Selecting your RESP provider is one of the most important decisions you’ll make when setting up your child’s education savings plan. RESP providers come in many forms, and choosing the best RESP provider is a subjective question. Some people prefer the transparency and flexibility of self-directed bank RESPs, while others prefer the improved returns offered by some group RESP providers.
Who Offers RESPs?
If you’re looking for the best RESP provider in terms of flexibility, transparency and security, a bank or other financial institution may be your best choice. Banks and credit unions typically offer self-directed RESPs which enable you to determine how much you want to contribute, how you want to structure withdrawals and other important considerations. With a bank or credit union, it’s typically easy to find out what fees you’re paying and you may have more flexibility.
You can also get RESPs from group plan dealers. Group dealers may offer more favorable returns than bank or financial institution-based RESPs, because they’re subject to different rules and they are administered differently. However, group RESPs may also feature more restrictions, penalties and fine-print than self-directed RESPs from banks and credit unions.
Every RESP is Different
The best RESP provider in Canada may be your bank or credit union, but it may also be a RESP offered through a group plan. It depends entirely on your personal needs, tolerance for risk, the amount of flexibility you want and what plan you select. While RESPs typically comply with basic government guidelines, you get a lot of variance in the fees you pay for a RESP, your return on investment, rules and restrictions and the way the RESP is structured.
For example, many group RESP providers offer more than one plan option. Some plans may feature more growth opportunity coupled with more risk, while other plans may feature fewer administrative fees but more potential penalties or rules for withdrawal. Review all the plans offered by your favorite RESP provider, and select the one that best meets your needs.
When selecting an RESP provider, make sure you ask whether they offer the Canada Education Savings Grant and Canada Learning Bond. Not all RESP providers offer these valuable education savings tools, so this should be one of your criteria when you’re shopping for a provider.
Read the Fine Print
Some group RESP providers have fallen under scrutiny by the Ontario Securities Commission for providing misleading plan documentation. Some group RESP providers have been investigated for “creative calculations to make the returns appear higher,” lax record-keeping, and failing to publish all the fees and penalties up front. When you’re doing your RESP provider comparison, make sure you read the fine print. Ask about:
- Fees for opening an RESP;
- Fees for withdrawing money from a RESP;
- Fees for managing the RESP;
- Fees for services and commissions;
- What happens if you can’t make payments regularly;
- What happens if your child doesn’t continue his or her education;
If you have to close the account early, do you have to pay fees and penalties; do you get back the money you contributed; do you lose interest and can you transfer the money to another RESP or different account type?
Make sure you understand what you’re getting when you do a RESP provider comparison. Not all providers and plans are created equal, and you might not be getting what you think you’re getting.