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Norbert’s Gambit at RBC Direct Investing

January 10, 2017 - 18 comments

US-listed ETFS are the most tax-efficient way to invest in foreign equities within your RRSP account. The funds also tend to have lower annual fees than Canadian-listed ETFs. However, they must be bought and sold in US dollars, and if you have to exchange your Canadian dollars for greenbacks, it can be extremely costly. Many discount brokerages charge about 1.5% - or a whopping $150 on a $10,000 conversion. If you’re going to use US-listed ETFs, you need to find a way to mitigate these high costs.

If you need to convert loonies to US dollars, I’ll show you a technique that can save you hundreds of dollars per transaction. At RBC Direct Investing, there is no need to even pick up the phone: the entire process can be completed online.

Introducing Norbert’s gambit

Savvy DIY investors have long used a technique called “Norbert’s gambit” to sidestep these steep currency conversion costs. The name comes from Norbert Schlenker, an investment advisor in B.C. who was the first to popularize it.

Norbert’s gambit with DLR and DLR.U

The simplest way to do Norbert’s gambit is with the Horizons US Dollar Currency ETF.  This ETF – which is equivalent to holding US cash – is available in two versions.  Both trade on the TSX, but the first, with the ticker symbol DLR, is bought and sold in Canadian dollars, while the second, DLR.U, trades in US dollars.

You can use these ETFs to exchange Canadian dollars for US dollars and then use the proceeds to buy US-listed ETFs. Norbert’s gambit can be confusing, so I’ve put together a video tutorial that you can follow along with. For more information on this strategy, please refer to our white paper.


By: Justin Bender with 18 comments.
  29/03/2018 9:31:35 AM
Justin Bender
@Dolce Roselli: Norbert’s gambit has never worked in an RBC practice account – but it does still work in a real account (try it with a smaller amount first if you’re still nervous).
  26/03/2018 1:12:42 PM
Dolce Roselli
Hi Justin, Sorry to ask again, but do you know if this still works today? I just tried twice on march 26 (in my practice account) and both transactions were refused. Not instantly though, at first it looks all good, then in my portfolio I had a "refused" mention explaining I had insufficient titles in my account : / I bought DLR and was trying to sell DLR.U Cheers
  06/02/2018 10:11:27 AM
Justin Bender
@Marc: US-listed foreign equity ETFs are only more tax-efficient for a Canadian investor when they’re held in an RRSP account (this is generally the case for US equity and emerging markets equity ETFs). Here’s the link to the white paper:
  29/01/2018 12:09:31 AM
Hi Justin,
Why are US-listed ETFs more tax-efficient for a Canadian investor? Doesn't the additional layer of withholding tax add extra drag?

I'm sure you covered this in a white paper somewhere - can you direct me please?

  08/01/2018 3:10:18 PM
Justin Bender
@Cedric: I’m glad you found the video to be useful. All the best to you and your family in 2018!
  03/01/2018 3:29:41 PM
Amazing Justin! Thank you for this detailed video walkthrough. I'd been paying upwards of $200 per conversion through RBC DI over the past 6 months. This will put several thousand back in my wallet every year! May you have a great 2018!
  24/11/2017 5:31:36 PM
Justin bender
@Steve: Your Norbert’s gambit steps are correct. As far as I know, the process still works the same at RBC Direct Investing. The process can be a bit intimidating your first time around – I would suggest trying it out with a smaller amount.
  15/11/2017 4:38:23 PM
Just wanted to ask again if the Norbert Gambit still works at RBC.

If I'm understanding this correctly, I'd do something like this:

1) Funds are going to be deposited into my US Bank account
2) transfer money to my US Investment account,
3) purchase the DLR.U,
4) sell them DLR,
5) funds get transferred to my CAD investment account, 6) Transfer funds out of investment account to personal savings account.
  26/09/2017 4:40:49 PM
Justin Bender
@Sam: The changes shouldn’t impact the Norbert’s gambit process at RBC Direct Investing (I tried it out after the changes and had no issues).
  10/09/2017 10:20:48 AM
A Real-Time Foreign Exchange feature is now available on RBC Direct Investing's website. During Foreign Exchange Hours (Approx. 7:45 am to 4:45 pm ET on business days), you are now able to obtain real-time foreign exchange rates when converting from Canadian Dollars to US Dollars or vice versa.

"RBC Direct Investing no longer converts available funds in clients’ accounts from Canadian Dollars to US Dollars or US Dollars to Canadian Dollars when trades are settled. Clients must process their own foreign exchange conversions. Please visit the Transfer Cash & Foreign Exchange page under My Portfolio to make your currency conversions."

Does this change Norbert’s Gambit at RBC?
  01/09/2017 9:00:59 AM
Justin Bender
@lauraH: I just tested out the gambit a few days ago and it appears to still work no matter which direction you’re going.
  29/08/2017 10:35:39 AM
Oops, just re-read your note and realized that we are talking about two different directions. I use the Gambit to move US$ distributions to the Can$ side of my account. Will I still be able to do this?
  22/08/2017 4:40:49 PM
Whew! Thanks.
  22/08/2017 9:36:26 AM
Justin Bender
@lauraH, @Tuzo: It sounds like this new policy would only apply in the event you purchased a US-listed ETF and you didn’t have the US dollars available (RBC would convert your CAD to USD at their rates when it was time to settle the trade). With the gambit, you convert your CAD to USD – RBC just cleans up the positions.
  16/08/2017 12:29:06 AM
RBC has been great for Norbert's gambit but I just received the following notice, "RBC Direct Investing will no longer schedule foreign exchange conversions on the trade settlement date to offset any debit balances in your account". Looks like I'll have to find another approach/broker.
  15/08/2017 12:49:28 PM
Hi Justin,
You were very helpful last year when I used the Gambit for the first time. Today I saw the note below on the RBC account . Will this effect the Gambit at RBC?

Date: 14 Aug 2017 04:09 PM ET

Soon, we will be introducing a Real Time Foreign Exchange feature to our website. During Foreign Exchange Hours (Approx. 7:45 am to 4:45 pm ET on business days), you will be able to obtain real time foreign exchange rates when requesting a transfer from Canadian Dollars to US Dollars or vice versa.

To request a foreign exchange transfer, you can visit the Transfer Cash page under My Portfolio.

As part of this enhancement, RBC Direct Investing will no longer schedule foreign exchange conversions on the trade settlement date to offset any debit balances in your account. For more information on how this may affect you, please contact an Investment Services Representative at 1-800-769-2560.
  16/01/2017 8:27:49 PM
Justin Bender
@Geoff: Norbert's gambit is more complicated to implement at Questrade - here's a link to MoneyGeek's tutorial on how to do it:
  15/01/2017 11:48:09 PM
Hi Justin, does this work on Questrade just as easily as you demonstrated with RBC? Thanks.

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