By Mike Katchen

You probably haven’t heard about it but right now thousands of Canadians are missing their life savings. Hundreds of millions of dollars are stuck in limbo, completely out of their owners’ control. The culprit? That most archaic of payment technologies, the paper cheque.

The Canada Post strike has delivered a fresh reminder about our outdated financial system and exposed a problem that has existed in Canada for years. Cheques have been used to transfer money since at least the 18th century. And though we may live in an increasingly digital world, it’s estimated that Canadians still write nearly a billion cheques each year. But it’s not just people who can’t quit paper cheques. It’s also many financial institutions. Even if you bank online, when you move an investment account (like your TFSA or RRSP) from one provider to another, it’s still likely that behind the scenes your hard-earned money will travel by cheque.

In Canada, moving investments is often unwieldy, interminable and expensive. Instead of electronic transfers being the industry standard, financial institutions are still allowed to use physical cheques to complete registered and non-registered account transfers. A third of account transfers coming to Wealthsimple in 2024 were done by cheque. And the negative impact on consumers is hard to ignore.

To start with, it’s incredibly slow. Even without a postal delay, it can take up to four weeks for funds to arrive where an investor has requested they go. Anxious to finalize the move of your RESP to take advantage of a surging market? Sorry, your cheque is in the mail. Doing things this old-fashioned way lacks transparency and security for the investor. Once the funds are removed the investor has no visibility into where their life savings are until — fingers crossed — they reach their destination.

And it’s costly. Investors lose any potential gains from high interest rates or being invested in the market, because that money sits in paper cheque purgatory. And they’re charged up to $150 for the transfer even though the average cost of an electronic transfer is about 60 cents.

Provincial securities regulators, who oversee investment accounts, could protect Canadian investors by creating account transfer standards that put consumers first. These standards would simply mandate providers to meet reasonable transfer timelines. Rather than tell financial institutions exactly how to move the funds, regulators could focus on the consumer outcome, by setting a limit on how long account transfers should take. This approach has been successful in the U.K., where cash in investment accounts must be transferred within 15 working days or investors are entitled to compensation.

Holding Canada’s financial services industry accountable to timely money movement might finally compel the remaining institutions to join the 21st century and use the automated technologies that are available today.

Our clients are waiting to move hundreds of millions of dollars to Wealthsimple via paper cheque. And we are only one financial institution. Even more Canadians will experience weeks of delays — for some, their life savings won’t arrive until mail service resumes. That’s billions of dollars — retirement nest eggs, down payments on homes, education savings — pending, depriving Canadians of their right to manage their own money. And while it shouldn’t have needed a strike to illustrate the scale of the problem, it gives decision-makers a golden opportunity to fix the issue once and for all.

Mike Katchen is CEO and co-founder of Wealthsimple.