Why should a business consider using a deposit broker?
A deposit broker is an independent retailer of financial products and services, some focusing on consumers (typically high net-worth individuals) and others focus on businesses (typically net depositors, with more cash on hand than bank loans). Deposit brokers often offer various guaranteed investment products, including chequing and savings accounts, term deposits and GICs, as well as (for those focusing on individual depositors) RRSPs, RRIFs and LIFs.
Most Canadian deposit brokers are members of the Registered Deposit Brokers Association (formerly the Federation of Canadian Independent Deposit Brokers) who provides a member directory.
A deposit broker saves you time and effort, serving as a one-stop shop for all your guaranteed investment needs. Deposit brokers monitor interest rates and available products on a daily basis to help you get the best possible returns from a wide range of deposit instruments. Unlike your regular banker, they are shopping your money around to various institutions, not just quoting the best in-house rate. Because product availability, demand, and volumes vary daily between financial institutions, new opportunities for better rates are constantly being found.
Deposit brokers have access to the best rates, for free, because they connect financial institutions with high dollar volume of depositors / investors. With GICs and other guaranteed investments, you the depositor, pay no fees or commissions to deposit brokers. The institutions pay the deposit broker a finder's fee, which means you don't have to. Typically, a deposit broker can find you rates that are up to 1% better than the retail bank-posted rates, without any increase in risk.
A deposit broker can also help you negotiate better rates with the banks and achieve fairer outcomes should disputes arise. If you need credit now or in the future, they can help you submit the ideal package. The best part is all our advice and assistance is provided at no cost to you, the banks pay the deposit broker to help you (and they benefit by having a lower internal cost of dealing with clients).
Deposit brokers typically deal only with CDIC (Canadian Deposit Insurance Corporation) accredited institutions. The CDIC insures your deposits (typically up to $100,000 per bank), but it is important to understand the limitations on deposit insurance. For example, GICs are covered only if their term is five years or less, and mutual funds and foreign-currency deposits are not covered at all.