Scholarship RESP Plans (Heritage Trust/Knowledge First) - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

Slava · 08-01-2018, 12:51 PM

Unfortunately these plans are around and people who think that they've saved for post-secondary school for their kids are learning that the money is gone. I think a large part of this is consumer education, but realistically the documentation is probably lacking...

https://www.thestar.com/news/investi...-was-gone.html

pseudoreality · 08-01-2018, 01:07 PM

I was worried for a second that you were going to be promoting/selling them. I think most mutual funds are a bad deal, but these trusts are outright criminal.

Slava · 08-01-2018, 01:17 PM

Quote:

Originally Posted by pseudoreality

I was worried for a second that you were going to be promoting/selling them. I think most mutual funds are a bad deal, but these trusts are outright criminal.

LOL, no and I wasn't sure how to make the thread title work out the best. I guess I could have used the title from the article.

The thing is you can have an RESP with no mutual funds or any managed products like that if you prefer.

Swift · 08-01-2018, 04:54 PM

Well, ####! We started one of these with CST right after our son was born. Had no idea until now that it was a bit dodgy. Just spent the last hour reading online articles and comments and I'm pretty mad. I think these guys just called out of the blue right after my son was born and I see that's a common practice for them.

So, from what I'm reading the cons with these guys, you're not entitled to the money they promised if you miss a payment, pull out early, child doesn't go to to university, doesn't do a 4 year course, switches courses or takes a year out prior to university. I'll have to dig out the paperwork later to see what the fine print says on all this. Additionally, even then, you don't get your full payment back as they keep a big chunk of it for maintenance fees.

At this stage in the game, my son is 9, so we're halfway through. We've paid $100 a month since he was born. Our son will almost certainly be going to university (very intelligent kid) so I guess it doesn't make sense for us to pull out now. Maybe a dumb question, but is it possible to have two RESPs for a child? Thinking it might make sense to open a more stable one with a bank just in case we get screwed with CST.

Slava · 08-01-2018, 04:59 PM

Quote:

Originally Posted by Cameron Swift

Well, ####! We started one of these with CST right after our son was born. Had no idea until now that it was a bit dodgy. Just spent the last hour reading online articles and comments and I'm pretty mad. I think these guys just called out of the blue right after my son was born and I see that's a common practice for them.

So, from what I'm reading the cons with these guys, you're not entitled to the money they promised if you miss a payment, pull out early, child doesn't go to to university, doesn't do a 4 year course, switches courses or takes a year out prior to university. I'll have to dig out the paperwork later to see what the fine print says on all this. Additionally, even then, you don't get your full payment back as they keep a big chunk of it for maintenance fees.

At this stage in the game, my son is 9, so we're halfway through. We've paid $100 a month since he was born. Our son will almost certainly be going to university (very intelligent kid) so I guess it doesn't make sense for us to pull out now. Maybe a dumb question, but is it possible to have two RESPs for a child? Thinking it might make sense to open a more stable one with a bank just in case we get screwed with CST.

You can have more than one RESP, but there is a finite grant and that’s all you get (if that makes sense?). There are a few other advantages such as tax sheltered growth and things like that which you would still get though.

Later (when I am not on my phone) I will post an RESP primer to go through a bunch of the considerations and things like that.

pseudoreality · 08-03-2018, 11:29 AM

Quote:

Originally Posted by Slava

You can have more than one RESP, but there is a finite grant and that’s all you get (if that makes sense?). There are a few other advantages such as tax sheltered growth and things like that which you would still get though.

Later (when I am not on my phone) I will post an RESP primer to go through a bunch of the considerations and things like that.

Can you address the rules about the grant money and interest it earns in your primer? I've got an RESP with a big bad bank and they keep the grant money in a money market fund separate from the main mutual fund my contributions go into. That makes it easier if it has to be returned, but am I unnecessarily losing out on investment earnings potential? They also asked what school my kid might go to. I recall it being explained that if the kid doesn't go to school, the grant money is returned to the government and the interest the grant money earned goes to the school I initially identified. I can't seem to find much info online about this. It seems the people that go self-directed through a discount brokage link Quest Trade just see the grant money show up in their account as cash and then they redistribute it based on their chosen ETF allocation. I guess the math wouldn't be that hard if you don't contribute over the amount they match with the grant, it would just be 20% of the total.

And yes, I know I'm a hypocrite for having a mutual fund. It was the easiest thing to convince my wife of when we had our first. However, she is now totally onboard with self-directed investment through a discount brokage and I got her set-up for her TFSAs that way. We recently had another baby, so it is decision time. Do we double down on the bank mutual fund, which is the easiest and most expensive, or do I transfer it to a discount brokage and manage it myself for better returns/lower fees?

Slava · 08-03-2018, 01:47 PM

Quote:

Originally Posted by pseudoreality

Can you address the rules about the grant money and interest it earns in your primer? I've got an RESP with a big bad bank and they keep the grant money in a money market fund separate from the main mutual fund my contributions go into. That makes it easier if it has to be returned, but am I unnecessarily losing out on investment earnings potential? They also asked what school my kid might go to. I recall it being explained that if the kid doesn't go to school, the grant money is returned to the government and the interest the grant money earned goes to the school I initially identified. I can't seem to find much info online about this. It seems the people that go self-directed through a discount brokage link Quest Trade just see the grant money show up in their account as cash and then they redistribute it based on their chosen ETF allocation. I guess the math wouldn't be that hard if you don't contribute over the amount they match with the grant, it would just be 20% of the total.

And yes, I know I'm a hypocrite for having a mutual fund. It was the easiest thing to convince my wife of when we had our first. However, she is now totally onboard with self-directed investment through a discount brokage and I got her set-up for her TFSAs that way. We recently had another baby, so it is decision time. Do we double down on the bank mutual fund, which is the easiest and most expensive, or do I transfer it to a discount brokage and manage it myself for better returns/lower fees?

Yeah for sure, and I will go through the idea of a family RESP for you also. I got preoccupied with weather/politics for my CP time, which is embarrassing!

Wormius · 08-28-2019, 01:03 AM

This story isn't quite the same as the one in the OP, but looking at that company's website it looks pretty dodgy about the fees and what the investments actually are.

https://www.cbc.ca/news/canada/calga...fees-1.5257810

Slava · 08-28-2019, 07:51 AM

Yeah those plans are toxic in my personal opinion. There are a lot of options for these and and plenty of choice, but the fees and penalties for these particular ones are exorbitant.

Wormius · 08-28-2019, 09:41 AM

Quote:

Originally Posted by Slava

Yeah those plans are toxic in my personal opinion. There are a lot of options for these and and plenty of choice, but the fees and penalties for these particular ones are exorbitant.

I wonder why anybody would sign up for that, except that they're using pressure tactics / preying on newcomers. There was no transparency that I could see. It would seem like if all you're doing is just maxing out the grant, you would be better off than in those plans. The withdrawal process for even using the money for education looks like pulling teeth. How do those outfits even exist and go unregulated?

Slava · 08-28-2019, 09:55 AM

Quote:

Originally Posted by Wormius

I wonder why anybody would sign up for that, except that they're using pressure tactics / preying on newcomers. There was no transparency that I could see. It would seem like if all you're doing is just maxing out the grant, you would be better off than in those plans. The withdrawal process for even using the money for education looks like pulling teeth. How do those outfits even exist and go unregulated?

Yeah I don't understand it myself. But the truth is, people have no idea about the fees and penalties. I can't see anyone finding out in advance what the process would be to shut this down or move it (or whatever), and deciding that is the way to do things.

One of the issues in personal finance in general, is that the information is asymmetrical. So the advisor/bank rep/whatever the title is has more knowledge and information than the consumer. There's no real fix for that because you want these people to have expertise and knowledge. The issue to me comes down to one thing in my personal opinion: fiduciary duty.

These instruments are regulated by the Securities regulators though (most are based on Ontario and as a result they're regulated by the OSC). So it's really not the wild west at all.

BeltlineFan · 09-24-2019, 03:20 PM

I just happened to stumble on this thread and after quick review I've cancelled my plan with CST. Thankfully, it's only been two $200 payments since my son was born so I'm considering myself lucky. There definitely were some pressuring sales tactics from their end when we set it up on how much better they are than the banks and how we needed to jump on this early.

The sales person did mention the sales fee at the beginning but I didn't realize it would be so much or that the other RESP providers, such as banks, wouldn't have similar fees. Because the sales fees are taken up front (so they still get your money if you cancel), I don't get any of my $400 dollars back. But if I'm understanding this correctly, I can set one up at a bank and avoid paying the next $4000 that would all be going to the sales fee as well.

MoneyGuy · 09-24-2019, 07:09 PM

Quote:

Originally Posted by BeltlineFan

I just happened to stumble on this thread and after quick review I've cancelled my plan with CST. Thankfully, it's only been two $200 payments since my son was born so I'm considering myself lucky. There definitely were some pressuring sales tactics from their end when we set it up on how much better they are than the banks and how we needed to jump on this early.

The sales person did mention the sales fee at the beginning but I didn't realize it would be so much or that the other RESP providers, such as banks, wouldn't have similar fees. Because the sales fees are taken up front (so they still get your money if you cancel), I don't get any of my $400 dollars back. But if I'm understanding this correctly, I can set one up at a bank and avoid paying the next $4000 that would all be going to the sales fee as well.

Yeah you’re lucky. I had a client years ago was was angry with one of those plans and wanted out. We found out it would have cost about $8,000, if I recall correctly. It was a large RESP. She didn’t care what it cost.

Best thing you can do now is to mention this to friends with young children to help them avoid your mistake. I was once told that there are no bad products, just bad application of products. I can’t find any redeeming qualities for this type of RESP.