2011 year-end assets in tax-free savings accounts (TFSAs) fell half a billion shy of $60 billion, an increase of 50% over the year. While the growth trajectory was steep, TFSA assets failed to keep up with the expansion of the contribution room, resulting in a 17% decline in the utilization rate to 51.3%.
The asset total includes TFSAs held at retail bank branches, full-service and online/discount brokerage firms and financial advisor firms. In the second half of 2011, retail bank branches led all channels in TFSA growth, adding 10% or $3.5 billion in assets. With $39.2 billion, the channel accounts for two-thirds of the TFSA asset base. The full-service brokerage and the financial advisors channels were the runners-up, expanding their TFSA assets by 7% and 3%, respectively, during the six-month period.
The online/discount channel declined by 2%. The retrenchment in the TFSA assets of the channel’s do-it-yourself investors was likely a reflection of the weak equity market conditions in the second half of 2011. (The channel’s asset composition is skewed towards equity allocations.)
Now that we know where TFSAs are held, just what exactly is held within them? In the retail bank channel, mutual fund assets increased 11% in the six-month period and 86% for the year, leading all products in growth. Customer withdrawals from savings have resulted in dampened growth in the savings category. Savings deposits now account for 52.1% of TFSA assets compared to 52.2% in June 2011 and 55.4% in December 2010. For more information on news and developments concerning Tax-Free Savings Accounts, please see the upcoming issue of the Deposits and Fixed Income Advisory Service http://investoreconomics.com/issue/deposit-and-fixed-income-advisory-service-2. Posted by Anthony Yeung Anthony@iei.ca.