—By Alison Griffiths—

Imagine shopping for a car. You visit a Toyota dealer where only Camrys and Corollas are available in black, grey or silver with cloth seats.

A few days later you discover the Camry actually comes in a variety of different colours and with many interior packages. Not only that, but Toyota also manufactures SUVs, trucks and oodles of other vehicles. However, in order to take advantage of this cornucopia of cars you must shop at a different dealer than the one you chose.

This is the situation for investors who set up a Tax Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP) or Registered Disability Savings Plan (RDSP) through a branch of a “Big Five” bank.

In fact, many readers are contacting me to ask why they are unable to buy investment products they read about — from Exchange Traded Funds to lower-fee mutual funds — for their registered accounts.

Often, such individuals don’t realize there are two ways to open most investment accounts: One is at the branch level and one is through the bank’s discount brokerage — the latter is called a self-directed account. Investments for accounts opened at the branch are usually restricted to GICs, all or some of the bank’s own funds or fund families owned by or associated with the bank.

At RBC, for example, you can’t buy the bank’s own Exchange Traded Funds. A bank spokesperson said this was because ETFs are listed on an exchange the way stocks are and investment advisers at the branch level are only licensed to sell mutual funds.

But here’s where it gets really strange. You also can’t invest in RBC’s own series D mutual funds, which have far lower management fees than other series (usually A) of the exact same fund with an investment account at the branch level.

The RBC spokesperson explained that the cheaper funds are intended for “independent investors.” Presumably, if you open an account at the branch level you are dependent (on what I’m not sure) and if you venture over to the discount brokerage, Direct Investing, you can fend for yourself and therefore enjoy lower costs and a full range of mutual funds, ETFs, stocks and bonds.

However, the brokerage does not offer RDSP accounts, so you’re forced to deal with limited selections at the branch.

CIBC has similar investment choices at the branch level. And like the other banks, if you have an investment account through a CIBC branch you can invest in a variety of “portfolios.” You’ll often see these referred to as managed portfolios, portfolio solutions or something similar. They are mutual funds, usually the bank’s own, which hold other mutual funds.

If you want to buy third-party mutual funds, stocks, bonds or ETFs you will have to open an account at CIBC’s discount brokerage, Investors Edge. However, as with RBC, the brokerage doesn’t offer RDSPs.

BMO offers more options for all four accounts. A TFSA, RRSP, RESP or RDSP at the branch level gives you access to the standard GICs and the bank’s own mutual funds. However, you can also buy one-stop shop BMO ETF portfolios. Bear in mind these ETF portfolios hold other ETFs and have higher management expense ratios, over 1 per cent, than BMO’s individual ETFs, which are mostly under 0.6 per cent — many lower. Individual ETFs can only be purchased through the brokerage.

Interestingly, BMO “bank” RRSPs do allow investments in a wide range of third-party mutual funds.

As with RBC and CIBC, BMO’s discount brokerage, InvestorLine, gives access to a full range of products for TFSAs, RRSPs, RESPs. But again you can only open an RDSP at the branch level.

Scotiabank has similar investment restrictions on accounts opened at the branch as RBC and CIBC. The site is harder to navigate and doesn’t list eligible investments. Rather you are directed to call or visit the branch, which is annoying in this Internet age.

For the full range of investment products you will have to go to the brokerage, Scotia iTrade (good luck getting through on the phone). The brokerage also allows you to purchase any of 50 Exchange Traded Funds without paying a trading fee. Though trading commissions have dropped considerably at all brokerages when you have $50,000 to $100,000 worth of bank business, this a major benefit for ETF investors.

RDSPs, however, are only available at the branch level but in two different areas. At Scotiabank, you can invest in GICs or hold cash in the account. At Scotia Securities Inc. you have access to GICs and the bank’s mutual funds for an RDSP.

Of the major banks, TD Canada Trust provides the most flexibility with branch level investment accounts. Not only are its low fee e-version mutual funds available, but also third-party mutual funds and ETFs for TFSAs, RESPs, RRSPs and, happily, RDSPs. Be aware, however, that a number of readers have reported difficulties investing in TD’s e-mutual funds, largely because branch personnel were not familiar with the product.

The lesson in all of this is: Be clear about where your various investment accounts are housed. Know what options and restrictions exist. Be aware that if you choose to open an account at the branch level the advice given is almost certainly going to direct you toward the bank’s own mutual funds or pre-set fund portfolios.