‘TFSA’ name leading Canadians astray

‘TFSA’ name leading Canadians astray

‘TFSA’ name leading Canadians astray

“I want them re-named - let's call them the TFIA, tax-free investment account, so that people don't think they're only savings accounts,” commented Prince George dual-licensed advisor Sarah Holland on Wealth Professional’s website Friday. “Who named them anyway – the banks?

Holland’s comments come fresh on the heels of our TFSA-related story Friday detailing the misinformation that exists when it comes to the retirement product that was introduced by the federal government in 2009.

See more: Advisors face a TFSA dilemma

One of the big problems, suggests Holland, is that many people take the name TFSA literally and treat it as a savings-related product where contributions are “invested” in high-interest savings accounts paying 2 percent or less.

“The number of people I meet with who really do think it’s just a savings account is really high,” says Holland. “It’s a surprise to me just how many people believe this – that it’s a high-interest savings account saving tax on a measly 1% a year, if that.”

Some experts suggest the TFSA is the perfect vehicle for an emergency fund because any withdrawals are tax-free to the client. But the idea of using a high-interest savings product in a TFSA specifically as a client’s emergency fund does not find favour with all advisors.

“The only time I’d use it for that [an emergency fund] is if a client has no other open money,” says Nova Scotia advisor Glen Rankin. “If it’s all they have and they still need an emergency fund, I’d rather have that fund with tax-free interest. But other than that, I think it’s a waste of time. You’re putting a Skoda engine in a Ferrari.”

13 Comments
  • Stephen Duquette 2015-06-23 9:51:16 AM
    Well said by the other advisors! I have spent an inordinate amount of time explaining to clients and prospective clients that the TFSA is available to them and not only through a bank, but more importantly, that the various options for investment choices are no different than the investments that they have in their RRSP"s, non-registered investment accounts, RESP's etc. I would agree that a name change would help in dispelling some of this confusion and potentially misleading information about this type of account structure.
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  • Michael Clarke, CFP 2015-06-23 9:55:03 AM
    I agree that the name TFSA is misleading and doing a disservice to Canadians. I've been in this business since they were created, and I'm amazed that I still see countless people (typically dealing with a bank branch or PC financial or Tangerine) who do not understand these accounts and treat them like a savings/chequing account - moving money in and out on a frequent basis and basically having it parked in cash within it. If used correctly, its essentially our only tax sheltered investment vehicle, whereby over time, people can have socked away a large nest egg to be used in retirement - TAX FREE! I'm for calling it a Tax free Investment account, or something of that nature. Let's start a "TFIA" campaign.
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  • douglas swanson 2015-06-23 10:46:57 AM
    The banks have a great big edge in marketing this product due to the name. Again the majority of Canadians are so slow building up to accumulating wealth for future lifestyle. The banks are the first in line. We need a change to get the idea of accumulating capital into the average persons thinking, not saving.
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