Self-Directed RRSPs: What to Know

Registered retirement savings plans (RRSPs) are excellent tools to help you save for your future while enjoying tax benefits in Canada. A self-directed RRSP, sometimes referred to as an SDRSP, allows you the freedom to hold various types of investments in one account.

Once you open an RRSP through a financial institution or a brokerage, your next step is to choose how you’d like to invest. If you prefer a simpler approach to RRSP investing, you might opt for a guaranteed investment certificate (GIC), a mutual fund account or a savings account within your RRSP. Alternatively, you can choose a self-directed RRSP.

What is a self-directed RRSP?

A self-directed RRSP, or SDRSP, offers a more hands-on approach to financial planning by allowing you to curate and manage an assortment of assets in your plan.

An SDRSP lets you hold different kinds of investments in a single RRSP account. That means, instead of holding a single GIC, for example, you could hold a mix of income-generating assets — including equities, GICs, mutual funds and ETFs.

You can also choose to take an active role in managing your SDRSP plan or consult a professional fund manager, broker or robo-advisor.

How an SDRSP works

As the account holder of a self-directed RRSP, you’re in charge of

Don’t let the term “self-directed” intimidate you; you don’t have to handle an SDRSP on your own — a bank or brokerage can manage it for you.

Using a full-service investment brokerage, you can open an SDRSP and consult with a broker, who selects investments based on your goals and comfort with risk. The broker will oversee the account with as much or as little input from you as you’d like.

A robo-investing firm, another way to manage your SDRSP, can reduce fees by eliminating human interaction. To get started, you may need to complete an online questionnaire that gauges your risk tolerance and investing goals. Based on your answers, you’ll be matched with a specific portfolio of funds for your RRSP account.

More experienced investors with the time and expertise to choose their own investments and maintain their portfolios independently can opt for a self-directed plan with a do-it-yourself online brokerage.

RRSP vs. SDRSP

How to open an SDRSP

Many Canadian financial institutions allow you to open an RRSP account either in person or online. If you choose an online brokerage firm, however, you will typically have to open your account online.

Once you have an account, you can set up a self-directed RRSP with the institution, usually through a full-service or DIY investment arm, an online brokerage or a robo-advisor.

To open an SDRSP, you may need:

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What to consider before opening an SDRSP

In addition to ensuring that you don’t exceed RRSP contribution limits, especially if you already have another RRSP, consider the following factors when deciding whether to go with a self-directed RRSP:

Risk: Nearly all forms of investment come with risk. If you hold assets like stocks or ETFs in your self-directed RRSP, your portfolio’s performance will be at the mercy of the markets. If the economy does poorly, the markets could decline and you could lose money.

Fees: SDRSPs usually come with fees. Look out for set-up fees, annual maintenance fees, and sales or commission fees. A “hidden” fee that’s often overlooked is a management expense ratio (MER) fee, which covers the management and operating costs associated with a fund.

Online-only and robo-brokerages usually charge lower overall fees and also tend to offer investments with lower MERs.

SDRSP Alternatives

If you’re new to investing, have a lower risk tolerance or value liquidity, you may want to consider other investment solutions, such as:

Returns on these investments may be moderate, but you also don’t risk losing money.