial institutions should be permitted to levy high, hidden exit fees on the rapidly growing number of registered plans,” privately-held Wealthsimple said in its submission.

The Canadian Bankers Association, a lobby group representing the country’s big banks, said in a statement that banks are required to clearly disclose any fees.

Analysts say the success of challenger banks such as Wealthsimple and EQ Bank could squeeze the profitability of big banks and require them to re-evaluate fee structures.

(Reporting by Nivedita Balu in Toronto; Editing by Caroline Stauffer and Rod Nickel)