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?

Cheers.

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: http://www.google.com/search?q=why+group+resps+are+bad&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-GB:official&client=firefox-a

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.

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.

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

Cheers!

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.

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.

Geoff,

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.

Cheers,

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..

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.

Cheers