Norbert’s Gambit: How It Works

You’re getting ready for your trip to New York, but you realize you forgot an important step: USD. Sure, you can pay with your credit card — but what if you need some cash? So you run over to the local Forex shop or your nearest bank, and somehow, your new USD doesn’t add up to Google’s prediction on the exchange. What gives? Maybe you chat with a financial advisor, but it’s not about your spending habits — it’s the fact that currency exchange isn’t free. Currency exchange is a business model, and exchange platforms usually charge a fee around 2.5%. Even banks like RBC who boast “no fees for our clients” will take their cut through a higher exchange rate that doesn’t give you as much money back. Norbert’s Gambit is a strategy that helps you keep more of your hard-earned dollars amidst sky-high currency exchange fees. We’ll walk you through the strategy, when to use it, and how it helps you save money in your currency exchange. 

Norberts Gambit

What is Norbert’s Gambit?

Norbert’s Gambit is a CAD to USD exchange strategy that saves you money in currency exchange fees. How? By buying and selling stocks that are available in both CAD and USD currencies. 

CIBC Investor’s Line Offer

Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

The strategy is named after Norbert Schlenker, a Certified Financial Planner and broker from British Columbia. He’s the one who discovered that stock exchanges could help you save on exchange fees by noticing companies with shares in both USD and CAD don’t charge exchange fees upon buying or selling. All you’d need to pay is the commission, which is an average of $10 per transaction. In most cases, the commission is a lot cheaper than the foreign exchange cost.

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norbert's gambit infographic

How does Norbert’s Gambit work?

If you have $20 CAD and your friend has $14.50 USD, the exchange seems pretty straightforward. But what if your friend didn’t have the exact amount? They only have $13 USD in exact change, but they’re willing to trade anyway. But then you wouldn’t get your fair exchange. Similarly, they could have the right amount but want to hold onto their USD. 

That’s why currency exchange isn’t free. The right time and amount to exchange aren’t easy to find, so banks and companies provide a service to capitalize on. Norbert’s Gambit helps you avoid those fees through the stock exchange. 

Say you buy a few shares of a business on the stock exchange in CAD, but you could also technically buy them in USD. When you sell your CAD shares, sell them in USD instead. Stock brokerages get to avoid currency exchange fees, and Norbert’s Gambit helps you capitalize on that.

CIBC Investor’s Line Offer

Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

Here’s how you can use Norbert’s Gambit: 

1. Open a stock brokerage account

You could create an investment account through your bank to buy and sell stocks, like RBC Direct Investing or TD Direct Investing. Otherwise, you might open an account with a brokerage like Charles Schwab or Fidelity Investments. Alternatively, you might choose to engage in self directed, digital investing, like with Questrade or Wealthsimple. Most platforms charge a commission of $9.99 per transaction, though some could charge as low as $5. Be sure to understand the fees related to buying and selling.

Keep in mind your account will require both a Canadian and US dollar trading account. If you only have one, be sure to open the second currency account. If you already have a dual-currency brokerage account, you can use your existing account and skip to the next step.

2. Buy shares in CAD

Pick a company that has equivalent USD and CAD shares, like the Horizon US Dollar Currency ETF. Purchase a significant amount of shares, enough to make the commission worth it on both the purchase and future sale. A minimum $20 of fees should be expected ($10 on the purchase and $10 on the sale). You’ll want to purchase enough to avoid doing this process too many times, otherwise you’ll keep paying commission. In other words, it’s best to exchange currency in bulk.

3. Wait for the transaction to settle

Once you buy the CAD shares, wait for the transaction to settle. This can take up to 5 business days, depending on your brokerage account.

4. Transfer your shares to USD

This is where the magic happens. The next step is to transfer the shares from your CAD account to your USD account. In essence, this step is just a transfer of shares from one account to another. If you don’t see an easy option to do this on the platform, contact your broker or customer service representative. 

5. Sell your USD shares

Once again, wait for the transaction between the CAD and USD accounts to settle. Then, it’s time to cash in. Sell your USD shares and you’ll end up with exchange-fee-free US dollars.

Now you know how to use Norbert’s Gambit — but don’t use it for just anything. You should make sure the situation and amount you’ll exchange make it worth it to use this strategy. Keep reading for tips on where to use Norbert’s Gambit. 

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When should I use Norbert’s Gambit?

Norbert’s Gambit isn’t for every situation. 

If you need a currency exchange quickly, remember that stock transactions usually take at least 24 to 48 hours to settle. In some instances, it can take up to 5 business days. Similarly, Norbert’s Gambit isn’t worth it if you’re only exchanging a small amount since you’ll be paying about a $20 commission to the brokerage. 

Where you can use Norbert’s Gambit is with large currency exchanges and USD share purchases. If you’re converting currency in bulk and have time to complete the transaction, Norbert’s Gambit is ideal. Also, if you’re wanting to buy stock in USD, you can use Norbert’s Gambit to convert the currency first.

Not sure if Norbert’s Gambit makes sense for you? Why not chat with a financial advisor? You’ll receive financial consultation to help you lay out the pros and cons, or consider other opportunities that work better for your situation. 

CIBC Investor’s Line Offer

Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

How long does Norbert’s Gambit take?

Every transaction takes between 24 to 48 hours to finalize. However, it can take up to 5 business days under some circumstances. If you don’t have available funds or an open brokerage account to action Norbert’s Gambit, it can take some additional time. But generally speaking, Norbert’s Gambit shouldn’t take more then 5 business days using an open, active account with available funds.

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Yes, Norbert’s Gambit is 100% legal. Although, if you’re using Norbert’s Gambit to engage in illegal financial activity, that is, of course, illegal.

How much do I save with Norbert’s Gambit?

Norbert’s Gambit can save you around 2.5% of your converted amount, based on the general exchange fees at most banks and currency exchanges. Still, you won’t save a substantial amount if you’re working with a small amount of money. Don’t forget about the approximate $20 commission for the stock purchase and subsequent sale. 

Is there a minimum amount for Norbert’s Gambit?

Technically? No. You can test the waters with a small stock transaction to see how Norbert’s Gambit works, as long as you don’t mind spending the $20 commission fees for each group of transactions. 

Still, you won’t reap as many benefits using Norbert’s Gambit for small amounts of money. You’ll want at least $800 CAD to play with if you’re going to try using Norbert’s Gambit. This is because the fees are the same with $800 whether you’re doing a currency exchange ($800 x 2.5% = $20) or Norbert’s Gambit ($10 per transaction x 2 transactions = $20). If you’re exchanging less than $800, you’re actually better off going through traditional currency exchange.

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Is Norbert’s Gambit worth it?

Life is expensive enough — why spend more on currency exchange fees when a strategy like Norbert’s Gambit can help you save? At the end of the day, it’s worth it for transactions over $800 CAD and for people who don’t need the money immediately. 

Thinking about other ways to save money? You don’t have to do it all on your own. Our platform connects Canadians like you with certified financial advisors who make it their business to support your financial goals. Connect with a financial advisor today!

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