Setting up a RESP

[GP_Matt]

I will post in there the next time I am re balancing or buying.

On a side note, that is insane that an adviser would recommend 90% of your money going into one fund. When I first started with my adviser 99% of my investments were in shares in a private company (the one I worked for) due to a great price that I was able to buy in at. In order to keep those shares with the adviser I had to sign a sheet acknowledging that it was very risky to have all your money tied up in one thing and that the adviser had advised me against it but I insisted. I knew that it was worth it as long as the company didn't fold due to the way the shares were structured.
My adviser works for Nesbitt Burns, but he operates in Grande Prairie so I am not sure how valuable a recommendation would be.

[macker]

Originally Posted by Slava

To the first point, neither would anyone doing it themselves. The reality is that if you try to trade these headlines you are going to get destroyed. I follow things really closely and frankly my money is caught today along with everyone else. I'm fine with that, but I am curious what you could do to miss this once the news breaks for this morning though.

To the second point, I can't speak for everyone, but I do a lot of investing outside mutual funds for clients. The thing is there are situations where funds make sense though. I've noted before there are taxation issues that make funds very attractive and frankly there are situations where buying single stock or ETFs are just not sensible. I also think that for some clients who hardly understand the stock market to begin with that trading securities on the exchange is not prudent to get an intro to investing.

At least as a DIY you can play both sides and go long or short and not be restricted. Go to cash as trends last a loooong time. You won't get destroyed if you step out of the way. If you are bold enough to use an inverse etf. It works both ways....I know you hate ETFs and don't recommend them to anyone and would think it crazy to be in SDS today as it would destroy you. You can't ignore things that can protect you in these markets as they do mitigate the risk. Doesn't mean you go 100% into SDS but to just sit there and take punch after punch after punch is the way that you get destroyed in this market.

[macker]

Originally Posted by Slava

This is just so wrong though. No wonder you think that the fees are too high, because this isn't how they're calculated at all. Advisors do not get the full MER, that's completely off base.

The whole ETF industry has done an amazing job marketing though. If an investor had put money in at this point in 2008 they haven't made a dime. In fact the TSX is what 25% off the levels seen four years ago? So sure, maybe you saved a percent a year in fees (if that), but you haven't made any money for that either.

You said "The DSC is not an extra fee for most people"

Is the cost not embeded into the management fee and the advisor gets paid a commission. You can let me know what % of the 2.5% goes to the advisor as I would think it is around 1% to 1.5%? Regardless there is not a lot of transparentcy on the fees and the way that fees are embedded into the MER is very confusing and misleading. Fact is the DSC is an extra fee and the advisor gets paid because of it.

[bizaro86]

Originally Posted by macker

At least as a DIY you can play both sides and go long or short and not be restricted. Go to cash as trends last a loooong time. You won't get destroyed if you step out of the way. If you are bold enough to use an inverse etf. It works both ways....I know you hate ETFs and don't recommend them to anyone and would think it crazy to be in SDS today as it would destroy you. You can't ignore things that can protect you in these markets as they do mitigate the risk. Doesn't mean you go 100% into SDS but to just sit there and take punch after punch after punch is the way that you get destroyed in this market.

Now, I'm a pretty hardcore DIY investor, (Options, stocks, bonds of companies that have or will default, etc) but buying inverse ETFs as an investment is crazy. They're specifically designed for speculating during the trading day. If you're talking about long term trends, inverse ETFs are 100% not a good way to play that, unless you're talking about long term being 1-4 hours.

[macker]

Originally Posted by bizaro86

Now, I'm a pretty hardcore DIY investor, (Options, stocks, bonds of companies that have or will default, etc) but buying inverse ETFs as an investment is crazy. They're specifically designed for speculating during the trading day. If you're talking about long term trends, inverse ETFs are 100% not a good way to play that, unless you're talking about long term being 1-4 hours.

Why ignore something that helps reduce benchmark risk. You don't need to day trade to use them. I talking about a month ago when I saw the S&P trending lower I got into SDR and it has worked. Now the S&P P/E is around 13.2657 so the hedge will be comming off soon. I have other things in my portfolio that I am kinda stuck with so if things change unexpectedly good as I will benefit both ways. What is crazy about playing offense and defense. The markets can stay irrational longer than you can stay solvent. It is all what you become used to. I haven't gotten into options and investing in bonds of companies that are going to default and you may think that is less risky but I don't. Whatever works...

[macker]

Anyways....this thread is a productivity killer Back to setting up an RESP......

[Slava]

Originally Posted by macker

At least as a DIY you can play both sides and go long or short and not be restricted. Go to cash as trends last a loooong time. You won't get destroyed if you step out of the way. If you are bold enough to use an inverse etf. It works both ways....I know you hate ETFs and don't recommend them to anyone and would think it crazy to be in SDS today as it would destroy you. You can't ignore things that can protect you in these markets as they do mitigate the risk. Doesn't mean you go 100% into SDS but to just sit there and take punch after punch after punch is the way that you get destroyed in this market.

Those are all things that you can do with an advisor and often with an advisor telling you that you might want to consider this. There are a lot of people who just (a) aren't interested in following these things or (b) have no idea what to do when the markets are doing anything normal or abnormal.

Just to correct you, I don't hate ETFs at all. I have recommended them for a lot of clients for specific situations. I just don't think that they are a great panacea that correct all that's wrong with the investing world. They have a place and are advantageous in the right situation though.

Originally Posted by macker

You said "The DSC is not an extra fee for most people"

Is the cost not embeded into the management fee and the advisor gets paid a commission. You can let me know what % of the 2.5% goes to the advisor as I would think it is around 1% to 1.5%? Regardless there is not a lot of transparentcy on the fees and the way that fees are embedded into the MER is very confusing and misleading. Fact is the DSC is an extra fee and the advisor gets paid because of it.

The advisor gets the same amount of money regardless of the load charge though. If you buy a front end fund with no sales charge the advisor gets a larger trailer, and if you buy a DSC fund the trailer is half of that. The MER is the same, and the advisor gets paid the same; the difference is that with a DSC the advisor gets money paid upfront as opposed to the FE versions of the fund.

This is why the DSC isn't an "extra fee" though; lets say you invested $100k into a DSC fund. You have $100k in the fund. The advisor gets paid upfront and the MER is 2.5%. At the same time you invested $100k into a front end load. The advisor gets a trailer that is double what the DSC version is (I'm generalising here), and you have $100k in the account. The MER is still 2.5% In this case there is no extra cost to the client. The difference is in how the advisor gets paid and not how the fees are levied.

[Table 5]

Bump...

I have some RESP questions for you smart folks.

My kid is due in December. Should I make sure to put in money by Dec 31st, 2012? Or does he have a full year for his first contribution? Can I set this up BEFORE the kid is born? Not sure if it's a time sensitive matter.

Is it better to put in as big of a lump sum as possible at the beginning, or stick to the max contributions that get you the max grants? For example, if I had 10k at year 0....would it be better for me to stick 10k in there right off the bat, or should i spread it out over 10 years?

What happens if we leave the country at some point? Can I keep these funds in there, or do I have to close the account? I assume I woudn't get any government contributions at this stage.

What if I withdraw the money early? Can I? I assume there's some gigantor penalty if so….what is it?

What happens if the child uses less of the funds for education than there is in there? Ie, say there is 50k by the time he's 18, but he decides to go to clown college and only spends 25k. Can I transfer it to another kid? Or hell, myself if I want to take some continuing-ed course. Or even better, take it out and waste it on a car?

Do I have to open up one for each child, or can just have one account for multiples?

[Rathji]

Originally Posted by Table 5

Bump...

I have some RESP questions for you smart folks.

My kid is due in December. Should I make sure to put in money by Dec 31st, 2012? Or does he have a full year for his first contribution? Can I set this up BEFORE the kid is born? Not sure if it's a time sensitive matter.

Is it better to put in as big of a lump sum as possible at the beginning, or stick to the max contributions that get you the max grants? For example, if I had 10k at year 0....would it be better for me to stick 10k in there right off the bat, or should i spread it out over 10 years?

What happens if we leave the country at some point? Can I keep these funds in there, or do I have to close the account? I assume I woudn't get any government contributions at this stage.

What if I withdraw the money early? Can I? I assume there's some gigantor penalty if so….what is it?

What happens if the child uses less of the funds for education than there is in there? Ie, say there is 50k by the time he's 18, but he decides to go to clown college and only spends 25k. Can I transfer it to another kid? Or hell, myself if I want to take some continuing-ed course. Or even better, take it out and waste it on a car?

Do I have to open up one for each child, or can just have one account for multiples?

I can answer some of these.

You need a SIN to get them so I don't think you can do it early.

Since he amount the govt puts in I capped (7200 iirc) there is no real loss to waiting until the new year that I can think of. You need birth certificate and SIN so might be impossible to do otherwise. You can wait as long as you want with the only penalty being a loss of potential earnings. I think you might lose $100 if you wait until they are 12 or older, but I doubt you would wait that long anyway.

I have the same account for both of my kids.

[MoneyGuy]

Originally Posted by Table 5

Bump...

I have some RESP questions for you smart folks.

My kid is due in December. Should I make sure to put in money by Dec 31st, 2012? Or does he have a full year for his first contribution? Can I set this up BEFORE the kid is born? Not sure if it's a time sensitive matter.

Is it better to put in as big of a lump sum as possible at the beginning, or stick to the max contributions that get you the max grants? For example, if I had 10k at year 0....would it be better for me to stick 10k in there right off the bat, or should i spread it out over 10 years?

What happens if we leave the country at some point? Can I keep these funds in there, or do I have to close the account? I assume I woudn't get any government contributions at this stage.

What if I withdraw the money early? Can I? I assume there's some gigantor penalty if so….what is it?

What happens if the child uses less of the funds for education than there is in there? Ie, say there is 50k by the time he's 18, but he decides to go to clown college and only spends 25k. Can I transfer it to another kid? Or hell, myself if I want to take some continuing-ed course. Or even better, take it out and waste it on a car?

Do I have to open up one for each child, or can just have one account for multiples?

It's better to get the money in before year end, but you can catch up later by doubling up on contributions each year. You can't set an RESP up until your childish born and has a SIN. No SIN, no plan. Remember that you only need to worry about the grants and growth, so you may be best off withdrawing that money first.

You can have multiple accounts or one family plan. I usually recommend family plans.

You need help with this. I suggest you contact Slava, who manages these things and is in Calgary.

You can get your original contributions outs without penalty. The grant and growth must come put when the child is enrolled, or the penalty applies. Yes, you can transfer money for one child to another, the other child has contribution room.

[Slava]

Originally Posted by Table 5

Bump...

I have some RESP questions for you smart folks.

My kid is due in December. Should I make sure to put in money by Dec 31st, 2012? Or does he have a full year for his first contribution? Can I set this up BEFORE the kid is born? Not sure if it's a time sensitive matter.

Is it better to put in as big of a lump sum as possible at the beginning, or stick to the max contributions that get you the max grants? For example, if I had 10k at year 0....would it be better for me to stick 10k in there right off the bat, or should i spread it out over 10 years?

What happens if we leave the country at some point? Can I keep these funds in there, or do I have to close the account? I assume I woudn't get any government contributions at this stage.

What if I withdraw the money early? Can I? I assume there's some gigantor penalty if so….what is it?

What happens if the child uses less of the funds for education than there is in there? Ie, say there is 50k by the time he's 18, but he decides to go to clown college and only spends 25k. Can I transfer it to another kid? Or hell, myself if I want to take some continuing-ed course. Or even better, take it out and waste it on a car?

Do I have to open up one for each child, or can just have one account for multiples?

Just to answer a couple of your questions that I think were missed by the other answers:

- You wouldn't want to just put $10k into the account in December because the maximum amount for the grant is $2500. You would be best to hold on to the remaining $7500 and contribute another $2500 in January and then $2500 over the next two years.

- If you leave the country (and assuming you go to the US) you would want to be careful. I would have to check to make absolutely certain, but some accounts with tax-preferred status in Canada are not treated the same in the US. In other words while you grow the money tax free in Canada if you live in the US the IRS doesn't see it that way and you have to pay tax on your gains. I know that is how things go with the TFSA and I *think* RESPs but I would have to check to be certain.

- There are a number of options about what to do with leftover money. Its your money, but you might have it in an account where another child can use it, you transfer it to your RRSP as a contribution, or potentially you take it and buy a new car. You do lose the grant money if you take the cash out, and there could be tax implications as well, but there are options.

[Table 5]

Thanks for the answers guys, really appreciate it.

Slava I might be giving you a shout in a little while. I definitely need a little planning.....I also seem to need some insurance, not sure if that's in your arsenal.

[Slava]

Ya I definitely could hook you up with insurance. I was going to post something about that in the baby stroller thread that you had up, but thought it was a little too blatant!

[albertGQ]

I have my RESPs and life insurance (as well as my RRSPs) with Slava and he is fantastic.

Give him a call Table!

[MoneyGuy]

Slava is Canada's second best financial planner. I recommend him highly.

[aaronck]

This was set up for my daughters...we're now 8 years in, is this bad?
http://www.cst.org/

[albertGQ]

Originally Posted by aaronck

This was set up for my daughters...we're now 8 years in, is this bad?
http://www.cst.org/

I had a meeting with them too. Chose to go with Slava instead. I have heard nothing but bad things about CST. I'm sure Slava and Money Guy will let you know the reasons why they don't like CST

[linecook]

Originally Posted by aaronck

This was set up for my daughters...we're now 8 years in, is this bad?
http://www.cst.org/

What has been your rate of return each year? They shoot for 5% if I remember correctly.

[MoneyGuy]

Originally Posted by aaronck

This was set up for my daughters...we're now 8 years in, is this bad?
http://www.cst.org/

Yes, it's bad. Fees are very high, they're hard to get out of without severe penalties and they can be very punitive if your girls choose not to go on in post-secondary. I also hate how they market them, hitting up new parents just after a birth, not disclosing all facts and pushing these inferior products with pressure. Most of those plans will give you all of your contributions back if your children don't go on in school, but you lose the growth. Those funds that you don't get in that situation go to other children, which is how they can tout higher returns. They're not regulated like financial advisors are so they can get away with these things.

Before you make any decisions like pulling out, you need to analyze what you have, the costs to abandon the plan, etc. One option may be to keep the RESP, fund it minimally (what you're required to by contract) and put extra contributions into a better plan (a self-directed RESP).

If anyone wonders why I tout Slava, we're both advisors with the same firm but he's in Calgary and I'm not. I have lots of Calgary clients, including some who are members here, but Slava is local, and I'm not.

Aaronck, if you wish to talk to Slava, ask his help in analyzing your current plan. See if he agrees with me that you may be better off keeping it and starting a second plan. Note that I said MAY, as I don't know the details of the current plan - market value, what the costs would be, your daughters' liklihood of going on in post-secondary, do you keep all of the value minus fees if you pull out, etc. With all of that information, you can make an informed decision.

[Rathji]

One issue I had with one of the CST type plans, although I am not sure which one) is that if you stop contributing you lose everything.

I had my first when I was a student, and that raised huge red flags for me personally, since things were pretty tight some months.