This article, New Babies and the RESP Salespeople, first appeared May 20, 2011 on Walletpop.ca.
It started before the kid was even born.
In the month leading up to my child’s birth I was a bit of a mad woman – working like crazy to meet all of my deadlines ahead of time, lest the kid make an early arrival – and the phone wouldn’t stop ringing. These weren’t sources or clients I needed to talk to though, they were sales people. RESP (Registered Education Savings Plan) sales people.
As I understand it, Registered Retirement Savings Plans aren’t the most lucrative things to sell, so it seems the job’s been shopped out to call centres in a lot of cases. Those do who call are absolutely relentless. In my limited experience so far, they’re right up there with the folks who want to sell me on flat rate hydro and gas contracts.
Not Every Investment Sales Person Is Bad
My own personal jury is still out on the value of those hydro contracts but I can tell you, with absolute certainty, that not all RESP programs are created equal. Worse, some of those selling the programs use your child as a powerful piece of emotional bait in the game to get you to sign up.
Not every investment sales person is bad. Some of them are quite excellent, in fact. If you didn’t know better, though, it can get really hard to tell.
They want to talk on the phone and come to your house. Some give you their names and pretend to be helpful. One lady even claimed to be offering a service – she made it sound like she was calling from a government program that helps new moms set their new babies up with a social insurance number and birth certificate. (Beware, new moms! They give you a whole information kit on getting your baby’s paperwork while you’re in the hospital. Chances are anyone calling to help you out with this sort of thing beforehand is probably trying to sell you something.)
Now that I’m no longer a sleep-deprived zombie I feel a little better equipped to deal with money decisions. I should also say this: The programs they’re selling are not scams. In my opinions they’re expensive, restrictive and probably not the best use of your money, but they’re not scams.
Research – Don’t Just Go With The First Offer
Also, if you don’t have a relationship with a financial institution and if you probably wouldn’t seek out RESP information on your own, saving something, even in a lackluster program, is better than nothing. Whatever they’re selling you might work out just fine. Once you’ve looked at your options it’s also possible that you’ll decide that the program being sold sounds just about right for your needs – that’s fine too.
No matter which way you decide to go with your education savings dollars though, try not to go with the first plan you’re presented with without asking a few questions first.
Specifically, “don’t hesitate to look around. Talk to your friends, see what they’ve done and keep an open mind,” says financial planner, Paul Haslam. “Don’t just buy the first thing off the shelf.”
What if your circumstances change in the future? What are the penalties if you can’t commit to your monthly obligation?
What happens if you’d like to stop making contributions? What happens if you need to withdraw your money early?
“Look at the fees, the program’s terms, the rate of return and your needs,” says Zena Amundsen, client service specialist at planning firm, Tyler & Associates. As for the plan’s terms, she echoes Haslam’s advice: “Can you stop (making contributions)? Can you transfer out? What are the fees to do that? What’s the return going to be like?”
Finally, “look at the agreement yourself. Don’t just ask the sales person,” says Mike Holman, author of The RESP Book, the Complete Guide to Registered Education Savings Plans for Canadians. “Are there any penalties for not keeping up the contributions? What happens if they want to transfer to a different institution? What penalties are they looking at to do that? Also ask upfront about commissions. I’m not saying they’re bad (mutual fund sales people earn commissions as well) but you need to be aware of that sort of thing.”
Next: Choosing a product.
Kate McCaffery is a freelance writer in Toronto, Ontario. Visit mccaffery.ca/kate2.0/ for more information.
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