Knowledge Centre
 

Frequently Asked Questions (FAQ)

General Questions


Wrap accounts are fee-based products that combine or "wrap" investment management, brokerage, custodial and reporting services into one package for a flat annual fee, generally based on the value of the managed assets.

No. CDIC is a Federal Crown corporation created to protect eligible deposits held by you with financial institutions. Mutual fund units or shares are not eligible deposits.

The management fee is a charge by the mutual fund manager for the management of its funds whereas the MER is the measurement of the total cost of operating a fund as a percentage of its average net assets. The management fee is included in the MER.

Mutual Funds are a pool of investors' money invested on their behalf by a professional money manager in various securities. Mutual funds are available in many different forms, such as equity, bond, balanced, money market, international and specialty funds. BMO Mutual Funds further groups the funds into Security, Income, Growth and Equity Growth, each with a unique investment style.

The main differences are:

  • Classic Units are purchased only under the Sales Charge Option, with lower service fees and management fees.
  • Mutual Fund Units are available under the Sales Charge, Low Load, or Standard Deferred Sales Charge Options and have higher service fees and management fees.

In order to administer the processing of an Estate, BMO Mutual Funds requires the following documentation:

JTWRS Accounts (joint tenants with the right of survivorship)

  1. Letter of Direction signed by surviving tenant, with a signature guarantee stamp, or notarized stamp.
  2. Original or notarized copy of Death Certificate.

Non-Registered Accounts

  1. Original or notarized copy of Death Certificate.
  2. Original or notarized copy of Last Will and Testament.
  3. Letter of Indemnity (filled out by the beneficiary, with signature, and signature guarantee, or notarized stamp).
  4. Letters of probate (Certificate of Appointment of Estate Trustee with a Will -in Ontario) for accounts valued over $30,000.00 in Canadian currency.
  5. Letter of Direction signed by executor/beneficiary, with a signature guarantee stamp, or notarized.
  6. Outstanding BMO Mutual Funds certificates.
  7. Social Insurance Number and date of birth of the beneficiary required, should they wish to maintain an open account at BMO Mutual Funds.

Registered Accounts

  1. Original or notarized copy of Death Certificate.
  2. Original or notarized copy of Last Will and Testament. (If there is no beneficiary, then the estate is designated.)
  3. Letter of Indemnity (filled out by the beneficiary, with signature, and signature guarantee, or notarized stamp)
  4. Letter of Direction signed by executor/beneficiary, signature guaranteed.
  5. Application form, should the beneficiary wish to maintain a registered account with BMO Mutual Funds.
  6. Letters of probate (Certificate of Appointment of Estate Trustee with a Will -in Ontario) for accounts valued over $30,000.00 in Canadian currency, with no beneficiary attached

These requirements apply to client-held accounts only. Various circumstances may alter the above requirements, including special requirements for residents of Quebec. Please contact our Client Services department for additional information.

If the account is registered in our records in the name of your Dealer (a Nominee Account):
Please contact your Financial Advisor.

T Class mutual funds provide investors with regular, predictable cash flow, regardless of the income generated by the underlying investments. While conceptually similar to conventional Automatic Withdrawal (AWD) or Systematic Withdrawal Plans (SWP), T Class funds have some significant differences. AWD and SWP plans generate cash flow each month by selling units of the original investment. As a result, the cash flow from these plans is taxed every year it is received. T Class funds generate cash flow each month by simply distributing, not selling, a predetermined portion of the investor's original investment. Because this cash flow is not dependent on the income generated by the underlying fund, T Class funds enable investors to receive regular cash flow, while potentially deferring taxation.

Every BMO Mutual Funds T Class mutual fund establishes a monthly distribution amount at the start of each year, which is based on either a 5% (T5 Class) or 8% (T8 Class) annual distribution rate, depending on the Fund. This monthly amount is determined by applying the annual distribution rate to the T Class Fund's unit price at the end of the previous calendar year, arriving at an annual amount per unit for the coming year. This annual amount is then divided into 12 equal distributions, which are paid in cash each month.

 

Registered Plan Questions


If you are employed outside of Canada, you may continue contributing to your RRSP only if your earnings are considered earned income in Canada. You may want to contact your local taxation office or your tax advisor for more information.

Bill C-12 (an Act to amend the Bankruptcy & Insolvency Act, the Companies' Creditors Arrangement Act, the Wage Earner Protection Program Act and Chapter 47 of the Statutes of Canada) has received Royal Assent and parts of the legislation were put into force on July 7, 2008.

The following are the essential components of the legislation as they affect registered plans:

  1. All RRSPs and RRIFs will be exempt from seizure (bankruptcy)
  2. A one year claw back (of contributions) will be in effect for RRSPs in provinces without previously enacted exemption laws (i.e. all provinces other than PEI, Saskatchewan, Manitoba, Newfoundland & Labrador)
  3. There will be no upper cap on the amount of RRSPs that may be protected
  4. The courts will not have the jurisdiction to extend the one year claw back period (where provincially applicable)

If you leave the country and become a non-resident, you may leave your RRSP in place, but you will not be eligible to make any further contributions unless you have earned income in Canada. Revenue Canada's Pension and RRSP Tax Guide explains how to calculate earned income if you are a non-resident. If you become a resident of the U.S., amounts earned by your RRSP investments after you leave the country may be subject to U.S. income tax. If you decide to redeem your RRSP after you have become a resident of another country, the appropriate tax will be withheld in Canada and a Non-Resident tax slip will be issued.

The RRSP is yours but it will be included as part of the family assets that will be divided up with your spouse on the breakdown of your marriage or common-law relationship. Please consult a lawyer for advice.

A LIF is one of the options available when your Locked-In Retirement Account (LIRA) matures. A LIF is similar to a Retirement Income Fund (RIF); however in a LIF, there is a minimum and maximum annual withdrawal amount. The intention of a LIF is to provide you with an income for the rest of your life. Federally legislated LIFs, as well as those in many provinces, no longer require LIFs to be converted to annuities at the age of 80.

A LIRA is a Locked-In Retirement Account that is often referred to as a Locked-In RRSP and is similar to an RRSP. A LIRA consists of accumulated pension benefits transferred out of an employer pension plan. It is subject to rules and regulations of the pension regulatory authorities at both the federal and provincial levels. Similar to an RRSP, you must convert your LIRA to a Life Income Fund (LIF), Locked-In Retirement Income Fund (LRIF) in some provinces where allowable or an annuity by the end of the year in which the account holder reaches 71 years of age. In the year following the conversion, you will be required to begin taking a retirement income subject to a defined minimum and maximum. BMO Mutual Funds does not offer annuities.

An RESP is a savings vehicle that allows a subscriber (contributor) to make contributions on a non-deductible basis to a plan that will generate tax deferred income to be used toward the post-secondary education of the beneficiary. While the annual contribution limit has been removed, for each beneficiary, the lifetime limit for contributions to all RESPs is $50,000.

To help you save for your child's education after high school, the Government of Canada will add to your savings in a Registered Education Savings Plan (RESP) with a Canada Education Savings Grant (CESG). The grant is paid directly into your child's RESP.

Children up to and including the age of 17 are eligible to receive the CESG based on the following conditions:

  1. The child is a Canadian resident;
  2. The child has a valid Social Insurance Number (SIN)
  3. The child is named as a beneficiary of an RESP; and
  4. Money has been put into the RESP

For children 16 and 17 years old, one of the following conditions must be met in order for the child to receive the CESG:

  • a minimum of $2,000 of contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary by December 31st of the year the child turns 15; or
  • a minimum of $100 in annual contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary in at least any four years before December 31st of the year the child turns 15.

Eligible plans receive annual grants of 20% of contributions made each year, but grants are capped at $500 per annum or $1,000 if carryover room is available. Grant room can be carried forward. The lifetime CESG limit for a child is $7,200.

"Qualifying RRIF's" are those that were opened prior to 1993 and the annual minimum payment is calculated using a formula based on the clients' age of 71-90. All other RRIF's are considered "Non-Qualifying RRIF's" and have annual minimum payment percentages prescribed by the government. If a Client holds a Qualified RRIF, the post 1993 calculation applies commencing the year a client reaches 78 years.

 

Performance and Statistics Questions


Your personal rates of return would depend on your investment holdings. Please check your statements or contact your Financial Advisor.

Mutual Funds are considered long-term investments. The values of individual Mutual Funds fluctuate from time to time, depending upon fluctuations in the underlying investments held by the Funds which are, in turn, affected by changes in interest rates, economic conditions and company news.

Funds invested in equities generally fluctuate more (or are more volatile) than those invested in fixed income securities, but also tend to provide higher returns over a period of time.

 

Products and Services Questions


This program makes it easy for you to make regular investments automatically in the Fund or Funds of your choice. We make preauthorized withdrawals from your chequing account with a Canadian bank on a regular (bi-weekly, monthly, quarterly, semi-annual or annual) basis and invest them automatically into as many as five of our Funds. The minimum amount of each investment is $50 (US $50 for US NAV Funds).

Under this program, you can arrange for regular (monthly, quarterly, semi-annual or annual) transfers from a lump sum investment in Canadian Money to a maximum of five other Funds of your choice. The minimum initial investment in Canadian Money is $5,000 and the minimum transfer amount to any one Fund each time is $50. The same program is also available for our US NAV Funds using U.S. Money. A minimum initial investment of US$5,000 in U.S. Money is required with a minimum transfer of US$50 to any of our US NAV Funds.

If you hold at least $10,000 in investments in any of the Funds (US$10,000 in our US NAV Funds), you can arrange for a regular (bi-weekly, monthly, quarterly, semi-annual or annual) redemption of Units from your account. The minimum amount for each payment is $100 (US$100 for US NAV Funds) and you can receive the payments either by cheque or by direct deposit into your bank account at a Canadian financial institution. This service is not available to investors who hold their Units in a Registered Plan. It's important to keep in mind that, if your redemptions are more than the distributions paid by a Fund and any changes in the value of your Units, you will begin to reduce, and possibly eliminate, your original investment.

You can arrange to have distributions made by one Fund to be automatically reinvested in other Funds within the same Class and same currency under the same sales charge option. The reinvestment will be processed and trade dated on the same valuation date as if it was reinvested in the Fund that made the distribution. This service is not available to investors who hold their Units in a Registered Plan.

 

BMO Mutual Funds Statements and Tax Receipt Questions


BMO Mutual Funds sends out Transaction Statements on a quarterly basis. If you have not received your statement, one reason could be that you may have recently moved and have not informed us of your address change. Furthermore, if the account is registered in the name of your Dealer (a Nominee Account), BMO Mutual Funds does not issue statements, as they are provided by your Dealer.

As required by tax legislation, T3, T5 and NR4 tax slips are issued to both the client and the Government for any income or capital gains paid on an investment account. These slips are not issued on any Registered Plans.

For residents of the province of Quebec, BMO Mutual Funds issues these provincial income tax forms, equivalent to the following Federal forms:

Releve 16 = T3
Releve 3 = T5
Releve 2 = T4RRSP/RIF

BMO Mutual Funds T3s and T5s are sent out annually at the end of February. NR4s are sent out in mid-March. If you have not received your slips, one reason could be that you may have recently moved and have not informed us of your address change. Another reason could be that your investment is held in a Registered Plan, for which tax slips are not issued. If these cases don't apply to you, please contact our Client Services Department.

For detailed information, please consult our Tax & Financial Planning Tips section. To get a brief description of the boxes within a particular Tax Slip, please click on the link for the Tax Slip below:

There could be several reasons for this, including:

  • Confirmations are printed weekly only, after each Friday's transactions, and are mailed to you the following business day.
  • You may have a "hold mail" status on your account, because we do not have your latest address, and this would prevent us from mailing the confirmation to you.
  • For systematic plans, a confirmation is printed for the first transaction only, but not for each subsequent one.
  • If your account is registered on our records in the name of your Dealer (a Nominee Account), we would normally not provide confirmations, as they will be confirmed to you by your Dealer. Please contact your Financial Advisor.

T3's are issued for all Mutual Funds that are considered to be Trusts. T5's are issued for any Mutual Funds that are considered to be Corporations.

The Annual and Semi-Annual Reports or Financial Statements are important sources of information about your Mutual Funds, and we encourage you to read them. If you prefer not to receive these documents simply contact our Client Services Department with your BMO Mutual Funds account number and we will update your file with your preference. Should you change your mind at any time you can contact us and we will amend your file. Please note that we are required to send annual reminders to all BMO Mutual Funds clients that these documents are available to them.

 

Purchases, Switches and Redemptions Questions


BMO Mutual Funds does not charge for inter-fund switches; however, when switching funds, your Financial Advisor may charge a fee of up to 2% of the value of the Units switched. Please consult your Financial Advisor for further details.

You may invest with BMO Mutual Funds through a Financial Advisor. A Financial Advisor is a person who is a representative of a Dealer, is registered with the securities authorities, handles the public's orders to buy and sell securities and usually charges a commission for that service.

The answer depends upon the registration of your account on our records. Your account may be registered directly in your name (Client Name Account), or it may be registered in the name of your Dealer (a Nominee Account). The following indicates the redemption requirements for each type of account:

  • Client Name Account - An Instruction Letter signed by you detailing the redemption request must be provided by your advisor. If the value of the redemption is $10, 000 or greater, a guarantee of your signature is required, from your Financial Advisor or a Bank.
  • Nominee Account - a Letter of Direction is required from your Dealer or other Nominee. Please contact your Financial Advisor.
  • There could be additional requirements for accounts which are registered in the name of your corporation, joint accounts, etc. Please contact our Client Services Department.

Your initial investment in the Funds must be at least $500, unless you are purchasing through a BMO Mutual Fund Asset Builder (Pre-Authorized) Account. After your initial investment, you can make further investments in the Funds in any amount. For purchases at a US NAV, payment must be made in US currency.

Although contributions to the account are not deductible for tax purposes, withdrawals of contributions and earnings from the account are tax-free and would not impact federal income-tested benefits.

In the case of an all unit conversion, a switch is not possible and the transaction will be processed as a sell and a buy using the exchange rate provided by the bank at the time of the buy. In the case of a partial conversion, if a dollar figure is specified, the transaction will be placed as a switch using the exchange rate provided by the bank at that time.

There may be costs involved, depending upon the option under which you invested in the Mutual Fund, and the period during which you have held the investment.

  • Under the Sales Charge Option, a sales charge was paid when you invested, and no fee will be payable when you redeem.
  • Under the Standard Deferred Charge Option, no sales charge was paid when you invested, but a declining redemption fee may be payable when you redeem your investment. This redemption fee reduces from 6% in the first year to 0% after 7 years, with provisions for an annual "free redemption amount." Please contact our Client Services Department for more details.
  • Under the Low Load Option, the declining redemption fee reduces from 3% in the first year to 0% after 3 years. There is not an annual "free redemption amount" provision under this option.

Redemption fees are applicable only to investments made in Mutual Fund units purchased under the Standard Deferred Sales Charge or Low Load options. The fee is charged on redemptions which are not part of the "Free Redemption Amount" (applicable to the Standard Deferred Sales Charge option only), and are not switched in to another BMO Mutual Fund with the same sales charge option. The fee is based on the cost of the investment redeemed, including the cost of reinvested distributions, at the following rates:

Standard Deferred Sales Charge Option:

If the Redemption Takes Place:
Then the Redemption Fee is:
During the 1st Year
6.0%
During the 2nd Year
5.5%
During the 3rd Year
5.0%
During the 4th Year
4.5%
During the 5th Year
4.0%
During the 6th Year
3.0%
During the 7th Year
2.0%
After the 7th Year
Nil

Low Load Option:

If the Redemption Takes Place:
Then the Redemption Fee is:
During the 1st Year
3.0%
During the 2nd Year
2.0%
During the 3rd Year
1.0%
After the 3rd Year
Nil

For purchases made after 1993, up to 10% of the Units you hold in a Fund, under the Standard Deferred Sales Charge option, may be redeemed in each calendar year without a redemption fee. This amount is the Free Redemption Amount and is non-cumulative, meaning that you cannot carry any unused amount forward. The Free Redemption Amount is calculated based on the unit balance in the account as of December 31st of the previous year, plus the number of Units purchased in the current year.

DSC refers to our Standard Deferred Sales Charge schedule, while LL refers to our Low Load schedule.

The DSC schedule is 7 years in length and is broken down as follows:

Redemption during:
Redemption Fee:
1st Year
6.0%
2nd Year
5.5%
3rd Year
5.0%
4th Year
4.5%
5th Year
4.0%
6th Year
3.0%
7th Year
2.0%
After the 7th Year
Nil

The LL schedule is 3 years in length and is broken down as follows:

Redemption during:
Redemption Fee:
1st Year
3.0%
2nd Year
2.0%
3rd Year
1.0%
After the 3rd Year
Nil

Under the DSC option, 10% of the units held may be redeemed in each calendar year without incurring a redemption fee. This amount is non-cumulative, meaning you cannot carry any unused amount forward.

Under the Low Load (LL) option, there is no 10% free entitlement, however distributions are available for redemptions free of DSC. Cash distributions for LL funds are available for monthly and quarterly paying funds only. The distributions for LL funds can be carried forward unlike the 10% free entitlement for the Standard DSC funds. Please note, cash distributions are available for non-registered accounts only.

Short term trading by investors may adversely affect all investors within a Fund. To discourage short-term trading, a Fund may, at BMO Mutual Funds' sole discretion, charge a short-term trading penalty of up to 2% of the amount that you redeem or switch if you buy and then redeem or switch Units of the Fund within 30 days of purchasing or switching them. This penalty will be paid directly to the Fund. While this penalty generally will be paid out of the redemption proceeds of the Fund in question, we have the right to redeem Units of such other Funds in your account without further notice to pay this penalty. We may in our sole discretion decide which units are to be redeemed in such manner as we may determine. You will be responsible for any costs and expenses, as well as any tax consequences, resulting from the collection of this penalty. We have the option to waive this penalty at any time.

In addition, if it is a Client-held registered account, there is a charge of $25.00 plus applicable taxes.

 

TFSA Questions


The TFSA is a type of registered savings account that allows taxpayers ages 18 and over to earn interest, other types of investment income and capital gains tax-free. (For residents of Nova Scotia, Newfoundland, New Brunswick and British Columbia, the planholder must be age 19 and over.)

A TFSA is best suited for any Canadian resident who is over 18 with a Social Insurance Number and who would like to save including:

  • Individuals who want to be able to access their funds on a tax-free basis before retirement
  • Individuals who have maximized their RRSP contributions
  • Seniors who have savings and are concerned about their investment earnings impacting federal income-tested benefits or credits (i.e. Old Age Security benefits, the Guaranteed Income Supplement, or the federal age credit)

The Canada Revenue Agency (CRA) will impose a tax of one per cent per month, for each month that the excess contribution remains in the account.

Although contributions to the account are not deductible for tax purposes, withdrawals of contributions and earnings from the account are tax-free and would not impact federal income-tested benefits.

Clients who open a TFSA are generally permitted to hold similar investments that can be held in a Registered Retirement Savings Plan (RRSP). This includes cash, mutual funds, publicly traded securities, GICs, bonds, and certain shares of small business corporations.

A TFSA should be part of an overall financial planning strategy that takes assets, liabilities, goals, income needs and risk into consideration. Since every individual's financial situation is different, your advisor can help you understand your investment options and help you make an informed decision as to how to invest the funds in your TFSA.

With a TFSA, you don’t need to have any income to accumulate the $5,000 per year contribution room. With an RRSP, you must have income in order to accumulate contribution room.
Withdrawals from a TFSA are tax-free. Any amount withdrawn is then added to your contribution room in the following year, so that you could later re-contribute the amount that you withdrew. Withdrawals from an RRSP are taxed in the year of withdrawal (with the exception of the Home Buyer’s Plan (HBP) and Lifelong Learning Plan (LLP) which are not taxed provided they are repaid on schedule). Any amount withdrawn can not be added to your contribution room in the following year.
Contributions to a TFSA are not tax-deductible on your income tax return. Contributions to your RRSP are tax-deductible on your income tax return.
There is no requirement to convert the TFSA to an income payment option (e.g. a RRIF or an annuity) at any age. An RRSP must be fully withdrawn or be transferred to a RRIF or annuity by the end of the year you turn 71.

No, interest on money borrowed to invest in a TFSA is not deductible for tax purposes.

Only the TFSA account holder can contribute to their own account. However, you could give money to your spouse or common-law partner and he/she could then contribute that money to his/her own TFSA.

Withdrawals and income earned in the TFSA are not taxable to either you or your spouse/common-law partner regardless of whose money was used to make the contribution.

Similar to other registered accounts, such as RRSPs, joint TFSAs are not allowed.

The CRA will determine TFSA contribution room for each eligible individual who files an annual T1 individual income tax return. BMO Mutual Funds will report your contributions and withdrawals, so that CRA will be able to keep track of how much contribution room you have used and how much you have left.

Yes. You can open more than one TFSA but the total contributions to all your TFSAs cannot be more than your maximum contribution room for that year plus any carry forward room.

For example, your maximum contribution limit for 2009 will be $5,000, therefore you can open one TFSA to which you contribute $3,000 and another TFSA to which you contribute $2,000, so your total combined TFSA contributions equals the maximum of $5,000.

To open up your TFSA today, contact your Financial Advisor.

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