Well, she does sound young, that's for sure. Hopefully she looks better than her opinions...
D.
RESP - Scotiabank or TD ?
- Thread starter spacyfoil
- Start date
D.
If you haven't already gone in and invested, you may also want to talk with the parents as opening multiple RESP's can make it difficulte to track contributions and intern the related grants.Awesome, what better could I have hoped for
So wingedfaith, my Biggest question, what are the Fees I am NOT being told about ????
Scotia said, TD charges $50. Does your bank charge any fees ?
- As noted elsewhere the biggest bang for the buck on RESP's is the 20% contribution from the government on the first $2500 contributed for the child, any contributions above that, do not get matching dollars. Catch up contributions where the government will match back $$ is one contribution year back (so if the child is currently 3yrs old, and there's never been a contribution made for them, a max of $5000 should be made (current year plus 1 year back catchup) to maximize the Government contribution. Government then will contribute $1000 (20% of $5000)
- There are accounts at the banks that are no Fee for RESP's, usually they allow GIC type of investments, maybe mutualfunds for no charge. Use this until the account has reached 25K then move it to a self directed account like Waterhouse where it will not be charged fees and now you can then buy some high quality dividend stock (telco, Bank, etc) and let it grow.
- If there are more then one kid, then it's good to get it done as a family plan so the money pools faster to get into the $25000 range for the no charge account.
Overlooked your post and hence the belated response.
I do not think the choice of banks is all that important for RESP.
Surely the strength of TD could be an advantage for building a
sizable and diversified stock portfolio. But in my view aggressive
investment like growth stocks and equity funds are better left to
a RRSP account. One should only invest in fixed income securities
in a RESP account. Canadian bond funds offered by any of the major
banks should serve such purpose. Also note that some banks
actually allow you to buy funds from other institutions. With CIBC
for instance you can buy TD funds in your brokerage account.
Interesting thoughts of everyone here. Now, I do work with a major Bank and hate to say this that investing with Banks will be the worst decision ... To keep it simple see below:
Bank:
MER fee, your funds are not guaranteed, investments in mutual funds that can go good and bad, MER kills it.
Schoplarship companies:
Pros:
Your investment will get decent returns
Good selection of companies
Higher returns (compared to Banks!)
Cons:
Pushy Sales people who sometime do not educate people.
Many people are here are bashing saying that " higher commisions " are involved with scholarship companies and they are aggressive to stay away ? Really? LOL
You buy a property from realtor he gets big commision, does that mean one should stay away from them?How do you know Banks do not offer big commisions? I have been with a major Bank for 8 years and I know exactly it all works out. Not all scholarship companies are bad. Personally, I have a friend who introduced me to all this, whose company (in business since 1990) deals with all scholarship companies told me that most company except a company named Heritage (there is more to the name, google it i guess
Summary, there is good and bad everywhere, you just need to pick the right person to deal with. The 2 banks you are comparing I am working for the bigger one
, if you need any info from them, let me know OR if you need to go with scholarship companies, let me know too.
Bank:
MER fee, your funds are not guaranteed, investments in mutual funds that can go good and bad, MER kills it.
Schoplarship companies:
Pros:
Your investment will get decent returns
Good selection of companies
Higher returns (compared to Banks!)
Cons:
Pushy Sales people who sometime do not educate people.
Many people are here are bashing saying that " higher commisions " are involved with scholarship companies and they are aggressive to stay away ? Really? LOL
You buy a property from realtor he gets big commision, does that mean one should stay away from them?How do you know Banks do not offer big commisions? I have been with a major Bank for 8 years and I know exactly it all works out. Not all scholarship companies are bad. Personally, I have a friend who introduced me to all this, whose company (in business since 1990) deals with all scholarship companies told me that most company except a company named Heritage (there is more to the name, google it i guess
Summary, there is good and bad everywhere, you just need to pick the right person to deal with. The 2 banks you are comparing I am working for the bigger one
, if you need any info from them, let me know OR if you need to go with scholarship companies, let me know too.So many issues to address in your comments:Interesting thoughts of everyone here. Now, I do work with a major Bank and hate to say this that investing with Banks will be the worst decision ... To keep it simple see below:
Bank:
MER fee, your funds are not guaranteed, investments in mutual funds that can go good and bad, MER kills it.
Schoplarship companies:
Pros:
Your investment will get decent returns
Good selection of companies
Higher returns (compared to Banks!)
Cons:
Pushy Sales people who sometime do not educate people.
Many people are here are bashing saying that " higher commisions " are involved with scholarship companies and they are aggressive to stay away ? Really? LOL
You buy a property from realtor he gets big commision, does that mean one should stay away from them?How do you know Banks do not offer big commisions? I have been with a major Bank for 8 years and I know exactly it all works out. Not all scholarship companies are bad. Personally, I have a friend who introduced me to all this, whose company (in business since 1990) deals with all scholarship companies told me that most company except a company named Heritage (there is more to the name, google it i guess
Summary, there is good and bad everywhere, you just need to pick the right person to deal with. The 2 banks you are comparing I am working for the bigger one
MER's: any funds have fees to manage them but they are much lower than fees you pay for scholarship trusts. MERs will range from 1-3% annually for funds while your scholarship trust deposits lose about half your first three years of contributions to fees and commissions plus unknown ongoing fees.
"guaranteed": you say funds aren't guaranteed but in fact the returns from the scholarships often include some unknown potential bonus which is not guaranteed either. Personally, I will take my chances with the vagaries of the stock markets rather than some organization's arbitrary ability to award a bonus if they want. But if you are worried about guaranteed then you might not want to be in the stock market anyway and might be better off in something like GICs or even the scholarship RESPs.
"higher returns": you say you will get higher returns with scholarship trust RESPs than with bank funds. Interesting that you can offer such definitive answers for future results and you don't even talk about what kind of bank fund you are guaranteeing to have lower returns than scholarship RESPs! Not to mention that the bond based scholarship RESPs have benefitted from falling interest rates in the last twenty years: do you expect that to continue? If not [since it's impossible for rates to fall going forward] how can you expect [never mind definitively state] that scholarship trusts will do better than some undefined funds?
"big commissions": the issue is that the oversized commissions paid on scholarship trusts have to come from somewhere. Most people are able to make the gigantic leap of logic and understand that the consumer who buys scholarship trusts is the one financing the huge commissions. With funds from the banks [and elsewhere] you pay about 2% per year in fees whereas the scholarship trusts pay 50% of the invested funds to commissions and fees in the first three years plus unknow ongoing fees. I doubt the banks offer commssions on selling their funds for RESPs so there's no comparison to what the scholarship trusts pay out in commissions.
The bottom line is to be careful before committing to any plan and to understand the fees and commissions. You're better off getting advice from someone who can offer you different products and will explain all the features. I'm not sure that I would go with your advice even though you tell us "I have been with a major Bank for 8 years and I know exactly it all works out."
Good luck. D.
Just to add a few thought for consideration:
Why Mutual Funds rather than GIC's -- you want higher returns ... but ...
1. The government is already giving you extra money -- why take a risk -- you already have an extra 18% in free money. Do you need to be greedy?
2. Since it grows tax free there is NO advantage to equities over GICs or Bonds.
3. Will a fund grow faster after all of the fees considered than a no risk instrument -- all you can answer is maybe.
My suggestion: Find a bank with minimum fees for holding the RESP. Deposit the maximum each year and buy a 10 year bond. In ten years reconsider the renewal investment based on the child, the investment world at that time. Or buy a five year one each year and roll over each year into a five year.
I would also look into a 20 pay life insurance plan (make sure the dividends buy more insurance while we are in low interest world). This has the benefit of providing guaranteed insurance in case of health issues later. Money also grows tax free. The plan can borrowed against to provide funds for school, and are available to the child even if they do not go to College etc.
Why Mutual Funds rather than GIC's -- you want higher returns ... but ...
1. The government is already giving you extra money -- why take a risk -- you already have an extra 18% in free money. Do you need to be greedy?
2. Since it grows tax free there is NO advantage to equities over GICs or Bonds.
3. Will a fund grow faster after all of the fees considered than a no risk instrument -- all you can answer is maybe.
My suggestion: Find a bank with minimum fees for holding the RESP. Deposit the maximum each year and buy a 10 year bond. In ten years reconsider the renewal investment based on the child, the investment world at that time. Or buy a five year one each year and roll over each year into a five year.
I would also look into a 20 pay life insurance plan (make sure the dividends buy more insurance while we are in low interest world). This has the benefit of providing guaranteed insurance in case of health issues later. Money also grows tax free. The plan can borrowed against to provide funds for school, and are available to the child even if they do not go to College etc.
MER's: any funds have fees to manage them but they are much lower than fees you pay for scholarship trusts. MERs will range from 1-3% annually for funds while your scholarship trust deposits lose about half your first three years of contributions to fees and commissions plus unknown ongoing fees. Incorrect. I will give you some merit to that argument. Banks charge MER for ALL your contributions through out plan VS scholarships putting your contributions towards admin for no more than 1 year (at least the reputable scholarship companies), making 100% of your contributions towards the fund and NOT management of funds. Banks, will charge your that fee through out the plan...
> SORRY, I DON'T BELIEVE THAT SOMEONE WILL MANAGE YOUR MONEY FOR EIGHTEEN YEARS AND ONLY TAKE A MANAGEMENT FEE FOR THE FIRST YEAR: SOUNDS AWFULLY NAIVE TO ME. ANYONE MANAGING YOUR MONEY WILL CHARGE YOU ONGOING FEES: COMMON SENSE. I'VE EMPLOYED TWO PEOPLE WHO TOLD ME THEY GOT COMMISSIONS OF HALF OF THE FIRST THREE YEARS OF SCOLARSHIP TRUST CONTRIBUTIONS AND I'VE SEEN MORE THAN A DOZEN LIQUIDATIONS FROM THOSE PLANS WHERE THE PARENTS LOST MOST THEIR MONEY TO FEES IF THEY CANCELLED WITHIN THE FIRST FEW YEARS [MONEY PRESUMABLY GONE TO COMMISSIONS AND FEES]. IF THERE WEREN'T GENEROUS COMMISSIONS BEING PAID ON SCHOLARSHIP TRUSTS WHY WOULD THOSE SALESPEOPLE HUNT YOU DOWN FOR $50 MONTHLY PLANS?
"guaranteed": you say funds aren't guaranteed but in fact the returns from the scholarships often include some unknown potential bonus which is not guaranteed either. Personally, I will take my chances with the vagaries of the stock markets rather than some organization's arbitrary ability to award a bonus if they want. But if you are worried about guaranteed then you might not want to be in the stock market anyway and might be better off in something like GICs or even the scholarship RESPs. Re read your first line -"some potential bonus which is not guaranteed". Of course the potential bonuses are not going to be guaranteed. If it is potential "bonus", then it will not be guaranteed... Look at last 10 years of payouts in industry. Reputable scholarship companies have the highest payouts and Banks are no where close to that.
> OLDEST MISTAKE IN THE BOOK IS TO LOOK BACK AT THE LAST TEN YEARS AND SIMPLISTICALLY EXTRAPOLATE IT FORWARD. INTELLIGENT ANALYSIS RECOGNIZES THAT BONDS HAVE HAD THEIR DAY AND WILL NOT ONLY NOT BE ABLE TO REPLICATE THE LAST TEN YEARS BUT WILL ACTUALLY PROBABLY STRUGGLE AGAINST A TIDE OF RISING RATES.
"higher returns": you say you will get higher returns with scholarship trust RESPs than with bank funds. Interesting that you can offer such definitive answers for future results and you don't even talk about what kind of bank fund you are guaranteeing to have lower returns than scholarship RESPs! Not to mention that the bond based scholarship RESPs have benefitted from falling interest rates in the last twenty years: do you expect that to continue? If not [since it's impossible for rates to fall going forward] how can you expect [never mind definitively state] that scholarship trusts will do better than some undefined funds? Again, look at the payout statements for scholarship funds and Bank. That aside, you should know that the contributions to funds are diverse. So yes, bond based have benefited. Does that mean that other investments can never match up to this? Because one this has benefited during bad economic times, all the other things failed putting this at the top? really?
> I CAN'T REALLY UNDERSTAND WHAT YOU ARE TRYING TO SAY BUT IF YOU ARE IMPLYING THAT THESE SCHOLARSHIP TRUSTS CAN MAKE MONEY OUTSIDE BONDS I DON'T THINK THIS IS ACCURATE. MY UNDERSTANDING IS THAT THEY ARE CONSTRAINED TO ONLY BONDS. IN ANY CASE, I PREFER TO PICK MY OWN INVESTMENTS RATHER THAN HOPE THE SCHOLARSHIP TRUST PEOPLE WILL DO A GOOD JOB IN THEIR BLACK BOX INVESTMENT POOL.
"big commissions": the issue is that the oversized commissions paid on scholarship trusts have to come from somewhere. Most people are able to make the gigantic leap of logic and understand that the consumer who buys scholarship trusts is the one financing the huge commissions. With funds from the banks [and elsewhere] you pay about 2% per year in fees whereas the scholarship trusts pay 50% of the invested funds to commissions and fees in the first three years plus unknow ongoing fees. I doubt the banks offer commssions on selling their funds for RESPs so there's no comparison to what the scholarship trusts pay out in commissions. You can not be any more incorrect. How do you know they are over-sized? Based on aggressive behavior of some reps you will conclude that? My realtor was not pushy and since many realtors who are pushy make more money, does it mean that my realtor did not make good money? Do you know what commission structure banks offer? For one, you are wrong about contributions towards the fund. Secondly, you are assuming the scholarships advisors are paid big commissions while banks do not offer these based on no evidence of logic.
> I KNOW THE SCHOLARSHIP TRUST COMMISSIONS ARE HUGE BASED ON MY STATEMENTS TWO PARAGRAPHS ABOVE AND TWENTY YEARS IN THE FINANICAL INDUSTRY. I KNOW MOST BANK EMPLOYEES ARE NOT COMMISSION BASED AND EVEN THE BROKERS MAKE A ONETIME UPFRONT COMMISSION OF FIVE PERCENT MAX WHICH COMES OUT OF THE ~2% ANNUAL MER FEE. FACTS. REALLY.
The bottom line is to be careful before committing to any plan and to understand the fees and commissions. You're better off getting advice from someone who can offer you different products and will explain all the features. I'm not sure that I would go with your advice even though you tell us "I have been with a major Bank for 8 years and I know exactly it all works out." Agreed that bottom line is to KNOW and be CAREFUL, but defaming other things based on no evidence and assumptions (that you may call your logic) is absurdism.
> MY DEFAMING IS BASED ON A LOT OF FACTS GATHERED OVER MANY YEARS AND ON MY EXTENSIVE UNDERSTANDING OF THE INVESTMENT INDUSTRY. SORRY YOU SPENT SO MUCH TIME THROWING UP SOME REALLY ODD STATEMENTS. REALLY ODD. REALLY.
BETTER LUCK IN THE FUTURE. D.
1. Yes you have an extra 20% but most rational people would want more. Do you go to your boss and say "I already make $12 an hour so no need for a raise: I'm not greedy"? It's human nature to want more unless you have more than you need and most parents aren't in that boat I would say.
2. I'm going to have to assume you had a massive cramp and mispelled whatever you were trying to say since what you typed suggests you have no understanding of investments and I'd hope that you wouldn't be commenting if this is what you really meant to say.
3. Almost any equity investment is expected to do much better than the risk free rate in the long run. Fact: over the last twenty years the risk-free rate of return is 4.29% for T-bills and 9.8% for the TSX and 8.3% for the S&P500. Even after allowing for a 2% management fee you would have done much better than the risk-free rate by being in equties [and this ignores that it was a rough last ten years for the stock markets]. Also ignored is the fact that the risk-free rate currently is about 1% so almost anything will do much better than that even after 2% fees.
Your suggestion ignores the fact that long term bonds have a major risk called inflation. Stock market volatility can be dangerous in the short term but inflation is even more dangerous for long term guaranteed investments: it's just not as obvious or as well understood.
Lastly, you're worried about "all the fees" of investing in funds at the bank and yet you're advocating for permanent insurance [which is almost as expensive in fees as the original scholarship trusts]? Very ironic [moronic?] I would say.
Sorry, don't see the logic of most of your ideas but that's the nature of investments with so many different approaches to dealing with all the emotions and misinformation out there.
D.
*All that aside, Caps were not really necessary. You appear to be an avid online observant to site so would be a good idea to be mindful of internet etiquettes – CAPS = SHOUTING.*
**To be fair and not a prick, I would say that we both definitely have a difference of opinion on things, which I think is fair. May be it’s the delivery of comments on my end or interpretation on your end – who knows. Well, I am done with rebuttals on this thread and back to review section --- =) . Thanks for sharing your prespective.
i LOL'ed. Thanks for the good Sunday laugh.. I am done with humour on here.:closed_2:
We definitely differ in our conclusions but I am comfortable that with what I feel I know of these kinds of RESPs I would never recommend them to anyone. But you are comfortable with your position and understand the important issues so who's to say what will turn out to be the best.
By the way, I used caps to keep the comments next to the original material but distinct; it didn't occur to me that it could be interpreted as shouting given the tone of the conversation.
D.
