December 10, 2013
“My representative never told me!” Does anyone not share this fear of entrusting savings in good faith to a well-established institution, only to find that not every effort has been made to maximize the return on investment? The cure to such a dreadful feeling is to consult a competent advisor with a proven expertise in the area of registered education savings plans (RESPs). This raises the question: why a specialist for this specific type of investment? Well, because RESPs are one of the smartest investments you can make, given the government grants to which you may be entitled.
When it comes to making RESP contributions, how different is it from one institution to another? Aren’t rules governing grants the same for everyone? Shouldn’t we be expecting to receive the same grant amounts from one institution to the other? Generally speaking – yes. However, in reality, things get a bit tricky.
RESP ― Specialist or Not?
A wide variety of education savings products are offered by a number of financial organizations (banks, credit unions, insurance companies and RESP providers). As a result, certain things should be understood. Within the context of financial institutions or insurance companies providing RESPs, plan advisors will specifically offer advice on individual scholarship plans; hence, such financial counsellors are not required to pass an RESP-specific qualifying examination*. Accordingly, it is possible that a given advisor may ultimately view RESPs as one financial product out of many, be they RRSPs or insurance.
Case Study ― Details Matter!
A thorough knowledge of the rules governing the RESP industry makes all the difference. Here’s a case study to make you think. Annie opens an RESP for her newborn baby. In the process, she is asked to provide the infant’s social insurance number (SIN), which she would eventually obtain with a delay. “I suppose this is okay,” she concludes. “I was informed that I had an entire year to provide it!” Although that is true, let us not forget two things: Annie’s plan can only officially bear the mention “registered” (which is part of the RESP acronym) upon receipt of the SIN; and this latter condition is required to be met before Annie can receive the government grants she’s entitled to. As needed, Annie makes a first deposit at the same time the RESP is opened, in the fall on 2011; the SIN, however, is not provided until the spring of 2012. Now here’s what happens: the amount of government grants available to Annie is based upon her contributions for 2012, excluding those made for fall 2011. This whole thing about a social insurance number may sound like a detail to some people; it might be the case for a representative on training. For Annie, however, such a detail has a direct impact on her portfolio.
Claim Retroactively ... Under Certain Conditions
That being said, there's no call for panic. Annie has not ceased to be eligible for the 2011 grants; she will be able to claim these amounts retroactively. However, this will only be possible once the current year’s grant has been maximized. But then again, to do that, Annie must have access to the liquid funds available in 2012 and contribute the additional amounts required.
This is an example of the kind of case study Universitas representatives would receive as part of their training. In addition to being entirely dedicated to the sale of scholarship plans, and belonging to the only Quebec-based foundation providing group scholarship plans, these representatives are required, pursuant to the provisions of the Securities Act, to pass en entry examination, which entitles the successful candidate to sell such products, and to undergo a specified number of hours of continuing education.
For many people, choosing a financial product is not an easy task, nor is it an appealing one, especially if you do the exercise at a tiresome period in your life ― like the arrival of a new baby. Getting your advice from a specialist who deals only with RESPs is the smart thing to do ― for your peace of mind and to protect your investment.
*Refers to the examination of the Registered Education Savings Plan Dealers Association of Canada (RESPDAC).