First off, I would like to thank frequent commenter Mike for suggesting this topic. Though I have set up a self-directed RESP for my boys, I had not researched scholarship plans in detail. The little I did read about them suggested that I should stay away. Nothing that I learned while researching this post made me change my mind.

How do these plans work?

In a Group RESP plan, contributions are pooled together and invested in fixed income instruments. For an overview of how a Group RESP plan works, you can refer to pages 25 to 32 of this prospectus.

What are the fees involved?

You should keep in mind that there is no such thing as a free lunch. Scholarship plans are heavily promoted at doctor’s offices throughout the country. They also employ agents to sell their products. Guess whose pocket these expenses come out of?

In a typical plan, you’ll pay an enrolment fee of $200 per unit. If you enrol your newborn in a group plan, you are agreeing to invest $105 for each unit every year. The enrolment fee may be refunded to you, in portion or in full, when your newborn enrols becomes a qualified student. Note that you won’t receive any earnings on your enrolment fee.

You will also pay depository charges, administration fees, trustee fees, custodian fess and investment fees. These fees alone (excluding the enrolment fee) add up to more than 0.60% of total assets.

What are the advantages of a Group RESP?

When a contributor withdraws from a group plan, only the initial investment (less enrolment fee) is returned. The earnings on the investment stay within the plan and is shared by children who become eligible to receive payments. If the earnings boost from forfeited income were much larger than the total fees, you would benefit from a Group RESP.

What are the drawbacks of scholarship plans?

Lack of Flexibility: For most people, saving for their child’s education should have a lower priority than saving for their retirement or paying down their mortgage. If money is tight (a job loss or unexpected emergency), you should be able to skip a contribution to the RESP. Your flexibility is limited if you originally signed up for a regular contribution schedule. Also, you’ll derive full benefit from the program only if your child attends a four-year degree program.

Returns: You should keep in mind that scholarship plans are invested in low-risk and low-return assets like T-bills, bonds and mortgages. The return you should expect from scholarship plans will be similar to what you can get from bonds (around 5% currently) plus the earnings on capital of members who dropped out less plan expenses. It is extremely difficult to say how much the fees add up to and since it is not obvious, you have to assume that you will be left with more if you invest on your own. Also, note that fully one-third of returns are “discretionary payments” and around 12% was due to “attrition”.

Are there better options available?

In my opinion, you should carefully consider the alternatives and decide for yourself if they are better. I have a RESP set up for our kids with TD eFunds. There is no RESP administration fee and I am able to invest in one of the lowest cost mutual funds available. It gives me flexibility (I can decide to contribute or skip entirely. Remember, most people have other priorities like saving for a retirement and paying off their mortgage) and control (my kids are very young, so the portfolio is heavily tilted toward equities. If your kids have five years or so till university, you should be invested in bonds or GICs). In contrast, you have to keep contributing to a scholarship fund or you lose your membership. You also don’t have control over where the money is invested. It makes no sense that an infant’s college fund should be invested entirely in bonds.

Is there any drawback to self-directed RESPs?

Yes there is. Though it should take you an hour or so to set up and fifteen minutes every year to monitor, it is entirely your responsibility to do so. You should also be disciplined enough to take appropriate risks. You should not invest 100% of a 15-year old’s college savings in the latest investment fad.

What should I do if I have already enrolled in a Group RESP?

It makes no sense to stop contributing to a scholarship plan because only your contributions less fees are returned to you. You lose the earnings on your contributions as well as the matching grants provided by the government. The longer you have been contributing to a plan, the more important it is that you continue to do so.

Related: MoneySense article on RESPs; Comments section of Million Dollar Journey’s post on RESPs.

This article has 413 comments

  1. RBC has Mutual Fund mix that is geared to certain graduation periods for RESPs. Where by the mutual fund has different risk periods depending on maturity.

    See RBC Target 2010, 2015, 2020 Education Fund

    • I have 2 kids that I’ve saved for and have seen the investment to maturity. The first child was invested in a moderate risk mutual fund. We invested $25,000 over 18 yeara and got paid out $16,000. We invested our second child with Heritage, a group plan, with the same amount and we received $50,000. Each plan has there own fee structure. Please don’t pretend that the Mutuals are better, when very little is disclosed about them. The numbers were proof enough for us, we’d choose Heritage any day! Think about it, how do you think we felt when we received $16,000 after 18 years of saving $25,000? Heritage at least has a track record, one I will tell my children to rely on for their children.

      • By chance to you happen to sell for Heritage? Show me that mutual fund that has posted negative returns over an 18 year period.

    • I keep trying to post my RESULTS with our Group plan vs. mutual fund and you won’t post it. Heritage paid me $50,000. The mutual fund paid me $16,000 and I invested $50,000 in both. Regardless of various and differing fee structures, does the bottomline not tell it all?

  2. I think these plans might be useful for people who have absolutely no financial discipline at all.

  3. Canadian Capitalist

    Mike: I would be a bit more enthusiastic about group plans if I am able to understand how they work. After reading the prospectus, a couple of times, I have to say that they are very complicated. It is also not easy to ballpark how much total returns will be in the future: the rate of return published is before fees and expenses and is meaningless IMO. One thing I can say for sure, if I don’t understand something, I simply avoid it.

    • If you don’t understand how they work, why are you commenting and bad-mouthing something you don’t understand Capitalist?

  4. Good point. From what I could see from the prospectus of CST it looks like the costs are about 5% (ie 5% MER) so that’s a pretty big hit from their gross returns.

    And you’re right – better off to avoid them. For some folks the best resp plan might be to pay off the mortgage before junior goes off to college which will free up enough money to pay for the schooling.

  5. My daughter was born last September and all throughout the natal ward were CST posters, even a “Free” photo-postcard sponsored by CST.

    I have my daughter’s SIN so I’m just weighing my options, but I will be definitely taking advantage of the CSG. When else does th Federal Government give away money?! (okay, bad question)

  6. So how does the RESP change now, that the yearly grant is $500? Do I have to put more money in to get it? –C8j

  7. Canadian Capitalist

    Big Cajun: Yes. You have to contribute $2,500 to get the $500 grant. Remember though the maximum grant stays at $7,200.

  8. I actually do have a CST plan for my daughter. I’ve been contributing for just around 5 years now at $105 a month. Our first contribution was April 2002. That’s put us at about 59 months of contributing. If you do the math that makes my contributions about 6195, plus the 20% that the government should be topping off would be 1239. That means my 7434 has been working over 5 years to net me a whopping $7149.51.

    Yes, that’s not a typo and you read it correctly. I just logged in to my account to get the ‘Current Balance as of 28-MAR-2007’.

    My only advice for people shopping for an RESP. If approached by a sales rep for a group RESP provider (especially CST). RUN. Run for the hills as fast as you can. You would be far better off stuffing bills in tin cans and distributing them in non-random patterns in your back yard underground.

    Oh, I’m not bitter. 😉

    • Traciatim, you do understand that an RESP is intended to be used for your child’s education, don’t you? It has been 5 years since your original post, so I had assumed that you wouldn’t be reading this, but now I see that you have been lurking on this site for the last 5 years. I wonder if you work for a financial institution in competition with Group RESP providers?

      Anyway, I found your inability to comprehend basic mathematics (and then set up a soap box) so frustrating that I had to respond. CST has front-loaded fees. You probably saved nothing for the first two years of your contributions. Those funds do not incur costly MERs like many mutual funds would. I understand that you say you are in a low-MER fund, but I’ll bet you are also in a low-return fund (unless you are currently being whalloped in a moderate to high-risk fund).

      With a Group RESP provider, your principal (net fees) is protected – this is not so with a bank self-directed RESP. With a Group RESP provider, your money is invested in government-backed securities. My provider (USC) has a ten-year average rate of return of 7%, which is EXCEPTIONAL for such a low-risk investment vehicle. I’d like to know what you have saved thus far, since you have now been saving for 12 years. I’d also like to know what you will be receiving at maturity with your Group RESP plan. If you still have it, I’ll bet it will be tens of thousands of dollars more than you would have received with the banks.

      If you haven’t noticed, the markets are tanking. Conservative investments are the way to go.

      @Slick:Your post begs for more information. It is of the utmost importance how much you have contributed and on what kind of schedule. If I have read your post correctly, you have contributed 92K to receive a return of $110K, $18K of which were CESGs, which means you are only ahead the $50K that you have withdrawn. Do you realize that a Group RESP with my provider would have yielded over $250,000? I’m assuming that you have 3 children and that you have almost maxed out your $7,200 lifetime CESG limit between the children. I’m also assuming contributions of $150 per month per child (which equals roughly $90K over 18 years).

      • Seems someone does work for the Group RESP industry Bob.

        Try this math on for size. Open an RESP at a financial institution, invest in an ETF bond fund and save the Group RESP fees. Who comes out ahead after 18 years? I’m guessing it is the ETF investor who never dropped a dime for commissions, annual fees, depository fees, etc.

        If you did come out as well as you say you have you should understand where the gain came from. A large portion of group RESP returns come from those poor investors that were unable to finish contributing to their plans. That can be people unfortunate enough to lose a job, get divorced, etc. or it could be someone who’s child decided not to go to a qualifying post secondary institution. Is that how you want to make your money; off of unsuspecting Canadians who did not have the foresight to predict future problems 18 years in advance?

        The Group RESP industry is the scurge of the financial industry and should be regulated out of existance. Average Canadian would be better off for it.

  9. P.S. Jon . . . I wonder if my 280 bucks paid for that photo-postcard you saw 🙂

  10. Please do not sign anything. RUN.

    If you did sign they usually give you a grace period.
    CANCEL TODAY, while you still can.

    If you are stuck. I’m stuck too.
    Write to me at

    I cannot understand why is the government doing nothing to stop this. There should be a class action suit.

  11. Hi My name is Nitu and i have been in the financial industry for over 10 yrs. Being a financial advisor with CIBC , investors group and few other dealears. I have also had my license sponsered by pooled RESP dealers. Being on both sides and being able to offer my clients an option of self directed or pooled (group RESP) leaves me unbiased.

    I think both products are good depending on the risk tolerance and so forth of the client. I belive many financial advisors and consultants do not understand the group RESPs and are too quick to Judge them . Here are the fact of positives and negatives of pooled RESPs;


    1. They are less flexiale than self directed ones as you would have to stick to choosen payment schedule.
    2. Fees are front end therefore you would not earn interest on part, not all of your principal for the first two years. This is why some of you are seeing a lower current balance than you have contributed.


    1. Fees are actually lower than most mutual funds MER’s. Depending on the company you go with they range anywhere from 0.5% to 1%. There are also membership fees depending on the number of units you purchased , usually 100/per unit (average units are about 11) Compare this with your average mutual fund fee of 2.0% over the life of the plan assuming 18yrs (started when a child was a newborn) these fees are actually nominal . (I would have to explain this in detail on paper but the math has been done). Good Mutual funds (non bank) also have fees similar to the pooled membership fees they are called frond end or back end. If a mutual fund is sold with front end fees than up to 2-5% can be charged or deducted from your principal never to be returned, if they are sold with back end fees ( which they normally are ) then there is a redemption fee sechdule usually from 6% to 0% withing the first 7 years deducted from what you withdraw. Pooled RESP fees(MER;s) are not only tnominal but the membership fees of the group plans are returned if the child goes to school, therfore only charged if the nominee does not attend any post secondary education. With the mutual funds weather the nominee goes to school or not or wether the fund performance is positive or negative the MER’s are there yearly.

    2. You are able to get a decend rate of return average of approximately 7% -11%over 10 yrs without having to risk your principal, if the child goes to school. If the nominee does not attend post secondary education then the returns would be similar to that of low risk bond funds. In my opinion its worth to try to get high returns without risking your principal in case the nominee does further their education, and have a lower return if the child does not attend post secondary insitution. Also remember where ever your principal is invested that is where the grants will be invested. So if a mutual funds performance is negative the grants will also be negative.

    3. over 10 yrs ago if the nominee did not further their education the pooled plans only returned the principal and the members lost the interest. This was changed many years ago, now all group plan give interest as well.

    4. The group plans were also very rigid , long ago. Now if the members are not able to keep their commitment of what they started out with then the plan could be suspended for 3yrs and then has to be restarted, however if the client wants to cancel altogether and take out their money they will lose the membership fees as with the back end fees of the mutual fund for the first 6 yrs. Some pooled RESP’s can be locked up after approximately 8 yrs so the clints do not have to continue at all, withoug loosing anything.

    Lastley i would say the trick is to find the right company and representative who can explain the both options with full knowledge. Usually the group plan sales people have limited knowelege of mutual funds and the Financial adivsors have even less knowledge of the pooled resp’s usually they are misinformed and stuck on the old version of group RESP’s.

    At the end of the day i belive if the client is willing to take a risk and their financial situation alows them to take a risk then i would recomend mutual funds however if the cleint is low to medium risk then why put them in a low risk mutual fund with higher fees and no gurantees when the group RESP’s are a great alternative with potential heigher returns and lower fees.

    As far the people who are seeing less than their principal amount in their group RESP statements, thats because the membership fees have been deducted up front as it would be in a front end mutual fund. Do not worry, i have seem 1000’s of families in group Resp’s getting a very good return at muturity. In time you will see a much bigger balance, just give it time to earn that.

    By the way i repersent Heritage Education Funds Inc which is the easiest to understand and the lowest fees group RESP. I myself could have invested my son’s RESP into mutual funds that i was selling or Heritage and i choose heritage.

    By the way if you read a full prospectus of any mutual fund, it is also confusing as is any prospectus. They are that way because they have to give full disclosure.

    If any of you want to have the choice of offering your clients the mutual funds and the group resps and need more information regarding this or clarifications , let me know

    • Thank you Nita! I wouldn’t deal with anyone that bad mouthed another company. People, read the prospectus…frankly, We invested $ 25,000 for our first child in a moderate risk mutual fund. We got back $16,000. Our second child we did with Heritage. We invested the same amount and had $50,000 paid out. All this talk about fees, returns, etc. is meaningless when the numbers speak volumes! How do you argue that? I’ve been there and seen it through, with a Group Plan and a mutual fund and the Heritage Group Plan would be the way I’d go again, HANDS DOWN!

    • Your original post was from a few years ago, still relevant I’m sure. Are you familiar with the CST plans, they really are difficult to comprehend with regards to fees etc. I have three plans set up for my children are really hope this was the best decision, I just hate seeing those darn entitlement fees every time I read the statements! Too late to change things now as my oldest is already 11, just not sure if I should change our investment strategies for the younger two…..thanks

      • Ram Balakrishnan

        @Carlos: Since you will lose most of the front-end loaded fees if you withdraw from a Group RESP, I think it makes sense to stay in the program assuming your child will attend a 4-year program when the time comes to collect.

  12. Canadian Capitalist

    Nitu: You are comparing pooled RESP plans with the worst mutual funds out there in terms of fees. I won’t call the membership fees nominal when it amounts to about 11% of the total investment.

    I don’t see how future returns in pooled RESPs will be in the 7%-11% range. Bonds are today yielding 4.5%, so how are pooled RESPs going to manage 7% in the future?

    My main point is that I can get at least the same return that a pooled RESP provides by investing in a self-directed RESP in low-cost funds. I can also tailor the risk based on the age of the child. It makes no sense to me that a newborn’s college savings should be entirely invested in bonds.

  13. Canadian Capitalist: I am actually comparing Mutual funds in general with pooled RESP’s and typically (not always)the funds with low MER’s are underperformers.

    I have said the fees are nominal compared to that of mutual funds, not in general. I am really interested to know how you have calculated it to 11%. If this is the case then the mutual fund fees would be alot heigher than 11%.

    On an annual contribution of $2,000 a mutual fund with the MER of 1.92% would amount to $12, 390 over 18yrs , compare this to the pooled RESP where it would amount up to $7,629, if the nominee did not futher his education and only would be $3,903.00 if the nominee attended a 4 yr program. I would say that is nominal compared to a good performing fund.

    True today the bonds have low yields but as for the future we don’t know they could be high as they were in the past. Just as in a mutual fund, you can only look at the historical data and i think a 10 yr return is a good time frame to look at.

    Lastly i am not saying pooled RESP’s are for eveyone and a good advisor would not say a mutual fund is for everyone. It’s not about how the advisor feels about the investment. At the end of the day we have to do what may be best for the client based on their risk tolerance and financial circumstances (KYC). For some, pooled RESPs may make sense and for some they may not. All i am saying is that they are an alternative or another option if you will, and they are not a bad option if you fully understand them. As you have said that a newborns savings should not ENTIRELY be invested in bonds, this could be an alternative for partiall savings for diversification or fully if the client is a low risk client. Wether it make sense to you or not a low risk client should not be invested in equities. Besides a great advantage to pooled RESP’s is the possible gains from other members who forfitt their fees and yet the worst case scenario is a return similar to a bond fund without having to manage the risk.

    As i said i offer my advice as pooled RESP’s being an alternative for some not all, as are mutual funds.

  14. Canadian Capitalist

    Nita: It is incorrect to say that low-cost funds are under performers. Do you have any studies to back up your claim? I can show you any number of studies that show the importance of low MERs. In any case, I am invested in index funds which will track the index less the MER, which is lower than 0.5%.

    Take the CST. The annual contribution for a newborn per unit is $105. The membership fee is $200. You are agreeing to contribute this amount for 18 years. So, the load is 10.6%. Yes, membership fees are refunded in nominal, not real terms, but only if the child enrolls in a 4 year program.

    If future bond yields are higher it is bad news for someone investing in bonds today. It means their principal is being inflated away faster than they are being compensated for it in terms of interest payments. In any case, total bond returns have a high correlation with current yield. So, it is reasonable to assume that bonds will have total future returns in the 4.5% range.

    BTW, I am not suggesting that the entirely invested in equities, but a diversified portfolio of stocks and bonds. I can invest in bonds myself, why would I want to invest in bonds through pooled RESPs?

    The only attraction of a pooled RESP is the possibility that attrition will boost returns as long as you are not the one dropping out. I am not convinced that the boost from attrition will make up for all the negatives I have pointed out.

    Here’s the math on what you can optimistically expect in future from pooled RESPs: portfolio growth = 4%, attrition = 0.5%, discretionary top ups = 1.5%. Total = 6%. If you are pessimistic, returns will be in the 4.5% range. That’s before accounting for the membership fees. Is it any wonder I prefer the self-directed route?

  15. I have a family plan for the 4 kids, and have tossed it all into a Td waterhouse trading account. once you are over $25,000, there are no annual admin fees, only trade commissions.
    I have it loaded up with income trusts.
    We are now in the process of trying to make a withdrawal, as the oldest is planning on college this year. I had to educate my accountant as to my understanding of the way the withdrawal is removed, and taxed.
    I was concerned that our contribution was going to be exposed to tax a second time upon withdrawal, but this is not the case. Only the Gov’t grant, and the income is taxed in the childs hands. I am planning on waiving the withdrawal part that is our contribution, so that the plan keeps returning an income for the other children.
    We’ll see how that worls out.
    Hope this helps

  16. Your website is why the vast majority of people believe very little of what they see on the web.

  17. Canadian Capitalist

    Dave: What’s your point? You are welcome to disagree with my opinions or post your point of view. There is no need to be disagreeable.

  18. I did sign up with Children’s Education Fund Inc. Canada. What a nightmare. I cancelled with them after 15 months. The CEFI personal was nothing but bad advice, especially the local Rep. from CEFI. Any RBC branch can handle your money better. Don’t use CEFI run and look for someone better. If you like to share any negative information about CEFI, go to my forum.

    Good luck!


  19. I’d just like to ask why does everyone think that what they do for their children, or whom they work for (banks, advisors,resp specialist) think that they are right and everyone else is wrong?

    I have a bank investment (TD) and a group plan (Heritage) I opened with Heritage as the investments I had with the TD didn’t grow at all. Yes, there is an upfront enrollment fee for the group plans, but it is very nominal compared to the MER’s that banks and others charge, on a compounding total including the CESG. There are good and bad in both, however is safe secure flexibilty is what you are looking for then in MY OPINION group plans are the best. There are 5 group plans out there… you have only talked about one, what about the other 4? I can tell you that with Heritage, they pay in the number of years your child goes to school. Who knows when you have a newborn what or where they will attend at the age of 18? At least I know if my daughter goes to college or university she is covered. Some don’t opporate this way, but check all your facts before badmouthing ALL group plans.

    Who say’s that banks and or investors are any better? They make TONS of money off their fees, but don’t share all of those details with the clients.. so who’s bs’ing who?

  20. Jennifer, I will have to lump Heritage in with my assessment of CST above. It’s garbage.

    Lets looks at the fee structure of heritage vs an RESP through TD mutual funds (E-Series).

    TD Mutual Funds:
    CDN Index – 0.31%
    US Index – 0.33%
    Europe Index – 0.48%
    International Index – 0.48%
    CDN Bond Index – 0.48%

    Fees for Heritage:
    $100.00 per unit
    $10/year for monthly contributions
    0.055% Management Fee (Up to 0.20%)
    0.50% Administration Fee

    Now, I’m not sure how each unit works in Heritage but for my own in CST it works as every $10.00 in contribution per month is one unit, so for my $105 for my daughter, it’s 10.5 ‘units’. I’ll use that for my example. I assume equities are making 7.5% and Bonds are making 6%. Heritage will be equal to bonds. Doing an even $100 monthly contribution to make things easy.

    Year 1, we made $1200 in contributions. $240 came from the 20% CESG for a total of $1440.

    1200 split in to 5 fund equally = 288 per fund. That puts $288 in bonds (6%) and $1152 in equities.
    288 * 1.06 = 305.28
    1152 * 1.075 = 1238.40
    Now take off the MER’s.
    Bonds: 305.28 * 0.0048 = $1.47
    CDN Index: 309.60 * 0.0031 = $0.96
    US Index: 309.60 * 0.0033 = $1.02
    Europe Index: 309.60 * 0.0048 = $1.49
    International Index: 30.60 * 0.0048 = $1.49
    Total of Fees Paid: $6.43
    Total Invested: $1200
    Money Left for child: $1537.25

    $1200 Invested, $240 from CESG.
    $1000 deducted in enrollment Fee
    $440 invested making 6% = 446.40
    Subtract the $10.00 Fee for making payments: $436.40
    Take off the 0.5% Admin Fee of $2.18: $434.22
    Take off the $0.055% Manage Fee of $0.23: $433.99
    Total Fees Paid: $1012.41
    Money Left for Child: $433.99 (+1000 of fee reimbursement that doesn’t get to compound)

    I can see your point on how the bank is making HUGE AMOUNTS off the fees. I’ll do year two for a full contribution year, just to be a little more fair.

    Year 2, $1200 in and $240 in CESG for $1440 of new cash.
    $288 in each of the funds
    Bonds: Had $303.81, now 591.81. Add the 6% and I end up with $627.32
    CDN Index: $308.64, Now 596.64. Add 7.5% for $641.39
    US Index: $308.58, Now 596.58. Add 7.5% for $641.32
    Europe Index: 308.11, Now 596.11. Add 7.5% for $640.82
    International Index: 308.11, Now 596.11. Add 7.5% for $640.82
    Bonds Fee: $3.01
    CDN Fee: $1.99
    US Fee: $2.12
    Europe Fee: $3.08
    International Fee: $3.08
    Total Fees: $13.28
    Total Invested: $2400
    Money Left for Child: $3178.39

    Had $433.99 + $1440 = $1873.99
    Add the 6% interest of $112.44: 1986.43.
    $10.00 payment fee: $1976.43
    0.5% Admin of $9.88: $1966.55
    0.055% Manage Fee of $1.08: $1965.47
    Total Fees: $20.96
    Total Invested: $2400
    oney Left for Child: $1965.47 (+1000 of fee reimbursement that doesn’t get to compound)

    I could keep going all night, but I think you see my point by now. In no way can heritage ever catch up. Please forgive my math if I made mistakes, it’s a little late here, I was just getting ready for bed before I saw the comment.

    I stand by my original comments that Group RESPs are good for NO ONE except the group RESP companies.

  21. Sorry, in TD year one it should read:
    “$1440 split in to 5 funds . . .”

  22. Canadian Capitalist

    Jennifer: I don’t work for any bank or financial institution. I don’t work for pooled RESPs either. I am simply trying to save for our kids education in the best way possible.

    First, please tell us how a group plan’s fees are nominal when compared to the rock bottom fees of e-Series funds. Also, note that you don’t need any expertise to invest in fixed income. You can simply buy some GICs in a self-directed RESP that is as safe and secure and offers more flexibility.

  23. Canadian Capitalist

    Tim: Thanks for your detailed comments.

    Jennifer: I did take a look at Heritage prospectus and find it very similar to CST. I found nothing to change my opinion of group RESPs. However, if you have already signed up for a group RESP, it is best to keep contributing because the alternative (losing the membership fee) is even worse.

  24. Thanks for this post CC. We just had our first kid and had to deal with a CST rep who kept calling starting on our baby’s due date. If I hadn’t read this post we might have been persuaded. He kept going on about the horrible hidden bank fees.

    Opening a family RESP at TD with efunds.


  25. What is all this talk about “you must keep contributing”? I set up a “lump sum” account with Heritage and I can pay whatever I want whenever I want. This is all without putting any of my capital at risk. I know that there could be some higher rates of returns out there at TD. What if there is a big market correction in the near future. With my principle at risk, I may never be able to recover that.

  26. Maybe you should be praising TD, but not necessarily at the expense of group plans. When discussing RESP’s with Investor’s Group, I found that the average MER is 2.5%. If Traciatim were to plunk this in his example, he may find that Heritage would catch up in the long run. I didn’t do the math so I may be wrong. Again…. assuming that your principle is NOT at risk.

    I only say this because my brother lost 10% during the 2000-01 year on his RESP when he was graduating with RBC RESP. Ouch!! He actually lost principle!!

    • It’s not fair to say you lost money in an RESP – what SPECIFICALLY was it invested in? It sounds like there were a lot of high risk equities at a time when the portfolio should have been rebalanced to be more conservative because of the shortened time horizon in needing the money. Who was responsible for managing the portfolio? You can’t put your money into a self-directed account and then complain when performance is poor (because the SELF did not DIRECT)

      … and it IS possible to have RESPs without any Front End fees – where 100% of your money is invested AND you don’t have to pay to take money out – AND you aren’t responsible for babysitting yourself AND you don’t have to pay for the guidance

      … so depending on how much time you still have left it MAY be beneficial to cut your losses and invest in something without the fees with a bit better track record.

  27. Ok Lb, I’ll play along. This time I’m running through real numbers though. Lets say for instance that your child is just born and within a day or two your RESP is set up.

    You decide that heritage is the way to go so you buy 10 units. On page 46 of the Heritage RESP it mentions that a per unit price for lump sum contributions is 437.45. It bases this on the 6.08% (before fee) return, which i assume is what they target. You fork over your $4374.50 Of which they keep $1000 aside for safe keeping (safely locking you in the plan that is). They charge you a $3.71 charge just to make the deposit, and you get a $875.10 CESG contribution making your total invested 4246.89. Since their MER equivilant is around 0.57% after 18 years of a return and the return of your 1000 bucks they took you end up at near 12086.33 if I did my math correctly.

    TD with E-Funds. I read recently on that the worst rolling 10 year period since 1950 was 3.3%, the best 19.5%. Many people use the average return of 10% just for nice round figures. I will be using 5.5% return on bonds. At 10 years I start moving 15% of the equity balance of the funds in to bonds, so at 18 years a good chunk should be there.

    So, if TD makes 3.3% you end up with 8809
    At 6.08% you would end with 12972
    at 8% you would end with 16909
    at 10% somewhere near 22000
    at 19.5% you’d be at 79400

    If your MER was 2.5%:
    At 3.3%, 6439
    at 6.08%, 9422
    at 8%, 12229
    at 10%, 16016
    at 19.5% 56100

    All This proves that people that pay fees get far less return. If it’s Heritage, IG, or anywhere else. Fees dramatically diminish returns. I still stand behind my original statement and I’ll lump IG in with it.

    Also, I couldn’t find anywhere in the heritage prospectus that states your principle is guaranteed. Though they invest in mostly guaranteed investments so it’s very unlikely that you will lose money in your situation, it’s not written in stone.

    Interesting fact too… if you want guaranteed. North Shore Credit Union (first one googled, I’m sure there are others) offers RESP eligable GIC’s at 4.25%. Using these over 18 years would yeild 11923 vs the heritage 12086. You could also find GIC index linked products that guarantee principle and follow an index. Not sure of the fees here though.

    So many options, none of the good ones are pooled RESP providers.

  28. LB – do you think the pooled providers don’t charge MER? When I took a look at CSTs financial statements, I calculated an mer of about 5% which is ridiculous for a fixed income fund.

    That said the problem with resp providers is that resp admin is quite complex and expensive and they don’t have the economy of scale that bank & MF companies do.

    Regardless, if you’re happy with them then you’ll do just fine with Heritage.


    • You obviously don’t know how to read financial statements. I’ve looked at the statements and the MER is nowhere near 5%. I have my CA designation to back up my claims, plus 15 years experience setting management fees for Mutual Funds. Do you even know what an MER is?

  29. Canadian Capitalist

    Lb: I did note in the post that you should take responsibility for your investing if you set up a RESP on your own. If your child is going to university in a few years, you should not be risking the college fund in equities. But, if you child is 3 years old, you have a very good justification to take the extra risk in equities and the time frame to recover from set backs.

    If capital preservation is important simply invest the RESP in GICs and you’ll do at least as well as Group RESP plans.

    For me the bottom line is simple: with a group RESP, I don’t know what I’m getting. So, I choose to avoid it. Your mileage may vary.

  30. All very good points people….. I am just noting that MOST people don’t have the inclination, desire, or knowledge skill set to know what we are talking about here. They don’t know what research to do or where to do it. They don’t know who they should listen to as they are getting conflicting stories. I know they should take responsibility for their investing… I know…. I know….. I know…. but they don’t.

    I have seen it so many times. I think we are all agreed here correct??

    Therefore, they go to somebody who they feel may know what is best.

    I bring my car to a mechanic near my house to get fleeced because I don’t know how to fix it or diagnose the problem.

    Then I hear about the guy across town that may do it cheaper but they get their parts from somewhere else. I haven’t got a clue here. I know I should investigate but I don’t.

    With this being said, the Investor’s group people, many financial planners, and yes…. even some bankers will set families up in mutual funds with high MER’s. It is sold to them stating that there are no fees for RESP’s. They do not mention the MER’s. These MER’s can range up to 2.5%.

    I was a bank mgr in another life and know how it works. It is always about the almighty dollar.

    Oh yes… they are told it is a “self-directed” plan but many don’t have a clue which investments to put into their RESP portfolio, so they trust the person on the other side of the desk. I met one poor guy who was with a credit union who had his 3 year old twins RESP’s invested in term deposits yielding under 3% because he said he wanted safety. After all, the Credit Union guy knew best didn’t he??

    Most in this post have also commented on the fact that as the child ages, the portfolio should be shifted more to conservative bond type investments. Agreed. But now, the person at the bank who originally set up this RESP has long gone, as has their other 4 predecessors. Sound familiar?? People are trusting that the bank is taking care of their kid’s money so they let it ride. They don’t know any better. They are not taking responsibility for their investing as they should. So now they are sitting with $70,000 in an RESP paying a 2.5% MER = $1,750 by the way. And exposed to market risks. Thank you Investor’s Group. A LOT of people don’t take responsibility for their own investing….. did I mention that??

    Group plans may be the devil…. but I feel they have a place in this society. Folks put their money in and they can forget about it knowing that principle is safe and money will be there when their kids go to school. Yes there are fees… fees are everywhere in different disguises for those who don’t investigate. Yes there are slimy salespeople (renowned in the RESP company circles). Yes, there are penalties for pulling your money out early, or for taking time off. (these can be solved with a lump sum plan).

    I agree with what MOST people have written in this post but people should not be made to feel that they have done their children a great injustice because they invested in a group plan. As Canadian Capitalist mentioned in his/her last post, “invest the RESP in GICs and you’ll do at least as well as Group RESP plans.”

    The greatest problem is that there is TOO MUCH information out there for people to digest. Most people, when reading the prospectus for a mutual fund or a group RESP don’t understand it. Agreed. Capitalist mentioned that he/she “doesn’t know what (they’re) getting. So (they) choose to avoid it.” A LOT of people don’t know what they are getting at a bank, financial planner, or group RESP meeting. They just look at the bottom line. If it is growing, they are happy. Group plans, banks, and planners prey on these people.

    One thing that can be said about group plans is that they are consistent. Is every bank RESP the same??? Absolutely not. Some are better than group plans or “at least as good” as Capital mentioned above, some are worse like that poor guy who had term deposits and didn’t know any better.

    I would just like to acknowledge that all you people out there who locked into group plans…….. you’re still doing a good thing. You are saving for your kid’s future and you don’t have to worry about managing your portfolio or trusting someone else to manage it for you.

    You heard Traciatim point out that the numbers favour TD. I know, you didn’t know, and you went with a group plan. You are still doing OK. You are saving for your kid’s future.

    For all of you who stuck with me this far…. I have my children’s plans in both a bank (is CIBC but may soon be TD, thanks Traciatim) and in a Heritage lump sum plan as I want some no worry safety. Hell, I may not even be here in 16 years to “shift” my TD plans into more conservative investments. So I know that some of it is safe.

    Would anyone be willing to comment that all of these products have a place here as the market of those purchasing them is as varied as the products being sold??

  31. I don’t think the pooled plans have a place at all. The IG one with the 2.5% MER, maybe, but questionable. The GIC based one at a credit union or banks, sure. I’m even in CST… consider me ‘suckered’. Only I don’t blame the sales person. It’s not like she would get any sales if every time she made a point she brought up how much better you can do with other providers. She made the points that the company wants to sell and I signed up not knowing any better. Looking back it was a huge mistake. I want Canada to learn not to make the same one.

    See, people don’t need to understand the fee structure. People don’t need to be able to read financial reports. People don’t need to be a financial planner. The problem is people should be able to trust finance companies and RESP providers to have the clients future success as it’s primary goal. That’s not the way the finance industry works.

    People shouldn’t really have to worry about being suckered in to term deposits for 18 years. They shouldn’t have to worry about 2.5% MERs on marginal performance on products.

    The problem with my theory is that people just don’t care. In order for there to be change there needs to be movement in money to simple cheap products that work. In order for that to happen you have to scare people (see advertising industry for last 50 years) in to thinking they are not doing the right thing. If people can link ‘Pooled RESP’ to ‘My kid will fall behind their peers’ then score one for the home team. People will migrate to better products simply because the worst ones get weeded out for them. As people migrate, the providers will wake up and make better products. You can’t expect them to change if the money isn’t leaving.

  32. Hey Traciatim,

    Are you aware that you can do what’s called a “conversion” with your CST plan. If you started when your child was a newborn, at around 7 – 8 years old, you can pay up your plan as if it were a 5 year annual plan. End of deal. You could then put future payments in a your TD RESP account. Ask your CST agent about that. They don’t offer up that option, you have to ask for it.

    You are bang on by the way about people not caring!!!

    To summarize then….. you are against all RESP’s that have high fees, and/or low yields regardless of whether they are “pooled” or not.

    I agree with you on that.

    Unfortunately competition and the potential for profits is what drives greed and, therefore, Corporate Canada .

    Even the “ethcial funds” have some high MERs and/or front end loaded funds. You must hate those as they are a real contradiction in what you feel is wrong in this investment world…. making money with high fees for a fund investing in socially responsible companies. What is wrong with that picture???

    You can extend that to fast food and obesity… people just don’t care!!!!

    So what would you suggest for the RESP family ready to forge into the investment world that just doesn’t care??

  33. Canadian Capitalist

    Lb: I’ve made many posts on how I invest the RESP funds of my kids. That’s a template that others can follow profitably.

    Regarding fees, I agree with you that most mutual funds aren’t worth their cost. Best to stick with a low-cost index fund.

    I would be more enthusiastic about group RESPs if despite the fees there is high attrition. But there isn’t. According to their prospectus, 12% of the EAPs come from attrition and fully 30% is “discretionary”. The rest comes from earnings of the RESP investments.

  34. CC: Could you please expand on the attrition concept. I’m not familiar with that.
    You parenthesized “discretionary”. What do you gather from that?

  35. Canadian Capitalist

    Lb: Attrition is when people drop out from the group RESP. They get their contributions less enrollment fee back but lose all the earnings so far. The lost earnings is distributed among current members.

    The “discretionary” payments are made by the group RESP provider from the fees collected. It is not guaranteed and the provider is under no obligation to make these payments.

    Investing through a group RESP is nothing like investing in bonds / fixed income. There is plenty of unknowns on how much you can actually collect.

  36. I wouldn’t say high fees AND low yields. If someone has short time frames or is very risk averse then GIC’s or index linked principle protected notes (if you can find a simple low fee one) are a fine choice.

    I’m against complicated things that charge high fees for service that you could get otherwise far cheaper and much simpler.

    I wasn’t aware that the option existed to exit from the CST plan by paying out. I’ll have to look in to it, thanks for the tip.

  37. I have a CST plan for my 3 year old and 1 year old. What would be my best option now? Should I minimize payments on it and start another RESP account? Does that make sense? Or continue to max out the yearly payments (to gain the maximum governement contribution) And how does the “paying out” plan work with CST? How much do you pay, how is that calculated?

  38. Canadian Capitalist

    ben: I’m not sure you would be able to minimize payments without incurring heavy penalties. If you are already contributing the maximum, the best course might be to continue with the program.

    I’m not sure I understand the second part of your question. Do you mean the enrollment fee?

  39. I had a nightmare experience with CST last summer when I decided that it was time to stop “making deposits” to that plan and shift my daughters education savings to something else — my idea of diversifying her education savings. I had no problem discontinuing contributing to the RESP that I was investing in when I was approached by the CST sales rep, and I never imagined what was going to happen with the CST plan. I know for sure that I wasn’t made aware that I was going to be committed to making those “deposits” for that length of time or I wouldn’t have done it. I know this because I already had the idea of shifting her savings around before I ever met with the sales rep. I had no intention of paying into that plan until she was 18. Ultimately it didn’t matter what he may or may not have said, I signed up and that’s all that mattered.
    After many truly frustrating emails with a few representatives of CST and realizing that all my choices were grim, I decided to pull out. I know my daughter lost a pile of money and I’m still very bitter about it, but I could no longer keep giving money to an organization that was using such underhanded tactics to keep people in the plan. My instinct told me that if they could do this, then what’s to say what kind of surprise condition we would discover when it was time for her to go to school? How could I trust anything that the sales rep had told me when he clearly left out vital information? By pulling out my daughter lost all the government grants that had been put in, and the “enrollment fees”, in the $2000 range, this all happened last summer and so the details are a bit fuzzy now, also due to the fact that I went through the ordeal in a low-grade rage.

    Note for Ben: Don’t count on any option they give you as being “good”. You will lose money no matter what you do other than stick with what you signed up for.

    I, like Edward in post 10 above, cannot understand why this type of thing is allowed to continue.
    It’s shameful. I don’t know how those people sleep at night.

  40. Everyone seems to be under the impression that you must “commit” to payments under one of these scholarship plans. You can choose the “lump sum” option in which you contribute however much you want when you want.

    The salespeople don’t encourage this, however, as it is detrimental to their immediate commission.

    I wish they would just do away with these locked in payment plans!!

  41. I’m a CST rep and it’s true what a lot of you are saying. You CAN get screwed by cancelling early, and the front-end enrollment fee DOES slow down the growth of your investment in the first few years, and sales reps oftentimes don’t tell you everything – but that’s not just with Group Plan providers.

    I do my best to make sure that all my prospective clients know the risks involved with Group Plans – if they cancel or default then they only get their principal back, minus enrollment fees and forfeit their interest earned. So I encourage them to not over-commit on their contributions, so that they don’t run into problems with their payment obligations. They can also commit to only paying in to it for 2, 5 or 10 years – not always the whole 17 years. I have signed clients up for just lump-sums, with no ongoing commitments, even though it made me a much smaller commission. It’s all about knowing your client and doing what’s in their best interests. And I have no interest whatsoever in hiding the conversion option, because I’ve already been paid in full by the time the option becomes available. I suggest it to my clients all the time – they can either get out of their contract after 7-8 years with no penalty, or they can convert it and then write up a new contract for the same amount but get more return than they would have if they didn’t convert.

    I can state with absolute certainty that many parents still choose CST and other Group Plans, knowing full well the potential risks, and knowing full well not to expect huge returns. Very few people have the time, knowledge or inclination to research their investments. There is a significant subset who just want their money to be safe and who are not worried at all about cancelling their contributions and losing money, because they are committed to saving for their children’s future education. There are many who want to deal with a specialist – and nobody understands the government RESP regulations like Group Plan providers who ONLY do RESP’s.

    And people are often not worried at all about the fees, either, because with CST they can get a minimum 50% refund on their enrollment fees (which is non-discretionary, by the way) with a discretionary top-up to 100% refund. We’ve been refunding 100% for years, even though it is “discretionary”. True, your child has to be going to school to get this refund, but our participation rate is around 95%. How much of your MER have you gotten back? People LIKE that! There is definitely a place for Group RESP’s in the industry. Is everybody a bull on the stock market?

    By the way, CST donated $3.5 million in “discretionary” payments in 2007. The money comes from what is left over after we deduct our fees and cover our expenses. It adds significantly to the investment return. The 10 year average net return is 6.4%, not 4% like as has been suggested previously. What’s the average 10 year net return on a balanced-equity mutual fund – and which is riskier? And CST’s management fee is not 5%, but 0.5%. And about economies of scale, our assets are at $2.5 billion, so we’re not exactly tiny. Just to clarify.

    And yes, I did do the math on the enrollment fees. Group Plans ARE actually able to catch up to mutual funds with an MER of 2% – the average MER that the average person gets sold when they go to their bank – not everybody is savvy enough to pick their own stocks to track the index or buy into a low-cost index fund. People like that don’t go with Group Plans. But mutual fund salesmen sell the higher MER funds because they make a greater commission off them. You CAN do well with CST. Many people knowingly choose a stable 6% return with 100% protected principal, over a volatile mutual fund with no guarantees. Even stock market bears want to stay away from index funds, even if they have tiny MER’s, because of their percetion of the overall market risk.

    Why is it that some people have such a hard time accepting that not everybody is like them? If I don’t like it then it must suck and EVERYBODY should avoid it? C’mon!

    When mudslinging is going on, we all get dirty, and the client gets fearful – and does nothing. No savings for their children’s education at all. Is that what we want?

    I’m thinking that many on this discussion board are financial planners? Why else would you spend your time discussing Group RESP’s unless you had a specific agenda – to drive prospective clients towards what YOU are selling and making a commission off of. We’re all in the same boat, guys.

  42. So, Mike:

    I’m no financial planner, I’m a tech support agent in a call center.

    ” . . . it must suck and EVERYBODY should avoid it . . . ” Yes, that pretty much sums the whole thing up. It sucks, and everyone should avoid it.

    You claim the MER is 0.5% but that doesn’t include the enrollment fee, depository charge, Trustee and Custodian Fee, or Portfolio Management Fees. Let’s say for instance someone putting 100 bucks a month away for their kid, you have $10.00 (or 0.83% of 1200), 0.5% Admin, 0.015% Trustee, .1% – .3% Management, plus the enrollment fees. For a TD E-Fund account, all the MER’s are less than 0.5% and there are no other fees. How can you compare that?

    Plus, why did they change from 100% refund of your enrollment fees to 50% of enrollment fees refunded? Are they doing that poorly that they have to take peoples enrollment fees too?

  43. Canadian Capitalist

    Mike: For the record, I am not a financial advisor. I don’t work for a big bank or mutual fund company and I couldn’t care less if your organization does than mutual fund companies or vice versa.

    A knowledgeable guy like you should know that even a 100% refund years down the line is not even close to “getting back the MER”. Let’s run a quick calculation, shall we? A newborn is enrolled in a group RESP and pays the $200 fee and receives a refund of $50 each in years 18, 19, 20 and 21. What’s the refund worth today at a 7% discount rate? Try $53. In other words, the enrollment fees has eaten up close to three-quarters of your $200 enrollment fee assuming a full refund. Of course, a 50% refund is only worth $26.50.

    Now, we haven’t even talked about the other fees that Traciatim mentions in his comment. So. let’s add it up for someone who invests $1,000 in a monthly plan:

    Depository charge: $10, which is 1%.
    Admin Fee: 0.5%
    Portfolio Fee: 0.2% (mid-range of the 0.1% to 0.3%)

    We are already at 1.7% and we haven’t even added the enrollment fees that “you get back”. So, tell me how is a Group RESP better than a high-MER mutual fund that charges 2% on a fee basis?

  44. To Traciatim, we didn’t “go down” to 50% from 100%. Up until 2007, the enrollment fee was 100% discretionary (meaning we could refund from 0-100% at our discretion). In 2007, it became only 50% discretionary, BECAUSE we have a solid financial backing for this obligation.

    I’m not going to argue theoretics about Enrollment fees vs. MER’s. I’ve crunched the numbers. They work if you consider a 2% MER. Try it yourself. I’m not going to waste my time arguing with people who have already made up their minds about it.

    Thousands of parents are just happy with their CST (and other Group Plan) RESP’s. They work great for people who just want to save money and would’ve otherwise just done a GIC because they want their money to be safe. People who are deeply committed to their children’s post-secondary education and would never dream in a million years to cancel their savings plans. You are perfectly free to disagree, but that’s just your opinion.

    There are other opinions out there about mutual funds – “they suck and everybody should avoid them”. There are other opinions about the economy in general – “we’re heading into a major recession and we should avoid equities in general”. People are free to make their own choices – and many people CHOOSE Group-RESP’s, knowing full well all their options, as hard as that may be for you to believe. I deal with these people all the time. Over 90% of my clients are totally satisified (yes, I keep track of my numbers) – which, by the way, is a very high satisfaction rating compared with other products . So, hard as this may be for you to swallow, you are in the minority. I’m sorry you’ve had a bad experience, and you’re unfortunately not alone, but you’re not in the majority.

    The whole point of the matter is that one size does NOT fit all, it depends upon one’s risk-tolerance, their priorities, their goals … financial planners are supposed to review all of this before making recommendations. They don’t just say “this is the best investment – do it!” So please don’t generalize and pretend that you know what’s best for everybody else. You hate Group RESP’s. Fine. I’m not going to argue with you anymore.

  45. Gee, I’m so confused. Can someone help me? I have a CST plan for my son who is four years old. I’ve made annual contributions of $1800 for 4 years, his portfolio is valued $8878. That doesn’t seem like good value considering the top ups from the government.

    Would it make any sense to pull the plug and start all over.

  46. Hey Fred C, you are seeing the same performance that I am seeing. Nothing.

    It makes very little sense to leave the plan as you will lose your enrollment fees, which in the long run will be very difficult to make up over the next 14 years or so.

    If you were thinking of increasing your RESP contributions I would strongly recommend a separate plan from another provider.

    Hey Mike, I guess i was just misinformed when the agent kept saying ” . . . but you get all those back” whenever the fees were mentioned. I’m not sure if I still have the original material I had when I first signed up, but I’ll look for it to verify your claims.

  47. Canadian Capitalist

    Fred: Can you provide a breakdown? A $1,800 contribution over 4 years equals $7,200. A 20% grant puts the nominal contribution at $8,460, which means the growth is $418. It sounds about right, considering that initial contributions go toward paying the enrollment fee.

    As Traciatim and I posted elsewhere (read through the comments in the RESP category), it may not make sense to pull the plug because the biggest bit (the enrollment fee) is front loaded.

  48. Hey Fred,

    As Mike pointed out…. you can consider the conversion option when your child is between 7 and 8 years old.

    Check with your CST rep. According to Mike [he] ” suggests it to his clients all the time – they can either get out of their contract after 7-8 years with no penalty, or they can convert it and then write up a new contract for the same amount but get more return than they would have if they didn’t convert.”

    People who don’t understand group plans very well (most of the people on this post) seem to ignore this option.

  49. Hey Mike,

    Maybe you can explain why in the world people would want to “lock in” to an annual payment plan when they can simply lump sum every year for any amount they wish, without contractual obligation. With the understanding, of course, that the parents had their children’s best interests at heart.

    What do you guys get as commission?? About $70 per unit?An average $2000 per year contracted customer would give them about 17 CST units? Do the math. That is a big commission for a few hours work.

    Salespeople in these group plans have their own best interests at heart in my opinion. An $1190 commission(for a locked in $2000 annual payment) vs. a $300 commission for a lump sum arrangement upon sign up. Hmmmmm!!

  50. Hey CC, the math doesn’t work.
    $1800.00 x 4 Years = $7200.00
    CESG @ 20%= $1440.00
    Total = $8,640.00
    TOTAL = $8878.00

    Same Investment with 4% Compound Interest would yield me with a total of $9442.00

    That’s a difference of $564.00.

    Hey Mike from CST, am I doing the math wrong?

  51. I had a Heritage Rep over justa few days ago – WHAT A SCAM. All they pushed was the final $$ value in 18 ++ years. Hardly c ould understand that fact that they suck up about 4500 in enrollment fees within the first few installments. I will never go with a group RESP – what a scam. Heritage RESP is a scam.

  52. I’m a financial advisor here in Canada. A friend (and client) of mine dropped by the other day asking me to explaine his Heritage Education Fund plan to him. He began about 2 years ago with $100 a month contributed. His balance today is $1,682.08! There are deductions of $600 for membership fees, $10.60 depository fees, $60.60 insurance fee (that one got me steaming) and a slot for a fee for the Canada Learning Bond Admin fee (currently 0.00). Woof!

    I called the toll free number and spoke to a mechanical person who said I needed one of their forms to ask for a withdrawl (not true) and also spoke to a rude supervisor who refused to explaine the details to me. I was agast at the cost of this plan and the complete consumer rip off it is.

    It’s been said here before….stay away from group RESPs – goto your local bank or Credit Union.

  53. Hey Scott,

    FYI. The insurance on a group RESP is completely optional and the rep does not make any commission on it.

    The Canada Learning Bond which you……. umm….. seemed to bark at…… is for lower income families only. That family may not have been eligible for it. This is universal across all RESP’s (group plan or not)

  54. Mike, thanks for your input. I was getting tired of having people who have no training or clue about groups RESPs trying to explain them to others. I also work for a group RESP provider – USC. Do we have fees? Of course we do; I have to earn a living and pay my way just you all do. Commissions of $70 per unit – holy cow – where? I’d like a chance at that kind of cash. For a few hours work? Do you how many hours a week I work, preparing for appointments, making appointments, answering clients queries, training meetings, travelling? My clients pay a front-end fee that gives them access to me any day of the week, evenings & weekends. I travel to their home at a time when it best suits them, and they are entitled to that service until their children have finished their studies and they no longer need me. Many of the most negative posts are from (a) those who clearly haven’t taken the time to understand the plans and their options (b) assume that everyone understands investing. Believe me, most of the people I meet have mutual fund investments for their RRSPs and don’t have a clue what that means, that there are managements fees as well, nothing. Some of them don’t even know they’re not guaranteed investments! And I don’t mean just the great unwashed, although they are a part of my clientele. They include university educated, some with MB As. They can’t, or won’t, do the research necessary to make educated decisions about the differences between funds, risk factors, markets, when/how to diversify, etc. They rely on their bank manager (or whoever opened their account) to choose for them. Most of them are under the impression that the banks (or other financial advisors) do this for free, because fees are never mentioned. If the questions is asked, the answer is No. No, because they don’t charge an account opening fee. Since MERs are “expenses” they don’t include them in the answers as to “fees”. Is that transparency? At least with a group provider, you’re told up front that you have fees to pay (and if it’s not part of the presentation and written on the application – file a complaint with your province’s securities commission).
    To address all the back & forth about whether group fees are comparable to MERs, and all the calculations done by Traciatum & Fred. Try visiting the web site sponsored by Ontario Securities Commission: They have a nifty Mutual Fund Fee Calculator. For example, plug in $3000 ($2500 deposit + $500 CESG) and lock it in for 18 yrs. Pick any type of fund you like – equity, balanced, bonds and input the MER your fund charges. Check out the “loss of return” that your MER represents. That same investment – single deposit for 18 yrs – at USC would run $556.79 in enrolment fees (one time) + $3.50 (+GST) in depository fees (yearly) for a grand total of $623.27. If your child goes onto post-secondary education for 4 years, an equivalent of the EF paid ($556.79) would be available for refund to the student. If the student doesn’t go to school or goes to a shorter program, then the entire sum would have been your cost to manage the plan for up to 25 years (the max lifetime of an RESP). Oh – did I mention? In a mutual fund, you’ve paid MER on the entire amount – deposit & CESG – but in a group plan, no fees deducted are from the CESG. Expected return ( initial investment not included) $6249 incl interest on CESG at only 5%. However, USCI’s Net ROR over 10 years was 6.8% on the portfolio only. The principal is not guaranteed – but invested mostly in federal & provincial bonds, which is about as guaranteed as you can get outside a bank savings account. And that “discretionary” amount? It’s not the same in all group plans, but because USCI’s plans are sponsored by a non-profit foundation, and the foundation’s mandate is to return excess funds to eligible students, that “discretionary” amount might add as much as 20% to the return. It’s discretionary because the foundation doesn’t guarantee the amount – it’s dependent on the income earned and the number of students participating. As I said, however, not all group RESP foundations return excess funds and rely on attrition only. You’re right, though, attrition isn’t a huge amount, not like in the “old days” before the RESP laws were changed in 1997 to allow access to unused income and only students who went to university claimed the money. But that only goes to show the flexibility of the plans. Your income isn’t lost if your kid drops out of high school or decides to take up a trade or college instead of university.

    By the way – Scott, I’m glad you mentioned that you’re a financial advisor in Canada – since they’re not available to non-Canadian residents. The CLB is for available only for children born after 2004 and whose parents receive the Supplement to the Canada Child Tax Credit (usually, income less than $35K). The government actually pays $25 one-time to the RESP provider as an administration fee and no further fees are allowed to be charged for administering and/or investing. Therefore, a CLB may not be deposited into a mutual fund. This is another unfortunate example of the blind leading the blind. If you were a real friend, you would have told him that you couldn’t advise him regarding his group RESP because you don’t have the required knowledge. Also, if you were to call our head office and attempt to elicit information about one of our subscribers, you would be turned away as well. Same as if you called his bank and asked questions about his bank account. It’s confidential. Furthermore, the toll-free numbers are staffed by Customer Service, not registered sales reps. They are employed to assist current clients with their accounts and are not licensed to sell RESPs (which means explaining in detail how they work over the phone to non-clients). If you really wanted info, why didn’t you contact his sales rep? I believe the name & number would be found on the statement. And yes – a form IS required to withdraw money from an RESP. It’s a registered investment – don’t you think proof is required that we’re dealing with the actual client before collapsing his RESP and tainting his child’s CESG? (Please let me know if you need me to explain “tainting”.)

    I agree on one thing – pooled RESPs aren’t for everyone. But they sure help a lot of people who otherwise wouldn’t have any savings for their kids’ education, and don’t have a clue about chosing and/or managing their portfolio. As for the “locked in” aspect – guess what? commiting to a savings plan helps people prioritize their disposable income. It’s like the “pay yourself” principal. Most people save what they have left, after they go on vacation, eat out at the restaurant, go to the movies, which means mostly they save nothing or very little. Commiting yourself to your child’s future is a bad thing? And you needn’t contract for 18 years – most group providers have 5 and 10 year options, along with single deposit. And, yes conversion to a single payment option is usually available approx. 2/3 into your term. I also saw mention that parents should prioritize their RRSPs before their child’s RESPs? Unless you’re a much older parent, your kid’s gonna be finishing high school long before you’re ready for the easy chair. Besides – who said you can’t split your investment? Why don’t you set up a monthly contribution to your RSP and then take the resulting tax refund and put it into your child’s RESP? Makes a whole lot more sense than waiting until the last minute (a few years before they graduate high school, assuming you bought your house when they were born and it took you 10-15 years to pay down your mortgage). That is, of course, unless you decided to buy a bigger, more expensive home along the way and get into another mortgage (quite often the case in the real estate boom of the last few years). All the advice I read in the financial sections of the newspapers is to set up regular contributions to your child’s RESP as soon as he/she is born and if you can, put some money into your RSP. Once your house is paid off and your kids in college, you can maximize your RSP. After all, you’ll only be in your 40’s and most people realistically will not retire completely from the work force until after 60 (according to statistics, anyway). (My step-father retired at age 55 and is now 93. I don’t think he expected to live this long. His retirement home costs more than his current income, so every month he withdraws from whatever his has left. Luckily he still has a little bit and so doesn’t have to look around to move into a cheaper facility. Had he known, maybe he would have retired at a later age.)

    Take the time to look at both options – “self-directed” or group. Maybe do a bit of both. Compare more than one before deciding. Ask questions – write down the answers. If the answer sounds “too good to be true”, ask to be shown where it’s written in the prospectus. Don’t invest with someone just because they’re a friend or relative. In two years, they may have moved on to another job – your investment isn’t with them, it’s with the financial provider.

    By the way – TD does have pretty good returns. BUT – if your income qualifies you for the Additional CESG – 10% extra on the first $500 deposited annually, per child, if your NET family income is under $75,000 – don’t expect them to apply for it. Their web site clearly states that they offer the 20% basic CESG only – no Alberta, B.C. or Quebec extra grant available for residents of those provinces either. (or the CLB if you’re entitled). I doubt they’re the only ones not offering it either. RBC’s web site mentions the basic 20% only. You’re forfeiting a good bit of cash (plus its income) over the years that your child’s entitled to. (All the group RESPs providers make available all the grants out there, of course.) So, don’t forget to ask your RESP provider if they’re getting that extra grant for you. My guess is that they’re not all that interested in investors with incomes under $75K (you don’t have enough disposable income to invest to make you important) and can’t be bothered with the extra expenses – computing, accounting and regulations – that come with it. And their shareholders (which isn’t you, unless you actually own shares of that institution) are much more interested in keeping up their share of the profits than getting your child the extra money the government’s offering (which is, of course, just your taxes returned in a different form) and which will help fund his education.

  55. Excellent post Shirley. Applause….. well said.

    You have summed up what a lot of people have been trying to say.

    The only downside, which a lot of group reps don’t mention is losing your interest and fees if deciding to withdraw from the plan after one year. This is where a lot of frustration sets in.

    A family has one child… locks in to a $2000 per year RESP group plan. They are going to have another child. Things don’t work out…. they need VERY expensive invetro. They want to stop their RESP payments for the first child for a while. They can suspend but then would have to make up the missed payments. Unaffordable after $75 000 in fertility treatments. These factors were unforseen at the time the initial RESP was drawn up.

    The first $2000 payment was mostly fees (and they understood that). It is too early for conversion. They can reduce the amount of their payments for the first child but they are not reimbursed any of the fees.

    Bottom line…. this family has enough financial worries, not to mention family hardships. WHY CAN’T GROUP RESP’S BE MORE FLEXIBLE AND NOT LOCK FAMILIES IN? The scenario above is a real one.

    Reps don’t usually present the lump sum option because the up front commission is not there for them, even though this may be a better option for this family.

    In the end,this family just ended up pulling the plug and forgoing the close to $2000 in fees. The next payment will be used to try to have another child instead.

    Other than this one little pet peave about group plans, I LOVED THE WAY YOU EXPLAINED YOUR POSITION.

    Tracatim and CC will have some “yeah buts” and Scott may even “bark” a little, but they really don’t (in my opinion) understand group plans. It is obvious from their posts. But in their defence, a lot of people stay away from what they don’t understand. I accept that.

  56. I don’t have too much time to comment today, but Lb, the reason group plans lock people in, and are inflexible, is by the time the family realizes the poor performance, the high fees, the need of funds for some unplanned event . . . it’s already too late and they have your money.

    I understand my plan just fine, it’s performance is terrible, it’s costs are high, and I signed when I was 22, just had a child, and knew that an RESP was a good thing. They had an ad in the package that was dropped off to us at the hospital (IE, Ambulance chasers). I would have been far better off if I spent an hour a month researching RESP options for a year and signed up with something useful and not predatory.

    I was naive and signed in haste, my mistake. If I can keep others from making my mistake I will be happy.

    Shirley, that $70 bucks per unit add up quick when two young parents that worked at call centers at the time were able to easily get 10.5 Units. . . $735 bucks for two one hour visits is a pretty good salary to me. The same amount of time would be spent on a 25 unit plan too . . . which may actually pay for 4 years of university.

  57. Canadian Capitalist

    Shirley: Get your facts straight before calling everyone else “clueless”. Group RESP plans charge a “Administration Fee” of 0.5% per year plus 0.08 to 0.21% “Investment Counsel Fee” per year of total assets in the program. A mutual fund would call that expense of 0.58% to 0.71% as a MER. These charges are clearly stated in the USC prospectus in Page 13. So, it’s incorrect to claim that the enrollment fee and depository fees are the only expenses.

    BTW, I don’t know why the Group RESP reps insist on comparing the group plans with a 2.5% MER actively managed mutual fund. Maybe it is comparable, maybe it is not but that’s hardly the point I am making. Show me how a Group RESP is better than a self-directed RESP constructed with low-cost index funds.

    I find it funny that people who have a vested interest in showing that these products are “better” say everyone else “don’t understand these products”. And what do they say about not asking a barber if you need a haircut?

    There is no question that everyone should be fairly compensated for their work. However, the record of Group RESP programs in this regard isn’t perfect either. Check out this 2004 industry report into the scholarship plans by the Ontario Securities Commission (maybe they don’t have a clue either):

  58. CC:

    I think the reason that a lot of people think that you don’t understand group plans is that you said it.

    “Canadian Capitalist // Mar 26, 2007 at 3:33 pm

    “I would be a bit more enthusiastic about group plans if I am able to understand how they work. After reading the prospectus, a couple of times, I have to say that they are very complicated. It is also not easy to ballpark how much total returns will be in the future: the rate of return published is before fees and expenses and is meaningless IMO. One thing I can say for sure, if I don’t understand something, I simply avoid it.”

  59. Canadian Capitalist

    Lb: Fair enough 🙂 Though I’d point out that it’s more than one year later now and I’ve read many prospectuses and I have a fairly good understanding now. At least, much better than the folks who are selling these products and claiming that you pay no fees other than enrollment and depository charges!

    I think your position is that the returns on these plans are comparable to high-MER funds sold by financial institutions but you are not happy with the lack of flexibility of group RESPs. You may be right about that and we aren’t fans of high-MER, actively managed, sales load junk either. Our position is that investors who take a bit of responsibility for their portfolio can do much better on their own.

  60. Hi guys…. I’m new to this. I don’t know anything about these mers or mutual funds. All I know is that I put $2000 every year in a RESP in a company called Heritage. My daughter is going into her 4th year. We got a cheque for $36000 a few years back and then my daughter gets just over $19000 every year for school. I’ll let you guys do the math. Maybe I couldve done better in someting else. I don’t know. I didn’t have to worry for 18 years about us loosing money and my kid’s school got all paid for.

    Now I’m just a hard working dad who trusted someone a long time ago and it worked

  61. All I have to say is that there certainly is a lack of good information about RESP’s out there.

    I looked into the group plans and I was unimpressed with the prevarication of the Sales Reps. All they could talk about was the CESG of 20% and CLB like they were the ones earning this for me. I tried and tried to get a real rate of return out of them and they continually avoided the subject. One of them said they buy 7% Government Savings Bonds !!!

    I did not even inquire into the other fees because I was so turned off by their shiftiness and unwillingness to answer my simple question.

    I then decided to get a self directed RESP but then found that Etrade does not apply for all the grants I am eligible for. In my income bracket that is like giving up about $800 !!!

    I have now decided to go with two RESP’s One with Investors Group because they will apply for all the grants on the initial $500 contribution. The other I will open with Etrade and put the rest of my annual contribution in. They will only apply for the Basic CESG.

    Honestly after all the research and time and energy I have put into this I have only one thing to say


    There is a complete lack of clear concise simple information.

  62. I’m with brossi above. The group plan was the way to go for us “un-money wise” folks. I used USC group plan for my son. I didn’t have a clue about anything about investing and mutual funds.

    Boy, were we happy with what we got for our son’s college. We are looking at the same thing for our Granddaughter.

  63. Thanks everyone. I have no idea about these resps. I am signed with Heritage for first child. It is doing well. My nabor is loosing money with the TD index fund CC talked about this year even with the goverment grants. Mine is doing good. I am going with heritage for new child as well.

  64. Sucker or not, I signed up both kids for the CST 10-yr plan. I don’t consider myself an investment novice, but I also don’t have time to actively monitor/manage mutual funds everyday either. And I’m not affiliated with any bank or investment company that has anything to gain from my opinions.

    Despite everyone’s claims that you can do much better than CST and despite the historical proof that the stock market has outperformed every other investment vehicle in the free world “over the long run”, I have yet to see my mutual funds (MF) returns really impress me “over the long run”. And my investment *run* so far is around 18 years. Maybe an obvious statement, but it is all about timing!

    Take the recent TSX market performance. If you bought an index fund just a month ago when the market index was over 15000, and look at it today where it is below 13700, guess what, you just lost almost 10% of your portfolio. So which is it, high front-end fee on CST taking away a big chunk of your money, or low MER on an index-fund losing 10% over last month, take your pick. You are still out 10% or more, and it will take more than a 10% rise in the index to make that up even if you dollar cost average.

    As my stomach has twisted in knots after reading this thread and wondering if I made a bad decision on buying CST, I guess I am looking for some self-reassurance that I made the right choice. So please tolerate my ramblings.

    But back to my original train of thought, yeah the stock market probably will outperform everything else out there “over the long run”, but it is all about timing. And maybe I just have the medusa touch, but I don’t thing the average schmuck (like me) can do much better than the (crappy) 5% return of a group RSP unless they make it a full time job and watch the market every day. And even if you do, once again it is all about timing.

    After seeing my Mutual Funds erode 30-40% during the 2000-2001 stock market meltdown, earning a *plus* 5% sounds a helluva lot better than earning *minus* 40%. Yeah I eventually recouped that over the following 6-7 years and even made a little more, but think of how much further ahead I would have been if I had started my investing in 2002 instead of 1999.

    So once again it is all about timing. If you are convinced that 13500 is the low point of the TSE and that it will hit 20000 or 50000 by the time your kid hits university, then go for it. Me I’m not sold on it. Actually, I am quite convinced the market will hit 20000, but it likely won’t be at the right time when I need it to, and even if it does, most of us are too stupid (greedy?) to pull out of it and quit while we are ahead.

    The only people who make money on the stock market are brokers through their fees. Hmmm, this *fee* thing seems to be a recurring theme. So, despite high front end fees or lower MERs or whatever you claim I can make buying GICs on my own at the local bank, I’ll stick with the near-guaranteed 5% I will make as opposed to the high-hopes of making +20% and the more likely returns of -20% on the market. If nothing else, going with CST or any group RESP for that matter, will help protect me from me, and in the end, I know I will have at least 5% gain for near-zero effort and hopefully my kid will want to go to university by then.

  65. Thanks for the input everyone. The group plan sounds like the way to go for me. I haven’t got a clue about investments and mutual funds. I want to be able to go to bed at night not worrying about my RESP.

    Special thanks to Almo…… you summed it all up for all us “unknowledgeable” investors. Go figure I can disassemble and assemble an entire engine in 4 hours but I don’t know a mutal fund from a GIC.

    Group plan here I come!!!!

  66. Canadian Capitalist

    almo: What is risk? Investments fluctuating in value is a risk but don’t forget inflation. Inflation is a huge risk, especially since education costs have recently trended well above inflation. If you are making 4% from bonds (and group RESPs will have bond-like returns) and education costs are increasing 5% a year, your savings are losing ground. For young children with 10 to 15 years from university, equities provide a chance at a higher return. That expected higher return has a risk — your investments could fluctuate in value. That’s a trade off I’m willing to make. It is the classic dilemma between sleeping well and eating well. The trick is finding a balance not simply investing everything in low-return assets.

  67. Thanks Can Cap. Almo is still right though. You said something about equities. I don’t even know what those are. I eat very well (just ask my scale) and I plan on sleeping very well with a group plan.

    My friends RESP fluctuated alright. He lost $3000 this year in some bank plan and his son is going to school in September. When can he make that up? That is not a trade off I am willing to make.

  68. I stand corrected Can Cap….. I apologize. I was talking to my friend last night and he didn’t lose $3000 on his bank plan RESP. He lost $4700.00 this year. Can you imagine? That is one semesters worth of tuition!!!

  69. Canadian Capitalist

    truman: I have no idea what your friend invested in. If he invested every penny of his kids education funds in US financial stocks, I wouldn’t be surprised at all. But, is that what I’m doing? Not at all. I am invested in a diversified portfolio of low-cost funds.

    Just out of curiosity, I just checked my kids’ accounts and it has “lost” 2.7% (we’ve been contributing since 2006). I did mention in the lost that going the DIY route means taking responsibility — that includes setting an asset allocation and sticking to it, not speculating in the stock market.

  70. Truman, I have to agree with CC on this note. By the time my kids are a year away from school I will have extremely little exposure to stocks. Currently I’m in a pretty exposed position in my Son’s (He’s three) RESP having only a couple of index funds that track the equity markets around the world. So far I haven’t had near the hit you describe above (Though I haven’t sat down and calculated it, it’s probably close to down 4% or so). I don’t really log in to look at it that often so I don’t know off the top of my head.

    Also, being down 4700 on a 100,000 portfolio isn’t really that bad . . . if you have 10,000 instead it’s a massive hit . . . so use percentages so that comparisons can be made.

  71. See what I mean…. everything you guys just said to me is in another language. The words I did understand was “lose”, “lost”, and “down”.

    From what I understand, these words are not all that common in the group plans….. and that’s what I understand.

    My friend trusted someone at a bank to probably do all the stuff you guys were just talking about. He didn’t fair so well.

  72. Hey Truman, those words are in the group plans, they just mask them with things like ‘Enrollment Fee’.

    Take my case for instance, when I was 22 my daughter was born. In the pack that the hospital gave us was a card for a rep from CST. I signed up and proceeded to give them a shade over 7 grand over the years. Currently we stopped paying our monthly amounts in to our RESPs because my spouse went to school and is attempting to go in to business for herself. Stopping my sons RESP payments I logged in to TD and hit cancel on my payment plan. It was done, no questions, fees, or problems.

    That transaction cost me $2100 in CST, since now I log in to my account and it’s worth about 5K as my enrollment fees will now no longer be reimbursed unless I pay all the payments we missed or buy out my units by giving them lots of money.

    It’s very difficult to look forward and ensure that over 18-20 years you will be able to make payments the whole time with no changes.

    These two options are very different from each other and in both cases doing something will be far better than doing nothing. If you really want guaranteed returns you can go to a bank and open an RESP using guaranteed income certificates (GICs) only . . . you will probably pay no fees at all. I would guess that you would do far better and be even more secure that with a group plan. This is especially the case if you need to make a change in the future, like in my case.

    Also, if you look at you’re friends portfolio and ask how much money did he deposit, and then ask what it’s value is now I would be willing to bet he isn’t ‘down’ at all. Probably much further ahead than one would be if in a group plan.

  73. Hey Traciatim,

    Out of curiosity, why didn’t you “convert” to the 5 year annual plan?

    It would have saved you a bundle.

  74. Triciatim:

    Take my situation. I was just a little older than you when I started my family. The group RESP was FANTASTIC for me. I didn’t have to move anything around, didn’t have to worry about “exposure”, whatever that is, and I slept well at night.

    Just goes to show you…. different plans for different people all with the same good results…. educated children.

  75. Yes CC, I am very familiar with the various forms of risk, no matter how they are disguised. I have been gambling on risk for the better part of 18 years in the stock market and my conclusion is that it is all about timing. Certainly that is no stroke of genius on my part, but sometimes you just have to experience the ups and downs to fully appreciate the different forms that risk can come in. You can make a bundle *if* you time it right and get in and out at the right time. You have summed it up nicely by saying that it is the balance between eating well and sleeping well.

    And don’t forget that *balance* is another word for *diversify* which brokers and financial advisors like to throw around. It is really just code-word for, “I don’t know what the heck I’m doing, so let’s spread the risk around and hope for the best.” I’ve lived through all that too. And here’s some more honest advice on the stock market, “only invest what you can afford to lose”. If you consider the absolute best case and worst case of each investment method, you can use that as your guidance for choosing an investment vehicle and determine your risk tolerance. GICs: min gain=2% (your bank may vary), max gain=4.75%. Stock Market: min gain= -100% (lose it all), max gain=200% (no true max, but over an 18-yr period until your kids hit college age, you are unlikely to see the stock market do much more than that after things average out over the long run). No risk, no reward, right?

    So lets call inflation equal whether you go with stock market or GICs. But if you are invested in the stock market, not only are you susceptible to the risks of inflation, but you also have to contend with employment conditions, fluctuating world economies, wars, natural disasters and terrorists. It is a chicken-and-egg debate about whether these cause inflation or inflation causes (some of) them. And it used to be that in times of economic trouble, the best thing a country can do is go to war; unless of course, it was a war that got you into economic trouble (eg. USA).

    I do sleep better knowing my CST money is immune from most of these risks, except of course inflation, to which everyone is subjected. With fixed investments like GICs at the bank, you can at least ignore the dropping of the stock market, for a while. But at best, it is a 5-yr GIC and then at renewal time, you are subject to the effects of all the aforementioned risks. Therefore, your renewal rate may be much higher or much lower depending on market and global conditions.

    To be fair, I did check various sites and the best 5-yr GIC I see right now is around 4.75%. Not bad at all in this economic climate. So GICs don’t sound too bad. But I also checked the investment portfolio of CST and they have various short 1-5 yr and long-term 10-30 yr bonds yielding in the neighbourhood of 4-8%, with the majority of them being in the 4-6% range. So unless I’ve been completely lied to by CST, if after all expenses are paid, I still come out in the 4-5% range, then I’ve done just as well as the GIC. I didn’t do all the calculations, enough people on this thread have already done various forms of them. I’d rather not pay the up-front expense, but in the end, if I’m still essentially guaranteed to be coming out with *plus* 3-5%, even after paying all expenses, then I can live with that. As my stock broker would say, don’t worry about my trading fees, if I can still make you over x% on an investment after all fees are paid, my fee is irrelevant. True enough, unless you are selling your stock at a loss. Anyone figured out a way to make the CST fee tax deductible?

    So to me, CST sounds like it is roughly equal to plain bank GICs, and I don’t hold much faith in the extra kicker bonus you get from CST based on people dropping out or whatever, call it gravy but don’t factor it in to the best-case worst-case scenario.

    And just to be controversial, I am not saying that CST or any other group RESP is better or worse than bank GICs or other guaranteed bonds or Tbills. Originally I started this self-debate trying to convince myself that I did the right thing with CST. But I do think if you are in a fixed-term investment, then you should stick with it. I can remember a few years ago having money in a 5-yr bond at 9% only to be convinced by my “financial advisor” to transfer it to some MF where he expected I could earn well over 15%. Nope, never happened, it went negative, but then again it was all market timing. And I wonder if those who pulled out of CST would have been better off to stick with the plan? You traded a *guaranteed* 5-9% or whatever you were promised by your CST rep, for a speculative x% in the stock market with no guarantees. And you took a hit on early withdrawal, so you are starting off at *minus* y%. I can’t imagine what you have to make in a MF to get that y% back and still make x% on top of that. At least (x+y+z)%, where z is the extra amount you need to recoup to return y% to zero/neutral.

    So thanks for your vote of confidence Truman, I’m no great prophet, and I’m certainly no great profit either 🙂 , but I guess my main grumbling is that I am completely disenchanted by the stock market. It leads a lot of people down a *get-rich-quick* mentality and even down a *get-rich-slow* mentality since I’ve always been told that “over-the-long-run” the stock market will outperform everything else. (See my previous rambling about *timing being everything*) As I said before, the only one guaranteed to make money at the stock market is the broker on trading fees. The rest of us are just pawns in the big game of stock market chess.

  76. We invested in a group plan with USC two years ago. I recently found out that only principal contributions could be accessed during my child’s first year of university. All government grant money, interest, and enrollment fees paid could not be accessed unless my child attends year two or higher. withholding the grant money seems unethical to me, since the money is from the government for post-secondary education. I feel it should be available even if my child takes a one year course. Does anyone else have thoughts about this?

    Also…my overall experience with USC has been very negative. We were told many lies during the sales pitch and we are now feeling stuck contributing money to an organization that , we feel, behaves unethically. I think that groups sales reps prey on families stil adjusting to a new baby and all the emotions that go along with that. Shame on you!!!

  77. Canadian Capitalist

    truman: Fair enough. I don’t want to defend all the lousy “advice” that passes for stock investing. But, I do believe that, in this age of disappearing defined benefits, all of us have to learn the basics of investing, whether we like it or not. I put “lost” in quotes because it is not a loss until I sell and investing in stocks means putting up with markets where prices drop precipitously. Fixed income investments are less volatile but after netting out inflation returns will be low.

    almo: Your experience isn’t unique at all. Many studies have shown that investors don’t earn anywhere near market returns due to two reasons: expenses (the many layers of financial help we pay for) and emotions (selling GICs to buy mutual funds that could make you 15% in your example). Given these two drawbacks, what I’m trying to do is mitigate their effects by investing in low-cost funds and setting an asset allocation and sticking to it. Investors following this recipe have a good shot at earning whatever returns the market Gods give us.

    It’s true that stock brokers and financial help suck away the returns, but guess what? The group RESP guys are financial help as well. Who do you think pays for the advertising and sales people? You are correct in pointing out that if volatility scares an investor, they could get the same or better returns by investing in GICs. It’s simple logic — you are not paying for help and you pocket the extra returns. Not to mention the flexibility — if circumstances change, just skip a contribution or two and catch up later.

    I should point out that whenever I talk about stocks, it is the market as a whole. Individual stocks can go to zero but it doesn’t make sense that the entire market could go to zero. If that’s a reason to avoid the stock market, it’s a reason to avoid bond markets as well: the Canadian Government could default and refuse pay the principle back.


  79. I have a son for whom I have contributed for 15 years in the classic USC plan. This was a huge mistake! Our son is in his 3rd year of postsecondary education, but has switch programs. We have only received the return of our contributions, but no investment returns or grant. This plan only works if he is in a four year program and does not switch to another program. We still have to pay tuition but get no benifit from our savings. The people at USC are very uncooperative.
    This company & their plans suck big time!

  80. I have been approched by a few sales rep from the group plans companies and they sound a load of bs. They are trying attack the banks. They said they can guarantee your principal and have higher interest than the bank’s and never mention any costs associated with investing with them. They just sound very unprofessional. I honestly feel like they sound like con artist.

  81. Hey Ben,

    Funny…… I was just at two banks whose PBR’s told me that their banks didn’t have any fees related to RESP’s. What they failed to tell me is about the MER’s associated with the mutual funds that the RESP money would be invested in. Later research showed me that it would be 2.3 and 2.5% respectively.

    I asked them about the new Quebec Government grants…. both left the office…. came back and said they weren’t sure.

    They just sound very unprofessional. I honestly feel like they sound like con artist.

  82. Rainmaker, yes you are correct that many places charge big fees for RESPs. You did the right thing, and if everyone would avoid products with high fees the products wouldn’t exist anymore.

    Since I’m not in Quebec I can’t comment on how the extra money will be included in the RESP from different institutions, but don’t give up your quest for a rationally priced product from anyone other than the group plans. I have yet to come across a group plan that would be a good choice.

  83. Mutual funds DO NOT GUARANTEE your principal investments. In 2007 they looked pretty good, but in 2009 they showing huge losses.

    Universitas Trust Funds offers:
    – Principal 100% Guaranteed
    – 10 year return is currently 6.68%
    – Total Expenses of 1.24%
    – Membership Fees that are the lowest in the industry
    – Only group plan that 100% guarantees the full refund of the membership fees at maturity.
    – Flexibility to meet the RESP needs of all families.

    Group plans are not all created equal and it certainly is important to do your research.

  84. Canadian Capitalist

    Rhonda: One reason I’m disappointed with Group RESPs is that the frequent misrepresentation of fees. Even here, where fairly astute investors lurk, you are claiming that “Total Expenses” are 1.24% whereas according to your own prospectus, just the “Management fees” plus “Investment Management Fees” adds up to 1.35%. In addition there are “depository fees”, “trustee fees”, not to mention losing any earnings on the upfront membership fees until the plan reaches maturity.

    Do you still maintain that “total expenses” are 1.24%?

  85. Canadian Capitalist: The breakdown of fees for 2008, as shown in the Management Report dated Dec.31, 2008 are as follows:

    Admin Fees.: 1.08%
    Trustee and Depository Fees: 0.021%
    Broken down as follows:
    Trust Eterna Inc Trustee Fee: 0.001%
    CIBC Mellon Depository Fee: 0.003%
    RBC Dexia Investor Services (Trustee &Dep): 0.017%
    (Universitas recently moved from RBC Dexia to Trust Eterna and CIBC Mellon)
    Portfolio Management Fees: 0.14%

    So the actual TOTAL fees are 1.241%. The 0.001% difference is a result of rounding to the nearest hundredth, which is a standard in the investment industry. So, yes I do stand by the 1.24%.

    Over the past 10 years these fees have steadily decreased:
    10 years: 1.57%
    5 years: 1.38%
    3 years: 1.30%
    1 year: 1.24%

    As a Non-Profit Organization, we know that the more efficient we operate, the higher the scholarship returns. Fees are on a cost recovery basis only and our results speak for themselves.

    I agree with you that there are representatives that may not be giving all the data. This is true of banks, investment companies, etc. Consumers have to ask questions, do their research and get up to speed with how all of the options work. When representatives misrepresent their product then consumers should report this to the company and to the respective Provincial Securities Commission.

    As for the Membership Fees not attracting interest you are correct. They do, however qualify for the CESG. Again, Universitats Membership Fees are 3% below the industry standard and it is the only group provider that guarantees the return of these fees upon maturity.

    I have done extensive research on GICs, Mutual Funds and other group plans. I believe that all of these play a role in financial planning. Just as not all GICs and Mutual Funds are created equal, neither are all Group Providers. Again, consumers must do their homework. If a representative is evasive or talks lingo that they can not understand, they need to be cautious. Consumers should never feel pressured to invest, but should feel confident and knowledgable in the choice they are making.

    Universitas offers an excellent investment option for education with no risk to the principal, low operating expenses and a history of solid returns.

    You can access the 2008 Management Report at

    I am always open to discussions, as I believe it gives us all an opportunity to learn.

  86. Rhonda – your link above doesn’t work…..not the best way to prove your argument but I’ll assume technical glitch 😉

  87. I just wanted to thank you all guys for this excellent post. I was just about enrolling into Heritage group RESP and I read this post along with similar one in which prevented me from doing this terrable mistake.

    Right now, My kid RESP with TD e-Funds.

    Thanx again.

  88. Wow. What discussion. I haven’t had my heart rate jump and settle so many times since I was last at Canada’s Wonderland.

    I fully understand the risks of the market. I just bought a house and had the down payment in GIC RRSPs for the first home plan and nearly lost everything moving it into mutual funds. Thankfully I didn’t have time to find the right fund and then held back as the market went freefall.

    I also signed my daughter (now four) up with Canadian Scholarship Trust Plan last year. With all the crazyness of the house purchase I haven’t been watching the investment too carefully, but I do remember getting the statement a few months ago and I did gain several hundred dollars with the benefit of the grant(s). As a rough estimate, I think I put in about $800 and the value is at about $1,200 including the grants. CSTP does seem to be quite transparent with their income statements.

    I’m not worried about performance. My daughter’s education MUST be guaranteed, period. No risk. My personal retirement is another story. I love the idea of playing the market with low cost index funds and will ‘gamble’ on the market rebound slowly with that. But I cannot fail my daughter with her education.

    My concern is that I’ve heard about problems getting money OUT of the plan. Does anyone have any experience or understanding on that? I had heard from a recent ‘financial investor’ that “hell will need to freeze over” before I’ll get my money out of it. That same person also miscalculated so many income, expense and retirement need numbers that while she was giving my wife the pitch I was browsing on the laptop barely paying attention and I still caught several mistakes.

    RESP performance aside (this has been a two-year debate with no one giving any ground from what I see), what are people’s opinion on getting their money out? My rep seemed quite good and was willing to listen before speaking, kept eye contact etc and I have a good feeling about it (yes, I realize he’s trained). I also realize he’s out for himself. So am I and I don’t expect him to not make a heafty commission off me because he surely doesn’t sell 12 plans a day. He may have to feed his family for a week on what he made from me. I have no problem with that and people need to really give their heads a shake when they complain commissions and fees. No one works for free. If you picked an investment option that doesn’t pay out as well as digging in your heels and doing it yourself. I’m sorry, but too bad, suck it up. There are many worse mistakes you could have made. The term ‘penny-wise, pound foolish’ comes to mind.

    For me, as long as I get my initial investment back guaranteed along with the interest earned and grants I’m happy. I pay $160/month and have statements saying at the end I am guaranteed my investment (about $18,000) plus my daughter will get about $22,000 if she meets her criteria of going to post secondary school (I’ll need to check the four-year vs two-year issue). Does anyone expect I’ll have problems with actually getting this assuming I file all the paperwork on time?

    It’s been a fun and informative read everyone, thanks.

  89. Hey Steve,

    I think what you are doing is FANTASTIC and I couldn’t agree with you more on your strategy.

    Instead of waiting for responses about somebody’s brother’s uncle who had a cousin that tried to get money out for their child….. why not…

    Write down all of the possible scenarios….. or whatif’s and have your rep. come back to your house to answer very specific questions. Send him/her the questions in advance (as most reps are trained on the up front selling and not the paying out side of things).

    You would want to ask about 4 things: your principle, gov’t grants, interest on gov’t grants, your investment interest, and membership fees.

    Possible scenarios include but are not limited to:

    1. You choosing to be paid out over 4 years and your daugher quitting during her first year and not returning.

    2. Daughter waiting until age 25 to go to school.

    3. You choosing to pe paid out over 4 years and your daughter switching programs after 2 years.

    4. You choosing to be paid out over 2 years and your daughter decides to go 4.

    5. Your daughter becoming a wealthy entrepreneur and deciding not to pursue post secondary at all.

    6. What you EXACTLY have to decide at age 18.

    7. Ask about the “conversion” at about 8 – 9 years old so you can pay your units off in full and be free to start another plan of any kind. He/she will be able to tell you when you would be able to do that approx.

    8. Ask exactly which circumstances payout would NOT occur.

    Plus whatever else you can come up with.

    Ask for the responses on paper as well “for customer service and referral” purposes.

    It would really be a worthwhile exercise instead of basing your research on “hearsay” and rumours. I think the rest of this string might be interested in the reps responses as well.

    Just an idea!!

  90. Hi kruller,

    Thanks for the suggestions. I certainly will be speaking with my rep shortly, but things are too chaotic this month to sit down and properly prepare. I have a bit of background in journalism, so will definitely be going to the source.

    I do find that adding others’ experiences to the mix always gives fresh outlook, but I agree that it’s useless worrying about hearsay alone.


  91. Canadian Capitalist

    @Steve: I’m not very clear on your math. Assuming your daughter is 4 and you are contributing $160 per month, you would have invested about $26K. Add in the CESG and you should have $32K plus whatever growth you get on the assets plus the money from attrition minus fees and expenses. It is hard to say how much you’ll have in the future because growth on assets depends on bond market yields which are at historic lows now & money from people dropping out. Both are unknown at this point.

  92. I did a lot of research to decide what to do about my sons RESP. A lot on this forum thanks for the info. I did talk to and meet reps from the group plans. It seemed to me that they rely a lot on people not getting their money back to increase the return which really did not seem right to me. I was also unhappy with their inability to answer my questions about interest, fees etc in a direct manner.

    I did not feel capable of directly investing myself because every stock I buy seems to go through the floor.

    In my case because of my income the government feels like I should receive about $500 per month in baby bonus and two other payments. I turn around and throught authorized payments put it right into the RESP.

    I decided to use Investors Group to hold my RESP I chose an equity mutual fund last spring which took a real tumble when the stock market tanked. At one time I was down 30% but now I am down about 6% which is not bad compared to how I am doing in my other stocks. I am confident that as time goes on I will see dome healthy returns.

    I am very happy with my rep I have no trouble getting my questions answered

    I am so grateful to live in a country that sends me free money that I can invest so they can give me more free money so that my son can be educated. He is not even 2 yet and has more money saved than me !!! In any case with this great way of saving for our kids education the only mistake we can make is not to participate.

  93. Rachelle — as a parent I understand the great pressure we all have to ‘save for our kids education’ but your last line worries me that “he’s not 2 and has more money saved than you”. That’s alarming — there are no scholarships for retirement or getting laid off. Remember to save for your rainy day too Rachelle.

  94. Do not be alarmed. There are a few things I did not mention as well. I am self employed so my income is lower than it would be if I was employed. Also my house is modest but entirely paid off so I have no rent to pay. I do save 10% of my gross income. I am only in my second year of my business which grows every year so I look forward to making more money every year.

    It just so happens that the stock picks I have made have dropped through the floor and his has done rather well considering what has happened to stocks in general. I mean I get 20% right off the block in his investment which I do not get in my own portfolio. It grows really fast. I also get two other subsidies for his investment that most people do not get.

    The way I figured it the government of Canada sends me this money to take care of him. It is his money not mine to spend on the need of the moment. For me it is 100% free money, I put it away and get more free money for his education.

    Another thing I want to add is that if ever I had to take the money out I could except for the part the government contributed with no fees or penalties. I even get the interest made on the government contributions.

    Most people are unwilling to do what we are doing. Last year I made 15000 after my business expenses. Yet I am saving for my son and myself as well. My husband and I make many sacrifices so that we can be better off. We drive an old car. We don’t even have cable. That alone saves over 800 per year. We have Internet and download our shows instead. When we go to the ROM we go on Wednesday between 4:30 and 5:30 when it’s free. We make very carefull choices. It is amazing what you can do when you decide to save.

    I forgot to mention that the baby bonus money I get also does not count towards my income. My husband takes care of the baby while I work. I do not pay taxes I get money back. I do not pay for daycare. I keep my expenses very low compared to most people I know. In our society there is a lot of emphasis on how much you make, what car you drive and how big your house is rather than how much money you have left over.

    For example my modest house it is a two bedroom with a two bedroom basement apartment. It was in horrible shape when I bought it. I paid about 150000. When I added up the payments and interest I paid 200000 in five years. If I had paid a conventional morgage of 25 years I would have paid $450000 for the exact same house. Now Because I worked so hard I have the freedom to start my own business taking a pay cut, raising my own child, and still saving a little bit. I have made lots of dough in my life but I ended up with nothing because I did not pay attention to how much I was spending. Now I am 100% the other direction concentrating on saving rather than how much I can make. So far I am more successful at saving and much more relaxed and happy.

  95. Pingback: 4天搞定RESP:第3天,RESP怎麼買? | Rich Settler

  96. Has anybody studied RBC Target 20XX Education Fund ? (
    I examined their 2010, 2015, 2020, and 2025. Seems it makes more sense as the Fund would make necessary adjustment when its target date (20XX) approches.
    Any input ?

  97. JS — I looked at a similar fund, and the consensus from the smart people here is that overall, your better off just mimicing their performance and moving the funds yourself in a self directed account. You pay a hefty fee for the privilege of a target date fund, and especially as the kids get into years 14+ you’ll mostly be in bonds anyway so why pay 1.2% or whatever the MER is, if you can avoid it?

  98. I’m just going through the process of getting money out of my RESP for my son (first year). I can’t believe how easy it is!! The Heritage rep is very helpful and I can’t believe the amount of money I have amassed over the 18 years. I have to admit I did not follow how well it was doing during most of it’s life but I am impressed.

    You smart people will probably say I could have done better elsewhere…. maybe I could have but I am happy with my return. I don’t know how to put it in a percentage return but my RRSP didn’t fair even close to what I earned in the RESP.

    So thanks everyone…. your insights have been enlightening to say the least.

  99. John, congratulations on being successful with Heritage. I think the main point that the posters on this blog make is not that it’s a bad plan per se (though I don’t think it’s ideal) I think it’s more that many people don’t read the fine print and miss a payment etc in those 18 long years and then find themselves in trouble later. One way to show the return is to ask your rep to show you two numbers — how much money you’ve put in during the past 18 years, and how much it grew to. That’s not ideal because it doesn’t take into account inflation, etc but it gives a starting point.

    One thing that might be helpful is to actually document the process — do you pay the tuition first, submit a claim, etc?

  100. I am a lawyer by profession dealing in the area of corporate commercial and real estate. After taking a pounding in the stock market, which has recently recovered after 10 years of steady losses, and ridiculously low GIC rates, my wife and I went with Heritage.

    We make the maximum contribution every month, get back the membership fees if the plan is paid out over a minimum of 4 years and rest comfortably knowing that the plan averages about 6% per year. Even if it only averaged 1% per year; our level of risk is such that we would rather earn 1% than lose 1%. In addition, we life insured the payments notwithstanding that this is very expensive if you look at the cost per thousand dollar of insurance. However, it only cost $10.00 per month as I wanted to compartalize everything as my wife is a stay-at-home mom. This way my wife has a house with mortgage life insurance (which is also way to expensive – but again “compartamentalized”); a very good life insurance policy; and an RESP that is life insured.

    If our son doesn’t go to university for four years and I lose the membership fees – oh well, that money was for him and not me; and if he chooses to lose it, so be it, but at least his four years is covered if he chooses to go. When I went, I maxed out my student loans and worked for the rest. I would have been happy to have just the principal that I am putting away for him, let alone the $7200.00 from the feds and $800.00 from the gov’t of alberta plus any interest it might generate.

    I don’t really know if Heritage is good or poor. We own a fair bit of real estate and that has averaged quite well over the last decade. Even in a recession I can still plant a potatoe on it or raise some goats on our property.

    I became fairly convinced that over the last few years that the stock market/ mutual funds was simply a game for overgrown teenagers (calling themselves C.E.O.’s) to negotiate massive severance packages while working on the 26th floor on baystreet and gambling with investors money without any respect for the hard work it took to earn it and then bailing when the income couldn’t cover the expenses of those fancy offices.

    I think I’ll stick with my real estate and my Heritage Plan; at least no growth is better than negative growth.
    My daddy used to say “If you have a plan you have everything and if you don’t have a plan you have nothing ,so therefore any plan is better than no plan”; he also said “if you fail to plan, you plan to fail” : these may be quotes from somewhere else, I don’t know but they have served me well over the years.

    Just my two cents worth.


  101. Excellent debate from both Group and Self-direct fans. I have a group plan with CST for my two kids. My son still have 6 remaining annual $2000 payments left. I will leave it with CST because 3200 interest income plus 3000 enrollment fee, total $6200 will be lost if I transfer it to self-direct RESP today. However I am thinking to do something for my 8 years daughter’s RESP with CST which I contribute $1050 annually only since 2002 as I bought a house in 2001 so budget is limited:

    Contributions Net of Plan Fees $5,308
    Canada Education Savings Grant $1,470
    Interest Income $950
    Enrollment Fees $2,000

    Current Balance = $9,728
    Details of Plan
    Plan Started 2002
    Contribution Amount $1,050.00
    Your Contributions are Made Annual
    Contributions Remaining 10
    Number of Units 10.000

    Option one:
    Transfer it to TD eFund RESP, I will loose $2950 (enrollment fee $2000 + Interest Income $950), and start a balance at $6778 at TD, then continue to contribute $1050 annually in next 10 years. I am wondering if TD account could catch it up with CST account when my daughter is 18, say CST return is 4%, TD eFund return is 8%, I know the risk, it is not guaranteed, but…let’s say 10 years long run return and I am a lucky father. I know enrollment fee is not earning any income in CST.

    Option two:
    As mentioned in some posts, do a “conversion” and park the current balance in CST, and open a new TD-eFund RESP. Can somebody explain how to do a “conversion” as I cannot find it on CST website?

    Option three:
    Leave it with CST and pay 10 remaining contributions until 2018.

    I am not good at math, but as good parent as all of you. we do this for our kids to pursue their future without too much financial pressure when they reach 18.

    If you were me, which option you think is the good one.

    Much appreciated,

    • Canadian Capitalist

      Thanks for the info you have provided. I’m very surprised that interest income (on contributions less enrollment fees plus CESG) is very low at around 4%. The total return on contributions is very similar to what an investor would have achieved on their own by simply investing in bonds. Of course, DIY bond investors would have more because they are earning interest on the enrollment fees as well.

      If you transfer out of CST now, the hurdle to overcome lost enrollment fees plus interest income sounds pretty high, especially for RESP accounts that will become quite conservative over time. That’s the trouble with stocks — you never know what you are going to get next, especially over the short term.

  102. Hey Whoyou, I answered over at million dollar journey, but here is my opinion pasted here just in case you miss it over there.

    now that you are already in CST the best course of action is most likely to continue. It’s very unlikely that if you forfeit your enrollment fees that you would be able to recover in 10 years.

    If you have basically 10000 earning about 4% in safe investments now, and you instead want to forfeit 3000 (7000 left), then how much do you need to earn to ‘catch up’? It ends up being about 7.75%-8% or so. That would involve a huge amount of risk that late in the game, and what would happen if a year or two before she goes to school we have another 2008 in the stock market?

    I’m not usually one to recommend CST, but in this case I just don’t think it makes too much sense to jump ship now that you are this far in.

    My plan converted to an individual plan in CST just before I collapsed it. As far as I was aware, unless you pay out the units amount owning then you still use your enrollment fees, but I’m not certain on that one since my plan was being collapsed for other financial reasons. You may want to give their customer service line a call and ask how it works.

    Keep in mind you’ve done a great thing for your daughter giving her a head start that not a lot of other children will have. It’s a great gift that I’m sure she will appreciate.

  103. Thank you very much for your info, Traciatim and CC.

    Actually, CST real average return is about 3.2%, which is far below 8.5% they use to calculate “Illustrated Maturity Value” of my 2008 statement. Buying bond with high MER, I am not optimistic that CST can provide return they projected to parents. Anyway, I think I have to stick with CST.

    Great forum, CC.

    Thank you again,

  104. Hey whoyou.

    If you do a conversion, you can pay up your existing units in full. That plan is then done and paid up. You don’t lose any membership fees, or anything else for that matter.

    CST reps get a report of people who are eligible to convert. Usually between seven and eight years old (assuming they have been contributing since birth). They like to “convert” because then the hope is that you will contribute to another CST plan purchasing more units and earning the rep more commission.

    I would convert and then go with a TD mutual index fund just for diversification.

    Also that “illustrated maturity value” includes estimated enhancements.

    Good luck.

    PS…. Ravonar…… GREAT POST!!!

  105. Hi kruller,

    You mentioned that “If you do a conversion, you can pay up your existing units in full. That plan is then done and paid up.” What does “pay up your existing units in full” mean? Should I pay the total amount for the remaining contribution, or just stop paying and it can be converted? Could you give me an example how it works?


  106. to whoyou:

    To pay up your RESP simply means the following….

    If you are currently contributing annually (for example), you are making payments each year for 18 years (assuming you started at newborn).

    You will want to convert to a “5 year annual plan”. A five year annual plan is a plan that you make annual payments to for 5 years only to purchase a set number of units.

    By the time your child is between 7 and 8, on average, you will have enough in your annual plan to convert it to the equivalent number of units (as if you intended to do the 5 year annual plan all along).

    The plan is then paid up with the set number of units purchased and no further payments are required.

    Your rep will likely be able to explain it better than I am but I hope you get the idea.

    The reason it takes between 7 and 8 years is obviously because the 5 year deal would cost a lot more annually to accumulate the same number of units that you are based on 18 annual payments. It take about 8 years of your annual plan to equal enough principal and interest to equal the equivalent number of units in a 5 year annual plan. There may be a small interest adjustment that you will have to make to make up any difference but it is can be negligible if the the timing is right.

    Contact your rep and ask when the ideal time would be.

  107. Much appreciated, Kruller.

  108. be carefull in signing up in the canadian scholarship trust plan i did it and when it was time to put my child to school guess what because the head of the school is called a principal they refuse to pay the money out to my child. Make sure when you do this you have research all aspects of what you are signing your money up for for 19 years

  109. Hey Gene,

    An accredited institution is the same for ANY RESP. The Government classifies institutions as to whether they are eligible for RESP payouts.

    While not 100% sure, I don’t think that CST can veto this list. Your beef, I believe, is with the gov’t.

  110. Thank you for a very informative thread.

    I have subscribed to a group plan early this year, and already paid $1200. Does it make sense to switch to a self directed RESP with a bank (like TD) at this point?

    Second question, with an enrolment fee close to $5000. Will I still be owing 3800 to the group plan provider if I transfer out of the group plan?

    Appreciating your answers and thanks in advance.

  111. WOW. Where to start…….
    First of all, there are some things that you folks need to know.

    The Canadian Scholarship Trust (CST), USC, and Universitas have all started and discontinued multiple plans over the years, instead of updating their current one. Each of these plans has different rules that govern them. This is one of the reasons that this discussion board doesn’t work well, and why there is such confusion about scholarship plans in general. Someone might post “xxx” and another person will say “xxx is not true of the CST/USC plan that I have”. They may both be right, so unless they are talking about the same company and plan, there will be confusion. On that note, talking about what children are presently experiencing as they go to school is not necessarily indicative of the plans that are currently being marketed. (Keep in mind that I don’t prefer CST, USC or Universitas, but just want this simple fact known)

    So to the post that Kruller made on Sept 21, 2009 – the CST plan which that family has probably won’t pay unless it is a 4 year University program. (and that can be CST’s definition, not the governments) There may be other restrictions as well. (I am guessing a bit, as I don’t have the prospectus for that particular plan in front of me.)

    To be quite clear, when it comes to investments, it is ‘buyer beware’. Anybody can go on this site, and post whatever they want. It can become a shouting match, but it is hard for the average person to discern the truth. I do work for a scholarship plan company, and I do know a fair bit about all of them. (Not everyone in the Scholarship plan industry goes out of their way to research this, only learning enough to sling a bit of mud around, and what they sling usually isn’t true.) It you want, you can email me questions to canadianfinancialwizard-at-gmail-dot-com although I would prefer to answer them here, as some people may have the exact same question.

    In regards to ‘buyer beware’ I can give an example. I had a client who had invested with us for 3 years. They then had a financial advisor (mutual fund sales representative (MFSR)) tell them that if their child didn’t go to school, they would lose their money. This is absolutely untrue. I never talked to the MFSR, so I don’t know if he actually believed it (which, with all the misinformation out there, he actually might have) or if he just uses it to get sales. Either way, he was completely wrong, the people made investment decisions (and from most accounts, the people here would say that it was a bad decision) based on this wrong information, and also lost money. Sadly, they are completely happy with this MFSR, and might die not knowing how wrong and bad the advice was. (As well, they will probably spread the same misinformation to others.) The MFSR might not care, because he made his commission. Again, buyer beware.

    When it comes to any Scholarship Plan, you should read the prospectus. That will tell you more than the people on this board probably will. They are all available at so there is no excuse for people to have wrong information.

    One thing I will mention is that the responsibility is on you to understand the prospectus and ask the questions you need to. I will help with providing a couple.
    1. If the child chooses a scholarship option, will they receive all of the interest earned on their money, the entire grant the government contributed for their child, and all of the interest on said grants? Please word it this way, as this cannot be dodged. You will find that with CST, USC, and Universitas the answer is no.
    2. Also, it is up to you to read and understand all of the fees. Some claim that theirs are lower than others, but don’t show comparative numbers, relying on the fact that people will not research themselves. Talking about Universitas, I could not find in their perspective where it states that the membership fees are guaranteed to be returned. (could be true, I just never found it) Also, while Universitas claims lower membership fees (I don’t live in Quebec, so don’t want to spend the time to research it) their ongoing maintenance fees are substantially higher. I haven’t done the calculations, but I would guess that it would more than make up for the lower membership fees. (and they won’t ever return the maintenance fees – saying lower membership fees is great for sales, having higher ongoing fees makes up for it, and then they return less when it comes to memberhip fee returns – brilliant – lol)
    3. The most basic question a prospective subscriber should be looking at is the completion rates. This is something that the Securities Commission has recently required the plans to disclose, and is the best gauge of how flexible a plan truly is. What these (and they are in each companies prospectus) show are the percentage of students who are eligible to receive scholarships, and actually do. You will find that some of these plans have completion rates that are around 50%. That means that around 50% of the children receive all the money that they were entitled to. This is how some of them can show really high ‘scholarship payouts’, while earning much lower returns on the actual investments. (Good for sales, bad for children later on. Why can’t these children get their money?) I consider this the silver bullet, when it comes to comparing all of the plans out there. There is one plan that has an incredibly high completion rate – I leave it up to you to do the work and find it. Don’t get taken in by the smoke and mirrors.

    To Al, Dec. 2, Switching is up to you, but I would do a lot of research. Keep in mind you will lose enrollment fees, grants, and all interest. If you do cancel, you will not have any obligation to pay the remaining membership fees. There is one plan out there that I would run screaming from, but I obviously will not post that here.

    I could go on for days, but I have a life. Good luck to all, whatever you do, and do it with knowledge, and be comfortable with your decision.



  112. To my previous post, point number one. It should have said:
    1. If the child chooses a scholarship option, and only goes for two or three years of schooling, will they receive all of the interest earned on their money, the entire grant the government contributed for their child, and all of the interest on said grants?

  113. I can only speak for Universitas and the answer to those questions is yes.

  114. @Rhonda,

    To which questions are you referring to? If it is the question of whether or not a child will receive all of their money, in the Scholarship Option, under the Reflex and Universitas plans, if they go for two or three years of schooling, I am under the assumption that the answer is no. I am under the assumption that a child needs to qualify and progress 4 years to receive all EAP’s. I know that Quebec schooling is different that the rest of Canada, but this leads me to believe three years: (all quotes such as these * are taken directly from the Universitas prospectus.)

    *1st Scholarship: The Foundation awards the first Scholarship when
    the Qualified Beneficiary has obtained 12 credits at
    2nd Scholarship: The Foundation awards the second Scholarship when
    the Qualified Beneficiary has obtained 36 credits at
    3rd Scholarship: The Foundation awards the third Scholarship when
    the Qualified Beneficiary has obtained 60 credits at

    And if not in Quebec:

    *1st Scholarship: The Foundation awards the first Scholarship when
    the Qualified Beneficiary has completed his first year
    at university.
    2nd Scholarship: The Foundation awards the second Scholarship when
    the Qualified Beneficiary has completed his second
    year at university.
    3rd Scholarship: The Foundation awards the third Scholarship when
    the Qualified Beneficiary

    Why would you be on this board posting that a child will get all of their money if they only go for two years, when your prospectus says otherwise?

    As to the fees, it wasn’t a yes no answer. The Management fee of 1.19%, combined with the other fees and charges (1.3% ?) is WAY above what the other funds charge. I can’t see how you can claim Universitas’ fees are lower.

    Another question I would have of a Universitas rep: are your investments made according to National Policy 15? Can the investments that Universitas makes with my money lose value? Is my principle at risk? Are they exposed to equities, and if so, how? I state this because most parents want their child’s’ savings to be principal protected, and I am not sure that Universitas’ investments are.

    Forgive my not being up to date with everything about Universitas, as I am not in Quebec. As well, Universitas has started and stopped a few plans in the past, have three that they are currently marketing, so again, please forgive my confusion. (As I have stated previously, this is one of the reasons there is such confusion about Group plans, as some companies have multiple plans. It is understandable that the public cannot make heads or tails of how the plan works.)

    Just for yuks, I decided to take a look at the Universitas prospectus. I have to say, even I am a little confused as to why there are two different group plans. This alone makes me, as an investor, a little nervous. While I was reading, trying to discern some thinks, I came across a few interesting tidbits. First of all, if a child decides that they don’t want to go for 4 years of schooling, and transfers from the Universitas plan to the individual plan, here is what happens:

    *It is possible to transfer to the
    INDIVIDUAL plan at any time.
    However, only the income accumulated
    since the Maturity
    Date, if any, will be transferred,
    as well as the income accrued
    on the CESG, the CLB and the
    QESI, if any

    This alone would make me never want to invest in this program.

    And then there is this:

    *It is possible to transfer from the UNIVERSITAS plan to the REFLEX
    plan (and vice versa) within twelve (12) months of the coming into
    force of the original plan, provided the Beneficiary has not reached
    the age of 16. However, income accumulated in the original plan is
    not transferred, except for the Income from the CESG, CLB and QESI,
    where applicable

    In case it wasn’t clear enough:

    *When the transfer is made from a UNIVERSITAS or REFLEX
    Group Plan to another plan of the Foundation or another
    institution, part of the Accumulated Income accrued on
    the Savings or the total income, as the case may be, will
    not be transferred.

    And I pretty much stopped reading when I got to page 15, which tells me how the ‘guaranteed return of membership fees’ are funded:

    ** Membership Fees are refunded to the Subscriber at the Maturity Date from the income derived from the Subscribers’ Account in the UNIVERSITAS
    group plan and in the REFLEX group plan.

    So Universitas guarantees that they will take money from the subscribers’ income, and give it to the subscriber, calling it a return of membership fees. WOW, this is almost as sneaky as the insurance product that pretends to be a group plan. Great for sales, bad for customers. Gotta read the small print.

    So if this fund is invested just like a bank, and the membership fees are returned from my own income, why wouldn’t I just go to the bank, and not pay any membership fees? The folks who are comparing the stuff they do at the bank to this would be quite accurate.

    So basically, I am only into page 15 of the prospectus, and already I don’t like it. I don’t even understand the differences between the Universitas and the Reflex plans – if one is better than the other – get rid of the worse one. I am just guessing, but I would imagine that having two different plans allows the sales reps (not the moral ones) to promote the best of both, and let the clients assume that by being in one, they get the best of both. I am assuming that if I read more, I would find other things like this, but I won’t waste my time, nor force people who are looking for a good product to read more about this one.

    I understand group plans quite well, and the Universitas prospectus I find a bit confusing. Each plan has different schools that they allow children to go to? Why? And parents have to decide that when their child is a newborn? Sorry, I am guessing, but I bet that if you folks weren’t based in Quebec, you wouldn’t sell much. You probably play up the Quebec Head Office thing a lot, while, imho, your plan is really not flexible. I have to say that, as a parent, I am glad I am not in Quebec, as I might have felt some ‘national pride’ reason to buy into this product. As a rep, I wish I was in Quebec, because it would be easy to compete against plans like this.

    Other questions that come up:
    Why do they use 9% as an interest adjustment amount?
    Why are the returns in the prospectus, which is on Universitas’ website, only current to December 31, 2007. That is almost two years old. Are they hiding something?
    Is the life insurance optional? What if I don’t want it – do I still have to pay it?
    I didn’t even get to the completion rates, but are they above the industry average, or below, and why?

    I am done. I can only read this so much, as more questions keep jumping into my head.

    I would like to say that I try not to sling mud when I talk about Scholarship plans, but what I have read so far does not have me all that impressed. I see some talking points that are probably great for sales, but really nothing to make me want to jump into this product. I might be wrong on any one of these points. If I am, please reply and post the page number of the Universitas prospectus where I can find the correct information. This will improve my understanding of your product, as well as anyone here who reads this.



  115. “I know that Quebec schooling is different that the rest of Canada, but this leads me to believe three years:”

    Should have read:

    I know that Quebec schooling is different than the rest of Canada, but this leads me to believe FOUR years:

  116. Mark – if you can, please respond to my comments on (At bottom of comments)

    (And for anyone reading, that’s also a really good source of comments/info on resps that’s a good source of info, like the always reliable

  117. Hey Mark,

    I like what you are saying. I agree with the majority of it as well. I did a lot of research before choosing a group plan for my kids as well.

    Can you tell me one thing though? Does a bank require “successful completion” of a university/college year before they release money for the next year??

    Just curious.

    • Canadian Capitalist

      @mulletman: To my knowledge, bank RESP withdrawal rules are the same as that set by the Government. These rules are available on the HRDC website:

      @Geoff: I find Mark’s comments to have inconsistencies as well. For instance, he states Group RESPs have fees (yes, they do) but also says that they can make up these fees and more through active management (not true according to their own reporting). I do agree that transparency in Group RESPs is improving but these plans are still inflexible and have a high cost structure (especially if a subscriber is one of the drop outs).

  118. Thanks CC.

    I have read the site but am still confused with the following…..

    In a group plan if a student elects to take their EAP’s out over the course of 3 years they must “successfully complete” year 1 before they can access their year 2 EAP…. and so on.

    If a student fails the first year, they would not be eligible for second year EAP’s.

    Is this the same for bank plans??

    • Canadian Capitalist

      @mulletman: I’m not sure what you mean by “fails the first year”. Do you mean fails some academic courses and have to retake it? The Government rules simply have to do with enrolment, not how successful a student is in his education.

  119. @ CC — do you know literally the steps to get the funds out of a td efunds resp?

    I’ve been thinking about this, but can’t find anything on it.

    For instance, do I have to show proof of enrollment? If that’s true, then I probably can’t get that until he enrolls, but to get that I have to pay the tuition, but to pay the tuition I need the resp…..

    So I just can’t find something like: Step 1. Step 2. Step 3, etc.

    I think mulletman (great name btw) question might be answered by the answer to “can my son withdraw his entire resp account the first year?”

  120. I guess I have to clarify my question.

    With group plans… when your child reaches age 18, you have to make a decision as to how you want to withdraw your funds. All right away vs. EAP’s over 4 years. If you chose the latter, the only way to receive EAP’s in 3rd and 4th year is to have “successfully completing” years 1 and 2. (from my understanding).

    Example….. You elect to receive your EAP’s over 4 years. You go for 2 and flunk out of your third year of economics.

    You start another first year program(in philosophy) because you flunked out of year 3 of economics. It is my understanding that you cannot get the 4th installment of your group plan EAP.


    If Mark and Geoff can stop bickering long enough (just kidding) maybe one of them knows the answer.

  121. I’ve called TD and this is what they said:

    In the first 13 weeks of enrollment at a post-secondary education, I can only withdraw $5000 of the government contributions, and as much as I want of ‘my’ contributions. After week 13, I can withdraw as much as I want. I’m not sure of reasons why (protect the government’s interest, I’d imagine).

    So what happens if child enrolls, and flunks out? According to the rules above, they would have to enroll someplace else before I could pull it out again, it’s not forfeited or anything. However, it’s worthwhile to note that we’re talking at least for me 15 years in the future, and the rules might change.

  122. Long answer to quick questions:

    @Geoff Dec 15 – done and done.

    @ mulletman Dec 15

    The bank, for it’s own purposes, ‘requires’nothing. They are required to follow the RESP rules set out by the government. The government has some rules about when and how the RESP money can be accessed. In order to draw it all out, a minimum 13 week, qualifying program must be taken. (and it probably won’t be able to all be pulled out at once) If not, limits are imposed. The government makes the laws, and it is the promoter’s responsibility to ensure that everything is being done according to those laws. The reason that it took so long for me to respond to this post, is that I called CRA, and they didn’t call back until today. The fellow on the phone was very clear when it comes to what is required of a student. The law states “that requires a student to spend no less than 10 hours per week on courses or work in the program”. The Government makes the law, and they require the promoters to ensure that it is followed. If the government feels that a promoter is not ensureing that the law is being followed, and the tax shelter is being used in a way that conrtavenes the law, the promoter could lose their tax staus, as far as having RESP’s.

    The law states that the student is required to spend no less than 10 hours per week…. There are two ways that a promoter can ensure that the student is actually attending as required. They can ask for attendance records (This would be difficult for correspondence courses?), or they can ask for proof that the child has passed the course. Either one would satisfy the government in that the promoter proved that the child had attended as required. Each promoter had to come up with a system they could put into place to ensure that they were complying with the law. (I am not convinced that the banks have done this as yet, but I feel they will have to in the future.) Some have rules that the course must be passed, or they won’t pay any money the next year – others just won’t pay it out for the same course (same level) two years in a row. This is a very important factor to research.

    The RESP rules have only been on the books like this since 1998, and banks have only been doing Education Savings Plans since that time. How this will be interpreted in the future is anyones guess, but the law is clear. If the government thinks that a promoter is (knowingly, or even by neglect) allowing beneficiaries to enroll in a course (and not attend) for the sole purpose of pulling money out of the tax shelter in their hands (as opposed to their parents), the promoter could very well lose their status to hold RESP’s. What would happen to the RESP’s that are being held by that institution if that were to happen, I can only speculate. (I would hope that the families could just transfer them.)

    Scholarship plans are a one product company. They cannot afford to lose their ability to market RESP’s. To ensure that they are in compliance with the laws, and that the students are attending as required, they have all put into place a system to protect themselves, and their subscribers. To show again that there are ‘sales techniques’ that you should watch out for, I will give an example. There is a Scholarship plan that allows a minimum of 3 weeks per year (after the first year of 13 weeks are taken) to pull out a scholarship payment each year. Some of the sales people promote that a child really doesn’t have to attend. They promote the idea that a child can just enroll, and not attend. They even suggest the child can do this for the whole 4 years (not go to school at all), all while pulling the money out of the tax shelter. You can imagine that it doesn’t state this in their prospectus, and that in 18 years, the family will probaly be told, “No, that is not the case. The law requires that we ensure that your child is attending. This is how we do it.” Again, good for sales, not good for the people investing. If anyone, whether it be a Scholarship plan sales person, or a bank representaitve, or just a person you talk to tells you a trick to circumvent the law, keep in mind that it is probaly not an idea that is supported by the government, and I would imagine in 18 years that the government will find a way to prevent it.

    @CC Dec 15

    What parts of my comments are not true “according to their own reporting”? I can’t really respond to that, as it is quite vague. If you wouldn’t mind, please provide a few more details.



  123. @ Mulletman Dec 18

    Funny 🙂 – I like you already.

    First of all, I will comment again that you cannot lump all group plans together, as they have different options, and therefore different flexibility.

    “All right away vs. EAP’s over 4 years.” Not exactly accurate. It should read: “Just like a bank plan (with no benefits from the non-profit foundation), or their Scholarship option (which is different for each promoter. Might not require four years.)”

    “If you chose the latter, the only way to receive EAP’s in 3rd and 4th year is to have “successfully completing” years 1 and 2. (from my understanding).” This may very well be true, depending on which Scholarship Plan you decide to go with. Some offer much more flexibility.

    “Example….. You elect to receive your EAP’s over 4 years. You go for 2 and flunk out of your third year of economics.
    You start another first year program(in philosophy) because you flunked out of year 3 of economics. It is my understanding that you cannot get the 4th installment of your group plan EAP.” This also may be true of the Scholarship plan you are in, and if so, I feel bad for you and hope that doesn’t happen to your child. Again, with others, that is not the case.

    “IS THIS TRUE OF A BANK PLAN?????” – I hope my post above this one can better answer that. I wanted to answer your question earlier, but again I wanted to clarify some things with CRA. What I would state as a generalization, if it doesn’t look like the child is attempting to withdrawal money out, not for the purpose of schooling, they should be fine. In the future, I suspect the banks will have to have a system (and being as they are large, they want to minimize the paperwork, I hope that computers can help with it) to prevent students from abusing the tax shelter. Because the RESP program as it stands right now only started in 1998, I predict in the future this will become a bigger issue than it is right now.

    Hope this helps,



  124. Mark, for someone not living in Quebec, you seem to pretend you know a lot about the Universitas Scholarship Plan. Anyone can get on this site and mouth off, as if they are experts on all RESP plans. Most people would read your comments and believe every word you say, since it sound believable, but completely false. I believe you to be a competitor who simply doesn’t know or like the Universitas plan due to the success and reputation they have built. The success of a plan can be seen from the current value of a basic unit. Compare the value of CST, USC Hertiage basic unit to that of Universitas, and you will see that we certainly do pay out higher scholarships. As well, your information regarding the payout is completely false, you omitted some very important information found in the propectus which can be found on Sedar as well as the web-site of each company mentionned. For someone who pretends not to sling mud, you certainly have done a good job. Most of your comments don’t even dignify a response. If I had time to waste, like your obviously do, I would take the time. Should I have a day to waste, I might just give your readers the correct information.

  125. Cory,

    Did you even read the whole post? I said that I was unfamiliar with the Universitas plan. I asked a lot of questions, that no one has answered. I also posted all of the information directly form the Universitas prospectus. This is what really floors me. A universitas rep comes on here and brags that they are the only company that quarantees the return of membership fees. Universitas ‘guarantees’ that they will return the memberhsip fee – out of the subscribers intrest, and you are mad at me for posting the truth?!!! Don’t you think that deserves to be said?

    I don’t live in Quebec, but anyone can read a prospectus. I don’t claim to be an expert on the Universitas plan, but I am quite familiar with a Scholarship plan prospectus. I didn’t read half way through Universitas’, and even by then, I felt that it was incredibly hard to understand, and I ran into tones of stuff I found questionable. That is what I posted, and to be fair, I quoted directly from the prospectus. I did a lot of asking and assuming, so feel free to make any corrections.

    What did I say that was false?

    Scholarship payouts are nice, and if that was the only thing that separates all of the plans, CET would win, not Universitas. The fact is, if the scholarships are higher because a lower percentage of children are able to qualify for them, that is a negative, not a positive. I don’t want to find out down the road that I didn’t jump through the right hoop, or go to the right school, so now my child can’t access the scholarships. That is why I read the prospectuses.

    I do apologize that I was harsh on Universitas, but to be quite blunt, after the reading of their prospectus that I did, I have to say that I have a very low opinion of their plan. Feel free, (using facts, not trying to use emotions) to change my mind. I would actually prefer to have a higher opinion of them, but to be honest, I don’t live in Quebec, and so I don’t really care either way. I do, however, think parents should know in advance what they are getting into.

  126. What I deplore most about these blogs is the fact that people actually base their decision whether or not to look at a specific program on what they have read on this blog. In fact, that very thing happened this week to one of our reps. A customer read your comment about Universitas, and cancelled his appointment. His decision certainly was not based on the facts. For that specific reason, Mark, I am more than happy to respond to your question about Universitas. First of all, we have 3 plans that we offer people, Universitas, ReFlex and an Individual Plan. The reason we have 3 plans, is very simple, we offer people what they want and need. 45 years ago when Universitas was founded by Jean Marchand, it was simply a saving club for parents and students to save for their University education. They later incorporated the Universitas Plan which has served us well, and has an excellent track record. This plan has helped thousands of young people get different types of degrees. I personally know, a doctor, accountant, criminologist, and an engineer that were very thankful their parents had the discipline and foresight to save for their education. The Universitas plan is more restrictive but has a higher return, versus the ReFlex plan which is much more Flexiblity with slightly less return. When meeting with parents, we do a detailed client profile and based on the parents needs, the parents and not the reps make the decision. Both plans are shown and explained in detail to the parents and based on that information, they make their decision. Contrary to what you cut and pasted from our prospectus, the Universitas Plan also pays for Technical Cegep as well as University along with the another option of using the government grants before the scholarships to pay for either vocational training or general Cegep. The Reflex plan covers vocational training, ACS, DCS, technical DCS or University. With Reflex, students receive their first scholarship upon registration. (see page 14 of our Prospectus for the complete details of our programs, and not only half as was posted by Mark) Most Ontario based company’s payout only after having completed their first year of post-secondary school . So you asked, why different plan, why not! Give parents the option to choose a program that meets their needs.

    As far as Universitas returning 100% of the enrolment fees at maturity with the Principle, you will find this on pages 13 and 27. Perhaps a fact that you don’t know, Mark is that the AMF (Autorité des marches financiers) obligates us to return the enrolment fees at maturity. They have allowed Universitas to invest in the stock market,(Blue Chips) and due to this fact; we do have a much higher return than the Ontario based companies, who have been restricted to invest in guaranteed TB and Bonds. However, due to the fact that we invest in stocks we are not allowed any discretionary power. The Ontario Securities Commission allows all the Ontario based companies to have a discretionary power , that allows these foundation to decide how much, if any enrolment fees with be refunded, as well as how much if any profits and attrition will be added to the true value of the scholarships. Universitas, receives an annual external Actuary Certificate that states the following:

    We did an audit of the three following elements:
    􀀔. Tables of deposits in the 2008 prospectus (see pages 48-51):
    These tables must be calculated so that the amounts invested by each subscriber bring in roughly the same level of investment
    income to the scholarships of the beneficiary’s cohort.
    The tables must take into account the age of the beneficiary at the time of subscription, the savings period and the method
    of deposit selected by the subscriber.
    􀀕. Distribution of income and expenditures for 2008:
    The distribution of the income and expenditures of the Foundation by cohort and by plan must be just and fair.
    􀀖. Calculation of scholarships whose payment is made between September 1, 2008 and August
    31, 2009:
    The level of the scholarships paid to beneficiaries must be calculated to represent, on the date of their payment, an accurate
    share and a just and proper division of the net income accumulated in the Scholarship Fund.
    It is our opinion that the methodologies used, as well as the assumptions made by Universitas Foundation of Canada regarding
    these three elements are proper and fair, and well documented.
    Now with that said, I know you will bring up that the stock market did not do so well in 2008, and yes, that is a true, in fact our return which again is clearly shown in our prospectus on pages 18 & 40 is shown at a lose of -4.8 after our administrative fees. I am very pleased to inform you that because we invest in the Stock Market, we ended 2009 with 9.91% minus our administrative fees (which again decreased ) 1.07% for a plus value of 8.84%. Even thought we show a lose for 2008, our 10 year average net return (after expenses) is 6.68% for 2009, this should be higher for 2009. (page 59)
    You asked whether our investments were made in according to National Policy 15?….see responds below based on our prospectus Page 21.
    Foundation Account
    The investment policy regarding the Foundation’s account allows the
    two portfolio managers appointed for this purpose to make investments
    in accordance with the provisions of Decision 2001-C-0383,
    specifically,in paragraphs 8 and 9 of Article 1339 of the Civil Code of
    Quebec respecting investments presumed sound, in which a director
    of another’s property is required to place the money under his
    administration and, where appropriate, of Regulation C-15 on the
    prerequisites for acceptance of prospectuses for scholarship foundations
    ¨Below again taken from our prospectus on page 105… we can refund total enrolment fees.
    1. The Subscribers Savings Fund
    • The fund is made up of the subscribers’ savings and the amounts required to meet the obligation to refund membership fees on the maturity date.
    • It is entirely made up of Canadian fixed-return investments of which a minimum of 90% is guaranteed by either
    government or public organizations.
    • This fund’s investments are managed by Addenda Capital Inc., a firm specialized in this type of investments.

    2. The Scholarship Fund
    • This fund consists of:
    􀁄In part, revenues generated by the Subscribers Savings Fund;
    􀁄In part, the amounts paid by the CESP (CESG and CLB) and the MRQ (QESI) as well as the revenues accumulated on these amounts;

    􀁄The returns paid by the insurer on the subscribers’ group insurance.
    • The Scholarship Fund is composed of diversified Canadian investments with a target investment in Canadian shares
    of 85%.
    • This fund’s investments are managed by Jarislowsky Fraser Ltd. and Montrusco Bolton Investments Inc.
    As far as the administrative fees are concerned, you will see on Page 103 that for the 6th consecutive year we have decreased these fees. Any organization whether it be Universitas or CET, CST, USC, Heritage, we have to pay the trustee, depository, our administrators, the auditor, the actuary firm, employees etc. No company can be run without expenses. The law allows any non-profit organization to use 25% of their revenue to cover administrative fees. 1.07% is a very minimum amount compared to that.

    Effective 2010 the Insurance now is optional. However, in 2008 1.7 million dollars was deposited into the beneficiaries account resulting from Insurance discounts . (page 88)
    Wow, Mark…I don’t even think I have answered half of your questions this evening…..I’ll leave the remainder for another day. As well, Mark, you are more than welcome to move to Quebec and do CET business here. For the more than 6 years, I have been associated with Universitas, I have only come across one person with a CET plan, and have never run into any reps.

  127. You know the irony of two group RESP salesmen arguing over which plan sucks less should not be lost on anyone reading. Skip both these options – self-directed couch potato investing is the only way to go (imho).

  128. Geoff: We are not arguing over whos plan sucks less, I was simply answering questions that were asked….Do I not have the right to do so? And IMHO I certainly wouldn’t invest with a couch potato

  129. @ Cory – of course you have the right. I never meant to imply otherwise. Nor has CC ever (to my knowledge) banned your posting, so I don’t understand your comment.

    Bing couch potato investing. It’s not a person, it’s a strategy of DIY investing.

  130. What about USC RESP Plan..
    Can you advice me ??

  131. I would say that USC is probably the best RESP provider out there.

    First of all, going with an RESP specialist is much better than going with ANY of the banks. If you walk into a bank and ask about an RESP, they get so confused because they arent specialized in them, nor do they know much about them. I would rather go with someone who specializes in them, because I can be certain they know what they are talking about. Also, banks charge MERs, which are roughly 2.5%. I did the math and MER charges definitely outweigh the enrollment charges you will get with the RESP specialists (CST, USC, and Heritage).

    So the three RESP specialists I found while researching online as I just mentioned were: Heritage, CST, and USC.

    Each of these 3 companies prospectuses are found on their respective websites and can be downloaded for you to look at. I’ll admit, they contain A LOT of information, but if you take the time to look through it like I did, its not that bad.

    One thing I found out was that USC and CST are owned by not-for-profit organizations. So any excess revenue that USC and CST make they are legally not allowed to keep it because they are owned by not-for-profit organizations. In the prospectus it says that the Foundation (not-for-profit organization) will give their excess revenues each year to the students who are attending post-secondary education that same year. I looked at the numbers in their financial statements and the amount of money the foundation gives back actually covers the cost of enrollment fees and then some more. I don’t believe Heritage partakes in this profit-sharing because they are privately owned.

    So out of the three, Heritage is probably the one you shouldn’t go with.

    If you want to get really picky and compare USC and CST, take a look at their rate of return over the last five years. CST has an average rate of return of 4.5%, and USC has an average rate of return of 5.7%.

    This is the reason why I say USC is the best RESP provider out there.

    Also: I noticed in a few other posts that people argue why you would put money into government bonds for a newborn child’s education, rather than with a bank and into higher risk mutual funds. If you want to have a heart attack everytime your mutual fund goes up and down like a yo-yo every month, then go with the banks. But if you want a secure investment thats safe and will still make decent interest, go with the government bonds.

    Just like the line from the famous Turtle and the Rabbit story….. Slow and steady wins the race!

  132. Rob,

    My first guess is that you are a rep for USC. Seeing as how I can’t prove that, I will assume you are just a guy trying to figure out group RESP’s.

    I want to clarify a few things you said that were incorrect. You stated that you think USC is the best, but only state a couple of ‘facts’.

    Firstly, the claim that CST and USC are owned by the non profit foundations. This is true. That any revenue generated by the for profit sales arms gets into the hands of the children, is at best, questionable. (and not provable by the limited disclosure in the prospectus.) To quote:
    “So any excess revenue that USC and CST make they are legally not allowed to keep it because they are owned by not-for-profit organizations. In the prospectus it says that the Foundation (not-for-profit organization) will give their excess revenues each year to the students who are attending post-secondary education that same year.”

    You are doing a bit of assuming, which is what these companies want you to do. You are assuming that the for profit sales arms don’t spend everything they earn every year (they probably do). And you are assuming that the money that the non profit foundation donates is this money. (It isn’t) Basically, all of the companies are set up very similarly, and generate additional money for the children who go to school. Some companies call it different names, which ends up leading people to believe that the have an ‘extra’ source of money. (they don’t) There is an easy way to prove this. USC and Heritage have very similar 10 year averages, and their scholarship payouts are almost identical (even though Heritage offers more flexible options, so a higher percentage of children can benefit from the extra money.) If USC had additional money from the for-profit sales arm, it should translate into much higher scholarship payouts. (it doesn’t)

    As far as USC being better than CST, I will concur on the return numbers. CST has been horrible for the last few years. I would say that is a good thing to consider when making a decision. You should, though, mention that CST allows more flexible options for a child going for a short duration program, than does USC.

    Just wanted to make sure there was some fairness in the discussion. If any plan was chosen based on incorrect information, or just a couple of variables, then the family might not be making the best decision.

    I will let the families decide what the best plan is for them.

    My two cents.

  133. Non profit does not mean not for profit. I had the dubious pleasure of volunteering for a non profit men’s recovery home many years ago. Everyone involved was doing a whack of free work because well it’s non profit. Then I began to do the math and figure out where the money was going. Basically the guy who ran the place was paying himself a 6 figure salary for doing nothing. Any excess I’m sure was funneled to his pocket. He had a very nice house near Mount Pleasant and two cottages and several new cars. It was a bit of an eye opener for me. Frankly it’s the same kind of scam some charities have where hardly any of the money gets to the people who need it.

    So saying it’s non profit really doesn’t impress me too much. There are legitimate non profits just like there are legitimate charities and they do wonderful work but some are highly questionable.

    Further if you want a GIC RESP TD has one with no fees, no mer nothing.

    As far as bank reps vs group plan reps they are both seriously lacking in education in this area. Bank reps just seem to lack information while the group reps I dealt with were quite frankly evasive. I asked a simple question to these group reps. What is your rate of return?

    The answer always came back to well the government gives you 20%. I just kept saying I know about the government grant it’s available no matter which place I go what I want to know is what is your rate of return. Then it was well we have this bonus we give because some kids don’t go to school or parents drop out. I personally am not too comfortable with this; with a self directed RESP you can stop contributing all together and if your child doesn’t go to school you can take your money out plus the interest earned plus the interest earned on the grant amount all you have to pay back is the government grant, plus you can roll it over into your RRSP if you have the room.

    In the end I never got a straight answer to my question. What is YOUR rate of return. I did not deal with only one rep or one plan. I felt like all three reps I dealt with with very evasive.

  134. Rachelle,

    Sorry to hear that you had bad experiences with reps being evasive. I can’t understand why they would not want to share their returns. (the return fluctuates from year to year, unlike a GIC) I can only assume that they were not well trained, and relied on people not asking many questions.

    As far as non profit, you are right. There are good ones, and there are bad ones. Unlike the outfit you worked for, though, the group plans are strictly regulated as to how fees are taken. Owners can’t just ‘pad’ their pockets, as the books have to be audited every year, and the money all has to be accounted for.

    I do want to educate you a bit on GIC’s, as you make it seem like the banks do this for free. They do nothing for free. They take your money and give you, let’s say 1.5% on a GIC. They lend this money out at 4.5%. You make 1.5%, they make 3%. They make twice as much on your money than you do. Granted, it’s not a fee, but it is a cost of investing. They might also go and invest your money, and keep all profit over the 1.5% they give you. I personally feel GIC’s are a good place to ‘park’ money for the short term, but bad to invest for the long term.

    You are right, though, to not invest in something you don’t feel comfortable with. If you can’t find someone who can adequately explain a group plan to you, you shouldn’t invest in one. I wish you luck if you are trying to find something safe, but better than a GIC.

    One other thing I wanted to clarify is that with all of the group plans being marketed today, if a child doesn’t do to school, they can transfer the money to the parents RRSP, the parents can pull it out as taxable income, and with some, it can be transferred to a different child, or used by the parent’s themselves (as an RESP, please note that this last option is not available at banks, as far as I know). Of course, if a child or a sibling of the original child doesn’t use it for schooling, the grant monies must all be repaid.


  135. Rachelle,

    One other thing. If you really feel like the people you were talking to were evasive or untrained, I urge you to call their respective companies an let them know. They will appreciate the information, as they have a hard time of knowing what is happening in the house while the rep is there. I realize that this won’t help you, but it will help other families in the future.

    Just some advice.

  136. We open RESP with USC on 21 Nov 2009. After 60 (jan20 2010) days they sent official agreements note with package. We were not agreed some of condition mention on agreements then then we cancelled our RESP within 7 days of receiving our official agreement(28 Jan 2010). Now they not sent fully refund. They cut my entire enrollment fee and other changes.

    What should I do for get my all hard money? Anybody can help me regarding this matter USC RESP plan.

    Anyway we get my refund….

  137. Kaushik,

    60 days is far too long, (in my opinion) for you to get your welcome package. I would call the company, explain your situation, and be firm about demanding all of your money back. Explain to them that it was not your fault that the package was delayed that long. Tell them that you will file a complaint with the provincial securities commission if they do not help you out. If they do not help, follow through on your statement, and go to the securities commission. I think that you will find that the squeaky wheel get the grease, and that you will be happy with the results.

    I wish you luck.

  138. Dear Mark,

    I wouldn’t buy a GIC or government bond on any investment that has a 18 year time horizon.

    I was referencing OP wrongly when he stated government bonds my point is that if you want to hold these securities you can because TD has this kind of account.

    For me because I am low income I chose to go with Investor’s Group instead of TD because the only thing available with TD that applies for both grants is indeed the GIC account. IG was the only company that applied for all the grants. Unfortunately not self directed but… so far this year alone I am up 10% not including any contributions.

    I’m sure it has nothing to do with the reps honestly even their brochures don’t mention what their rate of return is. Why not? Their own documentation is clear as mud, filled with emotionally charged pictures and total market speak.

    I’m sorry to hear your story Kaushik, I hope it makes you feel better that you were ripped off so that USC could give some other kids your money so they could get extra money, surely sorely needed after their lousy returns. Honestly I hope you sure to get your money back.


  139. Mark – in your example you’re ignoring the fact that the bank is also taking on the risk that the person borrowing the money may default. So yes they are taking money and paying out 1.5% (guaranteed) but the bank is not guaranteed they will receive the other 3%.

    One other thing that’s never mentioned is that GICs have an inflationary risk inherent to them. In other words, a guaranteed return of 4% with inflation at 2% = a real return of 2%.

    That’s quite a scam Kaushik and I’m sorry. Give 60 days to cancel for full refund, and wait until day 61 to send out welcome kit. Good luck.

    I just really think these group plans are terrible products, sold under false pretenses and with little value. That’s my informed opinion, Mark and others have different thoughts. But I do find it informative that very (very) few comments on this blog from existing group RESP plan members have anything positive to say; most of the positive comments come from salespeople I think..

  140. Rachelle,

    IG is not the only place that applies for all the grants. TD is the only bank that doesn’t. (as far as I know.)

    I wonder why you say that the reps won’t tell you the returns (one company I would believe – three I slightly doubt, but I guess it is possible). You also mention that you can’t find the returns in the compaies sales materital. (some have it, some don’t – that is true.) Then you go on to say that their returns are lousy. You couldn’t find out what they are, yet you claim that they are lousy? Odd.

    For the record, of all the mutual fund sales people out there, I personally like IG the best. I have run into some really slimy sales reps, from a lot of compaines, but to date I have no complaints against IG. I therefore don’t think that they would be running around telling people that they are the only place that applies for all the grants.


    I realize that the bank does take on risk with their investments and loans, but I was using an overly simplified illustration. I also didn’t mention that the bank act allows them to multiply what they have in savings, and lend that out. This allows them to make far more than what I showed in the illustration.

    As far as people complaining, with any product or industry, that will exist. I would guess that there are over 100,000 children that started their first year of schooling with a group plan in 2009. How many complaints do you hear? Obviously, there will be a few. Even if 0.5% complained, I would expect 500 kids on this blog. I am starting to see children go to school with this, and must say that the ones I know are thrilled. Like anything, if you piss off one customer, they will tell 100 – if you please 100, they might collectively tell one. Just the way it works.

    As far as people here ‘boosting’ group resp’s, you are right, they may be sales people, or customers, but you can’t tell. Just like you can’t tell if the people attacking group resp’s are mutual fund sales people.

    Another side note on GIC’s for RESP’s. Banks won’t moniter it for you, and you might get locked in so the money can’t be used when needed. eg. start with a 5 year GIC. The bank will automatically roll this over for you. when the child turns 15, they will lock it in for another 5 years. Won’t be able to access it until the child turns 20, or lose three years (the best three years) of growth. I have heard of this a lot, so watch out if going with a GIC for an RESP.

    Again, whether it is a bank or group RESP, the government didn’t set them up to be used as a biggy bank. Don’t think that the government doesn’t have some rules on taking money out of a bank RESP.


  141. Canadian Capitalist

    The cost isn’t the only (or even the main) problem with Group RESPs. It’s the lack of flexibility. You read so many complaints here on how the Group RESP withdrawal rules are more restrictive than the Government’s. The Group RESP contribution schedules are also overly restrictive. It is important for people to realize that they are signing up contributing to their child’s RESP for a long time. If they change their mind or their circumstances change, they lose quite a bit of their capital.

    My understanding is that RESPs are a loss leader for banks. They are not in RESPs for the money. They are in it to offer a complete range for products to clients. Of course, their motive isn’t charitable. They are hoping you’ll have other larger accounts with them such as mortgages and RRSPs.

    But that ain’t the case with Group RESP providers. They are depending *solely* on Group RESPs to make their profits. I don’t think anyone begrudges a service provider their share of profits. It’s just that clients like to see a benefit as well. My contention is that a significant percentage of Group RESP clients lose a significant chunk of capital when they had to stop contributing for whatever reason or do not get full benefits. That’s why you hear so many complaints.

  142. Mark,

    I am actually a freshly graduated university student that benefitted from the USC Group plan. My mom signed me up with a plan when I was 10. I am 22 yrs old now, and just completed a 4-year commerce degree. I was just looking into the different RESP providers because i find it interesting to see the different types and was curious how the money I received was generated. And yes, I suppose my beliefs could be a bit biased since I had a USC plan, but the facts I stated were all true (to the best of my knowledge). But I just thought I’d let everyone know that I am the product of a USC plan, and it does work.

    BUT yes, I suppose an important fact I left out was: the Group RESP primarily benefits children/students that go to a 4 year program (and complete all 4 years). If a child just ends up going to a 2 year college program, the Group RESP isn’t very beneficial.

    At the end of the day it looks like it comes down to risk tolerance. If you’re willing to go riskier with the potential for a higher return, go with a Bank. If you’re looking for safe, steady growth, go with a Group RESP.

    Let’s face it, the way we’re going by 2025 (or earlier), you’re going to need at least a 4-year undergrad degree to get an even remotely decent job… so you SHOULD get an RESP from SOMEWHERE.

    My two pennies


  143. CC,

    Again, as far as I know, all the current plans being marketed have an option that allows them to use the RESP using only the income tax act rules, but they don’t receive any additional money. (Some older plans do not allow that, which does get some people a tad upset. Those plans are not being marketed anymore.) Some even allow the plan to be transferred to a sibling, another child, or to the parents themselves. This is more flexible than the banks.

    Again, as far as I know, all the current plans being marketed have many contribution schedules. This allows people to choose what is best for them. I have people that do all sorts of plans, even multiple for one child. It is possible to lose money, if no further contributions are made, but the percentages that I have seen are incredibly low. We do everything we can to help people keep the plan alive, with as much money in it as possible.

    You are right that the banks aren’t fond of RESP’s, but they don’t do anything at a loss. It is just hard for them to have their staff trained, as RESP’s are a tad complex, and they carry many products. The training is the biggest reason that the banks do not like RESP’s. On other reason that the banks like to have ‘everything’ is that if people start thinking that they should get their RESP’s elsewhere, they may start to think that they should get their mortgage, etc. elsewhere. They like people to believe that they have the best of everything. (I encourage people to check out a mortgage broker, when thinking about a mortgage.) They do, however, still make a tidy sum off of RESP’s, regardless of how people invest. They have fees for minimal plans to insure this. I trust that you know this, but your post seemed to indicate that they are doing this for little or no money, just to get people in the door.

    As far as hearing so many complaints, I only hear them on this board. Considering that the group plans have roughly 25% of the RESP business, and sign up 100,000 + families a year, a handful of people on a blog is not surprising. I personally make sure that everyone I sit down with has full knowledge to make an informed decision. No one that I sit down with can read this blog and say that they weren’t aware of X, Y, or Z. If someone does invest without understanding what it is that they are doing, they should take some responsibility for their actions, as opposed to blaming someone else for their decisions.

    There are a lot of options for people who have circumstances that change. I have had people that have to stop contributing, I have changed the start dates of many plans, and I have changed many plans to make it work for the circumstances of the family involved.

    As far as being inflexible, I can attest that at least one company routinely ‘bends the rules’ for children who are attending school, and have circumstances that require them to take much longer to finish schooling. These plans are not set up to be punitive, but to help as many children as possible, have as much money as possible. Again, each plan is different, and parents need to do their due dillegence when choosing. Sadly, many decide with emotions, which is one of the reasons people and investing don’t mix. 🙂

    My two cents.

  144. Rob,

    Congrats on your degree, and I am glad that your Mom saved for you.

    I will point out one thing, though. Not all group RESP’s are set up with restrictions that 4 years must be taken. (CST and USC have that restriction.) Some allow 2, 3, or 4 years in their group option, so it is not as risky if the child doesn’t go for 4 years of schooling.

    Again, congratulations, and I hope the job market is good to you. 🙂

  145. Mark,

    re: “As far as hearing so many complaints, I only hear them on this board. ”

    Mark, you and I have spoken on different blogs on this very topic. But if you want more references, both Ellen Roseman and Gail Vaz Oxlade * have come out against group RESPS, with many comments from those who’ve been burned by them.

    I think the main point CC is trying to make above is that there are MANY forms of risks. Yes, a self-directed plan has the risk of losing money (although over an 18 year period it’s a small risk, but it is a risk). But a so-called ‘safe’ group plan has risks as well – the risk that inflation will overtake the safe investments its making, the risk that your child will not go into a program that the Government accepts but the Group Plan does not, and that your circumstances may change and you may need to stop contributing and you will be sacked with fees for doing so.

    What I don’t understand is why anyone so concerned about risk would simply not open up a self-directed resp plan using etfs or other low cost funds and buy bonds/gics themselves.

    * Source:

  146. Finally, I cancellation my RESP plan and I will get my all money.
    Thanks for all who have to nice advice.

  147. Geoff,

    Sorry it took so long. I was going to write a long reply, but haven’t found the time. On that note, this will be brief.

    You are correct, and I appologize. I have been on the other board, (million dollar journey, if my memory serves me). I haven’t been on it in a while, but I have noticed that it is largely the same people posting on both. This is why, (I guess) in my mind, I lumped them both together. My main point is that I haven’t encountered this in my personal travels, or my experience as a rep. (I have run into a few issues with what I consider ‘dishonest’ reps, which deserves to be discussed by the government, not us, but this doesn’t mean that their companies are bad.)

    Also, people on the internet are ‘faceless’, so there could be one person posting with 5 different names. (you know what they say about pleaseing customers.) Again, with the volume of business that combined all group plans have, a handful of people who are disatisfied does not surprize me.

    Again I point out that only time can ‘prove’ what will be a better investment. I, with eyes wide open, and {saying this while trying to be humble} a tad more experience in the financial world than the average bloke, happily invest for my family in a group plan. IMO, the right group plan is a great, handsfree, and safe option. I think a handful of us can respectfully agree to disagree, can we not? 🙂


  148. I started wit a small investmeant of $42,86 sice for 6 units in 1992, total money at$8900, at this time as i understand it, my son at 18 is enrolling in th a 4 year BA program, if ecepted and pasing each year he will get approx this amount of mony each year fro USC Canada, sounds like ti works for me, amd i saying something wrong here? this is always how it was explained to me, so his four years of tuition and dorm are covered, I will help with the rest, this is a 400% return on my original benefit, so my son needs to past and complete to get the full amount, not rockect science here

  149. Hello everybody!

    I am looking to do a bit of both: pooled and DIY RESPs for my 9 months old. But I’m fairly new to Canada and very new to RESP and investing, so I’m scared. All I did for now is carefully digested the USC prospect and read some forums and articles.

    The USC so far doesn’t look too bad, but I haven’t met a real person, who benefited from it and they don’t give the examples of one particular person (“in and out”). So i wonder if maybe Rob, or somebody who went all the way with USC, wouldn’t mind to share his numbers(how many years? how much each payment? how many units at the end? what was the return? principal? interest? grants? top up? ) Because the millions of $$ in their prospectus doesn’t say how much a child received…

    Canadian Capitalist : I see this discussion started a wile ago, just wonder, is it still worth to open a TD e-fund RESP? How did your investment performed over this time? How does it look now? Or would you recomend something different for the current situation in economy?

    Thanks in advance.

  150. @ Irina – I think the biggest drawback to these plans is the lack of flexiblity which has been talked about in great detail on the comments, be sure to read through them all. As for the performance, remember an RESP is for long-term investing. Fluxuations in the past 10 years aren’t as relevant as confidence in the longer term prospects. I take the approach that 15 years ago I drank coke and used microsoft products and drank starbucks etc so assume that I will 15 years from now, which builds my confidence. YMMV.

  151. Thanks Geoff for reminding! I’m very careful with what I do with my money. Group plan is my backup plan, but their 136p. prospectus is not enough for me, I want more real information. And in this case past information it better than non at all. If nobody will be willing to share the numbers (and I’m thinking about comparing more than 1 person) I wouldn’t even bother with opening it. Unfortunately, with my brand new e-fund account nobody can predict ether… It’s now I’m regretting, I knew nothing about investing and didn’t by MF a year ago, but at that time… nobody knew (almost nobody?) about what’s gonna happen next and when…

  152. Canadian Capitalist

    @Irina: I’ll second what Geoff said. We have a TD Mutual Fund RESP invested in e-Series funds for our 3 children. As the kids are very young, most of the portfolio is invested in stocks. We did this with the full understanding that stocks will fluctuate a lot and there are no guarantees on returns, even over 15 to 20 years. However, as time passes, the portfolio will become more conservative by adding new investments in lower risk assets such as bonds or GICs.

    The are two main advantage to a self-directed RESP: (1) You have control over when and how much you want to contribute and (2) You can adjust the risk of the portfolio based on your needs and tastes.

    Here’s my actual experience so far: All three RESPs are at or below book value (total contributions + CESG). All RESPs are 80% invested in stocks.

    Two were started up in 2005. Total contributed + CESG = $16,800. Market value = $16,000.
    One RESP was started in 2009. Total contributed + CESG = $6,000. Market value = $6,000.

  153. Irina, with any group savings plan in their prospectus, you should find their 5 yr and 10 year average annual return…this will give you a good idea of what you can expect. Group plans have the track record of EAP made to the kids, unfortunately banks don’t. They only started offereing RESPs in 1998 with CESG started. In an article that was published this week, the CSA is looking into doing a clean-up with RESPs offered by banks. They want the banks to offer a prospectus with a description of the types of investment they use. What has been found is that most banks are not upfront with their customers, and in more than 50% of cases people don’t even know what their money is invested into. The article I received is only in french but I’ll try and find it in english, if so I’ll post it.

    • Canadian Capitalist

      @Cory: Since you can invest in any of the bank’s mutual funds (or pretty much any stock, bond or mutual fund in the case of a SDRESP), banks cannot put out a prospectus for their RESPs. You can always look up the prospectus of the individual mutual fund for past returns. It is incredible to me that you claim there is not enough disclosure. There is plenty. It is Group RESPs that have had plenty of criticisms about disclosure including the past practice of disclosing gross, not net returns.

  154. I never claimed any such thing…I was stating information from an article I read. However, banks certainly are neglect in disclosing all fees involved, and that is what the article was referring to. The CSA wants banks to disclose the all fees incurred when opening a RESP. I agree that the prospectus from Group plans is long and detailed but the securities commissions insist on disclosing all the information found within. Especially the AMF in Quebec. As for group plans disclosing gross and not net, you are correct when referring to most group plans but not all????

  155. I don’t believe ether one of them (banks or group plans) are willing to provide the details if they don’t have to… The USC rep. was throwing the number of $$$ they payed as an EAP, but didn’t say how many people it was divided within $1.000.000 for 1.000.000 students = $1 for each!

    On the other hand banks… I was shocked by the MF ADVISOR who opened a MF RESP for me, when she “suggested” a “complete portfolio solution for my type of investor” and said that it has “only” 1,9 MER and if I was to make the same portfolio by myself the MER would be… (she started to sum all the funds within it!!) 7.9% !!!!!!! Is she so stupid with 20.. something years of experience? I guess not, but she knew I’m new in this. So thanks to my background from another country – I doubt everything I hear at first and then think and use math and logic and search for the facts. How about people who will trust “professionals”?..

  156. Most collective RESP providers have been around for well over 40 years and they all have thousands of kids that received their EAPs and were very happy their parents made a wise decision. I meet many of them every week who open a plan for their own children. I don’t believe they would still be allowed to operate if they were dishonest. Of course their will always be people that are not happy and find something to complain about but that is part of human nature. I agree with you that each person should do their research. Know the right questions to ask, and if you can’t get a straight answer move on. If you decide to go with a bank, ask to see the performance of the fund they have choosen for you. Not one, two or three years, ask for the past ten year annual performance, ask what the fees are. I just read a great article in the Globe and Mail, which list 19 fees that banks might charge for investments.

    • Canadian Capitalist

      @Irina: Good for you. You should always think through matters yourself and not blindly trust whatever is put out by vested interests or even well-meaning folks.

      I can only tell you what I have. With a TD Mutual Fund RESP, there are no fees. Since the funds are invested in e-Series Mutual Funds, the highest MER for a fund is 0.48%. I would estimate the all-in cost of a TD e-Series Portfolio to be less than 0.50%.

      @Cory: Yes, bank mutual funds have fees. But there are also ones with low fees. Low costs are an important criteria for DIY investors and it is possible to build a RESP portfolio and pay rock-bottom fees. That’s what I’ve done personally.

      And FYI, Group RESPs also have hefty fees. I estimate the effective fees of these plans works to 2.15% per year.

  157. Hi !
    I just wanted to say, (as I am extremely irritated, frustrated and horrified) that I wish I had NEVER opened up an RESP plans with the CANADIAN SCHOLARSHIP TRUST FUND / C.S.T. CONSULTANTS INC. for my children. I am trying to comment on as many sites as I can, because something has to be done about these unethical business practices. My husband and I have a total of 7 plans for our 3 children. We are facing financial difficulties and now have to cancel these plans because we need access to these funds to survive (never mind saving for university). We are disgusted to find out that we will be penalized 48 % of our contributions if we cancel today. This is legalized fraud. I’m sorry. We knew there were fees when we joined, but the implications of the fees were not explained to us properly. How can you justify taking 3,700.00 from an investment of 7,800.00 ??? This is absurd and something must be done so that young families are not taken advantage of like this anymore.

  158. Pingback: Articles » Blog Archive » Saving for Post Secondary Education

  159. Hi Everyone , I was approched by heritage funds and did the application, after reading this thread and the prospectus I quickly cancelled my application. We were told the fees would be returned to us once the completion of the plan . Also the beneficiary can take and use the money for what ever school program they want not just for college or university. Read the fine print.The fees are not all returned to you it is on a “discretionary payments and that you should not count on the discretionary pymts . The foundation will decide if youwill receive payment in any year and how much the pymt will be ( this iincluded membership fee returns and enhancemenrs to EAPS” What a crock of sh../ I cancelled today and thank god I did, the rep called me this afternoon to say how high again the bank fees are and that the fees were not high with heritage. That is al they talk about is how high the bank fees are they dont tell you that there fees are not guaranteed back. Also to get the potential fees back the student would hve to go to school 4 yrs program / What a scam.. if anyone is aproached by these people RUN don t even let them makean appointment with you let alone an applicaiton . how stupid was I . pretty stupid but I learned my lesson and got out while i could. Iam going to eventually open up a resp with the bank and manage it on my own. Gics are safe and in the long run have a good return along with efunds. I total agree with Sandra and the capitalist. Group plans are not the way to go.

  160. I am looking for the pros vs cons, comments, criticism &/or input as to the RESP plans provided by Global Educational Trust Foundation. They can be found at: Thank You.

    • I did transfer quite a few years ago from a self directed account at Scotia, to a group plan at Global RESP. There was no fees involved, and it was very smooth.

      The Global RESP plan earned me an average of about 4% return (I’m not a seasoned investor but I think that’s pretty good), but the part I’m most happy about is that Global RESP allowed me to even use the money for my daughter for her studies in Europe.

      We didn’t anticipate that she would be studying abroad, but we were relieved to find out that we could use the RESP money, as I have read that some plans are restricted to only Canadian schools. So while my daughters case is probably not very common, this is something I would recommend looking into when choosing an RESP, because you never know what the future holds.

      I really recommend parents to check out it was a great experience for me, and I’m thankful I invested.

  161. Yoccam, all I see are lock in fees, transactions fees, and management fees. They invest in Bonds, and principle protected notes and their returns averaged 4.18% yearly over the past 5 years.

    The TD E-Fund Bond Index (MER 0.48%, no other fees) over the same period has an average annual return of 4.56%.

    If you were to use the GETF plan and do a monthly deposit (Which I assume is the most common way to do it) you also pay $10.00 per year as a depository fee. This plan seems pretty much in line with all other plans as an adequate way to put aside money for your children. Just remember that doing something is almost always better than doing nothing, and it’s not like the plans are bad, just not good in my opinion.

  162. Barney,

    It sounds like you have a reason to be upset with the rep who talked to you. It sounds like they tried to leave you with the impression that the fees are returned no matter what. Obviously, the material that they left, along with the prospectus, explained exactly how it works, so your issue is with the rep, not the company. I am sorry that you ran into someone in the industry who is like that. I strongly encourage you to call the company and file a complaint. Obviously, you don’t want someone else to go through what you did, and I can assure you that any company will act aggressively on a complaint from a consumer.
    I do want to correct a couple of your comments, though.
    First: You have issue with the return of fees. The return of fees and other extra money from the non profit foundation in a group plan cannot be guaranteed. The money required to do that is variable, and how it is generated is out of the non profit foundations ability to predict/control. The regulators recently required all group plans to let people know that these funds are discretionary. That being said, the non profit foundations have paid them out this way every year, and it is the intention in the future that they do. (They cannot keep the money for any other purpose, after all.)
    Second: I am not sure that you intended to, but it seemed like your post implied that a child cannot go to any school other than a college or a university. I am quite sure that is not the case.

    To the person who asked about Global. I cannot speak with total authority, but I think that the Global plan looks a lot like a regular group plan, when it comes to fees. It does, however, not have any of the extra benefits from the non-for-profit foundation (return of fees, extra money, etc.) If this is true, then it basically is a bank plan with a front end load. I haven’t looked into them much, so please research more, but if what I believe is right, it doesn’t sound like they have a compelling product. Again, they are a very small outfit, and I don’t deal with them much, so please read their prospectus yourself to be sure.

    To CC and Cory’s comments earlier, I think that detail that Cory was talking about in regards to disclosure of fees from banks is a ‘two page disclosure’ sheet. The regulators have been trying for 7 years to force banks and mutual funds to provide, at time of signing, a two page disclosure sheet. So far (which shows how much influence the fund companies have) nothing has been done. Right now, by law, if a person walks into a bank and asks what the fees are on fund XYZ, the bank employee can say nothing. They consider a MER an expense, not a fee. The regulators are aware of this, but they have been stalled by years of studies and delay tactics. I know the people on this board wouldn’t have any problem countering a ‘we have no fees’ claim, but the average person wouldn’t. Everyone, please call your MP to complain.
    Obviously, all funds in Canada have prospectuses, but most people do not read them. They rely on their financial planner to tell them what is what. A two page sheet detailing all of the pertinent information would be a great boon to Canadians in general. (Heck, it could even put pressure on all fund companies to lower fees.)
    * CC, as an aside, did you see the reaction the Ontario government had when fund companies threatened to start an ad campaign to push the government to drop the HST on MER’s? The Ontario gov’t threatened to start an add campaign to advertise the excessive fees on the mutual funds. Guess who backed down. 🙂 Just thought that would make you chuckle. The gov’t knows the fees are high, and they know most people are unaware, but they sit idly by and let the fund companies do their thing.


  163. Hi Mark. thank you for your comments , I appreciate your encouragement to put a complaint in about the rep. I should but just dont want the hassel or the headache. I have other things to think about. I just wanted to post my comment and that if anyone is thinking of going with Heritage Group plans to read the prospectus first before signing anything . Also Thanks for calrifying ther discretionary payments . A side note regarding the appplicaiton scenario if you have a spouse on the application they dont require their signature to process the application. .that was also a piss off thinking they would not process it until the second signature was provided. Iam still waiting for the deposit back , got the cancellation confirmation letter and it says it will take 4 to 6 weeks to return the contribution. Just have to wait . Mark regarding the college or university comment this is what the rep told me I quickly found out that they can go to a trade school as well. the rep was trying every tactic of persuasion and misinforming me or leaving important details out. Maybe I should launch a complaint. I will keep you posted…

  164. I also have had it with Heritage. When I met with the rep, she told me that I would qualify for a substancial amount of child tax credit since they would go by last years tax return (and at that time I was single). So she recomended that I take advantage of early contributions to maximize compounding interest. I also topped this up with savings. It was clear that this was only for a short period of time as when I filed my next tax return I was now married and did not qualify for the child tax credit, so our monthly contributions would be reduced from $400.00 to $100.00 per month (per child) She told me that the fees were “Not what they looked like, and we would get 100 % of them back if we showed proof of enrollment in a 3 week course. Even my husband or myself could enroll…..and we wouldn’t even need to complete the course……just show proof of enrolment”. So, when I faxed them to lower the payments (as was clear from the start), I was horrified to see the penalty we would have to loose. I called head office and the receptionist told me that you could only get 100 % of the fees back if my child was to enroll in a 4 year honours University program (and complete it), and half the fees for a 3 year University program. I called the rep and she said : “They really gotta stop giving advice about things they know nothing about…….they gotta do something about the people they hire in the office…..they should just leave it to us” ……We agreed that she (rep) would return to our house and redo the original paper work to reflect the $100 monthly contribution amount. This was done; however, not feeling comfortable about sending this outfit money for the next 17 years to discover their true policies in the end….I contacted head office (compliance dept), after several months of no return emails I finally made contact. Apparently ALL the fees are “discretionary payments” and you “should not count on receiving these back”.
    ……..bottom line …of my nearly $10,000.00 of contributions, I have just over $1800.00 !!!!!! Now, to me that is just plain robbery!!!!! Maybe legal, but we cannot allow other inocent people to be as foolish as we have been ! To top it off, the rep brought other peoples financial statements with her to show me how much other people have earned! These were carelessly left on my living room table when she left! So now I know you cannot depend on the claims to be private and confidencial !
    The compliance department have offered no alternative payment schedule or compensation. They are only concerned about trying to retrieve the financial statements of the other people. I plan on contacting these people myself. Fortunatley, I have recorded (on the nanny cam) both meetings with the rep at my house and do plan to pursue this disgusting company with legal action. Even if I do not have a leg to stand on (because I stupidly signed the contract trusting the explanations of the Heritage rep ), I hope to help prevent other innocent victims from lining the Heritage comissioned employees with their childrens precious savings!!!!!
    After reading the other blogs and seeing common threads, I am beginning to suspect that this fraudulent representation is perhaps a well planned out scam !
    Please email me if you have experienced this also. We need to bring more light to this and perhaps have government intervention. After all, they are helping to support this with the 20 % top up and grants.

  165. Hi JILL,
    As you can see by my post from July 30, I am in a similar situation. Since that date, my husband and I have put all 7 of our plans on hold, so at least they are no longer withdrawing the 200$ from our account every month. We have spoken with them numerous times over the phone and sent an official letter of complaint to the company (Canadian Scholarship Trust Fund). Since August 6th, we have been waiting for a response from them concerning our “case”. We have demanded to have all of the monies that we invested back, with no penalty. We feel that the implications of the “fees” and consequences of opting out of the plan early were not explained to us properly. I have called several times concerning the case, and they still have not given us an answer, when they initially told us that it would take no longer than 30 days. We are prepared to take legal action at this point because we feel more than ever that these companies are taking advantage of people. It is disgusting to me that I face losing half of my investment to fees. It is downright insane and sickening. Their reasoning is that the “group plans” re-invest the monies back into the other plans, so that all the children that are in the plans get the money. In other words, those who can not afford to stay in the plan, lose their money to those that stay in the plan. It is not right. This money that I gave them was for MY children. I want it back.

  166. I am with Hertiage my brother is with Scotiabank. I was all in a panic about Heritage until I calmed down. I was making too big a deal about the service fees, university requirements etc. I have 9 years of university and graduated in 1998 with a $50,000.00 student loan and a law degree from the UofA. During my last year of law school I was paying around $3800.00 for tuition, $3300 for books and materials and about $1500.00 per month for room and board. I just read an article stating that for 2010 tuition at a B.C. law shool was $9000.00 per year and I believe the UofT or Osgoode was $20,000.00 per year; also University tuition is increasing at 4 times the rate of inflation.

    I did call Heritage and ask about the $5000.00 discretionary fee. They told me that if I cancelled the policy I would lose the admin portion paid to date which is about $3000.00. Then I compared the rates of return on the BNS plan my brother has to Heritage. He is earning 0.04% and I am earning 4.8 per cent. Neither of us are stock market risk takers, so I would urge everyone to stay away from mutuals for the next 8-12 years minimum. I was also given the opportunity to life insure the Heritage Plan while my brother did not have this option.

    Also, with Heritage, you also get your principle back at some point, it will be moved into your RRSP or it will become taxable in your hands if you choose not to leave it in the plan.

    As we live outside Edmonton, we both bought houses in central Edmonton and amotized the payments over 17 years. This way, we have an investment that our families can use over the next 17 years. Real Estate in Alberta since 1980 has averaged 8% and by locking in for 10 years, we secured interest rates at 5.05%; stay away from floating rates, the banks love these because over the long run, this will only make the bank money.

    I also believe in the invest in yourself principle. If you are putting $250.00 in your childs RESP, you have to make $350.00-$400.00 to come up with that money. If you are paying 3-5% on your mortgage and only earning 1-2% in an RRSP, why not pay your mortgage out first? You would have to factor in the lost of the Government grants into this equation and the loss of intersest these could generate.

    The main thing is to balance out the fees you may pay with the interest you are earning. If you son or daughter only takes a 2 or 3 year program and you loose the discretionary payment, you will still be saving more in the long run. Also, lets not forget that your child also has some responsibility to help pay for their own education and can use interest free student loans, grants, bursaries, scholarships etc. On top of my Student Loans I received about another $30,000.00 in these areas.

    My plan is to provide my children with a free place to live (I’ll stock the fridge and deepfreez)e which over 8 years is worth over $100,000.00; give them a $100,000.00 RESP (or $95,0000.00); let them take out a $50,000.00 Student Loan (which is interest free until they graduate) – help them pay that back. In addition I have purchased 2 empty residential lots, I will give 1 to each and a Life Insurance Policiy with a savings component, so between the lot and the Life Insurance Policy, they should have about $300,000-$500,000.00 to put toward a house when they are in their late 20s or early 30s.

    Even if you took away the lots and the life insurance and the free place to live, your $95,000.00-$100,000.00 will still get them through their first degree quite comfortably. If you pay your house off before they burn through this; your wages will also increase, you can let them take out $50,00 in student loans which will see them through another year or two and then you can help with the last year or two when things are really tight for student. The main thing is not to worry not about discretionary payments but to pat yourself on the back for a job well done simply for planning for the future. I actually had friends who dropped out of university because they nor their parents simply could afford more than one or two semesters of university. No one thought about the cost of books or room and board.

    Your children will only thank you for having any type of a plan for them, no matter who it is with and you will minimize the impact on your retirement for doing so.

  167. @ Ravonar – I find your financial advice extremely suspect.

    “Then I compared the rates of return on the BNS plan my brother has to Heritage. He is earning 0.04% and I am earning 4.8 per cent.” – what mutual fund is this, and what’s the time frame ? CC has long posts about how misleading Heritage and other group plans are on rate of return.

    “I was also given the opportunity to life insure the Heritage Plan while my brother did not have this option.” – How kind of them… betcha the premiums are way high.

    “In addition I have purchased 2 empty residential lots, I will give 1 to each and a Life Insurance Policiy with a savings component” – ignoring the perils of buying real estate at the peak of the market, life insurance policies with savings / investments typically charge exorbitant rates – do term life instead

    “stay away from floating rates, the banks love these because over the long run, this will only make the bank money.” – patently untrue. Milosvec york univ professor has documented its far better to go variable.

    “I actually had friends who dropped out of university because they nor their parents simply could afford more than one or two semesters of university. No one thought about the cost of books or room and board.” – why could you get a 30K loan and not them?

  168. Thanks Geoff, I wanted to reply but I am at work and it would have taken way too much time.

  169. Hi Geoff: I do not know what the time frame on the BNS plan. For my second child (due January) I am actually looking at ATB guaranteed Alberta stocks where the prinicpal is guaranteed.

    I agree the premiums are way to high per which is why I also purchased a term 30 on myself with 150K in it so my wife doesn’t have any hardship if I kick off.

    With residential lots, they are two of a couple dozen I own. I am 39 and was a self-made multi-millionaire at age 37 simply by choosing to live in Northern Alberta near the oilsands and have invested wisely in commercial property and real estate and also developing the same which is why I love Alberta so much. I just read a report that we have the highest median income in all of Canada. Alberta is a province with wonderful opportunity and tremendous potential for anyone willing to work hard and take a chance.

    As with for quotes. I really do practice Veblin’s theory of conspicuous consumption. I believe Benjamin Franklin also said something about we have more to fear from banks than standing armies.

    I obtained student loans because I was dirt poor. On my last day of law school I had $0.25 left in my account and a balance of $500.00 on my credit card (which was the max). I bummed $1000.00 from my father to purchase my first few suits from Moores before being able to afford the $2500.00 ones at Singers and Holt. I am admittedly, the dumbest guy I know when it comes to investing which I why I enjoy reading everyone’s comments. Now I take my family and my mother twice a year, first class to the Carribean to stay in catered 1200 square foot presidential suites.

    Cheers from the North Country

  170. Ravonar,

    By chance are you a commisioned Heritage employee?

    I will encourage everyone to correspond with their RESP provider via email and not telephone as the answers you receive are tremendously different !!!

    You do not know the rate of return on your Heritage RESP. Read your contract a little closer…it says: “This is an illustration not a contract. It is based on past performance and is not indicative of future returns. It assumes a 6 % rate of return on underlying investments (AFTER administration fee and portfolio management fee have been deducted). It is based on plans that matured in 2005 and whose beneficiaries attended an ‘eligible’ post-secondary institution from 2006-2008”. I remind you that in 2005 the growth period was 22 % (at least it was for my investment portfolio)……..those days are long gone !

    The government approved schools and Heritage approved schools are not always the same ! BE CAREFUL! ….read the blogs of the people at the receiving end of the funds ! (or at least TRYING to receive the funds !)

    As for your comment about getting your “PRINCIPAL” back, let’s be clear that “principal” does not refer to the amount you invested !

    Here is a quoted example of one of my children’s funds. In one year I contributed $3,600.00. Here’s the breakdown:

    Total Contributions: $ 3,600.00
    Membertship Fees: $ 3,388.51
    Insurance Premiums: $ 169.38….(This was news to me. I don’t recall it ever being mentioned!)
    Depository Charges: $ 26.26
    Principal: $ 2.26 ……YES ! That’s a whopping $ 2. dollars and .26 cents !!!!

    Apparently, I still owe Heritage $ 3,120.00 in FEES !!!

    As for having “LIFE” insurance on your investment, can you kindly point out to me on what page of the PROSPECTUS this is found ? I am searching the insurance pages 53 and 54 and cannot find “LIFE” insurance included anywhere in the insurance. Nor was head office able to give me this information.

    I guess I should feel relieved that I have discovered this nasty Heritage RESP scam early on and have not invested 17 years to discover it in the end.!!! I have lost $ 8,000.00 of my children’s money in one year. This was money I worked very hard to save and I am devastated that I have been so irresponsible with it ! I truly thought that it would be compounding nicely for them ! It would have been much better spent on my mortgage. By far !

    I only hope I can help prevent another innocent person from falling victim to this scam !

    I don’t know how the HERITAGE salels representatives sleep at night !


  171. @Ravonar: Geoff has pointed out some of the inaccuracies in your first comment. But I can agree with this statement: “Your children will only thank you for having any type of a plan for them, no matter who it is with and you will minimize the impact on your retirement for doing so”. All I’m saying is that a SDRESP provides more flexibility and can be assembled for very low fees — much lower than those charged by Group RESP plans.

  172. I have been doing research on what I want to invest my money on for my 3 kids(that also includes talking to a Global rep.). Thanks to all of the great info. from both group plan reps and financial advisors I think I am going to go with a self directed resp. Even though I don’t know much more than what I have been told here and from the rep i spoke to Global does sound that it is structured better than the other plans. Global claims they have individual plans with group benefits and they use grants, fees and interest first for payouts than use the principal in the 4th year. If the principal isn’t used it goes back to the subscriber and any interest goes to their rrsp. However, like other plans don’t miss a payment or you aren’t eligible at their discretion for your fees back. I did ask a few questions that the rep answered very vaguely that made me leery; so i asked to be left with a copy of the agreement which seemed to frustrate them( I recommend everyone take time on their own to read all the agreement or have someone else they know read it through before they sign anything from any company including banks). Also run the company through the better business bureau; you will see the rating of the company and any complaints lodged with the BBB. I did it with Global and they are a B-. However, Heritage has a better rating but a lot more complaints. Anyone out there with complaints please do file them with the better business bureau, people like me do check up on them.

    @Jill: the rep I had here also pulled put a file of other clients and their statements to show me. I could clearly see their names and amount of their investments, in some cases I could see a copy of their drivers license. I guess the privacy isn’t at the top of these reps lists, just the sale is.

  173. BUYER BEWARE OF USC RESP!!!! I was approached by a sales rep when my baby was born. The sales rep gave us the info, gave us her contact info. I checked online to make sure it was legit. We were assured the money could be transferred or the agreement could be canceled anytime. 7 years later, I’ve made no money, infact i’ve lost money with the fees involved and i’ve applied to withdraw my money and they delay me every way they can. Its been over 2 months since I requested my money back and I still have not recieved it. Keep in mind, this is my money being held by this investment company for my childs education. Under no circumstances should you invest with this company. I’ve met people who have experienced the same thing. I’ve also met people who have sent their children to post secondary and experience nothing but problems trying to get their money through USC.
    I also have invested in mutual funds and RSP’s with major banks and a financial advisor, it took any where from 1 hour to 3 business days when I requested my money from them. Again, if you invest with USC RESP’s you may experience what I’m going through.

  174. Hi Pat,
    I am going through the same thing right now. If you look at my previous posts from July and September,
    it has been a long process trying to get our money back, which we probably WON’T be getting back. Since my last post, CSTF has given us their final answer that if we cancel our plans, we will not be getting back our fees. They state that their representatives have not mislead us in any way and that we signed the contracts and took out other plans since the initial one, therefore we were consenting to the terms. So right now, we have begun the process with an ombudsman and our file is being transferred to the AMF.
    If you stay in your plans until maturity (that means continuing to invest thousands of dollars) than you can get your fees back. We refuse to continue paying one more penny into the plans. The procedure with the ombudsman could take up to 6 months. After that, if we still can’t come to an agreement that we feels is fair, we will be contacting a lawyer. There is still a long road ahead…

  175. Reading through most of these comments shows the ignorance of a lot of people. These so called self proclaimed experts like Canadian capitalist don’t want to or can’t understand the group plans, but are sure willing to cut them to pieces. A little bit of knowledge is dangerous!!! If your willing to make factual statements regarding these companies get the facts!!! I have never dealt with an RESP company. But I can sure tell you that I have been misled, stolen from & cheated by many BANKS. If I was an investor today I would run as fast as I could from any Bank because they have proven over many years that they are unscrupulous at best !!!
    In fact today I opened a new account with one & they screwed it all up. If they can’t even do that, who is dumb enough to invest money with them? So work with someone who knows their product, seems trustworthy & has a track record. These people who invest in mutual funds & think they are so great, Mine went from $120,000 to $68,000 over night,what kind of fee’s are those????

  176. Canadian Capitalist, after much reading and investigating the whole RESP debate I have come to the conclusion that your an absolute moron. For reasons that I refuse to argue here simply because I have more important things to attend to in my life.

    My advice to anyone looking for an RESP, do your own homework and speak with every group RESP provider & bank out there. Make your own educated decision. Both options have advantages and disadvantages. It basically boils down to your risk tolerance.

    I am unsure as to why, I guess it’s just the blatant disregard for the truth, but I feel I am compelled to state once again, Canadian Capitalist – you sir are truly a moron!

    • @Dan: I understand group RESPs just fine, perhaps better than most people who make a living selling these products. Just because you have a problem with banks doesn’t make Group RESPs a better product for saving for kids’ education.

      @9146: So, let me get this straight. You are unwilling to argue my opinions but are perfectly willing to call me names. Wow, that’s real classy.

  177. I have been in this plan since 2006 and now would like to transfer my plan to another RESP provider and take the financial hit.

    I see in the prospectus that I can do this, but how do you actually initiate the cancellation and transfer to another RESP provider?

  178. James,

    The company you are transfering your RESP to should look after all of that for you.
    Do you mind if I ask why you are transfering? Are you sure it is the best financial move for you right now? I only ask because I have heard of people getting bad financial advice, and then make decisions based on it.


    CC admits that he doesn’t fully understand the plans, but at least he has read one prospectus. I can tell by most of the posts here that most people haven’t. This is proven by the inaccurate claims that they make. While I will assume that most people here are sincerely trying to help, and think that they are speaking factually, I would submit that this is not the best source of information when finding out the details of how a group plan works. Read the prospectus. CC is intitled to his opinions, and should not be called names because of them.

    Again, to anyone who has had a neagative experience with a group plan salesperson, please contact their company. The only way to ‘weed them out’ is to bring this forward, or else they will be out there doing it to others.

    Jill, on that note, I really hope you are able to nail the rep who misled you. She could have set you up with a lump-sum plan for the initial amount, and a lower contribution 18 year plan. Judging from what you have stated (again, I am only hearing one side, but I will assume that what you say is 100% true) the rep really shouldn’t have set up you contributions the way they did. Keep in mind, thought, that you still had an obligation to read the documents that you signed up with. Even a cursiory glance would have given you enough info to change or cancel the plans earlier on. Again, not trying to blame you, as an ethical rep would not have allowed you to sign up as you did. As a matter of fact, reps are supposed to inform people that CCTC is flexible year to year, and should not be counted on as income. And let’s face it, people who recieve CCTC usually have lower incomes, and not a ton of money to spare to begin with. I will say that as far as talking to a laywer, you probably don’t have much of a case. (Unless your nanny cam video is really good. That might be the only thing that can help you in court, but I am not a lawyer.)

    If anyone has any questions or comments, please feel free to email me. 🙂

  179. Exactly, because arguing with you would be a waste of my time. You have proven you don’t have the mental capacity to understand both sides of the RESP options, you simple think that because you have your own opinions, they are the correct answer. So I can only draw to the conclusion that you don’t have the mental capacity to understand anything I would attempt to teach you.

    The simple fact that you offer your biased advice to parents simply baffles me. Any reasonably smart financial advisor would realize that some investments are better suited to certain people, while other investments are better suited to other individuals. Yet, you can’t seem to grasp this simple concept.

    And just to clarify, moron was an understatement; I was trying to remain civil, because I’m classy.

  180. Mark – thanks for the info. I didn’t realize BMO (where my daughter has her RESP) would handle the transfer. I’ve already opened the new account for my son and will initiate the transfer immediately.

    I’m transferring because I think CSTP smells bad. I don’t trust the organization after all the negative press and reading these blogs and I feel that in 14 years when my son will need the money to finance his education that CSTP will throw road blocks in the way preventing the withdrawal of our funds. I think the company is prospering from all the confusion around RESP’s and they take advantage of the families by giving you a hard sales pitch starting right in the hospital with promotional pamphlets when you are with your newborn. During those times your emotional state isn’t necessarily the most logical and its easy to make dumb decisions. That’s what happened in our case.

    The sales guy from CSTP was a nice man actually, no problem with him. It’s just that the plan, well, sucks…

  181. @9146: You don’t have to teach me anything. The fact that you are unwilling engage in a debate speaks volumes. You must be one of those “unbiased” RESP salespeople who have caused so much grief for so many people.

    @Mark: I have to clarify what I meant by “don’t understand”. What I don’t understand from reading the prospectus is an estimate of how much attrition will boost returns. It’s not enough to know what attrition is today. You also have to estimate how attrition will look like over the term of an entire plan. That’s not information that is present in a prospectus. Other than that I understand these plans just fine and I have had no reason to change my opinion. If your kids are young and can tolerate some risk put some stocks in a SD RESP plan. If you are totally risk averse pick a SD RESP and invest it in GICs. Either way, you’ll have a more flexible plan.

  182. @James Braum: Withdrawing from a plan now will mean a huge hit to your account balance. It may be worthwhile staying in the plan for a few more years and consolidating the units which you can apparently do. I urge you to carefully explore *all* your options and not take a hasty decision.

  183. @ James Braum: I have to agree with CC on this, which is why I asked the question. You stated that you made the initial decision to go with CST because of emotions. Don’t make the decision to pull out from them based on that as well. If you started a plan with CST after 2001 you have their new plan, so a lot of the comments about ‘getting the money out’ that you see on line don’t pertain to your plan. You have to read the prospectus to get the details.
    I would you suggest that you sit down with a paper and pen, and to out all of the scenarios. Figure out what returns you will need to get in order to make this a smart financial decision. As CC as said, you can contribute for a few more years, and then convert it to a paid up plan. At that point you can open another RESP at the bank, if that is what you decide to do. Either way, I wish you well and hope you are comfortable with whatever decision you make. If it helps alleviate you concerns, CST will be there in 14 years, as will your money. I just don’t want people to make financial desions that negatively affect them based on emotions or incorrect information.

    @CC 9146: I am not sure what you mean by understanding attrition amounts. Are you suggesting that CST report what they expect attrition to be in 18 years from now? That is something beyond their control. As far as how attrition looks like over the entire life of the plan, that can only be extrapolated using historical numbers. Similar plan have been in existence for over 45 years, so they have a fairly good guestimate at how attrition might payout.
    As to changing your mind, I wasn’t attempting that. We can agree to disagree. 🙂

  184. Mark, CC – thanks for your advice to stay in the plan for a few more years then consolidate the units down the road. I think if I withdrawal now, I’ll pay about a $4K hit. The plan has about $8K in it. My concern, really, is the asset allocation model is completely wrong for the time frame that money is invested. I don’t need the money for 14 years, yet it’s basically sitting in government savings bonds, etc. I would expect this allocation model to be used in the immediately years before the funds need withdrawal.

    So, in addition to the ridiculous fees, the asset allocation model is plain wrong giving you no hope of achieving any kind of compounding.

    Given the lack of the opportunity for compounding, do you still feel the money should be left in?

  185. 9146,

    Please, give us some useful thoughts or get lost!

  186. James,

    Basically, that is still up to you. There are many variables, and that is something you have to be comfortable with. You have to decide when you would move this to a low risk investment (how many years). Try to determine what return you would be getting over those later years (I would use a 3.5% guesstimate, but it is just that, a guesstimate). Then figure out how many years you would leave it in high risk investments. From there, take the amount you would be able to take out of the CST plan, and figure out what percentage you would have to earn in the ‘high risk’ years to come out ahead of what the CST plan will give you. I cannot say for certain, as I haven’t run the numbers, but you would probably find that you would need to earn 20-30% in the high risk years to break even – higher to come out ahead. (Obviously there is a lot of assuming there, but no one can see the future).
    After you have run the numbers and are comfortable that you can achieve that, go ahead. If not, stay in the CST plan until it can be converted and go do something else after.
    CC has stated before that it is best to stay in, and I feel the same way as well, but each person has to do what is right for them. Sorry that I can’t give you a yes/no answer, but I hope this helps.

  187. @James: First of all, let’s make this perfectly clear. I did not advice you what to do. What I did say was you should carefully consider all your options and I urged you not to take a hasty decision. There are many variables at play here but let’s look at it strictly from an investment point of view. Can you generate better returns in the stock market that you could on the bond market on half the capital? It is possible, yes but not very likely. Just my opinion!

  188. CC…. “consolidating the units which you can apparently do”. It sure sounds to me that you are not completely knowledgeable about group plans. Shouldn’t you know that??

    Just my opinion.

    • @mulletman: Show me where it says in the prospectus that you can consolidate the units. That’s why I said “apparently”. You can apparently do it for some plans at some providers. Consolidating the units still means you lose *some* of your enrollment fees.

  189. Mulletman – CC doesn’t work for these organzations, so to answer your question: No, he should not know. It’s a reasonable question.

    If we’re speaking “should haves”, it shouldn’t even be a question – it SHOULD be on the website of the Group RESP as an FAQ and be done with it. The very fact that it’s a question speaks volumes about the transparency of these organizations.

  190. @cc – Nov 17 – 6:20pm
    I am quite sure that all plans allow for a conversion to a single payment plan, and it doesn’t automatically mean that some membership fees are lost. It depends on when in the life of the plan it is done.

    @Geoff – Nov 17 – 6:34pm
    I agree that CC doesn’t need to know these plans inside and out, and he did say ‘apparently’, which plainly says that he was unsure. I think people need to give him a break.

    As far as how and where information should be published, it is in the prospectus. This is available at, and most investments are sold this way. This is not specific to the scholarship plan industry. These questions are what the reps should be explaining in the home as well.
    As far as ‘should’ be on the website – this is an opinion statement. I will explain a bit about prospectuses, and the securities commissions. Basically, they regulate what information is to be presented, and they dictate what format is to be used to present it. The prospectuses are final result of many years and many national instruments. As well, they are always changing – every year. Each company has to have many lawyers and accountants to put the information together, to be compliant with the law. The prospectus is meant to be the ‘end all, be all’ of the investment.

    Now to use what I have explained above to comment on what they ‘should’ or ‘shouldn’t’ have on their website. Keeping in mind that the securities regulators change things constantly, and the fines for not being in compliance are huge (each company has a division that is dedicated just to this.) Every bit of information that a company puts out has to be vetted by their compliance department, lawyers, and accountants. Basically, you can see where I am going with this. It is time consuming, it requires more money, it must be constantly updated, and it puts them in the possible position of not being in compliance, (If some information turns out to be inaccurate. – fines)

    To say that everything that is in the prospectus should be on the website would make it very cumbersome. To put this information in a different format, where it might be misconstrued, would put the companies at risk of trouble with the securities commissions. Sadly, it is simpler to just say ‘look in the prospectus’.
    Some of the companies have gone to great lengths to ensure that folks get as much info as they can, before making a decision. They do, though, have to ensure that they abide by the law. Again, it boils down to investers reading the prospectus.

  191. CC… I’m going to base this on fact and not emotion as a lot of your readers do.

    People do not tend to be specialists in everything. I think we can agree on that.

    I’m going to assume CC (and the majority of readers), that you don’t replace your own brakes in your car, change your own oil, or change a leaky gasket in your snowblower before the winter.

    I’m going to preface this by saying that I feel everyone is capable of doing it.

    Why don’t they??? Do you know how much money you could save???

    The reasons may vary….. not enough time, not confident enough, not comfortable doing it, not my area of expertise, I’d rather pay someone who knows what they are doing, etc, etc.

    I do replace my own brakes, change my own oil, adjust the clutch, etc.….. and I’m not a mechanic. It’s easy. I can tell anyone how to do it. The bottom line is that there are still a lot of people who will NOT do it. They will go to a dealer (what a rip off. You go in for a simple oil change and $600 later you have a problem fixed you didn’t even know you had). Others go to a mechanic they hope they can trust.

    As far as RESP investing goes, everyone is capable of setting up a self- directed plan, and monitoring it, changing the asset mix, etc. It’s easy!!! You keep telling us how to do it. Most people don’t because they don’t have enough time, not confident enough, not comfortable doing it, not my area of expertise, I’d rather pay someone else who knows what they are doing, etc., etc.

    The reality is that most people go out and purchase a prepackaged RESP from a bank. They sit down with the banker and are given options. “Would you rather choose your own investments, or would you like to open an RBC Target 2025 Education Fund?” What do you think the majority of people will pick?

    RBC Target 2025 Education fund -2.1%
    RBC Target 2020 Education fund 3.9%
    RBC Target 2015 Education fund 4.5%
    B of M Balance Portfolio RESP 3.09%
    B of M Savings Portfolio RESP 3.63%
    B of M Strategic Security RESP 2.89%
    B of M Aggressive Growth RESP 3.16%
    BNS RESP investment cash account .25%

    I can’t list them all as you’ve probably stopped reading already.

    I haven’t even included the annual mutual fund fees.
    Go check these out……..

    Welcome Back!

    I’m sure group plans are no worse than these. Most folks choose these packages just like you choose the “winterizing deal” for your car. You have to trust someone right??

    How in the heck does the non mechanic know what brake pads to choose from while standing in the aisle in Canadian tire? How does the unknowledgeable investor know which mutual funds to choose from when sitting in front of their banker??

    You say…. It’s easy!!… and then go on to tell us why. We don’t want to fix our own cars or choose our own investments. Does that make sense to you?

    Your July 16 post stated:
    “we aren’t fans of high-MER, actively managed, sales load junk either. Our position is that investors who take a bit of responsibility for their portfolio can do much better on their own”

    In your July 28 post you stated:
    “It’s true that stock brokers and financial help suck away the returns”

    Why aren’t people getting all upset about these. Could it be because the bankers/financial help aren’t telling the investors about these fees???? Does this sound familiar???

    I don’t bad mouth the folks that go to the dealer to have their car serviced every 6 months(what a rip off). I think it’s great that they are taking care of their car. They’re told a whole pile of things by the dealer about why it’s beneficial to keep up with the maintenance schedule set out by them. What a scam, in my opinion, and what a whole pile of extra fees they are paying.

    This thread, generally tends to mock us folks saving our hard earned money to help fund our childrens’ education. You say the products we’ve chosen are inferior. I don’t know any better, I don’t have time, I am not comfortable doing it, I would rather pay someone to take care of it for me.

    You said it best in your Sept 23 post
    “Your children will only thank you for having any type of a plan for them, no matter who it is with and you will minimize the impact on your retirement for doing so”. All I’m saying is that a SDRESP provides more flexibility and can be assembled for very low fees — much lower than those charged by Group RESP plans.

    EVERY RESP PROVIDER (BANK OR OTHERWISE) IS IN THIS TO MAKE MONEY. Let’s not kid ourselves…… banks make millions off of their savings vehicles. I don’t believe your claim that RESP’s are loss leaders for them since they don’t seem to train any of their employees in the area. I would love for you to base this opinion on fact. The truth is…. you can’t.

    Group RESP providers make a lot off of the fees paid to them. They claim that investors MAY get some of those fees back (no guarantee). In the mean time, the sales people have made good commissions, the executives have bought their nice cars, etc.

    It is OK to say that parents are doing a good thing, even if they have invested in a Group RESP. They are saving. I know it is long term, but having asked the right questions, I believe that contributing annually, lump sum, is a great way to go. You are not locked into a contribution schedule, can stop any time you want, and yes… pay fees based on # of units you purchase.

    CC, since you are very knowledgeable about Group Plans and SD plans…. shouldn’t you concede to those who are not comfortable with SD plans (and yes there are a lot of us out there) that our choice is still OK… as per post above. Shouldn’t you be giving us strategies on how to maximize our flexibility within the group plan such as annual lump sum contributions and conversions after x number of years, etc. You claim to know more than the sales reps involved in these plans. You’ve provided advice for those already in a group plan… but only for planning a route to getting out.

    I know you don’t believe in them, just as I don’t believe in bringing your car to a dealer but if they are, then a different set of advice applies…. don’t you think?

    • @yakker: I’ve always said that parents who have already invested in Group RESPs and for whatever reason wanted out, to consider if they are making the correct choice. I find it grossly unfair to suggest that all I do here is plan a route for getting out of a Group RESP. If you’ve already signed up, you’ve already paid the enrollment fees — the biggest cost of a Group RESP. Getting out would be costly and there is no guarantee that your portfolio can recover. However, there is a risk in staying in too. If your contribution schedule is affected, you may lose a big chunk of your education savings. Or, as some Group RESPs participants found out, your child may enrol in University only to find that they will not be receiving all their payments. Can you tell me how either of the two is an ideal outcome?

      To me, the costs of a Group RESP and a high-MER bank mutual fund are comparable. But even a high-MER bank mutual fund is preferable IMO (and I say this as someone who can hardly expect Christmas cards from high-MER funds) because anything you put in is yours and yours alone. That’s not how it is in Group RESPs. If you are among the unlucky ones who couldn’t collect some or all of the benefits, you’ll be sorely disappointed.

      You raise a good point: What if a parent is unwilling for whatever reason to not manage their own education savings? Well, they can invest in the lowest-cost fund they can find. Or, they can simply invest their contributions in a GIC. Even those who have no interest in managing their own portfolio have other options. I’ll never concede that parents would be better off with a Group RESP because life is too uncertain to know for sure that someone will get the full benefits of a Group RESP ahead of time.

  192. @cc: While I in no way support the other folks with their meanness towards you, I can in part echo some of the feelings that they have. Basically, you do try to come off as an expert on group plans, and then slam them pretty hard. I will go out on a limb and say that I probably know them quite a bit better than you, and I happily place my children’s savings in them. You constantly say IMO for statements you make, but easily discount, ignore, and pretty much belittle people whose opinion differs from yours.

    A high-MER bank fund is much more expensive (even before the return of membership fees) and IMO is not preferable. The returns on GIC are very low, and I do want some return on my investment. I am not a fan of the stock market, for reasons I will not go into here. I am not the only one. The majority of the largest funds in Canada are fixed income. I would say that more people like their money safe, than those who like risk.

    As to James on Nov 12, ‘the asset allocation is wrong’ – that, as well, is an opinion statement.

    I personally am quite happy with my investment, and I understand it fully. The amount of information on this website that is incorrect is huge, and causes a lot of uncertainty. IMO, GIC’s are a bad idea for an RESP, and so is the market. Am I not entitled to this opinion? Am I wrong with this decision for my family? I think that this is the part that is bothering some of the folks that post here – the fact that you discount as ‘wrong’ the choices you wouldn’t make.

    Again, there are many companies out there, and some of them have had many plans over the years. I am really tired of people looking at the inflexibility of some of the companies’ older plans, that are not being marketed today, and using that as a reason to not look at the newer, more flexible plans. CC, you keep alluding to ‘not getting your money’ or some such thing. All of the plans marketed today have an ‘individual’ option that works EXACTLY (and in some cases more flexible) like a bank plan. Where is the lack of flexibility there?

    I like the group plan my family is in. I like where and how my money is invested. I am very satisfied with the returns. I did a lot of research, and this is what I purposefully chose for my family. I prefer this option over GIC’s or money market funds. I invest what is comfortable, and have no issue with what I am putting away. I like the possibility of my children getting attrition, and the possibility of a return of my membership fees.

    I also want to correct your ‘everything you put in is yours’ comment when it comes to mutual funds. The MER’s are taken off growth and principle. As well, if the fund is actually negative when you decide to pull the money out, guess what. Some of it isn’t yours because it is gone. To say that I put in $10,000 into a mutual fund and I am guaranteed to pull out $10,000 in principle is absurd. Your statement suggests that this is the case. Again, there are fees taken off, and it is possible to lose money.

    I agree that life is uncertain, but I can state that I know the minimum and maximum payout options of the plan that I am in, and I am very comfortable with them. If my children get the maximum benefit from the plan – great. If they get the minimum, I will still be farther ahead than the other options I was considering.

    Again, I am happy with the decision I have made. The people who are posting here, about your inability to even suggest that we have made the right decision for our own families; I guess kind of bugs us. It is in no small means condescending, and while you keep saying IMO, you in no way show respect for those of us who have differing opinions. I in no way feel that you will ever like group plans, (and this is not the intent of this (or any other) post), but your comments seem to deliberately belittle those of us who do. I guess all I would like is for you to respect my educated and informed decision for my own family. This is (I think) a similar idea as what yakker posted, and you immediately followed up with your opinion, again discounting his. To quote ‘I’ll never concede that parents would be better off with a Group RESP’ – here is a parent saying he(she) is, and here you are belittling them. Are you now going to post how wrong I am, and that my family would be much better off with one the choices you like. What arrogance. You don’t know anything about me, my family, my financial ability or education – yet here you are saying that you cannot ‘concede’ to say that my decision is the best for my family. Wow – sure would be big of you to concede that I might know what I am doing, and that I made the best decision for my family.

  193. @geoff

    As far as the “conversion” goes….. I just thought that something mentioned in this post since oh……2009 might have peaked the curiosity of CC. It is something the readers obviously are interesteed in.

    For someone who knows more than the sales reps, I just thought they may like to take that couple of years to do a little research.

    In last day’s post to yakker, you state that “Getting out would be costly”, yet you do not give the option of the conversion where there is minimal cost to the subscriber…… AND they get out of the group plan should that be their wish.

    From what I hear, agents actually like this because then they can sign the parents up for yet more units in the plan and earn yet more commissions. But since you claim to know more than most agents, you would already know this.

    I know you like to be informed so please do some research on this and tell the world!

  194. Although I like how Mark does engage in meaningful conversation and really do believe he believes what he’s saying, I have to ‘follow the money’ – CC’s income is not dependent on either people signing up for bank funds or group funds, while Mark’s is. That alone makes CC’s opinion more independent, in my thinking.

    I will say, as a father, I have found this thread of great value and think that we can go back and forth a million times but for the casual reader, I think it’s been a great help to find out about the differences of resps. I also think that if salespeople and highly educated finance people can argue about the rules of group resps that alone makes me suspect of the whole industry, but that’s my opinion. I’ll also say that when I was sleep deprived my first week of being a dad, it wasn’t calls from a bank about an RESP that I was dodging, it was calls from Heritage group resp. Talk about going after the weak sheep. Mark would say rightly that that’s just one group RESP and not all of them. Fair enough. But a bad taste in my mouth is a bad taste, none the less.

    The last thing I’ll say is that this blog is free and CC’s opinion is just that, his opinion. Sure, it’s a reasoned, educated, well expressed opinion that is clear, concise and helpful, but it is just opinion. Even CC can’t predict what the DOW will be at 2019. Your mileage may vary.

    • @Geoff: Even among friends, I haven’t always been successful in convincing them to go the self-directed route. All we can do is point to alternatives. Then the parent makes a choice that they are comfortable with but at least we’ve helped them in making a more informed choice. Whichever route they choose, we can only wish them good luck.

  195. Hi folks,

    I’m new to this post…. I was told about it by a co-worker.

    I have two registered plans…. one RESP and one RRSP. Let me start by saying I don’t know the first thing about investing.

    I went and took the advice of one of these threads 10 or so years ago and tried my hand at my self directed RRSP….. I failed miserably. I lost about $3000 in 2 years. I decided to get some professional help…. although I may have need psychological help for attempting it in the first place, I sought professional financial help. She managed to make me about $500 in 3 years. It worked out to be just under 2% per year. So I decided to try someone else…. a bank. That whiz kid added another whopping $700 during the next 3 years. That translated into a very low % as well. Since then, I switched again and have actually lost principal during the last 2 years. As you said to yakker above, “Can you tell me how either of the two is an ideal outcome?”

    Did I mention that I know nothing about investments…. I just don’t have the brain for that.

    Pity the poor people who have their RESP’s with those professionals or pity my kid if I had tried it on my own.

    I decided on a group plan. Couldn’t be happier with that choice. I started a bit late but am now paying my kid’s way through college. He is not going the full 4 years so I am not getting the full “discretionary” payments you mention or I’m not getting back some of my membership fees. I am still way ahead. Way further ahead than if I would have stuck with those other yahoos. Do they have group RRSP’s by any chance??….lol

    From what I can see, even after the 20% government grants I still earned a good amount of interest while preserving my principal. Woohoo!

    Fees are fees…. ain’t everyone in it to make a money? If I could count the number of times I’ve overpaid on my cell phone plan for features I don’t use or trying to get out of a contract.

    So with all the respect that you deserve Cdn Cap…. you’ve really gotta cut these group plans a little slack. They have a place in the market…. one of those places is with my family. I admit ignorance to investments, distrust the so called professionals, and stick with the folk who deal with these things exclusively.

    God knows not everyone likes, or respects “professional wrestling” but it still seems popular with a certain segment of the market.

  196. @Mark: Of course, parents have every right to choose what is right for them and their children. And if they decide to choose Group RESPs, well, I do wish them good luck and sincerely hope they’ll get the full benefit out of it. What I’m unwilling to say is that if a parents doesn’t want to go the self-directed route, a Group RESP is the best option available to them when I know that there are much better alternatives for most people. (because that’s what yakker asked me to concede).

    It is perhaps not surprising that Group RESP salespeople will congregate here singing the praises of the product they are selling. You suggest here in all seriousness that GICs are not a good choice in a SD account when you know fully well that Group RESPs are invested in pretty much nothing but bonds. Pray tell us, how would a Group RESP’s returns be better than GICs when both are invested in assets that have similar returns?

    @mulletman, @troop, @yakker: I’m not going to bother to respond to you anymore because I believe you are the same person commenting here from the same IP address. Likely another RESP salesperson.

  197. @ CC -Why would group plans exceed gic returns? Because their “returns” include the money that parents who have dropped out have forfeited. That alone is so distasteful to me – that I take my neighbour’s money because they fell on hard times and couldn’t keep contributing — thereby compounding their difficulties. That blows, Mark, Troop, Yakker, etc etc and I will never change my mind on that point.

    • @Geoff: It is true that group plan returns are enhanced by attrition. However, these additional returns are eroded by the expense structure of these plans. Whereas if I go to any discount broker and buy the best 5-year GIC rate available today, I can get a bit more than bond yields and pay no other expense other than the $50 annual admin fee for the RESP.

      There is another problem with attrition. Without attrition, Group RESP plans would be unable to claim returns comparable to what we can achieve on our own with low-risk investments. That gives vendors an incentive to structure their plans so that attrition takes place. A CBC report recently said that it is low income Canadians who are hit hardest by attrition. I wouldn’t want any part of money that lower-income Canadians were trying to save for their own children either.

  198. Too many posts to direct answers to individually, so I will do a shotgun approach to them.

    First of all, yes, I represent an RESP company, but that doesn’t mean that I have to invest with them for my own family. I could do something else, while still representing them. The reason that I do represent them is because I chose them after researching for my own children. I do know that they are the best investment out there for most families. (Obviously, this opinion flies in the face of some other peoples’ opinions, but at least I let it be known as an opinion, not try to present it as a fact.) To discount what I say because of what I choose to do for a career is unfair, and in some ways silly. On these posts I try to present as much factual information as possible, which people can use to help them make decisions. If someone wants to prove me wrong, feel free to, don’t just allude to the fact that because I represent a group plan company that what I post cannot be trusted. To the contrary, because I am trying to do my best to ensure that everything I say is true, I tend to reread and edit these posts to death, because if I slip up on any one fact, I assume that you folk will tear me to shreds.
    I had tried in the past to use actual returns to show the point when discussing this on the internet, but everything I posted was ignored. Look at how many people comment (incorrectly) that the returns posted by scholarship plans are ‘enhanced’. This is not true. The returns posted in their prospectuses, and Managers Report on Fund Performances, are before any benefits from the non-profit foundations that manage the investments. I am quite sure that they now all report after all fees taken as well. (Pretty much the same as any fund out there.) I am quite confident that if I did the work of reading all current prospectuses, posting all of their current, 5 year, and 10 year returns, most (all?) of them would beat the current, 5 year, and 10 year returns of GIC’s and Bonds. I contend that I could do all that work; only to have you folks discount it as trickery, or some such stuff. I don’t feel that is worth my time. I will say that I recently looked at the most recent Canada Savings Bonds, and GIC rates, and feel it is fair to say that they are returning around 0.8 to 2.7%. Please correct me if I am wrong. Considering that banks make 51% of their revenue on the spread, I really don’t feel that they are giving me a good deal.
    Anyone who is interested can feel free to go to and read in each company’s prospectus to see how they are comparing against that. Again, I don’t feel the need to do the work – I have already done it many years running and have never once felt that my decision was wrong.

    If the group plan has a better return (remember – after fees) than a GIC or Bond, and I have the possibility of a return of membership fees, and the possibility of a bit of attrition, I actually like that option. Again, no one can say where the market will be in ten years, and no one can say where bonds will be in ten years. What we can look at is how, historically, these plans have performed against the other safe investments.

    (Before I talk about returns, I want to preface it with something. Each group RESP company is different. While past returns are not necessarily indicative of future returns, some companies have consistently outperformed the others. During this part I will lump all group RESP plans together, but I do personally feel that some are better than others in quite a few ways. Do your research. I am doing this for simplicity’s sake.)

    To CC and his constant comment that investing in a group RESP is the same as investing in a bond fund, or GIC, is something that shows a lack of understanding of how these things work. Hence the questions as to why someone can expect a similar or better return in a group RESP than in a GIC, etc. There are quite a few reasons, and one of them CC has already pointed out in another post. I find it amusing that it appears to have been ‘forgotten’. Some of the group plans are allowed to invest in structured notes, which are guaranteed by the bank issuing them. So while they are safe, they might return better than the fixed income investments do. I say might, because unlike CC, (for example – “Group RESP plans would be unable to claim returns comparable to what we can achieve on our own with low-risk investments.”) I don’t make assumptions and present them as fact. While I like the fact that these structured notes are guaranteed, I again am not a fan of the market. There are other reasons why they have better returns. Basically, it has to do with what these funds are set up for. To compare to a bond fund, for instance, is not comparing apples to apples, because a bond fund can not take the long term approach to investing that group RESP plans can. Half of the people in a bond fund might pull out their money next year, and the bond fund will then have to sell some bonds prematurely to create the funds to allow this. (Because of this, they generally don’t ‘lock in’ too much of their money long term.) The group RESP, by its very nature, has a benefit that other funds do not have – they have a pretty good idea of when their investors are going to need their money. Because of this, they can make long term investment choices not available to other fund managers. As a matter of fact, group plan fund managers can take advantage of other funds that have to sell bonds at a discount, as well as buying strip bonds. A group plan fund never has to ‘liquidate’ an asset before maturity, so it always gets the full benefit of the investment decisions it makes.

    Basically, I invite people to research the returns for themselves. If the returns of the group plan outperforms the GIC’s, and bonds, over the one year, 5 year, and ten year time periods, there has to be a reason for this. (Again, remember that these returns are posted after fees, not before, as some people have alluded to.)

    When it comes to the membership fees, I prefer to just think of them as a front end load fee. There are other funds out there like that, some of which you need a minimum of one million dollars to invest into. The fact that I, as an investor, might get a portion or all of it back is just a bonus if I get it, not the reason I invest.

    As far as to the comment of sales reps and other people fighting about how these things work, I don’t know how anyone can claim that. I have been ‘fighting’ or ‘arguing’ – I have been explaining. I have no illusions about any of the other investments available, and I know these group plans inside and out. To suggest that I have been fighting or arguing suggests that I am unsure of my position, or the facts that I use to back it up. To make that quite clear – I am not on both points. I might be making a very broad statement here, but I don’t think I have read anything on this post that is factual, that I didn’t know before.

    I don’t have the time to correct everything on this page that is incorrect or inaccurate, so I try to hit the ones that are the most common. One ‘fact’ that I haven’t had the time to weigh in on yet is CC’s article about the ‘true costs’ of a group RESP. While I always comment on how I respect CC’c research into these things, and that he is probably more educated that most of the people who post here, I don’t agree with the philosophy behind his article. He did good math, and he even sent me the spreadsheet that he used to calculate it, and I can say that his example is quite sound. What I don’t feel is an accurate picture of the true costs of an investment is his discounting of the return of membership fees, based on inflation. I would say, and I think most financial professionals would as well, that he posts the true costs before he states his 2.15%.
    He shows that with a full return of membership fees, the cost are around 0.95%.
    He shows that with a 50% return of membership fees, the costs are around 1.25%.
    He shows that with a 25% return of membership fees, the costs are around 1.60%.
    The difference between what I would have without fees, and what I have with the fees, is the true cost of the investment.

    Another point that keeps getting brought up here is the attrition aspect. Simply put, the government did not set up an RESP to be used like a piggy bank. If money is taken out of an RESP, and the Accumulated Income Payment option is not available, what happens to the interest that was earned on that RESP? At a bank or mutual fund, that interest has to be donated to a post secondary institution. In the case of a group plan, they are allowed to keep it, because their investment is run by a non profit foundation. (That is why they have them, by the way) As some people have pointed out, group plans offer a payment schedule that is simply one contribution. I have many clients that do this. To suggest that a group plan can be deliberately set up so that there is more ‘attrition’ is an interesting comment, but I would suggest that it cannot be backed up by any facts – it is just that, a suggestion.

    Again, I cannot answer every misconception out there – all I can do is suggest that people research, read the prospectus, and ask a lot of questions before they make a decision. Whatever you decide, use your brain, and be comfortable with the decision that YOU make, for your family. Don’t let anyone push you into it. I personally explain this all very well to the people I sit in front of and I constantly get asked if we do RRSP’s.  Some people would invest all of their money with us, if they could.

    • “I am quite sure that they now all report after all fees taken as well. (Pretty much the same as any fund out there.) I am quite confident that if I did the work of reading all current prospectuses, posting all of their current, 5 year, and 10 year returns, most (all?) of them would beat the current, 5 year, and 10 year returns of GIC’s and Bonds.”

      RESP plans account for administration fees (typically 0.5%) and portfolio management fees (0.05 to 0.1%). The plan returns *do not* include the effect of enrollment fees. They do not include the effect of attrition either or adding back nominal enrollment fees when the children go to University.

      Let’s look at the claim that RESP plan returns will be markedly different from that of bonds.

      CST’s returns according to their own prospectus ( Bond returns in brackets.

      3 years: Plan return = 3.7% (Bond return = 5.1%)
      5 years: Plan return = 4.4% (Bond return = 5.5%)
      8+ years: Plan return = 5.3% (Bond return = 5.8%)

      Perhaps, Heritage will be different. Let’s take a look (

      3 years: Plan return = 4.45% (Bond return = 4.97%)
      5 years: Plan return = 4.89% (Bond return = 5.09%)
      10 years: Plan return = 6.96% (Bond return = 6.55%)

      See how closely RESP plan returns track that of bonds? Why is this surprising when the majority of RESP plan portfolio is invested in provincial and federal bonds (81.7% in the case of CST and 76.2% in the case of Heritage).

      “I will say that I recently looked at the most recent Canada Savings Bonds, and GIC rates, and feel it is fair to say that they are returning around 0.8 to 2.7%. Please correct me if I am wrong.”

      Glad to clear it up for you. The interest rate on a GIC is the return you will earn in the future. Guess what? Government bonds are also yielding about 2.7% today. That’s pretty much what you’ll earn in the future. You don’t have to take my word for it. Here’s what the Heritage prospectus says: “However, with persistent low interest rates for cash-like securities and little room for interest rates to move lower, the amount of interest income investors can generate from these investments in the near future may be limited.”

      “To CC and his constant comment that investing in a group RESP is the same as investing in a bond fund, or GIC, is something that shows a lack of understanding of how these things work.”

      So, we finally come to how Group RESPs miraculously able to turn water (a bond portfolio) into wine (higher returns than GICs or bonds). Mark says they invest in (a) structured products and (b) superior long term investment choices. I haven’t forgotten at all that Group RESPs invest a part of the portfolio in structured products. It’s just that it is too small to make a difference either way. CST has 15% in these products; Heritage 14%. That’s too small to make much of a difference to a portfolio and past returns I’ve posted about prove the point. As to the alleged superiority of a Group RESP portfolio, I’ll let the numbers posted earlier do the talking.

      “Another point that keeps getting brought up here is the attrition aspect. Simply put, the government did not set up an RESP to be used like a piggy bank. If money is taken out of an RESP, and the Accumulated Income Payment option is not available, what happens to the interest that was earned on that RESP? At a bank or mutual fund, that interest has to be donated to a post secondary institution.”

      For someone who says he knows everything about RESPs, you are totally mistaken here. Here’s what happens when you withdraw money from a bank RESP:

      I want to address the non-sense about “non-profit foundation”. A mutual fund is non-profit too. i.e. the mutual fund assets belong to unit holders. It is the companies that extract the fees from mutual funds that are for-profit concerns. Guess what? It is exactly the same with Group RESP vendors. Yes, the plan itself is non-profit. The people sucking the fees out of the plans are for-profit entities.

  199. CC – this is fun – I knew you would do the work. 

    First of all, one thing I want to stress is that you have consistently mentioned bonds and GIC’s as if they have historically given the same returns. What I have seen, consistently over the last few years, is that historically GIC’s returns beat Canada Savings Bonds, but track well below (over 1%) that of bond funds. I just point out that you here are comparing RESP fund returns to that of bond funds, but a few days before suggest that investing in GIC’s would be the same. Historically, that has not been the case.

    We agree that the membership fees do affect returns, which has been talked about here a lot, but we also can agree that there is also the attrition and return of membership fees that we are leaving out of this discussion of returns.

    I knew we would be having this discussion, which is why I was careful to mention that these plans have the component that is invested in structured notes. I was also clear as to my opinion of them. You are right, the amount that they have in structured funds (percentage wise) is not huge, but I would disagree that it doesn’t affect the returns. Let’s look at Heritage’s one year returns, for instance. (The one year is the only current return that breaks down the affect of the structured notes on the total investment.) I will note that I had said that I would show the current (one year), 5 year, and ten year averages, and you chose to show the 3, 5, and 10 year.

    Heritage one year return = 4.31% – DEX Universe All Government Bond = 1.57%

    If you look deeper, which I always do, you will see the affects. Just below these figures, I am sure that you would have read that the Heritage 1 year return on the fixed income portion of their investments was actually 5.41%. The Structured notes, which in your opinion cannot influence the overall return much, were at (1.51%). As you can clearly see, this portion that you claim cannot influence the returns at all brought the total returns down by 1.1%. [5.41-1.10 = 4.31] To me, and again this is opinion, that is a fair bit. To extrapolate this out, the funds exposure to the market through these structured notes has negatively affected the total returns quite a bit. This year (2009) did not do near as much damage to the total returns as the past year did. I can let you know that the funds exposure to the market through these notes has significantly affected their total returns. (only to the negative) The fixed income portion of these funds, as can been seen here and historically, have significantly out performed the average of the bonds. I feel that does prove my previous post as correct. Again, I am not a fan of the market, and wasn’t thrilled when the funds started investing in them, I am hopeful that they (the structured notes) can in the next few years reverse the damage they have done to the funds total returns, which will bring them back up to much higher that the bond average.

    Again, when I mentioned what GIC’s, and Government bonds were returning, I did mention that it was the future returns. This is all the more reason, in a low interest investment, to try to get the highest return that I can get. I won’t go into too much detail here, but you keep mentioning that a family should go and get a GIC. First of all, it is the ten year bonds that are near the 2.7%, and the GIC’s that are starting at the 0.7%. You keep suggesting that families go out and invest in GIC’s. Well, you and I know that the rates here can vary quite a bit, and it pays to look around. One thing to note is that most people can get a better return by ‘locking’ in the money for a longer period of time. Keep in mind that 18 years is usually how long a family will likely be comfortable with locking the money up. Basically, they can lock it up in a 5 year GIC, and do this three times. At the child’s age of 15, it would be silly to roll it over into another 5 year GIC. Simply put, when the investment can earn the most (compounding wise) it will probably be earning the least(interest wise), because it will probably be in three year (or less) GIC’s. Again, I see no comparison in benefits between a GIC and what a group RESP will probably do.

    As well, as far as turning water into wine, (nice reference by the way – quite cute) I again say that historically the fixed income portion has outperformed the bonds easily. I refer to my previous post as to how they achieve that. Again, I am not looking for huge returns from a safe investment, but if I can get 1% more, I will take it.

    Now, CC, sorry to take away your ‘aha’ moment, but you and I have already posted numerous times about the options that a child has if they decide not to pursue a post secondary education after high school. It is the same with banks and group plans, where the family can use the Accumulated Income Option. In a family plan at a bank another child can use the money, but group plans have always had the option to transfer to a sibling. Some group plans also offer the option to transfer it to a different child (not related by blood) or the parents themselves can use the RESP. These last two options are not offered through a bank. But I am rambling. What I suggest is that you reread my previous post. I was not commenting on what happens to the money when a child decides, after high school, not to pursue post secondary education. I was commenting on what happens when a family pulls money out, closing the RESP, before the child is 18. What happens, for instance, when they pull the money out when the child is 8 years old? Here is where it gets interesting. And for the record, yes, I do claim to know a lot about RESP’s, and in my previous post I was in no way mistaken. What I said is that if the conditions are not met in order for the family to do an accumulated income payment, then the bank, by law, must donate the income to a post secondary school. I forgive you for not knowing this CC, as most people who deal in RESP’s are totally unaware of this, but I can assure you that it is 100% true. So to the point of mutual funds being identical to group plans, this is obviously untrue. The income tax act allows the non profit foundations to keep this interest because they are registered as non profit entities under the income tax act. Mutual funds are not. Period. This is a big difference, and I just wanted to clear that up. I dislike that folks at banks make it seem like the family can pull out all of their money after a little while, without any negative complications. Again, the way the income tax act has structured the RESP, it is not intended to be used as a piggy bank. Lots of options are available if a child decides not to go to school, but any RESP is not intended to be yanked out to buy a car when the child is 9 years old.

    Again, I know these things quite well, and I am very confident that the decision that I made for my family is the rigth one.

    This has been fun – cheers.

  200. @Mark: We are talking around in circles and I’m going to stop the discussion here because it’s becoming pointless. You have a touching faith in the ability of Group RESPs to deliver returns better than bonds or GICs. It is also totally mistaken. I hope you’ll come back in 5 years or so and let’s compare notes.

    You go on and on about return of membership fees as if it’s such a great deal for parents. News flash for you: enrollment fees are the biggest cost of participating in a Group RESP even with full or partial return when the child attends university. A parent starting up a RESP for a newborn and planning to contribute $2,000 per year buys roughly 19 units at CST. She pays $3,800 in enrollment fees. The child will be returned a “guaranteed” $1,900 of the enrollment fee *after 18 years* if she goes to school and collects full benefits. But she will not receive any income that the $1,900 could have generated for those 18 long years. $3,800 is a lot of money. It can buy a lot of a la carte financial advice from independent financial planners who have no incentive to push product. Of course, RESP salespeople will pretend that this is such a wonderful deal for parents. Quelle surprise! I would likely do the same if my livelihood depended on it too.

  201. @CC: You are right, we are going around in circles, and neither one of us will in any way change the other person’s mind. How, though, can you fairly “stop the discussion here”, and then go on to add more opinion?

    I do find it interesting to note that, again, you state an opinion, as if it were a fact.
    “….better returns than bonds or GIC’c. It is also totally mistaken.” That is opinion. If we had talked 5 years ago, right now I would be saying, see, I told you so.
    As far as faith goes, I don’t think so. Faith is a belief in things that are unseen/unknown. I have a belief in what I can research and know right now. I would comment that it takes faith to believe without a doubt that in the future you will have great returns out of the market. (As someone said earlier, “what the market gods will give us.”)

    You can read my posts to confirm, but I would have to say that I don’t go “on and on” about the return of membership fees. I only mention it when it is pertinent. As I have always said: if I get it, great, if I don’t, I will probably still be much farther ahead. I again refer to your own post regarding the true cost of the membership fees/total fees of a group RESP. I understand it and am comfortable with it – It is not rocket science. That you allude to the fact that I “pretend that this is such a wonderful deal for parents” I find a tad unfair. To be fair, when I sit down with a family I show them the option if they receive no benefits from the non profit foundation, as well as the option if they receive all the benefits from the non profit foundation. You are insinuating (wrongly) that I sit in front of a family and only show the ‘big payout’ and all of its benefits. I show both, so the families can see the difference. Obviously, this also shows the total effect of the fees. Your posts make me feel that you think that I walk around only showing families the option of their child getting the full benefit from the non profit foundation. I show both, so that families can get a full picture. My clients get much more information from me than they probably would anywhere else. I am sure you have already noticed, but I can go on for days about financial matters, and into great depth. I don’t leave people trying to figure things out on their own – I explain everything.

    Again, it is easy to discount what I post here, and my opinion, because I work for a group resp company. Just mention that fact, and then discussion is a moot point. I prefer to say that you have your opinion, and I have mine. Again, I invested for my children before I started to work for them. I did the research and very much liked this option for my family. We can talk in circles until the cows’ come home, but I can assure you of one thing. When I have grandchildren, I will set them up the day they are born with the company I represent. If I in anyway thought one of the options that you propose to be better, I would set them up with that option, but I don’t. I can assume that you will throw your grandchildren’s’ money in the market? We will both do what we think is best for our families, and only time will tell what they will end up with. Again, our personal opinions will dictate what decisions we are comfortable with.

    I did want to clarify another thing that I feel you may have been misleading people to believe. (I don’t think that it was intentional; more an error of omission.) The group plans compare themselves against an index. You and I both know that this is not an actual return that an investor would have actually seen. Even if they had bought a bond etf that was tracking that index, the actual return that the investor would have experienced would have been decreased by that etf’s management fee. Let’s let people compare apples to apples.
    To quote CST’s MRFP:
    “For 2009 the Plan’s rate of return, net of fees, was 5.3% versus an investment policy benchmark of 8.9%. The return on the Government and Corporate Bonds component of the Plan was 9.5%, outperforming the benchmark, and the return for the Variable Rate Securities component was -5.3%.” (Again, their bond portion beat the index; it was their exposure to the market that brought it down. If you will note, it brought the total return down by quite a bit, again disproving your belief that the percentage of the fund that is in the market is too small to affect the total returns.)
    “The benchmark used for the Plan is the DEX Universe All Government Bond Index. This index measures Canadian investment grade fixed income securities issued by the Government of Canada . . . Investors cannot invest in the index without incurring fees, expenses and commissions, which are not reflected in the index returns.”
    Again, just to be clear, what they are measured against is an index. Yes, I feel historically, the choice that I have made compares very well against that index, especially considering I would shave off a few basis points just to invest in it on my own. The recent returns of the structured note aspect of these plans actually prove my belief that the market is not where I want my money to be. If anything, these plans have been hurt by their exposure to the markets. Had they stuck to their original investment strategy, we wouldn’t be having this conversation, because their returns (bond vs bond) would be clearly higher.

    It has come to my mind that the reason that we are having this discussion is due to a different set of opinions as to what ‘better’ returns might be. I am comfortable if the plans return 0.5 – 2% higher than the benchmark. I think that you would need to see something way higher, to offset the parts of the plan that you don’t like. I don’t. I know it is risky to try to ‘guess’ what you are thinking, so I apologize if I am way out in left field.

    Again, I have been looking at these plans for many years. Nothing that we are discussing now is new to me. I know the full effect of the fees, I know exactly how the plans work, and I know all of my other investment options. Again, everyone is entitled to their own opinion.

  202. @cc,

    from your post of Nov 19 “@mulletman, @troop, @yakker: I’m not going to bother to respond to you anymore because I believe you are the same person commenting here from the same IP address.”

    You should really check your facts……. the reason we all have the same IP address is because we all work in the same building. Each of our computers does have an individual IP address, but it appears to the outside world as an identical one because you are picking it up from a common router leaving the building.

    Hope that clears things up. We are all co-workers making good points.

  203. A few years ago, after learning our son the extent of our son’s disabilities, and coming to accept that he would never, ever, be attending a post secondary school, I called in to speak to Heritage Scholarship Fund. Their customer service agent, who’s name I did not get-biggest mistake ever, assured me that due to his disabilities, including mental retardation, that ALL our money we had put into this would be returned. I was forwarded the paperwork, signed and returned it, and received less than half of what we paid into it.. many phone calls later to many of HSF agents, and salespeople, I was treated like an idiot and told that I should not have signed anything, but transferred the units to our normal child. By far, this is one of the many highlights of my career of being a mom to a special needs child and dealing with ignorant people and companies. Now, with our son graduating this coming year, I have discovered that Heritage Scholarship Fund is a total RIP OFF, and he will not be getting as much as we were promised. But, at least I have the likes of facebook and twitter to warn all my friends & clients who, by the way, most of waited till later in life to start their families! Who in turn will do the same!

  204. LOL

    Just received this helpful investment advice in an email from CST:

    For example, a Plan opened for a newborn in 2010 with contributions of $100/month for 17 years, will be worth approximately $42,807 at maturity in 2027 (includes Principal, Education Assistance Payments, CESG Grant and Grant Income).* Adding just $200 more each year, over the life of your Plan, increases its total to $50,103 at maturity!* That’s an additional $7,296. Plus, if you live in Quebec or Alberta – you have access to additional Provincial Grants that can increase your savings even more! So when they’re asking for gift ideas, consider your RESP.

    This fineprint appeared at the bottom of the email:

    *Total worth includes:
    • Principal includes contributions made less enrolment fees of $200 per unit and annual account maintenance fees plus applicable taxes.
    • Education Assistance Payments (EAPs) are calculated based on the 2010 payout per unit. Calculations assume that the beneficiary collects all available payments. The value of EAPs is based on three factors that can’t be predicted: investment return, actual number of payments collected, and discretionary payments from the Canadian Scholarship Foundation. Discretionary payments in any given year are not guaranteed and you should not count on receiving them. The Foundation decides if it will make a discretionary donation each year and what the amount will be.
    • Government grant – basic Canada Education Savings Grant (CESG) only; based on criteria set out by the Canada Education Savings Act (CESA)
    • Grant income earned is based on the long-term expected net investment return of 4.85%.
    • Enrolment fee refund. The illustration assumes a 50% return of enrolment fee (which you may be eligible to receive). Please see the terms of your agreement for more information.
    NOTE: This example is an illustration for group plans only. Past performance is not necessarily indicative of future results.

    The CST Plan is only sold by prospectus. Investors should read the prospectus before making an investment decision because it includes important detailed information. You can get copies of the prospectus from or by calling 1.877.333.RESP (7377).

    The Canadian Scholarship Trust Foundation is the sponsor of the Canadian Scholarship Trust Plans which are exclusively distributed by C.S.T. Consultants Inc. ©2010 C.S.T. Consultants Inc. All rights reserved. Privacy Statement
    In Quebec, Canadian Scholarship Trust Plans are distributed by C.S.T. Consultants Inc. Scholarship Plan Brokerage Firm.

  205. All individuals who are disgusted with the CST plan should immediately withdrawl. My children will appreciate the increased payments.

    I too signed up when I was young and dumb and didn’t have a clue.

    Who’s signature is on the papers? Mine and my wifes.

    Was I provided with the prospectus? Was I held at gunpoint and forced to sign? Was I unable to think for myself?

    Everyone wants to blame someone else for their bad decisions. The best lesson to learn, is to realize that we are responsible for our bad decisions.

    As a previous poster said, “If you fail to plan, you plan to fail.”


  206. @ Schmotlzie – This posting (gotta be the most active on this active site) is all about making educating decisions.

    I tend to take people at their word so when you say you ‘signed up when you were young and dumb and didn’t have a clue’ – I’ll have to assume that’s why you accept the extreme likelihood of subpar returns and extremely controlling terms and conditions.

    I really do suggest you re-read the terms and conditions – it seems pretty clear that disbursements are at the discretion of the board – so keep that in mind as you wish for others to just drop out and forfeit their kid’s education funds because they made one bad, likely sleep deprived decision after being provided bad advice by their ‘advisor’. (Real nice by the way).

  207. Ellen Roseman covered Group RESPs in her weekend column:

    RESPs are easy to start and hard to leave

    The column reports actual investment returns of a CST subscriber who contributed $2,000 for 10 years:

    Principal = $17,087.59 (appears to be $20,000 less enrollment fees)
    CESG = $3,993.46.
    Income on the principal = $3,188.44.
    Income on the CESG = $1,065.69.

    The CAGR over 10 years is 3%. You’ll find advisors like Mark on this very thread claiming how Group RESP providers can magically get high returns. The actual returns show otherwise.

    @Schmoltzie: We are all for taking informed financial decisions. But you have to wonder: why do we hear so many complaints about Group RESPs and not competing RESP accounts? Maybe, the subscribers who complain have good reason to? Just food for thought.

  208. Geoff – Yes, I accept the likelihood of subpar returns. What I can not accept is withdrawing from the fund once I realized the consequences, and getting a negative return. This is what I call compounding bad decisions, kind of like compounding interest, but in reverse.

    On a side note, I anticipate subpar returns in many categories of the market for probably the next decade, at least in N.A. markets. I have a feeling that 3 – 6% won’t look so bad by 2015.

    CC – I don’t think all are for making informed decisions. Few are for making informed decisions, and many are for making uninformed decisions, and then blaming everyone for their poor choice.

    I enjoy reading the many thoughtful posts abouts the pro’s and con’s of different options, and I am amazed at the detailed number crunching by several posters. This forum has inspired me to continue improving my research and decision making skills, because in the end there is only one person that cares about my money and my family.

  209. Pingback: Best of Blogs – Lots to know about RESPs | Retire Happy Blog

  210. I just signed an agreement with Heritage and now I’m having second thoughts. Is it a problem to cancel? We have not yet paid anything, but like I said we did sign the papers.

  211. Pul,
    If you haven’t paid any money, there is likely not alot they can do. What does your Heritage rep say? What does the agreement you signed say?

    The question is, why did you sign up? What has changed your mind? Is there an altenative that better meets your needs, and why?

    I have been contributing to a CST and UST plan for my children for many years. It is a long time to commit to an investment. Thankfully, I have always been able to meet my obligations. This is critical to consider when signing on to one of these plans. If you are not sure that you can meet your payments, do not give them your money. If you are sure that you can meet your payments until maturity and want a very easy way to invest for you kids, than it might be worth it.

  212. Of course you can cancel. The contract that you signed should clearly state, and the representative has the obligation to inform you that you have 60 days from the time you sign the agreement, to cancel without any fees. All collective programs stipulate this in their prospectus. You will need to send a letter (or fax) saying you wish to cancel. If I were you, I would make a stop payment of the check and keep a proof that you faxed the letter.

    To Pul, there are options that should be explained to parents who don’t want to make a long term committment. They also have the option of making lump sum deposits.

  213. Heritage Education Funds Inc. is biggest scam in Canadian education fund. If any parents out there really care for your children education future, open up a saving account with your child’s name. I only find out the game they play 18 years too late.. Don’t fall into that trap. Don’t even get started, they won’t let you withdraw if you miss a monthly deposit, they won’t release funding unless your child go full time.

  214. There is no such thing as an investment that doesn’t cost something. Do you think the banks make Billions every year because they don’t charge fees? There are costs associated with investing. If it cost you $1 bus fare to go down the road and make $10, you are still $9 richer. Don’t take any advice from a Money Sense Magazine that has an advertisement on every other page. I am sure those advertisements were not free.

  215. I’ve invested with London life, Investors Group and CST for RESP’s and none of them were good for us. London life was a real joke, when I had “Freedom 55” pooled life insurance/retirement plan B.S. … took me 10 years to break even and than cashed out. Then went to Investors Group as I felt they would hold my hand through the investment process and fulfill my “hopes and dreams”. Time goes by with an average of 2.7% MER’s weighing us down and our positions never changed. Cashed out and very happy we did. A now we’re 100% self directed at TD Waterhouse and life is grand! Managing 400k at an average return of 10%/year at a cost of 9.99 Opposed to 400k – 2.7% (per year) = $10800. I have to say however I spent a lot of time studying the market… It may not be for you. But everyone can stay away from a pooled RESP plan like CST. Bank RESP’s are the way to go. Good luck!

  216. Ravonar: If you ever get divorced, give me a call.

    As far as the rest of you, this seems to be a pissing match between a bunch of overgrown idiots.

  217. I am the unfortunate owner of an ‘inactive’ Heritage RESP. My ex and I signed up when we were young, stupid, starry eyed parents. In the terms of our separation agreement he was supposed to keep paying it. Surprise surprise he didn’t.
    He stopped paying while I was in school myself. They told me I had to contribute for a year and a half before my account would be ‘active’ again. If I didn’t pay within three years I would lose it entirely. If I withdrew I would see less than half of the contribution back.

    Total Contributions: $4,500.00
    Membership Fees: $2,114.00
    Insurance Premiums: $218.70
    Depository Charges: $85.26
    Principal: $2,082.04

    Being enrolled in a 4 year program, raising two children on my own and working nights it was pretty impossible that I was going to be paying any money into an RESP for a while.

    For those of you considering group RESP plans try to imagine your life in 20 years. Try to imagine squashing that beautiful little child of yours into a box so that they can benefit from your investment in their future. Anything can and almost definitely will happen between now and then.

    Should your child go to a conventional institution, enroll in a 4 year program and graduate within 4 years then yes you probably will see an amazing return on your investment. Be reminded it will be at the expense of hundreds, perhaps thousands of other people’s children for whom life didn’t turn out like it does in the movies. Your welcome, from my daughter.

    Another poster made the very intelligent comment that it wasn’t a bank that was calling him daily when his new born was napping and he was trying to catch a few moments of peace on the couch it was a group plan sales person. Want to know who gave them his number? The hospital.

    Something that preys on the vulnerable is a predator and that is what these group plans are. They aren’t calling me now that my children are in school and I am a well adjusted adult looking to secure a little bit of my child’s future. Heck they aren’t even returning my calls.

    I might consider biting the bullet and continuing to pay into my group plan if I could be confident that when my daughter went to school the money I invested would be there for her. But Heritage Education Funds (aka Allianz Education Fund Inc) does zilch to allay those concerns. In fact the cryptic language only confirms for me that the odds of them ‘approving’ of my daughters educational institution aren’t great and I never was much of a gambler.

    Some of the best investment advice I was ever given: “If you are investing for anything less than a 20 year term you should expect to see a loss. That way you’ll be pleasantly surprised IF you actually make money. Contribute lump sums annually and know what you are saving for.”

    Heritage will never get another dime from me so I hope they make good use of my daughter’s $4500.

  218. keco86, i feel for you.
    if you scroll up to july 30 and sept 22 2010 you will see my story.
    i think it’s DOWNRIGHT DISGUSTING.
    currently, we are waiting for our case to be taken on by the ombudsman. we’re still fighting it.

  219. Lots of good stuff to think about here. I am at the crossroads, self directed resp vs group plan (USC), 4mo old baby. From what i have read here and from my understanding of the group plans, IMHO people are thinking about the group plans from the wrong angle. Do not think of them as classical investments (fees/loads, mer’s, yearly returns, market timing,etc). Think of them as a black box: there is an input, something happens in the black box, and then there is an output. You don’t invest in them, you purchase units, and then 18yrs later you redeem the units. You don’t really care about anything other than how many units you get and what each unit pays out, and is the payout worth the investment.

    my (atypical) scenario for USC: contributions (one time deposits): 20k in yr 1, $10k in yr 2, $10k in yr 3, $5k yrs 4 and 5; total $50k. total of government grants $2.5k. Why? because units are cheaper while the child is younger, trying to maximize # of units. This way should have approx 100 units (based on chart at end of 2010 prospectus). Historical EAPs (INCLUDING discretionary payments) for mature plans with the following calendar year of eligibility have paid out $1250/unit for 2005, $1190/unit for 2006, $1180/unit for 2007, $1160/unit for 2008, and prob $1140/unit for 2009 (my estimation based on the first 2 EAP installments). So here is the leap of faith: what will plans payout in 18 yrs from now? (this is where people with more knowledge than i need to chime in). Lets assume $1100/unit (why? because lets say payments have decreased due to the recent craziness in the economy and the economy should have stabilized in 18yrs). So total payout in 18yrs: $110k (EAPs:100units x $1100/unit) + 40k (contributions minus enrolment fees: 50k – 100units x $100/unit) + 5k (grants (2.5k) and grant income (assume 2.5k)) = 155k. So $50k in equals $155k out, is that good? i dunno.

    self directed method: assuming the same contribution method, what kind of average annual NET rate of return on your investments would you need to turn $50k into $155k in 18yrs: 6.7% (someone check that number, i used an excel spreadsheet with formulas i made up). So assuming a mer of 0.5%, you would actually need to get a return of 7.2% and have paid $12.5k in fees to the bank. now the question for you guys is: where can i (safely/low risk) get an average return of 7.2% every yr over an 18yr period??????

  220. I have both a group plan for my son (Heritage) and a bank plan with my daughter (no charges).

    My concern with Heritage is not only the membership fees but the conditions around them. I agree with keco86 in that regard, what if your child does not enroll in a 4 year program or worse yet, what if they enroll in a non-qualifying program, such as I believe, helicopter school, if you have maxed out, you will get your $50,000 investment back tax free but what about the balance and the grants…..

    Which is why, for my daughter I went to the Alberta Treasury Branches. I put 25% in bonds, 50% in Alberta Select (essentially they invest it in 13 Alberta Companies AND your principal is Guaranteed); 15% Canadian Stocks and 10% U.S. Stocks. Lets not discount the U.S. They are like a cat with nine lives. I recently dumped $50,000.00 from a “high yield” G.I.C. earning a whopping 1.2% and have averaged 10% over the last six months.

    Anyways those are my thoughts for this morning.

  221. Ravonar,

    There are too many comments on this site to reply to all of them, but yours intrigued me.
    Point form:
    Heritage has fees, but the ATB does it all for free, or do they have different fees?
    As far as ‘qualifying program’, you will find that the helicopter school will be treated the same way by the bank, as by the Group plan. They can use the RESP for the program, within Income Tax Act limits, and the rest can be pulled out as cash, rolled over into an RESP, etc.

    ATB – Alberta Select – market linked GIC. If risk is what you are after, you would probably have been better to invest the companies by themselves. The bank will take a large chunk of the profit, to provide the “guarantee”. (Nothing is free, you are paying for the guarantee).
    I hope you do well with your choices, but obviously, except for the GIC, only time will tell.
    As far as how well you have done in the American market – pretty much everyone has. It was on a rebound from the horrible dive it just took. I hope you do well with them, but I wouldn’t use the last 12 months of returns as any sort of guide.
    “High Yield’ GIC – no such thing. 🙂

  222. Reggie,

    I agree with much of what you have said, but would ask you to look at a few things. First of all, you are probably being optimistic with the USC payout at $1100. There are not invested in ‘the market’, and that will not be a deciding factor on their returns.

    You are right about the returns, but what most people on this page will argue about your point is that they plan to do a ‘high/low’ strategy. They plan to go high risk for the first part of the investment, and switch to low risk towards the end. Feel free to do a spreadsheet with that scenario. The returns that are needed in the first years then need to be much higher, as they shift to low returns, in what should be the highest earning years (exponential growth). Some people need the risk, and that is entirely up to them.

    The other thing you might want to check out, however, is other group plans. I would submit that if you shopped around, you would probably find one that offers more flexibility. Check out happens if your child two or three years with the USC plan. Find out if you can switch it to another child, if the first one doesn’t go to school. Make sure you know all of your options, and read the prospectus.

    Just my two cents.

  223. keco86

    Sorry to hear about your situation. It would have been better for you to have the statements mailed to you, while your ex was ‘contributing’ to keep an eye on the investment, but that is already past.
    I will let you know that you have other options than what you have posted, and I advise you to call the company to inquire about them.
    As far as ‘the hospital’ giving out information – that entirely inaccurate. They would never do that.
    Also, the child doesn’t ‘need’ to go to ‘conventional’ schooling, and doesn’t ‘need to go for four years’. They have as many options as with any self-directed plan. (actually more)
    As far as what you should do in the future, if you decide not to continue with your plan, get your principle back. Other people’s children don’t need to benefit from your ‘$4500’.
    I would recommend that you do more digging, as you do have options that I don’t think you know about. You might be pleasantly surprised.
    I work in the industry, and I am far from a predator. I have so many clients who continue to thank me for helping them, as they would have continued to put it off. I have other clients who start with the bank, and after a few years, realize that they have saved nothing. Some people like the structured saving.
    I would submit to you that your biggest beef should lie with your ex, because if you had been in the loop the whole time, things might have been much different.

  224. Henry,

    I don’t know what to say, other than a lot of what you say is untrue.

  225. To Ram @ Jan 17th,

    I do suggest that some group plans get good returns, and I have always coached people to look around.
    First of all, from the numbers you posted, I see a rate of return around 4%, not three. Keep in mind as well that the plan can be open for quite some time, before the grant is deposited into it. (for numerous reasons).

    As far as those returns, they can be found on, so they are no secret. The reporting is what is different with each company.
    Basically, if you took the posted returns from the MRFP of each of the group plans, over the last ten years, you would see big differences. The growth on a 10,000 investment, over the ten years as posted, gives returns that differ from the highest to the lowest by almost three thousand. The CST plan that is being marketed today doesn’t have 10 years of returns yet, but with the nine years they do have, it appears that they will be towards the bottom of the pack.

    I am saying two things – first, I am not sure how CST reports to their subscribers, but it is entirely possible that some of the income that was made in the plan isn’t attributed to individual plans, and is in the pool. That would mean that there is more available to the family than what is on the statement. (this could easily be answered by calling the company.)

    Second, I wouldn’t recommend judging all of the plans based on the returns of one. I know some of the plans don’t attribute all of the income to the individual plan holders, and is kept in the pool. Basically, that would mean that using the statement numbers that you posted to see the actual returns of the plan would be useless.

  226. Pingback: RESP Primer – Just The Rules You Need To Know | Canadian Capitalist

  227. @mark

    thanks for the reply. in regards to the payout for USC going up in the future, my thought process was something like: bond returns are influenced by interest rates/inflation, so right now interest/inflation is low b/c governements are trying to stimulate the economy, in future, the enconomy should get better and with it higher interest rate/inflation and better bond returns (correct me if i am wrong, definitely could be since i am new to investing outside of giving my money to an advisor to buy me mutal funds)

    high/low strategy: yea i saw that, but for the high part you need to be largely in equities, and therefore more risk, and another down turn could hit you close to the transition from high to med to low, possibly resulting in not enough time to recover before you need to be in the low risk/return phase. but still need to look into more

    as far as flexibility: thats one of the things that stops me from jumping at group plans. with usc, you will lose the remaining money if you stop after 2 or 3 yrs and i dont think you can switch it to another child (money from attrition is one of the reasons to be in the group plan). the one plan that is flexible probably would probably have lower returns/similar to individual plans (?) but if looking at individual plans then DIY cos then plan fees will hurt returns.

    the search continues


  228. Good afternoon,

    I was wondering if anyone had experience trying to withdraw money (once reaching maturity) in regards to a USCI scholarship plan. My husband and I signed up for the group plan (nearly 3 years ago) and was led to believe the fees (including enrollment fees) were standard. At the time, I didn’t take the time to thoroughly review the prospectus (which was our mistake). After reviewing the propectus recently and comparing it with self-direct plans, I feel I made a big mistake. I realize no one does anything for free, however, enrollment fees should not be paid entirely within the first three years of the plan. This should be an annual fee. By paying everything is full, you penalize anyone that has to (or chooses) to withdraw from the plan earlier (even to transfer to another institution), and you lose the earning power within the first three years. Furthermore, I don’t understand how they can justify taking back the income earned on your contributions. That is money earned because of your investment. That should not be forfeited. Secondly, the guidelines surrounding the Education Assistance Payments is insane. If they do qualify and you miss any deadline your student will no longer be eligible for EAP payments period (and these payments include income earned on your contributions, grants and income from grants, plus possible discretionary payments). I can see perhaps, forfeiting that particular payment, but for the remainder of the plan…doesn’t seem fair. Furthemore, the deadlines are hard to understand. In one section, it reads August 1st of every year (including the first year) and then apparently two more times each year (due to the installments). If you happen to miss any of these, my understanding is you are only left with the contributions (less all those fees). I am contemplating transfering this to TD. I know I will lose around $2000, but I really don’t feel comfortable with all the restrictions. So, getting back to the original question has anyone else had any experience withdrawing their money from USCI once their child became eligible? I don’t mind seeing things through (I’ve already paid all the enrollment fees), but I feel uncomfortable with the fact the money seems difficult to obtain in the end.

  229. Have you guys look at the alternative choice of compound growth dividends saving plan. Group RESPs or Bank self-directed investment involves lot of fees when you take close look. You may be confused by why a simply education saving plan could be made so complicated. I don’t mean that group RESPs or self-directed investment is bad decision to everyone. But for those who don’t want headeche for bothering which funds they should choose from self-directed investment and those who is scared about all the fees and hidden conditions, the compound growth dividends saving plan may be a good option to you. As posted, average return rate in last 25 years history is 9.3%, same as equity TSX average return but the deviation is only 1.3% vs to TSX is 16.4%. Best part of this option, my kids don’t need qualified to any school or university, and I can keep money compounding grow inside this account after 4 yrs school time without paying any MERs or enrolment fees. Because I can not guarante my kids will go to university or qualified college, can you? Why we take 50% risk on MAX $7200 government grant in RESPs.
    As we all know, $7200 is not even enough for 1 years tuition+room fee in UBC, don’t even mention about university in other province or abroad.
    If I deposit $2500/yr for newborn, at age 18 to 21, I can take out $60,000(no taxes in first 2 yrs) for his education cost. And also cash value in account will grow to $592,226 at his age 65.
    If you do have RESPs account already, I don’t mean you should cancel it if it will involve penalty. But I leave the question to you, can you make enough fund to cover the cost of 4 yrs university, the cost of continue education( if lucky) or the cost of future need for your kids?

  230. Thanks Swift. I’m definitely going to look into the “compound growth dividends savings plan”. I have already initiated the process of closing my son’s group RESP. I didn’t feel comfortable continuing to contribute funds to a plan that in my opinion is too restrictive. In the end, my son might have only been left with the net contributions. No interest, no government grants, no nothing if for some reason he didn’t qualify for their Education Assistance Payments. There were just too many “what ifs”. So, I decided to take the penalty and move on. On a lighter note, I would like to thank everyone who contributed to this blog. It was a very informative read. I only wished I had conducted the proper research in the beginning.

  231. I strongly discourage anyone from using the company Children’s Education Funds Inc (CEFI). My whole family used and it is a scam. They are very difficult to work with. My sister didn’t receive any benefit from it and I only received half of what was expected from them. My one word of advice: don’t use CEFI.

  232. Hey Ravonar,
    If you think you are paying NO FEES, you didn’t read their Prospectus. Ask them what their MER charge is? Ask them what a MER charge is? An RESP is a LONG TERM plan and some of the comments about returns early in this discussion (like judging after only 5 years) are misinformed. It would be like telling Da Vinci that the Mona Lisa was crappy, 2 days into his work.

  233. Sandy, you are welcome, if you like, I can share some detail info to you.

  234. The lady making the pitch for a group RESP at the mall last week made my young kids balloon animals. She was only able to make dogs but my kids were happy.

  235. Greg, yes. . . that mirrors my experience with Group RESPs. They are a clown show.

  236. Group RESP’s (CST, Heritage, CEFI…) are clowns to say the least. Stay away or leave them asap

  237. Wow this conversation has been going on for what 5 years now and the debate still continues?!!?! This just tells me the Group plan providers have no clue how to market their product as a simple, safe and reasonably sound investment. Maybe because it’s just not true! Btw… I work for one of the group plan providers in head office and hate my job because I know we add no value to Canadians. But its a job and pays the bills… So from an insider who really doesn’t care if the company does well or not take it from me. If you dont know much about investing stay away from the group plans. Funny they are supposed to be for people who don’t know much but the problem with those people is they also dont know when they are being ripped off.

  238. I beg to differ….in support of group plans, I started one for my son when he was young and this year he starts college. I received all of my money back in full and he just received his first payment for college. People just don’t understand that when one starts a plan it is a commitment to keep it going until the child is ready for school. I sure preferred to go with a group plan rather than loose my money in mutual funds….

    • the definition of mutual funds is a POOL of at least 30 different investments – they can be stocks, bonds, money market, and any combination from any region, sector, industry, etc.

      in laymans terms, purchasing a group RESP may as well be a mutual fund – except you loose the ability to decide to change/tweek how your funds are invested … check the prospectus, everything that is available in a group RESP is also available in Mutual Fund format WITHOUT the plethora of ridiculous front end fees

  239. I have seen many silly and obviously false comments on this topic, and I let most of them go by. Joe’s recent comment really shows how people have to be careful about who they believe on the internet, because of its anonymity. People can say anything, true or not, because they know that their identity will (probably) not be revealed, and no one can really “call their bluff (lie)”.

    Joe’s comment is a perfect example. If someone just gave it a once over, and went on their way, they might actually believe some or all of what he says. Upon a deeper reading, however, I think most people would see that he is either a scum ball, and therefore should not be listened to, or a liar, and again, should not be listened to.

    Here is how I figure that. Let’s first of all take his comments from the prospective that what he is saying is what he actually believes. He states: “Btw… I work for one of the group plan providers in head office and hate my job because I know we add no value to Canadians. But its a job and pays the bills… So from an insider who really doesn’t care if the company does well or not take it from me. If you don’t know much about investing stay away from the group plans.”

    So, again we are going from the perspective that he believes what he has written; here is what we know about him. He thinks that group plans (at least the one that he represents) are horrible for Canadians. We also know that he is willing, for money, to help this company in its goal of reaching more families. He says: “But it’s a job and pays the bills”. Basically, he is saying that he is willing to do something that he knows is wrong, for money. Obviously, this is not a person with integrity. Also, if he was so worried about ‘paying the bills’, would he really be here trying to get the company that he works for less business? Doubt it. Bottom line, if we believe what he writes, then we must also believe that he is a person of no integrity. The question must also be raised; if he really worried about ‘paying the bills’, would he be posting here, with the slight possibility that his identity might be revealed and his job lost?

    Now, let’s look at it from a more obvious angle. He doesn’t believe what he has written. Why then, would he bother posting? I have come up with a couple of realistic possibilities. First, he used to work at the head office of a group plan dealer, and got fired. This would probably be the only way he would have to lash out.

    Secondly, he never worked at any group dealers head office, but has a bone to pick with group plans. In the financial planning world, some people act with integrity, and some don’t. Group plan representatives go over the fee differences between mutual funds and their products quite well (or at least they should). In doing so, they sometimes anger the financial planners of the folks that they sit in front, because they haven’t adequately explained their fee structure to their clients, and sold them on the value of it. Many families every year change their investment strategy (which sometimes means that they also change their financial planner) after meeting with a group plan representative.

    Most financial planners have no idea how group plans work. I would say that this Joe fellow could be one of the financial planners who is new in the industry, doesn’t explain the MER’s well to his clients, and has just lost one (or more) big clients because they talked to a group plan representative. He then went to the internet to ‘research’ group plans, and came upon this site. He then figured that the best way to ‘slam’ the group plans would be to pose as an ‘insider’ from one of their home offices.

    No matter if you think that Joe believes what he has written or not, he cannot be trusted. He either is a pathetic person, willing to do anything for money, someone who just got fired, or competition of the group plans, with an axe to grind.

  240. Wow, having read through 3 or 4 years of arguments…the proof is in the pudding. My daughter is 20 and entering third year with plans for a Master’s.
    I proudly support group RESPs. (I had the money before I had the kids).

    I bought a personally chosen RESP when my daughter was 1. When a trust account crashed in Alberta I worried about my investment in CET (also known as Children’s Education Funds). My daughter was 4 when I made a lump sum purchase (saved up from the monthly ‘family allowance’ at the time) of a $2000 CST RESP. I chose the Founder’s Plan.

    So how did the two plans do as far as ACTUAL INCOME? Since this all predates government RESP contributions there are none of those included.

    Canadian Scholarship Trust: Very transparent and sent out notices estimating 2009 returns each year.
    Year one: in June she received a letter requesting information on where she was attending university. Upon providing a photocopy of her confirmed admission we shortly received a cheque ‘refunding our principal’ of $1600.
    Year two: A stamp from the registrar’s office confirming enrollment mailed back caused a cheque for $803.42 to appear in her bank account in late August for the fall term, and another in early January. Year three: a deposit of $803.42 in August. (total so far $4000) Probable total by the end of year 4 is $6400!
    What is that for $2000? Is that a 300% return on a 13 year investment? Or 45%? I only know it did way better than my GICs and I can’t even contemplate the pitiful returns on my mortgage fund.

    Children’s Educational Funds: $5000 in 5 lump payments beginning in 1992 when she was 1 year old got us 6 units.
    Year one: Nada… our sales rep had filled the paperwork as maturing in 2010. (kid was 15 when we noticed this in the fine print. Would have cost $1800 to correct. Cost the principal $64 just to find that out.)
    Year two: After standing in line at the registrar’s office to have them mail off our forms plus forms that they had to print off the internet (before August 1 or we would lose an extra $100) in mid September she got about $3600 as ‘refund on our principal’.(Other people ‘got’ $4500 in EAPs)
    Year Three: same as year two except we still haven’t seen a cent of her Education Assistant Payment (This sounded like a student loan when the first paperwork came in late July). Apparently CET has a problem with our university writing that she will be “third year” when she finishes her exams in December on the forms. Sigh… Probable after year 5 if we can survive their system? (…either $3600 or…) $15000 to $17000. Anything over $8000 still beats out 16 years of GICs at 1 to 5 %.

    So, yes ‘they’ skimmed about 30% off the top, but when it came to my child’s education I didn’t have a coronary incident every time the stock market dipped! Although buyer beware on Children’s Education Trust! And how ARE those stock-linked bank accounts doing?

  241. The people from CEFI should go to jail ! Why Canadian goverment spoil these type of companies exist so long? stay away from these agency like CEFI (children’s education founds Inc).

  242. Mark you’ve got too much time on your hands. I am telling the truth about the fact that I work for one of the group plan providers. NO I don’t like what I do for a living but I do have to feed my family so I do it for now until i find something better. I didnt know anything about group RESP when i took the job . Millions of people work for companies whose products they don’t believe in and I am one of them. If the company closes down and I have to find another job it’s ok but I doubt one comment on some seemingly endless thread on this website is gonna have much impact. I just thought I would give an honest opinion from an insiders point of view to maybe help out a few people. I work for these folks (for now) and I personally wouldn’t open a group RESP. Bottom line is it’s just not worth all the hassle. This is not even me speaking… this is the hundreds of customers who have complained (just the ones I know about) in my relatively short period of time with this company less than 2 yrs. It really makes no difference to me what anyone does with their money. I’ll be fine either way.

  243. Well it took most of the afternoon, and a bit of this evening, but I read – fully – all the posts here. My wife and I just had our first kid (11 wks ago), and were approached by a Heritage rep last week. Neither of us has a financial background of any sort, but we’re pretty clever people and we read the prospectus – carefully. I then went and examined the prospecti (?) from some of the other group plans, which were broadly similar. I then went and read this forum, and a couple of others, on the whole issue of group RESPs. I also followed the links provided by others in this forum.

    I would like to – in earnest and good faith – present my reasonably informed outsider’s opinion to those that pass by. In any and all cases, do your own research.

    Firstly, I am aware that there’s a tendency in this forum (and others) to interpret those who favour group RESPs to be reps or other shills. In some cases there are good reasons for this (it appears several posters on here have pretended to be happy customers singing the praises of their particular group RESP, but are probably reps. I certainly don’t consider Mark a shill because he’s been up-front about being a rep, careful not to say which one he represents (there are hints), and shown he’s put some real thought into his arguments). With this in mind, I want to be very clear that I am not a rep or in any way affiliated with any group RESP plan, or any financial institution or fund. My actual career is as a consultant geologist.

    Here’s a summation of my research and understanding:
    – Group plans are complex. The fees and expenses are not trivial for the average person to understand.
    – This complexity could be seen as deliberate obfuscation or as endemic to the system they use. Maybe a bit of both. However, it doesn’t reflect on their potential value to a client.
    – You can achieve higher returns with a self-managed RESP, or with a bank managed plan that’s a little more aggressive (to make up for the somewhat higher MERs, requiring more risk exposure).
    – These options usually require risk exposure, if you want to outperform a group plan. They also require you to do some work, and maybe be a bit knowledgeable, or trust your financial advisor(s) or the advice of people on the internet regarding how to manage your money. (Maybe don’t do the latter.)
    – GICs or bonds are the low risk self-managed alternative, but your return rates will be pretty low. Mark above made some good points regarding how these won’t perform as well as a group plan because of how group plans can make use of the large pool of cash, and knowledge of when a client will need the money.
    – Group plans offer low-risk but somewhat higher returns than your self-managed low-risk options.
    – However, group RESPs (particularly Heritage) are designed to work best – and are probably the best option – for people who 1) want to put no effort into managing the plan, and get all the prov. and fed. government grants they are eligible for, 2) are pretty darn sure that they will always be able to make payments, and 3) are pretty darn sure their kid will go to an accredited institution for a 4 year degree. You’ll get pretty much everything back (not the MERs) and more (scholarships, depending on attrition) in this case.
    – The list of eligible institutions with Heritage is pretty inclusive:
    – The very best results are obtained by kids who do a 4 year degree program and don’t fail so many first year credits that the university considers them still first year in year 2. (Actually if anyone fails first year courses they are partying way too hard. Find a tutor or wake up and smell the future.)
    – If they do a 2 year college program you lose 75% of the enrollment fees, but get everything else the 4 year degree person would get.
    – The return of the enrollment fees is “discretionary”, but from what I see the major group RESPs have a very good history of returning them in full when the criteria are met (again: eligible institution, 4 yr program, don’t flunk so much that you aren’t moving up a year. Actually, don’t flunk. Work hard.).
    – The enrollment fees are up front, so your account gains very little principal in the first couple of years. People appear to get very upset about this. I put it down to either reps not explaining adequately, or the client just didn’t get it and was sold on the large (perhaps optimistic) predicted sums available at maturity.
    – In the end, though, getting your enrollment fees back or not will be a fairly small %-change to the cash you get out of your plan.
    – The *key* thing with these plans is to keep making payments, stay in for the long haul, and get your kid to go to a good school and work hard. With these criteria, the Heritage plan is very competitive for the risk level. To me it seems these are things everyone should be encouraged to do anyway, so the losses for getting out early or ceasing to make payments are an incentive to stay in, and not use your child’s education savings for a new truck.
    – However, if a pushy rep convinces a family to sign up for more than they can reasonably afford, that’s crossing a big red line from “helping them help their kids” to “exploiting someone who doesn’t fully understand the system”.
    – If consistently maintaining a payment of just $50 a month for 18 years is not something you think you can do, you probably shouldn’t do a group RESP. Mind you, you should probably review your personal budget if you have a kid and can’t find a consistent $50/mo for them.
    – There are options to temporarily stop paying, or change your payment amount, but this sort of thing should only be for an emergency. There may be a buy-out option partway through the term (discussed above in this thread). I’m not sure if Heritage offers this.
    – If you just exit the program without transferring it appears that (with Heritage) the losses are: 20% of the interest on the principal, plus the enrollment fees, the government grants, and interest on the government grants. These are strong disincentives to do what my wife’s parents did to her: when she was 10 or 11 they took out the $10k they had amassed for her education and used it to get new stuff after a house move. She worked multiple jobs all through her two degrees, and has worked very hard ever since, to pay off her student loans. We’ll be finally free of them next Sept.
    – We are both professionals, live well within our means, and are not concerned that we would at some point be unable to make our yearly payment. We would never force our daughter to go to university, but we do intend to instill in her an appreciation for the immense value of a post-secondary education. In the end, if she doesn’t go, whatever. We weren’t going to have the money for ourselves anyway. We’d get about 2/3 of the value of the account back in that case.
    – To wrap up, I have come to believe that the plans work well for most people, provided they stick with them and their kid goes to post-secondary. I like that it’s hands-off with just a yearly payment (in our case, others do monthly). I found our rep knowledgeable and friendly, certainly not pushy or deceptive. My wife and I have called her several times with followup questions, and she has been completely open and forthright (and knows the prospectus inside and out). I know, from reading others’ experiences, that there are reps who are definitely not like that. Who are pushy, deceptive, or manipulative, using misinformation and conscious omission to force sales. They cross the big red line I mentioned above, and their actions are indeed predatory. They should at the very least be reported. Aren’t there laws that govern how financial advisors give advice and conduct themselves? Do these reps answer to those laws?

    So we’ve gone for it, and we’re going to stick with it. I’m confident that we will not miss a payment, or have to try to extract the money prematurely. If you aren’t able to be so confident, then it’s probably not for you.

    A final word:
    Again, I’m not a rep, or otherwise an industry member. Of course, due to the anonymity of the net, I cannot prove it (I considered trying but it’s pretty pointless really). I knew very little about RESPs at all until last week. I feel much better informed having read the prospecti and the more informed comments here. The point of my post here is to say that, after a lot of reading, I’m convinced that group RESPs (particularly the one we chose) offer the best RESP solution for us. If your risk tolerance, desired involvement level, and financial outlook are similar to ours, it might be the best option for you too. Note that I’m not offering this as advice. I’m presenting a rationale that works for my family, which resulted in a particular decision which in this sort of forum tends to be lambasted.

    As others have repeatedly insisted: do your own research. Read the documentation thoroughly. Understand as much as you can about your options. Arm yourself with info, examine your financial situation, and come to the best conclusion for your child’s future.

    Kindest regards to all.

  244. Maggie here again. After numerous phone calls and convincing the Registrar’s office that it was in their best interest to help my daughter get the funds by sending another letter confirming to Children’s Education Trust that she is a fine upstanding student in third year, CET came through.

    It was a whopping cheque for over $4000 as a “first EAP”, of which she is entitled to 2 more if she keeps up the good work. Considering the current economic climate I was astounded. Canadian Scholarship Trust (which has a much better reputation) only paid out just over $400 a unit, but CET managed $700+ per unit. Granted I began CST a year later. I hope that our windfall wasn’t accomplished on the backs of students whose Moms aren’t as forceful as myself, but it is a relief.

    And a $3600 return plus three $4000+ returns is absolutely incredible- $15600+ from a $5000 investment 17-19 years ago.

    Ralph says it well. Any other money I ‘invested’ since then did poorly although we have some nice older compound interest growth Registered Retirement Savings Plans. But a lot of money just disappeared as groceries, home repairs, and into autos and so it is not available for the kids, and that summer job income gets pretty sketchy by March.

    I’m still sold on group RESPs.

  245. Hi All,

    We are in the shopping phase of opening an RESP account. We were approached by the Fondation Universitas (MER: around 1.4% + enrollment fees + the usual restrictions) (a group RESP plan available in Quebec). We are leaning towards an individual RESP.

    A part from the TD e-Series, anyone knows similar products available at other banks? We are looking for MERs under 1.4%. I called TD Waterhouse and I really liked the fact that you can set-up an automatic monthly plan without any transaction fee (for th e-Series Funds). The 50$ annual fee is a bummer but still better than BMO Investor Line that charges per transaction. What is the recommended asset allocation?

  246. Jonathan – to clarify, you can open up TD e-Series without (a) opening a TD Waterhouse account and (b) without even opening up a TD banking account. So in other words: No annual or monthly fees outside of MER. No other banks offer this type of thing to my knowledge.

    As for allocation I personally do: 20% bonds, 30% international equity, 30% canadian equity, and 20% us equity. I think most people do some variation along those numbers (note: my son is 5. When he’s 10, he’ll be at about 40% bonds). That’s because I’m a bit conservative; I’d have done better with a 0% bonds allocation but hey, I have to hedge my bet just a bit.

  247. Geoff – thank you for the info. The rep (called Director at the Bank, but, hey, all cashiers became Bank Directors when they started to introduce ATMs) at the branch told me that it was only sold through TD Waterhouse.

    Is your allocation considered aggressive? I am not second-guessing your choice, but I always thought that the main objective is to preserve the capital. How ofter do you change the allocation? Once every year?

  248. Yeah I figured that’s what they told you. They don’t know. There’s an article on this blog that talks about how to do it step by step. When you go to the branch, bring a print out of the step by step. I personally have done it. Part of the problem is the “investor advisor” you meet with doesn’t get any commission or credit for the sale which I see as a TD problem, not mine. But it means they’ll try to get rid fo you anyway they can.

    I consider my allocation moderately aggressive but not foolish. The main goal is to maximize returns while minimizing (not eliminating) risk for me. But then again, I believe that 13 years from now coca cola will still be sold in stores, microsoft will be around, people will buy ipads or whatever and so my investing reflects this (with the 20% bond allocation hedging 20 cents of every dollar). There are people who advise with a newborn to go 100% equity but I couldn’t bring myself to do that, even though I’d have done better with that than my 80% in the last 5 years.

    I don’t change teh allocation, though I do use the government match to shore up my %’s a bit.

    My plan is once my son is 10, to move up to 30% bonds and then basically do that every year until he’s about 15 and he’ll be in 80% bonds, 20% equity since I won’t have a lot of time to recover if the market goes down.

    You could always start at 40% bonds, 60% equity if you’re more risk averse.

  249. @Jonathan: I can confirm Geoff’s comments. I have set up a TD Mutual Fund RESP account for my own kids. The mutual fund account has no fees of any kind but note that AFAIK, the TD Mutual Fund account can only receive basic CESG. So, if your family is eligible for the enhanced CESG, you have to look elsewhere. You can set up a TD Mutual Fund account even if you are not a TD Bank customer.

    Again, my asset allocation is similar to Geoff’s (my kids are 6, 6 and 3). As they grow older, the portfolio will become more conservative. The point is young kids have a long time horizon and can afford to take risks but if you are unwilling to do so, just dial down the exposure to stocks. As Goeff points out you can do that by boosting the allocation to bonds.

    FYI, most of my posts on RESPs are filed here:

  250. I’ve said it before and I’ll say it again. Stay away from Group RESPs. I posted a few months ago and my motives were called into question. I said that I worked for one of these companies (in head office not sales) and didn’t think they were a good product. Well I no longer work for the company. I just couldn’t take it anymore and finally found another job. People I have no connection to this industry at all anymore. I really just want to help young families who are trying to make a decision in how to save for their kids education. We got hundreds and hundreds of complaints each year from contributors who were either disappointed with payout amounts or baffled by how the product works. Many of them simply (despite the salespersons best efforts) did not understand what they signed up and later regretted it. Almost all of them say they wish they had just chosen a simpler way of saving. Do what you want, I’ve said before it ultimately makes no real difference to me, but don’t say you weren’t warned.

  251. Thank you joe

  252. I enrolled myself into Heritage RESP plan just yesterday starting from just a meagre amount of $50 co I was not too sure of it. But now going through this forum I am 100% in doubt. So cud anyone suggest a better savings plan for my daughter, who just turned one…we guys are not good in saving..and I originally aimed at RESP with the savings point of view.

    • @rups: I cannot provide advice on what you should do. Group RESPs has a significant drawback IMO: when you sign up you have to absolutely sure that you will continue to contribute in the future. But things could change: a job loss, an illness or whatever. Group RESPs may have some flexibility but it is also possible that you’ll end up losing a significant chunk of your savings.

      If you are willing to DIY finances, then there are self directed RESPs offered through banks, mutual fund companies and discount brokers. Each has advantages and disadvantages and I would urge you to look into all of them before deciding on what is best for you and your family.

  253. Any comments about Children’s Education Funds Inc. (CEFI) please post it here:



  254. Group better then Single

    Hi Rups.

    First of all, I have transferred funds from RBC, Scotia bank, etc… where parents have been getting negative returns… Group RESP are good, no matter what all these professionals tell you. Its a worry free savings plan for your kid. Fees aren’t that bad, and for practically guaranteed returns, you can’t go wrong!!!

  255. Group Better: So you are advising people to lock in losses on stock markets to pay exorbinant enrollments fees and lose even more money? I wonder where your motivations are. They sure aren’t in the clients best interest.

  256. Hi everyone,

    Okay, this is a very, very interesting post. There are more than 60 RESP promoters in Canada, and 5 Major Group RESP providers. Of these 60 promoters, each have their own rules and regulations. This website gives a breakdown of the differences between the major group providers: I am a statician by trade, and have worked in finance in the past, 2 years away from completing my PhD. I definitly have done my research. From what I can tell, the Universitas Reeflex plan seems to be the only group plan provider that guarentees refund of membership fees, has the lowest membership fees based on monthly or yearly deposits, allows the kids until the 35th year of the plan to use the funds, doesn’t have depository fees, etc. The other four group providers state that the fees are paid upon the discretion of the company, and not to count on receiving a discretionary payment, and that the child has to complete a certain number of years to recieve all of the funds. With the Universitas Reeflex plan, the fees are guarenteed at maturity. The other cool thing about this plan is that the child can access all the funds when they first register for studies, or they can spread them out through their studies. They don’t have the hoops to jump through like maintaining certain gpas, etc. One of the reasons that I’ve found is that although all of these group plan companies claim to be non-profit, Universitas is the only one where the non-profit runs their management. The other four companies have this the other way around. If the child doesn’t go to school, Universitas gives the parents their principal, plus the parents can either put the interest that was earned on their capital and that was earned on the grant either into an RRSP or they can take it out on their income that year.

    Now at the bank, well, has anyone seen a profit over 17 years more than 2% unless you are in a high-risk or medium-risk fund. What is the average over 10 years? What are the conditions? What if your child doesn’t go to school? What types of post-secondary education can your child go to? What are the management fees that are hidden? It’s a bank, it’s for-profit, they want to make money. Also, what about mutual fund fees? There are many questions and many companies. Everyone should do their own research. Good luck!!!!

  257. Those who commented negatively on group plan providers simply don’t understand how they work.
    For parents who prefer to invest their children’s education monies i safe secure products with the utmost flexibility – group plans are the best.
    Bank plans invest your savings into mostly mutual funds & since 1998, many parents have lost everything including the government grant money (this should be regulated so that grant money can’t be put into mutual funds)
    Bank RESPs & Group RESP’s are two completely different vehicles.
    Parents must decide if they want to gamble with their savings (banks) or not (group plans)

  258. April: That is completely and utterly false. I understand how group plans work quite well. Also, banks will invest the money wherever you tell them to invest the money. Your post is full of lies. Which group RESP company do you work for?

  259. @april kay: I had to laugh when I read “flexibility” and “group plans” in the same sentence. Unfortunately, for parents who drop out of these plans, it is no laughing matter. Many of them lose a significant chunk of capital plus the earnings within these plans…

    Going by this and other posts on Group RESPs on this and other blogs, the overwhelming complains are about Group plans. IMO, that is a telling commentary on which of these products is a gamble.

  260. sounds to me like you’re the type who seems to know everything about everything, but knows nothing at all
    DO YOUR RESEARCH before commenting on what you know nothing about.

  261. p.s. the only way to lose money in a foundation based group plan is to opt out early – the whole idea is to keep it to maturity – try not paying your mortgage once you’ve committed – what do you think happens then?

    • group RESP …
      – kid goes to college early – may not qualify for funds
      – kid fails – may not qualify for funds to re-take course
      – kid takes too long to decide or drops out – looses money and goes to other kids in the plan
      – some plans charge to withdraw in addition to deposit

      a properly structured individual or family RESP
      – doesn’t care when you start school as long as you have proof of enrollment
      – doesn’t care if you fail – take the course as many times as you want
      – doesn’t care if you take a year or 2 or 10 off – change majors – or even change schools
      – doesn’t charge you fees to deposit into savings
      – doesn’t keep the money your investment has earned when you want to transfer out
      – doesn’t penalize you to stop contributing

      … anyone that recommends group RESPs either works for a company that offers it or is too proud to admit they’ve been royally scammed and is trying to save face

      I read and do comparative analysis on different products for a living … I have several licenses in several provinces … and I have seen first hand the look of horror and shock when I explain to some people what it is they really purchased from pushy sales people with scare tactics and lies to get them to sign up and stay in … because after all, the longer and more they can con someone to stay in the program, the more commission they suck out of trusting individuals who think they’re doing right by their kids.

      yes, there is no perfect product, and there is good, bad, and ugly with everything on the market, but at least have the decency to offer full disclosure and properly explain to people what they are getting into!

  262. It has been a long time since I posted here. I cannot spend the time to correct every mistake or error (even the well intentioned ones). I can see that there are a few group people on here, trying to look impartial. That bugs me as much as the next guy.

    I did want to say that regardless of a families choice, be it bank or group, there are good and bad with both. Not going to rehash that, my comments have been made clear above. I did want to correct, or clarify, a comment that CC just made. Because of his stature and that fact that he runs this blog, his comments will be given more weight than an average poster. Also, I have heard some folks talk to bankers and also get this same incorrect info.

    It has to do with the ‘dropping out’ comment. I cannot be exactly sure what CC meant by this, but for the sake of clarification, I will assume he meant pulling out the principle, which in effect collapses the RESP. To be clear: if an AIP or an EAP cannot be made, the interest is not given to the subscriber. (this is law – not decided by a bank or other provider) At a bank, that interest will be donated to a post secondary school – with most group plans (do the research, because not all have this benefit) it is given to the students. I have talked to people who go to the bank and are told that they can pull out their interest and principle at any time – this is not true. All RESP’s have to follow the rules. If an AIP or EAP cannot be paid, the interest is forfeit.

    Other than that, keep up the debate. 🙂

  263. Mark, Enrollment fees, otherwise known as “Lock in Fees” are a major scourge of the group RESP providers. That was what CC is referring to, not the laws which are universal among all RESP providers. These types of fees are usually not charged by banks and investment firms because their producs are good enough that if someone actually figures out how they work they don’t immediatly want to throw up and close the plan.

  264. Traciatim; just to clear up a misconception you seem to have;
    EVERYONE charges fees – if you actually believe that banks don’t charge fees, you’re delusional.
    Banks are “for profit” – Foundation plan providers are “not for profit”
    The difference is this: Fees in a bank plan are in the form of an MER – “management expense ratio” and although they are not charged directly by the bank, but by the mutual fund, that’s where the bank gets their cut – also MER’s may seem small, but they average 2-1/2 – 3% OVER THE LIFE OF THE RESP – 18years, and they compound, AND you pay these whether or not you are earning any interest.
    (Non-profit)Group providers fees are paid up front, so you don’t see any growth for the first couple of years, after which your money begins to compound – AND group providers refund your fees (in whole or in part) depending on how many years your child goes.
    Banks have never given anyone anything.(except maybe a free toaster in the 60’s – now they can’t even cough up a calendar)
    Bottom line: Group providers’ fees are 1/3 to 1/4 of bank fees and YOU GET THEM BACK.
    My daughter has a group plan – she’s in her 3rd of 4 years at university – I tripled my investment & got all my fees back.
    Nuff said…

  265. Traciatim – you must be able to read CC’s mind, because that is not what he had written. There was no need for you to hop in. No need to rehash everything all over again. You have your opinion, I have mine.

    To quote CC, “drop out of THESE plans . . . lose a significant chunk of capital PLUS THE EARNINGS within these plans”.

    He was specifically talking about capital AND earnings. By saying ‘these plans’, he is (innocently) leading people to believe that it is only group plans who do not pay interest to subscribers when they collapse an RESP. The way it was written could lead people to believe that banks and mutual funds pay interest to subscribers when they collapse an RESP, when an AIP or an EAP cannot be done. I was clarifying this. I was only talking about the interest. I did not contradict him on the capital or fee aspect – it has been talked about endlessly on this page. Again, why you hopped in to ‘clarify’ something that I hadn’t even talked about is interesting.

    Why you felt the need to hop in and start talking about fees kind of surprises me. There was no need, and it makes me think that you actually have a vested interest in some way? Just a thought.

    And to be clear, if I pull out my money from any fund that is in the negative, I will lose money. There is risk in that, which could be considered a gamble. With a bank, there is also the risk of not getting the grant. Over half of the families that I switch from banks to us have not received any grant. (most of these are many years old) If the families do not notice it, and demand the bank reapply, they don’t get them. (And when/if they do, they have lost the compounding growth).

    I am happy with what I have done, and after many years helping families, I am glad to be able to do it. To be clear, I do feel that everyone should get full disclosure before doing anything. I have, however, seen a couple of things from my time in this industry. First, there are some reps who will say anything to get the business. I have talked about that before, and I abhor it. Also, there are some people who cannot understand these things (any sort of financial things).

    I can guarantee that the vast majority of those folks who cannot understand financial matters (if they read this page) will not run to TD and open an account with some ETF’s. They will either hold off on doing anything, or end up at the bank with a GIC or a MF (most likely a GIC, as the lack of financial knowledge usually teams up with a low risk attitude). I will assume that you have good intentions with all of your posts, but, for the average person, you might just be confusing/scaring them. They probably will not be better off for having read your comments, for multiple reasons.

    Just my 2 cents.

  266. Traciatim,

    I would also take issue with your opinion statement: “These types of fees are usually not charged by banks and investment firms because their producs are good enough that if someone actually figures out how they work they don’t immediatly want to throw up and close the plan.”

    First of all, you again try to mind read. I would submit that banks and MF’s prefer the MER for two entirely different reasons. First, they can call it an expense and “honestly” tell investors that they have ‘no fees’. In their lingo, it is an expense, not a fee. You and I know that they have these MER’s, and we know how they work, but the average person doesn’t, and the banks know this. They know that the average person will use the word fee, so banks aggressively avoid having any charges that are called ‘fees’. ( I believe that this deception is intentional, and will continue to believe this unless someone proves otherwise). Secondly, because it is an ongoing, unseen fee, they can charge more. (Again, while claiming that they have ‘no fees’).

    I also take issue with your suggestion that people ‘figure out how they work . . .” You might have sat with someone who didn’t fully explain things to you, and you might have been silly enough to sign something before you understood it, but my clients aren’t in that boat. I explain everything – the good and the bad. I don’t want someone coming to me in 4 years saying: “You didn’t explain this”, or something to that effect. You assume from your experience that everyone in Canada is silly and uneducated enough to sign when they don’t understand. I actually find that the more educated and experienced the investor is, the easier it is to get them to enroll. They weigh the good/bad, and they like the upside quite a lot. You don’t – we get that.

    Don’t assume that your experiences/beliefs/risk tolerances are the same as everyone else in Canada. I can speak for myself, and hundreds of clients who fully understand the plan. We like it.

  267. Traciatim,

    It never seems to end. 🙂 I also take issue with your suggestion that the membership fees are there to ‘lock people in’. This simply proves that you don’t understand these plans. I do, and I haven’t been able to figure out a better way to make them work.

    Simply put, the non-profit foundations that manage these investments have extra money. They have to give it to the children who go to school. They also need to have a fair way to divide it among the children who are going. Hence the units.

    People can do many different types of plans, including lump sum. Those, however, get the families less units. Once Families understand how the plans work, they realize that they should have more units. Either way, they base their contributions on these factors. They can do many different types of plans: ie. lump sum and monthly. This allows them the flexibility, but also gets them as many units as they can at the time.

    I would actually make more if I got a rider on a higher ‘MER’ type of fee, but alas and alack, that is not to be. This way a person is able to buy a ‘chunk’ of the pool, and get the additional income that goes with that.

  268. @mark: By dropping out, I did not mean collapsing the RESP. I meant not able to continue contributions for whatever reasons. As you well know, if a subscriber is not able to continue contributions, the financial penalties are much worse in group plans than it is in self-directed RESPs.

    @april: RE: Costs. The costs of a group RESP are comparable with that of high-cost mutual funds. With self-directed RESPs, one has the option of investing in low-cost funds. Group RESPs come in only one flavour: high cost.

    It is misrepresentation to suggest that Group RESPs are non-profit but mutual funds are for-profit. Actually, both group RESPs and mutual funds, which are structured as trusts are non-profit. The providers of both these products are *for profit* enterprises.

  269. April, more misinformation from you. My RESP through TD had no fees on top of the MER, and the MER averaged about 0.4%. Sure you can go out of your way to find mutual funds with high fees, but that’s kind of silly to do. Unless of course you want to pay enrollment fees, an MER, and a montly payment fee . . . then I guess let the silliness begin and start shopping for a group RESP.

    Mark: So that entire rant is to say that all RESPs do not return any income earned inside the RESP upon early collapse, as stated in the CST prospectus . . . “If you do not transfer to a Self-determined Plan, we will
    return your Principal in full and transfer the income earned on your Principal to the Education Assistance Payment Fund to be shared among other Qualified Students” (From the May, 2011 one)

    But I’m pretty sure that’s not the way the law works. I couldn’t find anything on CRA’s page that states all income is to be stolen by the RESP provider in the case of an early collapse. Can you provide a link please?

  270. @Traciatim: You are right. Even if we take “drop out” in the sense that Mark is using, a self-directed RESP (SDRESP) is better than a Group RESP (GRESP).

    In a SDRESP, you can withdraw *all* your contributions.
    In a GRESP, you can withdraw contributions less enrollment fees.

    In a SDRESP, CESG that is not shared with a sibling will be returned to the Government.

    Earnings on Contributions and CESG:
    In a SDRESP, accumulated income can be transferred to a RRSP. Otherwise, the AIPs are taxed as income plus an additional tax of 20% (which is fair considering the Government kicked in an extra 20% on the contributions).
    In a GRESP, you forfeit your accumulated income.

    @Mark: For someone who claims to be knowledgeable about RESPs, your statement that AIPs from SDRESP plans are forfeit is utterly false.

  271. @CC – I guess that I should ask that you be a little clearer next time. As far as worse penalties, it depends on the plan chosen, and how long it has been in existence, as well as the performance of the SDRESP investment. That has been discussed in detail above. I think I have already said that your calculations of the ‘cost of the fees’ is a bit slanted. A simple “here is the total with 6% and here is the total with the fee structure” would have been accurate in depicting the cost. You showed a bit of bias in how you presented the numbers, by adding a ‘discount rate’ on the return of mem fees. All of the dollars in 18 years have enjoyed some discount (the later dollars less than the earlier dollars), so to discount only some of the dollars, and not all, is skewed.

    @Traciatim – first of all, do your own homework. If you cannot definitively say that what you are typing is true – don’t type it. Some folks might believe it. “I’m pretty sure that’s not the way the law works” really doesn’t sound convincing, and certainly does not hold up in a court of law.

    @CC and Traciatim – Why do you doubt me. CC, again, I do know what I am talking about. Please read my comments again. I can’t make it clearer than what I have already typed. But I will try.

    All RESP’s have the ability to provide the interest to subscribers or beneficiaries, under certain conditions. The AIP, the RRSP rollover, or the EAP. If a subscriber withdraws their principle, thus collapsing the RESP, and the conditions are not met to do one of the three options I just mentioned, then yes, the interest is forfeit. (nice word, Traciatim – “stolen” – take it up with your MP). You boys can argue all you want, and tell me repeatedly that you don’t think it is true, but I can assure you that it is. Check your contract with TD – there should be a spot there to designate a post-secondary institution in the case the interest needs to be forfeit. If not, call them and ask. Be prepared for someone to answer who doesn’t know what they are talking about. Odds are you know more about RESP’s than they do, and you don’t know this.

    @CC – whether or not MF’s and the non-profit foundation of the group plans are structurally the same is not the point (and I am not sure that they are). The foundation’s non-profit status is used to benefit from the left over interest of families that withdraw before maturity. MF’s do not offer this benefit, so in the points I have been making, there is a big difference.

    @CC – while we are talking about ‘utterly false’ I should point out where you are wrong. You state: “Earnings on Contributions and CESG: . . . . In a GRESP, you forfeit your accumulated income.” Seeing as how you are alluding to an AIP being an option, I will assume that the RESP in both cases has reached the point where one of the three options is available. If that his is the case, to be clear, in every group plan that I have looked at, they offer the same options as a SDRESP. Some even allow the RESP to transfer to a sibling who is not named on the RESP, or to a different, unrelated child (grant will not transfer), or the parent themselves can use the RESP (again, grant will not transfer). I would suggest that the banks don’t offer all of those options.

    CC – To your statement: “your statement that AIPs from SDRESP plans are forfeit is utterly false.” Please read my comments more carefully. I never said that.

    I love how you guys try to challenge everything I type, yet in the end, you are proven wrong. As a further note, when CC talks about someone withdrawing principle from SDREP, they can withdraw their principle, less any losses in the fund, as well as any fees. Any gains have to be taken out as AIP’s, rollovers, or EAP’s. So to say flatly, “this is better than that” leaves a lot of variables unspoken, as well as not accounting for people’s preferences and opinions. I am starting to think that you boys don’t respect other people’s opinions, and this blog is more about opinion than fact.

  272. I said I’m pretty sure because i have never read anything that states otherwise. I noticed you didn’t provide the link.

  273. @ Mark – relax. The simple fact is any position can be twisted, misinterpreted and worked around. I completely read what CC wrote as what he meant, but you’re right he didn’t specify. Just like if I said I was a pro-choice (I am) people might think I’m pro-choice for people’s right to choose a yellow car (I’m not).

    To me – and to most, let’s face it, the target audience for this thread are people investigating their options, so me in 2007 and not me in 2012, the proof is in the pudding.

    What is telling though to me is that most people who are expressing regret at having chosen group plans give succinct, specific retellings of their choices and the outcomes; and most people advocating group plans give vague descriptions of ‘saving money’ and ‘avoiding terrible bank fees!!!!’ with all the related hyperbole. While most people who advocate bank plans also give specific descriptions of their actions and specific returns on their investment (which in most cases are ‘average’).

    So in other words, if this were amazon, I read this as group plans getting an average rating of below satisfactory — with some people ranking them “excellent” and some people ranking them “horrible’ and most people ranking them “satisfactory” and bank plans as an average rating ‘satisfactory’ without much swing either way.

  274. Oh, but the fact that CC, Gail Vaz Oxlade and Ellen Roseman have all come out against Group Plans dunks group plans in the cellar for me in the end.

  275. @Geoff – it took me a while, but I did want to reply. To your point about CC, Gail, and Ellen, I would submit that CC knows more about GRESP’s and SDREP’s than both of the others combined. I have also read one of Gail’s books, where she talks about GRESP’s. Basically, I don’t believe either of the two have done much research on them – they have fully relied on a report that was very flawed. It was flawed for the same reason that a lot of the comments that you mention with people not being happy with a GRESP came to be. I have mentioned it elsewhere, but to be quick, I will reiterate that the report lumps in the old ‘use it or lose it’ plans with the new, more flexible ones. It is the equivalent to saying ‘don’t buy a Ford because people have complained that they don’t have powers steering or power brakes’. Yes, Ford used to make cars like that, but they don’t anymore. It has to do with comparing apples to apples.

    I will also point out that some people who look at these plans in detail like them. I am one of those people. But again, my opinion doesn’t count here, because it is against the norm on this blog. I would submit that the majority of folks who feel that they have a beef with GRESP’s will hit the internet and scream as loud as they can, while the vast majority of folks who like GRESP’s will never get on and tell anyone, why would they think to, and what is in it for them – nothing. A more accurate survey would be a poll of existing and past clients, and how they felt the plans worked for their families. We have grandparents who open plans for their grandchildren after they have seen their own children use the plans to go to school.

    While I don’t hate the market, I have less faith in ‘the market gods’ (as someone else posted) than CC and some other posters. I am very analytical, and not to go into too much detail, I think that our current society is built on debt. The market increases we have seen in the past 20-30 years were partially due to actual increases in GDP and the like, but largely due to increased gov’t and private debt. I read an article a couple of years ago that calculated that the total year over year increase of GDP in the USA, for the past 10 years, would have been almost 0 if the increased federal, state and local gov’t spending (debt) was taken out. That didn’t account for increases in private debt. There are people out there who don’t have the faith in the market that you do, and would like some of their money in a safe investment. The largest funds out there are fixed income.

    Here is a good article to read. (A bit off topic, talks about pension funds).

    After thinking for a while about a good way to explain how I see these plans, I decided to create a hypothetical ‘Survivor RRSP’(SR). (To be blunt, I think a Bank or Insurance company who did this would make a fortune).
    The rules of the SR are as follows. People can sign up and contribute to it. They are grouped in cohorts, depending on the age that they will turn 70, and start to draw the income for retirement. (Men and women in this example will be considered equal, even though women tend to live longer). The more money a person puts in, the larger a ‘slice of the pie’ they would be entitled to, and therefore the larger the costs. They would not own the interest earned on their investment. It would be in a group for the cohorts of that particular age. At any time they can stop putting money in, and convert to a lump sum investment. They can also pull out their principle (less fees) at any time. If they die, they and their estate lose all access to the interest (keep the principle). Basically, it rewards those who ‘stick with it’ and those who actually live long enough to retire on it. The payouts would depend on those factors, as well as the rates of return. What is cool is that the money could be invested in low risk investments, but because of the benefits of the ‘group interest’ process, they could expect to get a much greater payout than if they had done the same investments on their own. (As an aside, this is very similar to the CPP, except that we can’t opt out – lol).

    If a product like a SR were on the market, I might be inclined to invest in it. I can see the possibility of loss, but also the benefit of being one of the ones who get to benefit at the end. It could mean that I could have a comfortable retirement, by putting in a lot less money. Kind of a ‘communal retirement investment’. Now I know that to some this whole idea is abhorrent. They would see it as unfair, and it smacks of socialism. I see it as a way to force me to save, and rewarding me for doing so. If I enter into the agreement with my eyes wide open, and something goes wrong for me, I guess I could complain. I, however, would see it as a chance I took, and I would do it again, as the reward is worth the chance.

    While there are some similarities between this hypothetical SR and a GRESP, they are not entirely the same. In a GRESP, if a child decides not to go to school, the parents have a lot of options as to what they want to do with the money. I see it as a safe way for me to invest for my children. I understand the fees and risks, but I see the rewards as worth it. It will be a while until I see my kids use their RESP’s (I will beat them if they don’t go to school) and I expect to be quite happy with the results. But they are not for everyone. I realize that there are some bad reps out there who don’t fully explain the pros and cons, and I believe that is where most of the angst comes from.

  276. So I got a up until 2009 and decided to ask this really stupid question.

    I have a total of 4805 at CST.
    Yes, they got me at birth.

    I have been approached by a Financial Advisor from Primerica and he advised to cut our losses and invest in their RESP. Diverse Mutual Fund Portfolio with AFG.

    Now, I know nothing! I just know that after reading the amount of strand that I read, I am nervous.

    I don’t want to lose what we have invested thus far! But I don’t want to keep paying our humble $287/month.

    We can’t either. We just bought a house and money is tight.

    I inquired about the conversion, which cannot be done until my girls are 9. That’s another 6 years for the youngest!

    I was told I could transfer the RESP to an Individual from a Group. But at the end of the period I still am responsible for the amount that I would have contributed up until that point.

    We are looking at approx 20,000 more in $$ for the 9 yr. conversion mark to be able to close the acct.

    I am begging for advice here.

    Cut out now and lose the money or suck it up and get another job to pay? Or transfer to Individual and Pray that in the future I can make-up what i Owe (Sounds ridiculous, doesn’t it? I OWE to something that I started contributing towards out of my own free will as a savings, now I OWE THEM)?

    Your advice will be most appreciated.

    Thank You!

  277. Moose family; You do have options – contact your rep at CST, and ask to 1) put your plan on hold – you can do this for up to two years & lose nothing or 2) reduce your units to an amount that you feel is manageable. Sounds to me like you got in over your head with $287/mo & regret it now.
    CST & other some group plans have the options I mentioned & don’t wan’t you to lose what you’ve already invested.
    Good Luck!

    • if you put your plan on hold, many will charge you if you want to start up again … you will owe all monthly payments you missed PLUS and increases those payments could have earned

      you need to do a side by side comparison – what will it cost you to get out vs what will it cost you to stay in and see it through – in addition to the potential increase in gains (if any, depending on time horizons)

  278. A little extra; starting an RESP is a bit like buying a house in that it’s an 18 year commitment (except that you are saving money for your children’s education) instead of 25 or 30 for the mortgage.
    Also, fees are upfront, yes, and like a mortgage(where nothing comes off the principal for @ 5 years), you won’t see much growth for the first 2 years or so – afterwards it will start to compound eg. the return on the 18 year gov’t grant of $7,200 is just over $7,000.
    Incidentally, CST & Heritage were once the same foundation (way back in 1965) and both have a history of
    refunding your fees at maturity.(although they don’t guarantee the return of fees, there hasn’t been a year yet in which they haven’t)
    Hope this has been helpful.

  279. @ April – starting an RESP is *nothing* like buying a house with a mortgage.

    When you take out a mortgage, you are taking out a loan and making a commitment to pay it back.

    When starting to save for your kid’s education, you are putting money aside with no commitment to keep doing so, and no money to you has been fronted to you either. At least, that’s what you are doing with a Self directed resp.

    This is why group resps are so terrible in my (and others opinions) – with my self directed resp, I can literally click ‘stop payments’ and whatever funds are in my resp accounts stay there. No penalties, no rules, no nothing. Group resps penalties abound simply for real life happening.

    @ MARK – since you’re the most informed on group plans, why don’t you give some advice to Moose Family on exactly what he should do?

  280. @Geoff,

    Why did you assume MF was a male poster?

    I will accept your challenge, with a caveat – nobody on this site should be giving financial advice to others, as we don’t know their personal situation, we are not licensed for that (or other) products, and there is no way of insuring that what is typed on this page is accurate. I will, however, give general suggestions.

    @ Moose Family

    First of all, MF, I would submit that you take everything you read above and below your comment with a grain of salt. I would also say that you tread carefully with a financial planner that suggests you ‘cut your losses’ and invest with them. I am not saying that it won’t end up good for you – that is what you will have to decide. What I am saying is that it will end up better for the FP, as they will be getting more overrides. The biggest question I would have for them, if they were suggesting that I move money out of an investment, would be: did they read the products prospectus? Also, after reading the prospectus, what is the reasoning for the suggested move? If they haven’t read the prospectus, and they are suggesting you move money out of said investment, what are they basing their decision on?

    As far as what to do about the CST plan you currently have, that would have to be your decision. You would have to get accurate information on what options you have, and then weight out the pros and cons to all of them. Have you considered reducing the plan now, to what you can afford, and adding to it with lump sum contributions as you can, and in the future increasing it again if you can? I am not saying that the company that you went with has that option, but I would suggest that you inquire. (Every company is different, and some have multiple plans) That (it seems) would give you the most flexibility, and options for the future. Again, ask the company in advance of doing anything.

    As you weigh the option of staying with CST, or going with the FP (or anyone else), I would suggest you have the FP ‘earn their money’. Have them do an example of what they can do with the money that you pull out of the CST plan. Compare that against what the CST plan looks like it will do if you reduce it to an amount you can afford. Ask the FP what rate of return he would need to get you in order to break even with the option of staying with CST, and if you are comfortable with him being able to do that for you, go with him. Every family is different, and they all have their own considerations. What is right for you and your family might not be for the next family.

    Lastly, you came to this forum for advice, and you got some. The bottom line, however, is that it is your family, and your decision. Nobody out there will care as much about how much money you make than you. That means that you should also be doing a bit of the work. Make sure you read the prospectus. It would be unfortunate if you were to get incorrect information of the internet, and make a bad decision because of it. It would also be unfortunate if the person at CST that you talked to was new, was incorrect, or if there was a communication error. Read the prospectus and with anything you are unsure of, get it in writing. Ensure you know all of your options, then weigh the pros and cons, and then make a decision.

    Good luck with your research, and I hope it all works out well for you.

    @Geoff – you are right. With a SD RESP families can click ‘stop contributions’ very easily. And the statistics prove that is what is going on. That helps ensure that kids have much less money than they could have with a contribution schedule that was more defined. I know for certain my children have way more money than they would have if I went to the bank, or did a couch potato approach on my own. I would have clicked ‘stop contributions’ very early on, and I would not have started again. There is always something else begging for my money. (My wish list is endless) Again, I understood the plan when I signed up, and that was one of the features that I liked about it. I know myself, and I would never, on my own, put as much money away in 18 years as I have already put away (and I am not done).

  281. Mark – your advice to the Moose family is great – incidentally, I think “Traciatim” & “Geof’f”are one & the same, probably a hot shot young know it all, on the bottom rung somewhere in a bank/financial firm, who has very little knowledge and even less experience.

  282. @Moose Family: I would recommend calling the person who sold you these group RESPs and ask them to provide you with a list of options. These salespeople have been handsomely compensated for basically selling you group RESPs and it is incredible that other group RESP salespeople would come here and say it is all done with the client’s best interests at heart!

    If I were you, I wouldn’t blindly go with a financial planner either. After all, the FPs have an incentive to put you in products that earn them fees. If you transfer out of a group RESP now, you will lose a big chunk of your capital. You’ll have to decide for yourself whether you can make up that loss. IMO, I don’t think you can; certainly not with low-risk products.

  283. @april: There is no need to attack other posters here. Geoff and Traciatim are parents trying to do the best for their kids. They do not have an axe to grind here. Too bad, I can’t say the same thing about most posters who sing the praises of Group RESPs here.

  284. I wasn’t attacking anyone, just saying having had first hand experience with my daughter’s RESP, I was very satisfied with my group provider – I tripled my investment & got my fees back.
    These programs are forced savings plans – if you don’t stick with it for the term, then yes, there are always
    A friend of mine works at a bank & says even though bank employees are loyal & most have their kid’s RESP’s with their bank,of the CEO’s of the big 5, three of them have their’s with group providers – what does that say?

    • @april: I’m glad that Group RESPs worked for you. However, it is undeniable that a significant percentage of Group RRSP members are unable to continue contributing for whatever reason. These members would not want to lose a significant percentage of their contributions to enrollment fees, so if they are withdrawing, it means they are genuinely unable to keep contributing. That’s why a number of neutral observers hold the opinion that SDRESPs are a much better alternative, provided a parent is willing to do some homework and prudently manages the education savings.

      I don’t see how the education savings of bank CEO’s are relevant to this discussion. For one thing, bank CEOs are not everyday people. They are never going to have trouble contributing a measly $2,500 per year. Also, Group RESPs make up about 1/3rd of total RESP assets. Clearly, SDRESPs are the more popular alternative and deservedly so, IMO.

  285. As always April, you are completely wrong. In both your description of comparing a mortgage to an RESP and your assumptions about other people. I guess giving out terrible advice is universal to group RESPs whether it be frum their scummy used car commisssioned sales people or their delusional users.

  286. @ Mark thank you for responding. Your advice is good, although Moose family I would really consider asking Ellen Roseman for help if you get stonewalled; some bad publiclity can sometimes grease the wheels in terms of getting fees reduced.

    Also Mark obviously I referred to moose family as ‘him’ because I’m a sexist, racist, terrible human being. That’s the only conclusion possible (not that I just typed that rather quickly on my lunch break).

  287. @ CC – I guess you pretty much agree with my suggestions for the Moose Family. 🙂 We don’t have to disagree on everything.

    @CC – I would agree that where bank CEO’s place their money is irrelevant to this discussion, but for a different reason. Their information is personal and confidential. No one can prove where Mr. or Mrs. Smith invests their money, so why talk about it. If it were true, however, it would show that people with more knowledge choose that option.

    As far as people only pulling their money out of group RESP because of lack of ability to contribute, here I can easily say that your personal beliefs are clouding your opinion. (Just because you start a thought with the word ‘undeniable’ does not make it so). I have talked to and know a few people who have pulled money out of a group plan. The single biggest reason I have seen so far is a bank or FP advising them to do so. By far. (Not being ‘unable to contribute’). It is usually done with the bank or FP having incorrect information on the group plan, and advising their clients based on that. You assume that folks would know both options, and choose what is best for their family. I would say that few people do the research. (Which is why I suggested the MF read the prospectus).

    This ‘lack of research’ is also the reason that banks do so much of the RESP business. You assume that it is because of their flexibility in contributions. I would submit it is more because of exposure, lack of full disclosure, and the plethora of companies/salespeople that promote them. People know their banks and trust them, they advertise like crazy, and they are on every street corner. The single biggest reason I have seen people choose banks over group plan is because the FP at banks tell their clients that they have ‘no fees’. You and I both know they have MER’s, but banks do not consider that a fee, they consider it an expense. It has almost nothing to do with the contribution schedule – lots of people like being kept on a regimented contribution schedule. It has more to do with banks not being required to explain to their clients the true costs of their investment. I know you endorse index funds, but I can assure you that banks do not when a client talks to them, and that index funds do not account for a large chunk of the SDRESP’s held at banks.

    You state that because SDRESP’s have 2/3 of the market, that clearly shows that they are the more popular alternative. You are assuming the all of the folks who choose the SDRESP have explored other options, and even know that group plans exist. I would submit that you are incorrect in that assumption. I would submit that most do no research at all, and fully trust their bank or FP. That Group plans have 1/3 of the RESP business, against the dominant marketing power of banks, mutual funds, and insurance companies is a testament to their popularity, among the people who do the research, IMHO. It is kind of funny how you can see a stat and take it a totally different way than another person can. Almost like we can all have different opinions, yet still get along. We can just agree to disagree.

    One thing that is undeniable, however, is that clients who chose group plans contribute far more to their child’s RESP than clients who choose SDRESP’s. (Of that, I am the proof. I can assure anyone who asks that I would have clicked ‘stop contributions’ very early in my children’s plan life, if I were at the bank. There is always another demand on my money. My wish list is long, and I like being kept on a schedule that helps me achieve my goals. CC, you might be the type of person who contributes the $2500 every year, on Jan 1st, but I am not. I would have delayed, procrastinated, and then forgotten. The single biggest thing that this blog is doing is encouraging people to go to banks, where they will, for the most part, end up with far less for their children than if they choose a group plan.)

    In regards to April’s comments about Geoff and Traciatim, I agree to a point. There is no need to attack other posters. I would submit, however, that you share those same words with Traciatim. Their most recent comment is far from “not attacking, without an axe to grind, coming just from a parent who is concerned about others”. Geoff at least shows some civility.

    @Geoff – your last comment made me laugh. (And I am not being rude here) I laughed because it showed me that with the written word, people can take it different ways. When I asked about the ‘him’ comment, I was alluding to the possibility that you knew the poster. When you came out with the other bit, I laughed. We were on totally different pages. Thanks for the compliment, by the way.

  288. Guys, people don’t always want to lower or stop contributing based on lack of funds. I originally signed up with Heritage and agreed to what seemed to me to be a very affordable amount which I intended to continue with. The rep talked me into “back buying” larger amounts to make up for lost time (6 or 7 yrs old, and a 5 day old baby). So I did (8 x’s the amount I intended to contribute monthly). When I told her to change the amount back to the amount we agreed on she said ” No Problem”. It was then that I discovered things were not as explained and I was given papers to sign to change the amount (and forfeit a huge amount). I refused to sign and insisted the rep return to my home to discuss further. She repeated herself over and over that things were not that bad. She also lied to me when she said there was no maximun for the government 20 % top up). So, in further research (took forever to get email answers (in writing) I discovered what a scam it really is. I first spoke to my bank manager who showed me his investments with Heritage and told me he realized it was a rediculous scam, but he had no choice but to stick with it and hope for the best…..NO FEES are guaranteed to be refunded, even in part……Read your prospectus!

    Rather than continue to debate with each other on the “what if’s” , I would gladly forward to any of you correspondence I personally have been having with Heritage, head office. They are nasty, making it clear that “All fees are discretionary payments. You should not count on these receiving these payments”

    For crying out loud, this is your childrens future! WHY would you even risk 18-20 years of an unsure investment ??????? And that is EXACTLY what it is. Keep control of your own finances.

    If anyone out there has figured out how to get out of these damn things and keep even some of your children’s money, I would really, really appreciate your advise; otherwise, I’ll continue to be the sucker my bank manager is…….

  289. @Jill,

    First of all, I would like to say that I was saddened by your story. I have said it before that ‘scummy reps’ make me sick to my stomach.

    That said, I am confused a bit by what your post says. You suggest that you are considering lowering or stopping contributions, but that it is not due to a lack of funds? You then say that you started to contribute a reasonable amount? You say that the rep convinced you to contribute 8 times what you originally intended to? I am asking theses as questions, because I am not quite sure that is what you meant. I do not want to assume, or put words in anyone’s mouth.

    The first thing I would suggest, if what I was assuming above is true, is that you should bring this matter to the attention of the manager of the rep, and demand that you speak to the compliance department (to file a complaint). Make as much noise as you can, because you want to put a spotlight on that rep. You need to do everything you can to show that the rep intentionally misled you. (If that is in fact the case). The reason I am suggesting that you do not go to the head office with it is because they are just following what is in the contract you signed. They have no way of knowing anything other than what is on the paper. (The compliance dept. works for the head office, but their job is to keep the reps in line). Without anyone telling the compliance department about reps that are saying ‘funky’ things, they have no way of knowing.

    I would like to ask, however, why you signed something that, it seems from what you have written, you clearly didn’t understand. You seem to suggest that the discretionary return of membership fees as being a shock to you. If you understood how the plans are structured, you would understand that while they can’t guarantee the return of membership fees, it is a mandate of the non-profit to return them, and to the best of my knowledge, all of the groups have done so every single year. My point, however, is that the regulators require that the discretionary nature of the refund of fees be disclosed everywhere they are talked about. You would be hard pressed to find any mention of the return of fees without the disclaimer that they are discretionary. That they are discretionary does not mean the non-profit won’t pay them, it means that it is possible that in some years that they don’t have the funds to do so. Either way, how could you have looked at any mention of them, without seeing the disclaimer about them being discretionary?

    As to the contribution you set up for, I am sure that any of the documents you signed would have had full disclosure of the fees, as well as how they are taken. Did you feel that you had read the information well enough, and that you were confident that you made a good decision at the time? The documents that you sign are regulated as to how they disclose information, as to make it clear. That is to protect the consumer, as well as to protect the company. When I hear a story like yours, I feel that the rep should be held accountable, but I also feel that some of the responsibility should be shared by the consumer. You had 60 days to glance over it, and realize then that it might not fit for you. (Or even decrease the contribution then).

    I can’t figure out what you mean by ‘unsure investment’. Did you base your whole decision to do this investment on a rep telling you that you would get your membership fees back? That is a bad reason to invest. I personally tell people that the return of membership fees is a bonus (under promise – over deliver :)), but even without it, they are making a great choice. Again, as all of these plans are invested in safe things, and consistently show positive growth, I don’t understand what you mean by ‘unsure’. To be blunt, I think that even now you do not understand how your plan works, just based on your comments.

    As far as your bank manager, was that his beef as well? And he manages a bank, yet he signed something that he didn’t understand? Again, the majority of the money you will get will be growth. Why you seem to be so hung up on the return of fees confuses me. If it was because of what the rep said, I again suggest that you file a complaint with the compliance department.

    I guess my final point would be that your complaint really should be with the rep, and a bit of the blame should also be shouldered by you. I like the group plan that I have chosen for my children. I find nothing ‘unsure’ about it. I fully read all of the information on it, and went into it with eyes wide open. If I were to now say ‘I didn’t know’, or ‘the rep misled me’, I would also have to admit I was lazy and didn’t read a thing before or after I signed up. It would be the equivalent of me going and getting a cell phone plan will Bell, and getting a free phone, after signing up for 3 years. At the end of 5 months, I could try to keep the phone, and demand that I don’t have to pay anything. The bottom line, however, is that I should have read the papers that I signed, and decided then if I wanted to do it. If a Bell rep misleads me, that doesn’t mean that Bell is bad. It means that the rep is bad, and that I should have done more homework.

    When I hear a story like yours, it always gives me pause to wonder. I have dealt in the service and sales industry for quite some time, and I know that communication is a huge thing. Sometimes we say one thing, and the person hears another. Sometimes communication problems are entirely unintentional. I know that in this industry the reps are ‘gauged’ on how many units ‘fall off’, and how quickly in the life cycle of the plan they do so. A rep who has ‘bad numbers’ is at risk of losing their license. As well, one or two complaints that are similar in nature can lead to the same thing. That is why I am so hard pressed to see a rep deliberately risky their livelihood. It seems to make no sense to risk a career over a few bucks. But, to be sure, not everyone is that smart, and I would also expect that the bad reps do get weeded out, but not before they create a few stories like this one. Again, I am sorry that you find yourself in this position, and I wish you the best as you become the ‘squeaky wheel’.

  290. @Jill, I would like to see the said e-mails. Could you print-screen them and put them in photobucket or something. Thanks.

  291. Dear All,

    I am amazed by the wealth of knowledge here and the intellectual discussion.

    I just had a son. Hence,
    1. Can someone please provide in a point format, the advantages and disadvantages of CST group RESP’s Vs Individual plans like GIC’s of TD Bank.

    2. Also, please let me know the hard questions that I should ask a CST rep. who is coming to see me next week.


    • @Nair:

      There are two advantages to a Group RESP that I can think of. One is its relative simplicity. You will likely receive help in setting up the account and you should be able to get some help if you run into problems. The second “advantage” is that you’ll receive a boost in your returns because some participants dropped out.

      The list of disadvantages is long. The main drawback is the relative lack of flexibility compared to self-directed accounts. And for what is essentially a bond fund, the fees are pretty steep.

      Hope this helps.

  292. @Nair,

    Congrats on doing some homework. I will say, however, that what you are asking is hard for anyone to do. Every family is different, and what is right for one family might not be right for the next. On that note, be wary of anyone who ‘tells you what to do’.

    That being said, there is lots of good information on this page, if you read it all. What I would submit is that you fully understand any option, before you do it. Don’t make any hasty decisions.I would also submit that you would do well to compare a few of the other group plans, before you decide.

    Once you have done all that, feel free to come back to this page, and ask questions. From there, you can do what is right for your family.

    All the best. 🙂

  293. Not sure if I posted this before but I was with Heritage. After investigating this further and watching a program on T.V. I decided to pull my plan and eat the $5000.00 in penalties; Heritage was delivering their promised 6% which I believe the put in bonds; however, I was worried about the inflexibility of their plan. My son is only 3.5 and the way University and Technical schools are going, I can see fundamental changes in the way education is delivered on the Horizon. For example, the Law Society of Alberta no longer has a Bar Admission course, it is now online. So who is to say one will sit in a classroom year after year like I did, 20 years from now? So not wanting to be be limited, I put the remaining balance in with the Alberta Treasury Branches Portfolio which won the Lipper Award. It has been earning between 6-11% since I invested with them. My brother with BNS is earning a whopping 1%; inflation is actually eating away at his investmnet so he is looking at moving to the good old Alberta Treasury Branches. Interesting enough, the ATB also has, from time to time, Alberta Select series for RESPs and RRSPs in which your money is invested in Alberta’s top companies, like Syncrude, where the principle is guaranteed.

  294. @Ravonar,

    You are starting to sound like an advertisement for the ATB. 🙂

    I have mentioned before, you pay for any ‘guarantee’. The ATB cannot put your money in the market and ‘guarantee’ you will have your principle, without some set of rules, as well as charging some fees in order to do it. (obviously, they cannot ‘guarantee’ that the market won’t go down. Check the TSX) Congrats on your returns, either way. You got in at a good time. 🙂

    Keep in mind, however, the 6-11% you have gotten was abnormal – mostly due to timing. If you are talking the ATB Compass Balanced Portfolio, it has the following posted returns:
    1 year – 2.64%
    2 year – 7.04%
    3 year – 11.66%
    4 year – 4.20%
    5 year – 2.51%
    inception – 5.63%

    While it has, IMHO, done well vs. other funds, it would be prudent not to let people believe that your returns are typical to the long term returns the fund has had, and that they will do that in the future. It appears that they greatly benefited from the recent bull market. They don’t even have a 10 year return. Time will tell, and I wish you well.

    I am curious, however, as to why you think that a child cannot use the group plan you were in, to take correspondence courses, or something like that? You state that was a concern to you; did you research if your child could, or could not? (for the record, they can). Seems to me you forfeited $5000, without doing a lot of research. If that is the case, do you think it wise to advise others, from a financial prospective?

    Just asking.

  295. Well, whatever is said , just confuse parents more and more, so i believe and ask parents to take a cautious step before deciding on anything, not just read these forums and make decesions on what the agents from the banking institutio or RESP representatives tell you here, think about your child , Do you want to put your money for your child’s eductaion on a uphill where there are numerous chances that if its hit its going to come downhill and put all your savings for your loved child in a jeopardy or on a staedy road that will help you reach your goal for sure. Its entirely individual parents decesion and I would advice every parent to think about their child first and if they want to have their education savings secure or put it on a dwindling boat which may or maynot give you the more, same or most likely LESS result.

    I know what I need to so , I want the funds that I am saving for my child to be in safe hands which will grow in the future ata steady pace even if its slow BUT will pay for my childs eductaion and that is what will give me satisfaction. Only when we start getting greedy to earn out of our childs education benifits for ourselves is when we start thinking about money making options, that money saved is solely for your childs eductaion so why not put it in safe hands which will at least cover that and make childs and parents life secure and happy.

    I do prefer group RESP and will ask all sensible parents to do the same …dont RUN away from it ..but go through the documents and decide after thorough research which one of the group RESP to chose …Thats the best thing available for your child so dont turn your back to it …else you are facing a real tricky option..THINK PARENTS.

  296. Very wise advice – parents must decide their risk tolerance before starting an RESP
    High risk involves financial institutions & bank RESP’s
    Low risk tolerances favour group plan providers

    • @ april

      It’s way too high a risk for me to go with group plan providers who offer no guarantees Re: paying back fees and flexibility Re: contribution amounts.

      I’ll stick with the big 5 banks since they weathered financial storms and are saints compared to the banks in the U.S.A.

  297. More lies from April. More like:

    Low Cost, flexible plans from financial institutions.


    Lock in fees and shady sales tactics from group RESP providers.

  298. Who cares what the fees or the inbetween costs are , at least they are clear enough to tell us what will be the final amount that will be given at the time or maturity , the parents are sure that they are going to receive at least that final amount listed on thhe document and that will solve the purpose of our childs eductaion…I feel sick of people who think of making money even on issues relating to their own childs education funds…comon guys let the parents decide whats best for their child and not influence them or CONFUSE them to go on a wrong track…they will be knowledgeable to decide what s better for their child and his future ..nobody else can do it for them ..and better do not confuse them with unsuitable options which puts their childs future education in jeopardy and darkness.We should indeed keep it at low risk else are we going to hunt for money in our old age for our children’s eduction.I still think group RESP is a better option for each and every parents when they are thinking about their child future eductaion.

  299. @april, @Aarav: Your claims are demonstrably false. Self-Directed RESP *does not* automatically mean “high risk” investments. A parent can simply invest in GICs if that’s what they are comfortable with.

    I take issue with claims that “Group RESPs are a better option for *each and every* parent”. Must be a Group RESP salesman.

  300. Traciatim – Again, your knowledge of this subject is quite obviously self-taught and self serving.
    Let me educate you:
    RESP’s in Canada include 60+ providers, most of which are banks and financial institutions (life insurance & investment companies )the majority of which will invest your savings into mutual funds – there are no guarantees with these, your principal could be lost and your grant too & if your child doesn’t pursue post-secondary education, you would have to pay the government grant back out of your own pocket – also the fees associated with these are called MER’s (management expense ratios) which compund over time and will usually eat up as much as 1/3 of your investment.
    In 2011, the five big banks in Canada paid out less than 2% on their RESP’s
    Group providers are fewer and some of these are non-profit foundations – this will explain the higher rate of interest earned (4.7 to 7.4% in 2011) Students also benefit from additional monies from attrition and enhancement, and group plan fees are up front, yes, but some providers refund some or all of your fees at maturity – you will never see a bank return your fees (or any mutual based investment)
    Investing in bonds or GIC’s is certainly safe, but you won’t collect any government grant unless you’re in a registered RESP – this can mean 20-40% more money for your child. There is $7,200
    in grant money for each & every child in Ontario – in 18 years, the interest on that 7,200 is almost $7,000 – parents just have to go after it with a reputable provider.

    Aarav – You misunderstood my meaning – there are some RESP’s that offer both types of investments, yes, but keep in mind that the very term “self-directed” is false, as you personally are not directing anything – you are trusting your provider to decide what’s best for you. Also, I said that your chioce of provider will be determined by risk tolerance, and parents who want to make a killing in mutual funds
    shouldn’t gamble their children’s education savings in that pursuit.

  301. Knowledge First Financial Group RESP: Buyer Beware. No representation from the sales representative.Did not hear from her for 2.5 years, when I called was referred to customer service. Non transferrable between family members unless we had invested in more units with a new product that came out in 1995. Did some one explain that: no just sent out a mailing. Bottom line I was naive and I end up getting less than my intial investment since my daughter is not enrolled in a 2 year program. Do not invest! Might as well have kept this money under my mattress!

  302. Hi all,
    just got more confused reading all posts from 2007 onwards 🙂
    anyways what about these guys “Industrial Alliance, Insurance and Financial Services Inc.”

    i am a new landed immigrant so please guide me in present conditions .my profile needs higher returns than risk.

    further can u also help which c. resp rep. earns the highest commissions so if i may can endorse the product and buy myself..

  303. PLease heed some simple advice.
    DO NOT invest into group RESP’s!!
    you are hit with massive fees, and are committed to keep ‘investing’ with that company.
    Do not let anyone else invest for you.
    We started a family RESP for our 4 kids years ago at TD Waterhouse.
    Go to a big bank online broker or reputable discount broker.
    Keep it simple.
    Buy shares in a blue chip dividend payer. [BCE, or a pipeline, or bank stock]
    We have JE, ENF, IPL, and BPF.
    DRIP all dividends.
    We have invested about 92K,and received $18K in CESG’s.
    Our account is now worth $110K, BUT we have had $50K in withdrawals.
    Contribute diligently, learn the rules, let time work its magic.

    • @Slick:Your post begs for more information. It is of the utmost importance how much you have contributed and on what kind of schedule. If I have read your post correctly, you have contributed 92K to receive a return of $110K, $18K of which were CESGs, which means you are only ahead the $50K that you have withdrawn. Do you realize that a Group RESP with my provider would have yielded over $250,000? I’m assuming that you have 3 children and that you have almost maxed out your $7,200 lifetime CESG limit between the children. I’m also assuming contributions of $150 per month per child (which equals roughly $90K over 18 years).

      • Bob;
        my numbers stand on their own, and there are 4 children in the plan. Only one left under 18 now tho.
        you commented that your Group provider ‘would have yielded over $250 K’, not that it did yield that.
        If you can get your group provider to relinquish that kind of money, go for it.
        Also, the CESG lifetime limit is $7200 per beneficiary.
        My point is that a group plan swallows your yield with the restrictions and fees they consume.
        penalties for changing to another provider, strip the plan.
        The biggest winners are the salesmen. parasites.
        But if you are happy with that, God bless.

  304. Please can someone help with a reasonable advice? I have a son about 6 months who I will like to open an RESP, but will does not really understand the various options, though I am thinking of going with a self directed RESP, due to its flexibility, but I am wondering if I will be the one responsible to remind the government on when the grant is suppose to be paid? Does anyone when and how the fees are charged? when will be the best time to move from Self Directed to a group plan if I decide to do so in future? Thanks

  305. @ Peace – okay here’s my advice as I’ve been in that situation.

    First, you have a 6 month old which is exhausting. You may not know this, but you can apply retroactively for grants back up to 8 years, so you can get some sleep if you want and not lose anything.

    I (and CC) strongly recommend a self-directed RESP at a bank. If you just qualify for the 20% grant (which is the majority of people) you don’t need to remind the government, you make your contributions and then every month the government matches 20% of your last month’s contributions automatically. Fees are always charged regardless of who you use, whether it’s a bank or group. The only difference is sometimes ‘fees’ are hidden as management expense ratios (MER) or their hidden as ‘enrollment’ or whatever. It is my and the majority of people here who aren’t selling group plans that a self directed plan that charges 0.5% (half a percent like the TD eSeries) is quite reasonable. There is no good time to move to a group plan ever in my opinion. There’s no real benefit.

    • Thanks so much Geoff! Do you have an Ideal on what I can do to secure the past grant? I may not be eligible for the 20% grant by the time I file in for tax this year because my family financial status changed, I learnt there is an addition grant of 10%, does the bank help to secure that as well? Please do you know anything about the self-directed plan in Heritage, it is called impression plan? Thanks

    • Bob must be a Group RESP salesman. In my experience they are the only ones who are so enthusiastic about them!

      Let’s address some of Bob’s criticisms of self-directed RESPs offered by banks:

      1. Banks are in it to make money.
      That’s true. So are Group RESP providers. Yes, the Group RESP is set up as a trust, which is non-profit. Guess what? So is every mutual fund out there. Yes, that’s right. Every mutual fund is a trust owned by unit holders and operates as non-profit.

      BUT… the management fees paid by the mutual fund to its manager is the source of profits. It’s exactly the same with Group RESPs. The enrollment fees, management fees etc. are received by a for-profit entity.

      2. You can lose everything in a self-directed RESP.
      This is true as well. If you gamble with your RESP funds, you could potentially lose every penny of the principal and grants.

      BUT… to my knowledge, no one recommends investing RESP funds in penny stocks or a single company that could go bankrupt. If your child is young, you could invest most of the funds in a low-cost index funds that track the broad market. Yes, you are taking risk in the expectation of higher returns. If that sounds too aggressive for you, you could always open up a self-directed RESP at a discount broker and invest all your money in GICs. Your principal and grants will be fully guaranteed.

      3. My Group RESP returned x%.
      Group RESP salespeople frequently make this claim. And it is definitely stretching the truth. What they mean to say is that the portfolio that the Group RESP is invested in returned that number. This is not rocket science. You can obtain roughly the same returns yourself. For example, XBB, an ETF that trades on the TSX and is mostly invested in Govt. and Provincial bonds had the following returns as of April 30, 2012:

      1 Year = 8.63%
      10 Year = 6.4%

      You have to keep in mind that a Group RESP subscriber does not earn the returns the underlying portfolio did. That’s because a Group RESP subscriber paid up a large chunk of their capital upfront as “enrollment fees”. These fees *may* be refunded but only nominally. In other words, subscribers do not receive the returns that the enrollment fees could have earned. Now, granted, subscribers share the income earned on the capital of subscribers who have dropped out. That offsets some but not all of the loss of the earnings on the upfront fees.

      4. A Group RESP subscriber can transfer to an Individual Plan for a $20 fee.
      This is an outright lie. Yes, a subscriber can transfer to an individual plan. However, the fees are much more than $20. First, you’ll lose the significant chunk of the account that was paid as enrollment fees upfront. Second, you’ll lose the income earned on your contributions. Basically, the subscriber will lose a big chunk of their account, not just $20.

      You don’t have to take my word on this. See the Knowledge First prospectus. Page 29.

  306. Peace, I have to disagree with Geoff. Your principal is secured in the Group Plans, whereas you can lose everything, including the grants when you choose a self-directed RESP. Banks are in the business to make money, yet people seem to prefer to gamble with them, even in uncertain economic times. The power of advertising is incredible. The more advertisements you see, the more “friendly and helpful” they seem. I don’t know about the Heritage self-directed plan, but if you are intent on self-directed, ask them if they guarantee your principal contributions and grants. That is the only way to go, in my opinion, when you are trying to save for your children’s education. The way I see it, I gamble on the stock market with money that I am prepared to lose…and I am NOT prepared to lose funds allocated for my children’s futures. Group RESP providers are restricted on the types of investments they can make – which are usually governement-backed, secure investments – and yet their returns beat the heck out of the banks. In my opinion, there is no reason NOT to go with a Group RESP provider over the banks.

  307. 1) RESP matches are based on calendar year, not taxation year if that makes things clearer. The 20% is provided regardless of income, this is the Basic Canadian Education Saving Grant which matches a maximum of $1000 in one year. So let’s say your child was born in 2011. This year (2013), you could put in $5000 and get $500 for 2011 and $500 for 2013. Next year, (2014) you could put in $5000 and get $500 for 2012 and $500 for 2014. Then you’re caught up for 2015. I don’t know how you designate the year match though, you’ll have to find that out yourself as I started the year my son was born and never had to backdate.

    I think what you’re talking about for the additional 10% is the Additional Canada Savings Grant available to families with incomes below a certain threshold. I’m not under that threshold so don’t know, though I think the e-series fund DOES NOT automatically get you that money, you may have to pursue other options for that or at least ask lots of questions.

    I don’t know anything about the self directed plan in heritage, I would stay away myself, those places just leave a bad taste in my mouth. I’d just use a bank (not saying banks are perfect, but they are better in my opinion as they offer flexibility in leaving or changing our mind with minimal penalty).Self directed by the way is a lot scarier than it sounds – it might be self directed but once you pick your index funds which buy a little bit of everything for you, it’s as hard as paying a bill online.

    What you should do is (a) ask lots of questions and (b) get answers in writing and (c) most importantly take your time and get some sleep. Do not rush this or get pressured into doing something you couldn’t explain back to your mother. you can always just keep the money in a regular savings or chequing account and then move it over in a year.

  308. Peace, I’m just offering my opinion here. Bob, I’m confused – just because it’s self directed DOES NOT mean you have to invest in the stock market at all if you don’t wish. For instance, with a self directed account Peace could invest her resp entirely in the td e series bond fund, which breaks down its holdings as following:

    Asset Name % of Total Assets
    Bonds – Government 70.6%
    Bonds – Fixed Income 28.2%
    Not Reported – Asset 1.1%
    Cash Equivalent – Asset 0.1%

    This is probably awfully close to what Heritage is investing in (afterall, it’s not like they have special access to bonds the government doesn’t sell to banks) but with far less paid in fees and most importantly, far far fewer restrictions on how you can stop contributing. With group plans, the lack of flexibility is a real killer, along with the distastefulness of benefiting from other parents who have to forfeit their contributions because life (divorce, death, illness, job loss) hit them hard. Google group resp plans – gail vaz oxlade, ellen roseman, moneysense magazine, etc all do not suggest using them.

    And incidentally, saying the banks are in the business of making money somehow implies that heritage could stay active if it was the business of losing money, which doesn’t make sense but is a typical boogeyman argument that doesn’t hold up on reflection.

  309. I signed an application for cst last week. The papers say I have 60 days to cancel. Does this mean if I cancel tomorrow I lose 0$?
    Thank you
    PS no money has been withdrawn from my acct yet

    • @William: I think you should be able to cancel without any penalty because you are within the cooling off period. Please contact CST to make sure there are no penalties just in case. Hope this helps.

  310. Geoff,

    Saying that the banks are in the business of making money only implies that Heritage could stay in business by losing money if you infer it that way, which incidentally, would be creating a strawman argument. What I meant was that banks answer to CEOs and shareholders, while Group RESP providers are non-profit organizations. They cannot keep excess profits, so they are free to share this revenue with the students they serve – and most DO!

    The TD e-series looks good, by the way, but I wonder if their returns can match the 13.2% I received from my children’s Group RESP plan last year?

  311. Bob I suspect this argument could go in circles – The organization might be non profit, but the salespeople are definitely for profit (incidentally, you were the one to bring up the idea of why banks are in business, I merely stated the obvious).

    I have to ask – of that 13.2% return, how much came from attritition of parents who couldn’t keep up their payments or who’s children chose programs your group plan doesn’t provide coverage for? Because I know how much the bonds your account invests in returned in 2012, so any excess has to have come from somewhere, no? Personally I find this veyr unappealing, but an individuals’ mileage may vary as they say.

    • @Geoff: Bob is right about the 13.2 percent return for the year ending April 30, 2012.

      XBB, which is invested mostly in Govt. of Canada and Provincial Bonds returned 8.63% for year ending April 30, 2012.

      The difference between the two can be attributed to the fact that a portion of Group RESP funds are invested in market-linked GICs and likely marked-to-market in reporting returns.

      5-year returns of the Knowledge First Group RESP investment portfolio is reported as 6.6%. 5-year returns for XBB for the comparable period is 5.8%. Again the difference is probably due to market-linked GICs in Group RESP portfolios.

  312. Geoff,

    People in non-profits do not work for free, nor should they be expected to work for free. They provide a valuable service, after all. I suspect that you are again missing the point of my comment. Non-profit organizations have no CEO or shareholders to whom to siphon profits. Non-profits cannot keep excess profits, which must be donated to a cause of their choosing. My provider chooses to donate the money back into the plans of the students who have plans with them. All of their expenses and fees MUST be above-board and transparent, otherwise they would lose their non-profit status. This has NOT been my experience with the banks.

    By the way, of that 13.2% return, not one penny came from attrition or discretionary top-ups – those are in addition to the exceptional rate of return. There are myriad strategies for bond trading, including negotiating preferred buy/sell prices for 35-40 years down the road and selling/renegotiating new prices as conditions change. Bond investment at that level is actually quite complicated, so forgive me if I question your knowledge of the return on investments in 2012. Check out the prospectus – you can find it online.

    My provider (Knowledge First, formerly USC) ALSO tops up the plans with excess profits that they make, but that is not included in the 13.2%. Those discretionary top-ups actually far exceed the enrolment fees – consistently. Even though the top-ups are termed discretionary, I have been assured that the company has never missed a year of paying these top-ups. Back to the 13.2%: that is the income stated in the 2012 prospectus. The 10-year return on investments is “only” 7%. Of course, this 10-year figure includes years like 2008-2010, which were not good investment years across the board.

    You seem to have a problem with “attrition” – and as a parent I can definitely understand that. However, with my provider, if my kids decide to go to part-time studies or (egads!) even take a short training program, they can transfer their plan to an individual plan with no loss of the income that will have accumulated and there is no need to become part of the attrition figures.

    You and others on this site are misrepresenting the options available to parents who decide to go for the higher payouts of Group RESP plans to fund the high future costs of their children’s education. I haven’t seen anyone mention the fact that Group Plan providers give students the option to transfer from the Group Plan to an Individual Plan at any time before plan maturity, yet they do give that option. If my boy decides that he wants to take a short training program instead of 4 years of school, he can transfer to an Individual plan for a $20 (I think) transfer fee. Simple and flexible. Plan maturity can also be deferred if necessary. This actually gives a great deal of FLEXIBILITY to the students and peace of mind to my wife and I.

    I, for one, am tired of having the banks making a consistent profit off of my money and giving me in return a very small sliver of the pie. I will continue to choose alternatives to inadvertently contributing to the ever-growing fortunes of our banks. Group RESP plans are a wonderful alternative to supporting the banks.

  313. One last thing. Customer service with my Group RESP provider FAR exceeds that of the banks. The sales agent who helped my wife and me open our plans is ALWAYS available to discuss any questions or aspect of our plans, and she makes house calls, if necessary. Her knowledge and professionalism far exceeds that of the bank representatives that I have spoken with regarding RESPs. At the banks, I have been transferred from agent to agent, and I have had to explain/re-explain my situation/concerns/questions anew each time. Not so with my agent. She takes care of the paperwork and the footwork for me.

    I honestly cannot believe that anyone would suggest to others to leave their Group Plans and go to the (ugh!) banks to be treated like an insignificant number.

  314. @ Bob, it sounds like you and I just will have to agree to disagree based on the evidence I’ve seen. Namely: if it were really easy to stop contributing to these group resp’s with only a $20 penalty, I don’t think there’d be pages of stories of people complaining of the opposite. Same with getting money out the back end when your child is done and wants to do a 2 year course at a community college that the government recognizes but the group resp provider doesn’t. I can’t reconcile those two ideas – that it’s easy to change these flexible group plans with the notion that it can be done for a simple $20 penalty. As for your return, thanks to CC it appears that’s likely what you would have gotten anyway from a well balance portfolio.

    And in any case, for me personally the biggest deal breaker is the idea that even one dollar of my son’s education could be paid at the expense of my neighbour’s daughter forfeiting fees and not able to attend post-secondary. Even one dollar is too many.

    • Geoff, I suppose you’re right – we’ll have to agree to disagree. By the way, I’ve heard PLENTY of people complain about bank RESPs. Specifically, I’ve heard the complaint that they have lost money over the course of 18 years (i.e. their return was lower than their principal investment). Then again, sometimes we “hear” louder those stories which support our perspective. Before I agree to disagree, however, I’d like to comment on some things from your last post:

      I don’t know about other companies, but my company gives me the explicit right to transfer to the Individual plan at any time for $25 (I said $20 in my last post). Under these circumstances, those who are having financial difficulty are able to transfer and simply hold the investment until maturity. There is no need to profit off of them.

      Finally, if the chosen educational institution is recognized by the government, it WILL DEFINITELY be recognized by a Group Plan provider. Why wouldn’t it? The restrictions on institutions are set by the government in the first place to minimize abuse of the RESP program (and collection of grant money).

      Peace to you, Geoff.

  315. @ Bob – please note that CC and I are recommending a very specific approach to investing, not turning over investing to the bank carte blanche. Rather, we are recommending index funds which charge a management expense fee of less than the 0.70% that Knowledge First charges (page 8, its own prospectus) which incidentally doesn’t include the years of contributions that count 100% towards fees.

    Also, as a question, in the same prospectus it says for group plans: “payout is potentially higher because students who qualify for education assistance payments can share in the income left by plans that close before they mature or by plans for students who don’t qualify”. So a question – if it only costs $25 to change plans and most schools are recognized, why would anyone leave their money behind? How can their be any top-up at all?

  316. @Bob: See my comment upstream as to why your claim that a subscriber can transfer from a group plan to an individual plan for $20 or $25 is flat out wrong.

  317. Wow, I am beginning to understand why some of you are so negative about Group Plans: you just don’t understand them. There is a LOT of misinformation out there and the negativity seems to be stemming from that misinformation.

    Geoff, if an investor/parent is not disciplined enough to make the phone call to request a transfer from the Group Plan to the Individual Plan, I highly doubt they would be disciplined enough to follow the course of action that you and CC suggest. In my opinion, the majority of the people who have lost their money in Group Plan investments (and then gone on to complain to everyone who will listen) would lose in any venture that required even minimal monitoring and/or decision-making.

    Geoff, when you compare the MER that your bank funds charge and Knowledge First’s management fee, you are comparing apples and oranges. Your fund MER is charged annually on ALL assets, principal and income, in the fund. Knowledge First’s 0.7% management fee is charged ONLY on the pooled INCOME. This is a huge difference. Furthermore, Knowledge First’s Group Plan reported net investment return of 13.2% was AFTER the management fee had been deducted. The management fee is charged to the pool, not individuals, and the stated income is net of the management fee. Before the management fee, the income would have been 13.9%. As I said, apples and oranges.

    CC, Your claims about transferring from the Group Plan to the Individual Plan are dead wrong. Transferring to an Individual Plan does not incur any additional enrolment fees at Knowledge First. The transfer is a straight-up transfer. The enrolment fees are considered to have already been paid from the contributions to the Group Plan. In addition, there is no absolutely loss of income after transferring. I have to stress: it is important to realize that there is NO LOSS OF INCOME when you transfer from a Group to Individual plan. Whatever you have earned to date is YOURS.

    My friend recently switched from his bank to Knowledge First (on my recommendation and after months of discussions), even though months earlier he had chastised me for being a “Groupie.” He mockingly asked, “If Group Plans are so superior, why doesn’t everybody go with them?” I truly believe that the answer to that question is “Misinformation and ignorance,” in addition to clever marketing by financial institutions. As I mentioned, my friend has since switched to Knowledge First.

    • @Bob: Your claims on both the MER and transfers are incorrect. MERs are charged on total assets under administration whether it is a group plan or mutual fund. In Knowledge First’s case, the portfolio MER is 0.7 percent. The MER is *deducted* from the plan income. That doesn’t mean the MER is charged only on the pooled income. Check prospectus Page 8:

      “The Management Fee weighted average (calculated on a market value basis) for the 2012 fiscal year was 0.7%.
      • Calculated based on the total amount all subscribers have in the group plan.
      • Deducted from total income monthly before income is allocated to your plan.”

      See Page 29 for details on what happens when you transfer to an Individual Plan.

      “the income earned on your contributions will remain in the plan and be distributed to other students in the group plan with the same year of eligibility”.

      For someone who claims others of “misinformation and ignorance”, I ask: who is right, you or the prospectus issued by the Group RESP?

      • @CC: I believe I owe you an apology on one count: it seems I misinterpreted the management fee – it looks like it IS calculated on the total amount all subscribers have in the plan (not just the income), just as you said. However,I don’t believe this would include the grant because grants are held in a separate account until plan maturity – I want to look into that further. At any rate, this is not a big issue for me: the returns expressed are AFTER these deductions from income. Last year’s return was 13.2% after deduction of these fees.

        As far as transferring to an Individual Plan goes, you are wrong. Page 29 does not only cover transferring to an Individual Plan, but also transferring to any other RESP. You should have read the parentheses that immediately followed the bullet-point you quoted:

        “How it works…
        • the income earned on your contributions will remain in the plan and be distributed to other students in the group plan with the same year of eligibility (if you’re transferring to the individual plan, you can take your income – see page 27)”

        On both counts the prospectus is right, of course.

      • @Bob: Now go to Page 27. Here’s what it says:

        If your child doesn’t qualify for education assistance payments in the group plan, you can transfer the contributions, income, grants and grant income in your plan to the individual plan for the same child any time before your group plan matures. The child must be under 19 years old at the time of the transfer.” (emphasis mine)

        In other words, you can’t simply request a transfer to an individual plan (due to financial difficulty, for instance) as you claimed in your comments:

        “I don’t know about other companies, but my company gives me the explicit right to transfer to the Individual plan at any time for $25 (I said $20 in my last post). Under these circumstances, those who are having financial difficulty are able to transfer and simply hold the investment until maturity. There is no need to profit off of them.”

        Can you provide us in writing that Knowledge First Group RESP allows transfer from Group Plans to Individual Plans at any time for any reason while keeping the contributions, income earned on the contributions, grants and income on the grants (but not the initial enrollment fees). I’d be happy to stand corrected.

  318. @CC: Just be gracious and accept that you are wrong. Page 27 simply gives a scenario under which someone might consider transferring to the Group Plan. I just got off the phone with customer service and they verified that: (A) Any subscriber may transfer from the Group Plan to the Individual Plan at any time for any reason (which need not be divulged) before plan maturity (maturity can be deferred, if desired) and transfer 100% of the income that accumulated in the Group Plan to the Individual Plan; (B) The transfer fee is WAIVED for this transaction (I previously said that there was a $25 transfer fee); (C) Contributions can be stopped once in the Individual Plan for as long as the subscriber wishes – until plan maturity, if (s)he wishes.

    In other words, you CAN simply request a transfer to an Individual Plan at ANY time before plan maturity, and you can keep your reasoning to yourself. They do not need to know the reason. This can be done when your child is age 5, age 15, age 18…

    By the way, just so we are clear, you can transfer your Principal-minus-fees (meaning that you do NOT need to pay the enrolment fees again), 100% of the income, 100% of the Grants, and 100% of the Grant Income to the Individual Plan. However, from that point forward until plan maturity, you will receive the Individual Plan rate of return (which was 9.5% in 2012 – quite a bit less than the Group Plan’s rate of return, which was 13.2% in that same year). Moreover, in the Individual Plan you do not receive the ‘extra’ money that the Group Plans provide: upon maturity in the Individual Plan, you do not receive top-ups from attrition nor do you receive top-ups from excess Foundation profits. These are the “opportunity costs” of switching to the Individual Plan.

    If you would like to receive something in writing from Knowledge First, I suggest that you write to them yourself. I usually find that when people do not want to open their eyes to the truth (because that truth may contradict a belief which they, in fact, do not want to let go of) they ask 3rd parties to show them proof instead of seeking the evidence directly. It seems you have a lot invested in “being right” – so much that you may be blinding yourself to the truth.

    I invite you to contact Knowledge First yourself and request confirmation of these points in writing. I have already done my research.

  319. Jeez Bob why don’t you relax a little. CC was just going through what was written in their prospectus (this same approach showed you were significantly wrong on the MER they charge, which you gloss over but is roughly twice what CC and I pay). I question if it’s so easy, why don’t they just put that into the prospectus, instead of putting in the “if your child doesn’t qualify …” language.

    Why not put “Switch anytime without penalty into the group plan.” Clear, concise, direct. The fact that you (a customer) and CC (a pretty detailed financial guy) BOTH made mistakes reading this prospectus shows me there’s room for improvement in the clarity of their language and product offering.

    And you well know this 13.2% return in the group plan is not like it was done in a year when the index went down 12% either. It’s clearly linked to the same kinds of fiscal activity that affects every other investment vehicle.

    In any case, the fact that I would benefit at all from my neighbour’s bad fortune is a distasteful enough that I would never consider it a valid investment choice.

  320. @Geoff: LOL, I’m chill! My writing can be colder than I intend sometimes. You are correct that there is a big difference between a management fee that is calculated on all of the income as opposed to one that comes off all funds in the account, and I admit that I was wrong about that. However, Knowledge First’s management fee is not calculated on the grant or grant income, whereas I believe with your fund it is all bundled together. At any rate, the returns stated in the Knowledge First prospectus are NET of this fee. I wonder if your returns are stated before or after the fee is deducted.

    Last year was a good year…and the last 10 years have been very good as well compared to other investment vehicles that I have checked out. In addition, my principal is secure at Knowledge First.

    I also wish that prospectuses were more straightforward, however prospectuses must be OK’d by government policymakers – their job is to make the simple confusing, in the interests of creating non-ambiguity. This, of course, results in a degree of ambiguity. You have to love bureaucracy.

    By the way, if you find the attrition factor distasteful, Knowledge FIrst has a new offering which I may actually open in addition to the plans we already have. It’s called the Flex First and it’s considered an Individual plan, but it gives a guaranteed top-up (not discretionary) from excess revenues. It also gives a loyalty bonus for those who see the plan to maturity. If you withdraw your contributions before maturity, you can take all of your income with you AND you get a partial emrolment fee refund. After you open the plan, you can change or stop contributions at ANY time. Upon maturity, you get paid out however you want – lump sum, many payments over many years, etc. I have to learn more about it, but it looks very good.

    Once again, I do not intend any malice or negativity, to you, CC or anyone else. I do respect you both, but we are all human and we all experience cognitive dissonance. I find that most people try to reduce that dissonance by focusing on those things that confirm their original strongly-held beliefs instead of accepting evidence right in front of them which contradicts that belief. We all do it, and I guess I was just trying to make that point to CC. I didn’t intend to be disrespectful – if I came across that way, I apologize.



  321. I understand Bob. This Flex First plan sounds like it’s basically a SDRESP using index funds, but with none of the benefits quite frankly – in my current setup, I can do whatever I want when I want, without penalty already and without paying thousands in fee contributions first. And I keep 100% of all ‘excess’ incomes (as I’m only paying an MER of .5% and not .7%). It looks like a product designed to look good, but isn’t really. I believe that we should challenge things too using evidence, and most of the evidence points to these group resps not being right for even a marginally sophisticated investor. ‘enough said I think we won’t change each other’s minds (and for me, the attrition aspect is horrifically distasteful).

  322. @Bob: Can you please stop pretending that you are simply some parent who opted for Group RESPs and is happy with the choice? You are a Group RESP salesperson; therefore you should know better about the products you are selling *and* the competition.

    I won’t comment on transferring from a Group Plan to an Individual Plan because I have asked Knowledge First for a clarification. I’ll post the response here.

    “However, Knowledge First’s management fee is not calculated on the grant or grant income, whereas I believe with your fund it is all bundled together. At any rate, the returns stated in the Knowledge First prospectus are NET of this fee. I wonder if your returns are stated before or after the fee is deducted.”

    I don’t see anything in the Prospectus or Management Report to substantiate your claim that fees are not charged on grant income.

    FYI, mutual fund MERs are charged on the entire amount invested and returns are always published net of fees.

    “I also wish that prospectuses were more straightforward, however prospectuses must be OK’d by government policymakers – their job is to make the simple confusing, in the interests of creating non-ambiguity. This, of course, results in a degree of ambiguity. You have to love bureaucracy.”

    You gotta hand it to Group RESP cheerleaders for the chutzpah in blaming the Government for putting out obtuse prospectus. The fact is exactly the opposite: those of us following the Group RESP industry over the years know that it was Government criticism that has resulted in cleanup of extremely complicated Group RESP prospectuses. One egregious example: Group RESPs used to report returns before fees were deducted.

  323. Pingback: Group RESP Plans are Loaded with Fees | Canadian Capitalist

  324. CC;
    thanks for jumping on this.
    Your article was excellent.
    My point stands that fees put Group RESP at a disadvantage fromthe start.
    As for fees, I am with TD waterhouse, and have no fees as the household investments are over the $100K threshold. I do have $9.99 commissions on trades, but only have a few each year.
    Also, re customer service, tedious, but thorough. There are no delays on withdrawals.
    A request for withdrawal form can be downloaded online and mailed in. Cheque arrives in a few weeks.
    Thanks again for helping to educate people on not getting screwed.

  325. PS Bobs a dick

  326. @ slick – well calling people name’s isn’t helpful.

    @ Bob – though if you are a group resp salesperson you should (a) say that upfront, like Mark did and (b) know your product inside and out cold. Missing how something as basic but long term important as the MER is calculated is inexcusable for a salesperson not to know.

  327. CC, I have to admit, I’m feeling riled. I am as much a Group RESP salesperson as you are a paid cheerleader for the banking industry. If I were a salesperson trying to get some free advertising/sales from these comments, I would shout my credentials and contact information loud and clear. I’m a parent and subscriber who is convinced that I have made the right choice, and reading your article and some of the comments here only reinforces that belief. Calling up TD to ask for information the other day ALSO reinforced my belief. The RESP ‘specialist’ could tell me very little about what happens to my income if I withdraw my principal, except that she didn’t think it would be a good idea to withdraw. I strongly believe that my Group RESP has greater benefits than the alternatives – however, different strokes for different folks.

    By the way, your article title is not representative of the spirit of this article, which is what prompted me to comment in the first place. The content seems intended to scare people off investing in Group RESPs. The problem is, your content is inaccurate and misleading. For example, the only “benefit” that you mention is attrition. You do NOT mention other top-ups from excess profits and supplements (which, for my daughter, are projected to be about $12,000 by maturity – this projected figure does not include attrition, by the way). Another area of your article’s inaccuracy is fees. My enrollment fees were $100 per unit (not $200), and they are paid ONCE – not every year as you have inaccurately stated! Your blog entry and comments are RIDDLED with mistakes and yet you pick on the fact that I erred in thinking the management fee was only calculated on the income. Well, I guess that’s the only thing you CAN pick on, so you might as well go for it.

    I have to reiterate: your title, “Is a Group RESP Plan Right for You” is really very misleading and you know that, don’t you? I would expect fairness and balance from a title like that. Do you, by chance, take your journalistic cues from Fox News?

    It is clear that many of the people on this site are not actually looking to debate the Pros and Cons of Group RESPs, so this will be my last post. You can enjoy each other’s company in the absence of those who would contradict or correct your errors-in-understanding and continue to slap yourselves on the back, in the dark. I’d love to compare our returns in 17 years. Same place, 17 years from now?

    Enjoy your party and the company of the eloquent and insightful ‘Slick’.

  328. @Bob: It’s possible that I’m mistaken in concluding that you are a Group RESP salesperson or insider. I have no proof to suggest that, so it is certainly possible that you are simply a fan. I don’t know either way, so if I’m mistaken, I’m sorry.

    I do take issue with your characterization of the article as “inaccurate”. Nowhere does the article say that enrolment fees are charged annually. It does say that enrolment fees are $200 per unit for a plan where each unit is valued at $105. IIRC, the Knowledge First Group RESP currently sold charges enrolment fees of $100 for a plan where each unit is valued at $55. So, in fact, the article understates the enrolment fees charged by some Group RESPs!

    RE: topups. I refer you to the prospectus. The source of funds for the top ups are: (1) Income earned on income on your contributions (2) Contributions and income transferred from cancelled units aka funds due to attrition (3) discretionary top up from excess revenues. It is worth noting that all of these are paid at the discretion of the Group RESP vendor. I’ll leave it to others to decide whose statements are riddled with errors.

    I’ll admit that I’m no fan of Group RESPs. I’ve explained the basis of my opinion. They are obtuse, laden with fees and inflexible. Nothing I’ve seen and read since I wrote this article 5 years back give me reason to revise my opinion.

  329. @ CC – if you don’t know that Bob is a group resp salesperson you should apologize (innocent until proven guilty). The rest of your comments are bang on. In any case these postings are really for those out there looking at options. Rather than me trying to sway Bob or vice versa, I just implore everyone reading to ask lots of questions and look at on balance what is the best thing to do. In my opinion it’s a self directed resp, but bob and mark believe otherwise. I would say that in terms of commentators (not comments) it seems to run about 75% in favour of self directed.

  330. Good article, Canadian Capitalist. It’s hard to believe that 6 years later this post is still garnering so many comments. It’s apparent to me that when so many people are confused or feel deceived that something is going on here with how these products are positioned and sold (actually, I really think they are *sold*).

    It also seems to me that the industry has people posting here posing as customers with great success stories. This along with all of “rebuttals” by obvious employees of these companies (usually with incorrect facts or half truths) has an atmosphere of “methinks they protest too much”.

    For people who are interested it is probably worth reading the government Review of Registered Education Savings Plan Industry Practices ( ) from 2008. In particular, the section on How the group scholarship plans work ( ) is quite informative.

    The truth is that the investments are fixed-income and excess returns are generated by taking money generated (or forfeited) by the “have-nots” and distributing it to the “haves”. It seems more akin to gambling on your future circumstances than investing.

  331. That article is quite outdated and was iniciated by the banks who have been trying to get rid of group savings plans forever. Group plans where around long before bank even got involved in offering then to parents. No money was to be made before the grants where offered. As far as attrition is concerned, insurance companies have been doing it for years, no one seems it complain about them. They rack in the doe and life goes on. There are people that understand the power of attrition and actually join group plans because of it. Then there are others like the majority on this post that put 100% of their confidence in banks and pay fees they are unaware exist.

  332. @Tuzo: Unsurprisingly, I agree with your take 🙂 However, even the “haves” can be tripped by some of the more restrictive Group RESP rules as some have reported in the comments section on this blog.

    @MacKenzie: Do you know that this article was initiated by the banks? Am I biased against Group RESPs? You bet. That doesn’t make me a cheerleader for the banks. We’ve always recommended low cost products that we believe is in the best interests of investors, not banks. And we are pretty sure that we are aware of all the fees involved in a self-directed RESP. Often, it’s just the mutual fund MER and that’s it. There is no laundry list of fees as with Group RESPs.

    • I am shopping RESP for my 2-year old son now. After reading all these posts, I think the group plan is not the right choice for me.

      But which will be better a bank-based RESP or private-company RESP( Such as financial companies other than Bank)?

      I heard that you also can open a self-driven RESP account. But how to do it?

      Any suggestions.


      • Ram Balakrishnan

        @Catherine: If you qualify just for the basic CESG then consider a TD Mutual Funds RESP. That’s what I have for our kids and it is invested in low cost TD e-Series mutual funds.

  333. It’s so funny that group providers consistently say that a group resp is at least better than the most expensive options at the bank; when as CC says he and I and others advocate going a third way: the cheapest option through a bank.

    @ Tuzo – Slightly off topic, you don’t say it but you imply that being “sold” is a bad thing. As an ethical professional salesperson for 10 years (years ago, and real world items made of lumber) I can honestly say that being sold, and being a salesperson, is a noble profession and the bedrock of capitalism. Ideally to be sold is to be convinced, through honesty and logic, that the product your buying is the best choice for you. A good salesperson will listen to a customers wants/needs, give an honest opinion (which includes the option that the product selection may not be a good fit for them), and guides the customer to the best choice for them – which may or may not be the item they came in. Unfortunately ‘sales’ as a profession is denigrated and cheapened by unscrupulous, ignorant salespeople who live up to the caricature of misleading conmen.

  334. The issues here seem so simple to me but “I’m just a caveman and your complicated investments are confusing to me” (see ):

    You can fill out an application, submit your grant request, deposit your money and invest in any number of well known “qualified investments” (e.g. money, ETFs, mutual funds, bonds, GICs, stocks, bullion, etc.) that most investors are quite familiar with as well as some more complicated investments (e.g. royalty units) if you wish.

    Or you can invest in a much more complicated (IMO) investment which is very different than any other investment you will probably make in your life and involves many different potential outcomes to be weighed and considered (some of which are not beneficial to the purchaser).

    In the end, the (hopefully well informed) individual can make a choice that is in their best interests.

  335. @Geoff: there is being sold and being “sold”. I have nothing against sales people — especially ones that help me get something of value. [Great story about being sold a tennis racquet removed for brevity and relevance.]

    In terms of RESPs, I’ll just say that I spent many, many hours (over 2 weeks) reading and rereading the prospectus before being able to understand it. I can’t imagine how to meaningfully present all of the various alternate combinations and permutations in a fairly short sales call. Many of the alternatives are rather unpleasant for the investor and if answered directly would be huge warning flags for many people. This combined with the constant (and vocal) complaints and confusion from many people over many years has led me to my belief.

  336. William Harvey


    Self-directed, managed and group funds can ALL be effective ways of accessing the RESP and grant program; it comes down to different consumer-based needs.The fact is, most people wander down to their local bank, are asked what level of risk they are comfortable with and are put in a mutual fund they have little or no knowledge about. Banks are hardly transparent about fees, and often do not educate people very well about the investments. Canada also has THE highest investment banking fees in the world.

    Regardless of what kind of fund you are looking into, always compare products, ask about fees in real dollar costs over the term of the investment, and make sure that due diligence is accomplished. From what I have read from the many posts on this thread, there is inaccurate information on both sides of the discussion. I’ll leave you with a recent CBC segment on excessive banking fees, high investment management costs, and deceptive practices..

    Kindest Regards,

    Bill Harvey

  337. Children Edication Fund Inc (CEFI) is a scam. Stay away from them. Once you stuck with them they will never turn around to you and you will never get any benifit back from these people. They use to engage people from all community and whoever comes new comer they fall victim of these agents. Beaware of Pronobesh Podder who sits at Danforth. He is the guy who on behalf of CEFI loots money from new comer Bangladeshis.

  338. Tried calling CST Consultants today… 143 minute wait time!!!!!!!!!!!!

  339. Hello Everyone.

    The main reason of RESP is to save money for our child + get government grants when he reach 18. period.

    I am not getting why people want to risk(put) their extra money where you only get max (7200 CEG+2000 CLB + $100 or $200 A-CEG) Thats it.

    You are already getting 20% income on your invest.
    e.g. A person puts the money in RESP of $100. Government will give you $20. (20% growth)

    there are many other places you can invest eg. RRSPs, TFSAs, House(Properties), precious metals (Gold, Silver), Share, etc to gain where YOU and ONLY YOU are the decision maker. At least I know what I am doing loss or gain.

    But Group RRSPs where you give your extra money to someone where there is no guarantee of principal return.

  340. Jack I don’t understand your post, unless you’re saying do a self directed resp in which case I fully support you.

    With a self directed RESP, YOU are the only decision maker.

    One misnomer out there is that the only RESPs in Canada are group plans, and group plans alone get you that 20%. They aren’t.

  341. @ Geoff: Yes you are correct I am in full support of Self Directed RESP account.

    Also correction in my previous comment is “Group RESP” not “Group RRSP”

  342. I have a question regarding maximising the grants. What is the formula to calculate the unused portion of the grants. EX. If I start depositing 100/month in 2008 and now want to maximise those years, how much should I deposit?

    • Canadian Capitalist

      @Cory: Good question. I’ll see if I can put together a calculator. Assuming child was born in 2008, you should be able to get up to $500 of unused grants this year by making additional contributions of $2,500.

  343. @ Swift

    where did you find about “compound growth dividends saving plan”? Which bank or financial Institution offering this type of saving plan. I would love to know more about this plan.


  344. @Lb I’m going back to comment from 5 years ago…. my agent called me an said my childs account is ready for a conversion… and then he can sell me a new plan!! i want to convert but not buy a new plan – what are the right words i need to ask for to make sure i get that option? thanks

  345. @ Jay,

    All you have to do is ask for a conversion to lump sum.
    You are under no obligation to enrol in a new plan. You will be asked to sign a plan adjustment and you may, or may not, be asked for a little $ to account for interest adjustment…. or you could get a small refund which you should leave in the principal. Your plan will then be all paid up and you will not be responsible for any further monthly payments. It is a fantastic option for you. You can then get another RESP at a bank or wherever you would like…….. or not!! Please let me know if you have any questions.

  346. I came upon this (& admit I did not read EVERY comment, so I apologize if I am duplicating). When our kids were born (1991 & 1994), there was no choice in RESP’s, & no CESG at all, so we invested with USC (now Knowledge First). Once the RESP’s were introduced, we converted to lump sum, paid some penalty, but at least still had some of our initial investment (minus large fees that were withheld). However, our first child did use the USC money for 4 years, so at least it was better than nothing (have not done the math on our returns; I’m guessing we could have done better ourselves investing in GICs, T-bills, etc).
    Now our second child is in 2nd year of a 2-year program, meaning that if she doesn’t continue in something else, we lose out 2/3 of the growth from our investment & 2/3 of the CESG as well. We invested in some bank RESPs after discontinuing USC, & of course, we can get all of our growth & CESG from those – regardless that she goes for 2 years rather than 4.
    Now comes the next question – she might try to find some additional programs to specialize next September. Looking at a gov’t website, it says that qualifying programs must be 13 weeks minimum duration, etc (some part-time options too) — the RESP rules seem reasonable & quite flexible. Looking at the Knowledge First website, it mentions minimum 2-year program duration to qualify. It’s unlikely that my child will apply for a second 2-year program, rather than continuing on with shorter specialized programs. But how are we going to pay for those? Seriously, that’s money we can’t afford to just throw away.
    I really don’t know how KFF can legally get away with doing something totally different than the actual RESP rules. Why are they even still allowed to be in business? I’m hoping, I’ve misinterpreted, & that we’ll be able to get some additional money from them next year.

    • @Gabriella: My advise is Struggle!! Send an email requesting clarification to the contact email on your statement.
      You said, “I really don’t know how KFF can legally get away with ….Why are they even still allowed to be in business?” That kind of inflamed speech is judgmental, since you don’t seem to have asked. If you were self-directed you would just have to take your lumps.
      I have the same aged children as yours. I found that a letter or email actually made its way to someone in management, unlike phone calls. (Also, I could stew over a letter for a few days and appear rational!)

      • Hi Maggie & thanks for your comment — am I judgmental about it? You bet! I’m judging that it’s not ethical for these people to cheat my daughter out of interest from our savings — we worked hard to save for all those years & ought to be allowed to use the money — & most of all, the CESG money that is rightfully for my daughter’s education.
        However, I have emailed the support, & after many back & forths, the person had a “supervisor” contact me as well. Truth is the most I can do is to delay the EAPs for up to 2 years — in case by that time my daughter finds a 2-year full-time program that she wants to pursue. If there were a higher level 2-year program in her field, there’s some chance of this happening; as all the 2-year programs are at or below her level though, clearly she’s not going to duplicate what she’s already taken. Looks like we will indeed lose the money. It doesn’t matter to whom I speak / email there, it’s the same old responses, always ending with “if there’s anything else you need…”
        I’ve even emailed my member of parliament, who got back to me to say that even a bad contract is a legal contract. The fact that the regulations changed quite a while after we signed it makes no difference. Thank goodness parents today have more choices!
        IMO, stick with the banks, where you have a wide variety of choices, all flexible. Even if your end payout is slightly smaller (compared to 4 full years of post-secondary in a group RESP — & I don’t necessarily think it would be less), at least you know for sure you will get all you’re entitled to & as others in this post have said, you are the one in charge of your money as long as your child goes on to post secondary education. It’s much much less of a gamble. Once these group RESP providers have your money, & you’ve signed some out-dated contract, they won’t let you out of it. The further I can spread the word, the better. Some day, these unethical practices will have to end, but that day, unfortunately, isn’t today.

    • Ram Balakrishnan

      @Gabriella: So sorry to hear your experience. Unfortunately, a lot of parents still sign up for these “Scholarship” plans. Hopefully, your experience will serve as a caution for parents contemplating these plans.

  347. Maggie again. @CC Wow, your article on self-directed RESPs has sure been generating interest!!! I still think Group Plans are the better route to tuition. My only good Bank investment was a serendipitous $500 placed in a Canada Savings Bond in 1994 with a yield of $2000 over 12 years.

    For those who have skipped down the 7 years of pages: I bought a personally chosen RESP for my 1 year old in 1991 from CET (now known as Children’s Education Funds Inc), putting in $5000 over 3 years for 6 units. In 1995 I also made a lump sum purchase for $2000 (2 units) from Children’s Scholarship Trust (CST). I chose the Founder’s Plan.
    This was years before any government involvement, so there is no CGEG. I also expected my children to work summers and to commute from home, and to earn scholarships.

    So how did the two plans do as far as ACTUAL INCOME? Well,

    Canadian Scholarship Trust: Very transparent and sent out notices estimating 2009 returns each year.
    Year one: Upon providing a photocopy of confirmed admission we shortly received a cheque ‘refunding our principal’ of $1600. “Gasp!” you say, “They skimmed off 1/4 of the funds, The Fiends!!” However a quick spreadsheet reveals that a Bank charging 0.7% per annum (with my 8% interest return) would have soaked me for over $600.
    Year two to four: A fax from the registrar’s office confirming enrollment caused cheques for $800 to appear twice a year. Total return on $2000 over 14 years? $6400. Technically a return on $1600; so averaging 9.6%. I was assured by CST that the same $6400 would have been deposited for a 14 week course at the local graphics institute. But that was a perk of that Plan.

    How do they consistently give high payouts? Group Plans have lots of subscribers, so when they invest 3 or 4 Billion, they can get very high compound interest working in their favour.

    Oh… you all want to know about Children’s Educational Trust. The money was good too… $3600 returned from the original $5000 (oh, gasp all you want) plus a further $12000 in EAPs. 8.6%/a interest (or 6.6%/a) over 19 years. (You all would get CEGF on top of that and that make me sad for me).
    The bad news: A struggle each year after that first one with numerous forms, faxes, visits to the University registrar’s office, phone calls “May I please speak to a manager?”, clarification emails, reply-by dates… if the student doesn’t ‘pass into the next year’ you have to defer the EAP to the NEXT year, but most students do four years or less… I can only hope our CEFI case was unique.

    I still think Group Plans are the best choice for the average parent/grandparent. Just research a bit, and pick the most flexible. I can recommend CST because they have been around the longest, and l found their fine reputation to be well-deserved.
    And if I do this again I’ll diversify into 3 or 4 RESPs per grandchild,and a Canada Savings Bond for their first Thanksgiving.

  348. How do they consistently give high payouts? Group Plans have lots of subscribers, so when they invest 3 or 4 Billion, they can get very high compound interest working in their favour.

    I have to assume that Index Funds have more subscribers than that. I really do believe the real reason is that people drop out and forfeit their contributions, which is horrible.

    At this point, I think everyone has enough information to make up their own minds. For me, the fact that a good chunk of these comments are stories about terrible experiences with these products (including yours, it shouldn’t take a billion phone calls to get your own money!), that’s the most telling thing for me. I think I said this before, but if this were Amazon, I think it would go 3 stars for bank RESPS, and 1.5 stars for group resps. Good enough for me.

    Also, as a reminder, just because you go with a bank resp does not mean you have to sign up for their most expensive investment products.

  349. Pingback: Growth Fund

  350. We have been saving money for my two daughters with Children Education Funds. After two and a half years we received a report which shows NO MONEY! We did not obtain any profit during this period and they took commissions for selling and process our application! When we asked to cancel the contract they sent us a letter saying we have to pay extra money (26 CADs) for each child to obtain cancellation. In addition they are still taking money from our banking account even we called them and send them cancellation requests before.


  351. Hi there, I’m with CST for two kids, one is 13, the other 10. I contributed faithfully up until 2 years ago when I lost a good job and things got tight financially. I’m back in a good situation with a good job however I’m not sure what I need to do to get back in. CST moved me to the family plan out of the group plan, and they mentioned I need to make up the payments to get back into the group plan. Does that sound about right? I’ve been very distressed over this, so any help would be appreciated.

  352. I’ve got a 9-month son and am looking to set up his RESP, but have got to admit that I am intimidated and confused. Due to the many restrictions and confusing rules and despite the ‘guaranteed returns’, I’m not going to go the group/pooled RESP route.

    Right now I am thinking of either the RBC Target 2030 Education fund:

    And then eventually moving over to a TD e-series account once I understand investment products more and using ETFs to reduce fees.

    From the small amount of reading I have been doing I realize that the MER for the RBC fund is quite high (2.03%), but it is supposed to depreciate over time – as far as I understand it.

    However, with the market in a bit of a down cycle right now I am not sure this is the right move? Any advice?

  353. @ Newbie – you can basically replicate the whole 2030 target yourself for an MER of about half a percent. Start off with 80 – 100% in equities (see posting for suggested breakdown) and 0 – 20% in bonds. As your child ages, around 9, start bumping up more into bonds. It’s sooo much easier to start out this way, than transfer halfway through. If you can pay bills online, you can do this! Even if the RBC mer goes down over time – as it should, bonds don’t require much active management – why not start out this way? Also as a reminder, you don’t have to make a move right now. You could wait a year, and still contribute $5000 ($2500 for this calendar year, and $2500 for next year) and get the full match still. So don’t rush into anything.

    @ shane – congrats on your new job, that’s very stressful. I’m sorry you have to deal with them, but I hope you perservere.

  354. Hi guys,

    I have been reading all the comments below and going to being a new parent (expecting a new addition next month) i am also confused about where to optimally invest for RESP. Having read though the posts, i am not inclined to invest in group/pooled RESP.

    It would be wonderful to get some advice from the RESP experts or people who have invested in RESP regarding my situation.

    We are expecting a baby in March 2015 and i would like to start the RESP right away so i can take advantage from the start.

    My plan is to invest 16,500 on Year 1 (2015)
    2,500 for the next 13 years = 32,500 (2016 to 2028)
    1,000 for 15th year

    So in 15 years, i would invest a total of 50,000 and also getting 7,200 contribution from CESG

    Can someone please advice me if TD e-series would be a better way to start of if there are any other good options. Also, as most people spoke i would be comfortable in investing in higher risk unitl the kid is 10 yrs old and change the strategy in fixed income and bonds

  355. @ Nagesh –

    That strategy does seem logical to me but only if the RESP is the last tax free shelter you have open to you (ie no rrsp or tfsa room). At least that’s my thoughts anyway. Otherwise that first year you could just do $2,500 and dump the other $14,000 into your RRSP, and if you wanted to put the tax refund from the $14,000 into the RESP as an option.

    If you plan on making large lump sum payments each year, than there may be better ETF options out there than TD-efunds. TD efunds is really good for people like me, who put in $104.50 every 2.3 weeks. If I was buying an ETF, I’d pay $10 a trade (so a 10% fee). But in your case you’re doing big chunks so you can explore etf options, as $10 trade on $16,500 isn’t so bad at all.

    Agree on staying away from pooled funds. By the way, don’t be surprised if you get calls after the baby is born, I believe the hospital sells lists though can’t prove it. It took about 8 months for them to go away. Congratulations by the way.

    • Hello Geoff,

      Apologies for the late response….been busy with the kiddo and havent been checking on here…..first of all thank you very much for your valued opinion

      I am not a big fan of RRSP as the only time i used RRSP is for my HBP (Home buyers plan) which i took in 2013 and starting to make payments from this year. Apart from that i was not planning to make any RRSP contributions as TFSA option for my situation works (although i would definitely introspect again to see if RRSP is really viable for me)

      I have already maxed out my TFSA (with the 10k raise this year) for both my wife and I so there is no contribution room left there.

      I do plan on making large lump sum payments every year. Do you think opening a TD waterhouse account is a better option for buying ETF’s or go through the Couch potato model portfolio for ETF’s by choosing Vangaurd (or its doesnt matter at all?)

  356. Hi we opened my son cst Canadian schlorship trust fund 9 years ago we contribute $2000 a year. A few days ago my cst rep said that there is enough money in it to convert it to fully paid and open a new cst plan or just convert it to fully paid and stop putting more money into it. this is what I am leaning towards. I received a quotation from cst and the quotation states I would loose $1900 in interest if I convert it to fully paid. not sure what to do here looking for some help I can send over the quotation I received so you can look it over please help

    • Ram Balakrishnan

      @gus: I would love to hear details. Please contact at cc-at-canadiancapitalist-dot-com.

    • I believe what the rep. is suggesting to convert your plan from a collective to an individual plan. In doing so, you will loose the advantage of the collective plans interest as well as loosing your enrollment fees (service charges) which represent $200 per basic unit. If the rep. is encouraging you to start a new plan at that point it would be to his advantage only, not yours. He/She would then be paid commission on a new sale. Before making any decision get all the facts. It is never to your advantage to terminate a plan before maturity.

  357. Hi all, I am glad for this website. I have read now the first 200 or so comments, although they might be a bit dated. Yet, in the end, I am still not sure what the right thing to do is. My baby girl was born 4 weeks ago, the CST guy was already at our place and introduced his plan. The way I understand both private service provider and bank RESP is:
    – private companies like CST charge an upfront fee over the first few years; they are quite inflexible and they lock you in for many many years and promise you returns somewhere around 5%, plus gov. benefits of course.
    – banks offer more flexibility with their mutual funds plans, the duration until maturity can be shorter, but they charge MER’s.

    So I am wondering what you guys think about the following: I am quite conservative with finances and all I really want is
    a) have my principal protected
    b) get the government funds
    c) take some extra earnings but this is no top priority.

    My plan is to use the principal in 20 years of time to actually finance my kids college costs – plus the gov top ups plus anything extra. I see the RESP plan more as a savings account then, not a money-making tool.

    Thus, shouldn’t I just go to my bank and open an RESP account full of GICs (gov. insured certificates) that guarantee the principle and some (minor) return? In that case I have all my three priorities covered a) safe principle b) gov. contributions c) some extra return, though not a lot.

    Can someone tell me please what is wrong with my idea, if at all? From the majority of msg on this board, I get the feeling that most are concerned about mutual funds and stocks vs. CST, Heritage, etc and their hidden fees, policies etc. to make the highest possible return.

    What about going absolutely safe AND free and choose GIC’s for a lower but guaranteed return?

    Thanks everyone.

  358. I currently have a 9 year old and a 14 year old and I have not gone down the RESP road. I will be receiving a $40000 payday and my plan is to use this towards an education fund for the kids. I can look at the fund market and invest on my own, but I am staring at that free government money and I am wondering if there is anyway that I can try to take advantage of an RESP and get some or all of that $7200.