resp from industrial alliance

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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l2326t
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resp from industrial alliance

Post by l2326t »

Hi, Does anyone invest resp for your kid or have good/bad experiences with industrial alliance. I am thinking of investing 2 kids resp through them but don't know how safe or good going with them. After reading about all the hidden fees from CTS don't know what is a safe/good to invest resp. Not really good about self-direct investment. I was told by one of the agent at IA that they will "pay you an education bonus of up to 15% of the total monthly contributions paid into the Diploma RESP. The bonus varies according to the beneficiary’s age at the time of enrolment" but must stay in the program with them until the child ready for secondary school. I saw the rate of return this year on their website look like loosing money (due to economy) so I am a bit scare to invest with them or go with any other large financial institutions. Any recommendations/help will be greatly appreciated, if you have dealt with industrial alliance resp program.

thanks

Hi, thanks for the responses. I don't know much about investing as with the TD e-series is a self-direct resp, do you know if they have a profolio manager that can manage the fund for you, as i am sure there must be a fee as well. There are so many mutual funds out there don't know which one to chose from. Beside with industrial alliance, have anyone dealt with sunlife resp????

thanks
Last edited by l2326t on 04 Jan 2012 13:01, edited 1 time in total.
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kcowan
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Re: resp from industrial alliance

Post by kcowan »

I am in an IA seg fund (against my will - they acquired the company I bought it with) and I would suggest going with TD e-series.
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Re: resp from industrial alliance

Post by augustabound »

I remember someone (can't be sure it was here on FWF though), who had problems with their withdrawals though one of the RESP providers and some have more fees than others.
I've only heard positive things about the big banks RESP's and agree with Keith, go with TD e-series. For example, the MER on the TD e-series Canadian Index fund is 0.33%.
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Re: resp from industrial alliance

Post by ukridge »

Not specific to industrial alliance, but stay clear of all pooled RESP providers.

Just open an RESP with a bank with the lowest MER you could find. And buy a single balanced fund to begin with. Like the others suggested, td e-series may be a good option, but they don't have a balanced fund. Just put 25% each in canadian, us, international and bond index funds in that case (as a simple example).

If your reluctance on self directed route is due to lack of knowledge/confidence, you have 5-10 years to learn, by which time your balance may be big enough to consider a self directed account.

Good luck.

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Re: resp from industrial alliance

Post by mikester »

Ditto the advice to avoid pooled RESP providers.

Another basic option is to just open a GIC RESP at any major bank. This is the easiest RESP and might even be fairly appropriate if the kids are a bit older.

If the kids are younger, you can switch the GIC account to something else at a later date if you want.
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Pickles
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Re: resp from industrial alliance

Post by Pickles »

mikester wrote: Another basic option is to just open a GIC RESP at any major bank. This is the easiest RESP and might even be fairly appropriate if the kids are a bit older.

If the kids are younger, you can switch the GIC account to something else at a later date if you want.
We don't know anything about you and your investment experience, l2326t, which is why I agree with mikester's advice. It's safe and gets the RESP started. Then you can learn more about your options down the road.

Welcome to the forum! This is a great place to get advice and feedback but it helps to know a bit about you so members can give appropriate advice, eg. childrens' ages, investment experience, savings potential, etc. We have an "introduce yourself" thread here or you could just post in this thread.
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money123
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Re: resp from industrial alliance

Post by money123 »

I'm also looking into this Diploma plan and its bonus. No one has said anything directly bad about this plan yet?

The only bad thing I see so far is if you do not make the monthly contributions (there is a grace period) each month, you won't get the bonus. But that's no different than any other plan without a bonus.

For everyone who's said do it self-directed in banks, etc. How do you know you won't lose money (principal) ? GIC isn't enough to beat inflation obviously, so that's not a good plan to grow the money.

For all these RESP plans with companies, they all guarantee your original contributions. So just incase they do sooo badly in their funds, at least we didn't lose the principal amount. But with self directed, you could lose much of it, wasting a child's time and money. And I doubt anyone here is really THAT good in profiting in the stock market with consistency.
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Re: resp from industrial alliance

Post by brucecohen »

money123 wrote:I'm also looking into this Diploma plan and its bonus. No one has said anything directly bad about this plan yet?

The only bad thing I see so far is if you do not make the monthly contributions (there is a grace period) each month, you won't get the bonus. But that's no different than any other plan without a bonus.

For everyone who's said do it self-directed in banks, etc. How do you know you won't lose money (principal) ? GIC isn't enough to beat inflation obviously, so that's not a good plan to grow the money.

For all these RESP plans with companies, they all guarantee your original contributions. So just incase they do sooo badly in their funds, at least we didn't lose the principal amount. But with self directed, you could lose much of it, wasting a child's time and money. And I doubt anyone here is really THAT good in profiting in the stock market with consistency.
Tontine RESPs have worked well for many people and have also burned many people. The biggest risk is the structure of the product. The high fees loaded at the front mean you get back little, and in some cases, nothing if you drop out. Also, some are structured such that the student has to attend a traditional four-year program in order to collect the full benefit. That's can be a tough call so far out, especially as trades-oriented two- and three-year community college programs become more popular. It's important to understand that tontine funds are fixed income funds and the underlying portfolios do no better than other fixed income funds. The outsized returns of the past have been due more to the tontine -- which you call a bonus -- than to the investment performance. The tontine is simply the money left in the pool by all the students and parents who for one reason or other did not meet all of the conditions of the contract. IOW, parents who don't make all the required payments and kids who don't do four-year programs subsidize those who do.

Note: Tontine RESPs promoters have a long record of run-ins with regulators. And many of their salespeople are overly aggressive. So it's very important to read the plan's prospectus, not just the marketing materials. And don't rely on oral statements by the salesperson -- check the prospectus.
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Re: resp from industrial alliance

Post by money123 »

Thanks so much. Here's a silly question, what is "Tontine " ?? Is that something from Industrial Alliance?
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Shakespeare
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Re: resp from industrial alliance

Post by Shakespeare »

A "tontine" is an arrangement where a number of people put in money and the survivors collect from the residual after others die/drop out. In a life insurance pool, it has an unfortunate side effect of encouraging murder - see The Wrong Box (novel) - Wikipedia, the free encyclopedia.


Tontine - Wikipedia, the free encyclopedia
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newguy
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Re: resp from industrial alliance

Post by newguy »

Shakespeare wrote:The_Wrong_Box.

It's free!
http://www.gutenberg.org/ebooks/1585

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Re: resp from industrial alliance

Post by money123 »

thnaks. I obtained the long prospectus and read it. The "bonus" is a % (15% in my case) paid via 15% of the monthly payment made at the end of the whole thing (eg. age 17) by giving the equivalent # of units (not as cash). But my friend who's the broker tells me the amount appears in the bonus 15% account each month. So that gets invested into the fund each month. I'm going to call the company to make sure to understand this.

I do not forsee myself not being able to pay the monthly payment. The calculated monthly payment is about $238/month. If my child doesn''t go to university, etc, then that amount (minus the govern's grants) can be transferred to our RRSP, or cashed out (and reported as income to our tax return).

So the only danger I see is not being able to pay the monthly amount for 17 yrs. I could open up something else and do the investing myself, but (a) I doubt my returns will beat or match any fund, could even lose, esp. for 17 years, (b) I won't get the 15% bonus if I do it myself.
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Re: resp from industrial alliance

Post by brucecohen »

money123 wrote:If my child doesn''t go to university, etc, then that amount (minus the govern's grants) can be transferred to our RRSP, or cashed out (and reported as income to our tax return).
1. What if your child does a two-year community college course or a trades apprenticeship instead of a four-year university program?
2. If you reclaim your contributions early, do surrender fees apply? If so, at what rate? What happens to the accumulated income if you drop out? If there's no tontine, what funds the bonus?
3. Are you looking at a tontine plan or at a segregated fund registered as an RESP? If seg fund, is it an insurance contract wrapped around a regular mutual fund? If so, how much higher is the MER?
I won't get the 15% bonus if I do it myself.
Net, net this bonus could turn out to be a money-loser if the MER substantially exceeds what you'd pay for a simple DIY plan. See here. Again, if it's not a tontine plan -- and I suspect it's not -- what funds the bonus?

What's the name of the product you're considering?
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Re: resp from industrial alliance

Post by AlbertDude »

Recently looked into the IA Diploma product as my wife's financial advisor suggested it to us for our new baby.
My conclusion is to avoid this product.
The main selling feature of it is the 15% bonus that they give you when the child reaches age 17.
The main problem is the exceedingly high MER of ~3.5% for what is a market index fund.

Crunching some numbers,
- assuming the IA Diploma fund returns 5% annually over the 17 years (advisor used 5% in her projections)
- finding a similar market index product with a 1% lower MER (ie. MER of ~2.5%, which is still overly expensive) should result in a return of 6% annually. This extra 1% annual return results in a future value greater than the IA Diploma product with the bonus.
- the advantage becomes even wider with a market index product with MER of 1-1.5%
- additionally you won't be subject to all the conditions required to fulfill getting the bonus.
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Re: resp from industrial alliance

Post by adrian2 »

In a word: agreed.

More expanded: where do you think the 15% "bonus" comes from? Surely not from their pockets, but from other subscribers who fail to meet all the conditions. Run, not walk, from it!
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Re: resp from industrial alliance

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AlbertDude wrote:Recently looked into the IA Diploma product as my wife's financial advisor suggested it to us for our new baby.
My conclusion is to avoid this product.
The main selling feature of it is the 15% bonus that they give you when the child reaches age 17.
The main problem is the exceedingly high MER of ~3.5% for what is a market index fund.

Crunching some numbers,
- assuming the IA Diploma fund returns 5% annually over the 17 years (advisor used 5% in her projections)
- finding a similar market index product with a 1% lower MER (ie. MER of ~2.5%, which is still overly expensive) should result in a return of 6% annually. This extra 1% annual return results in a future value greater than the IA Diploma product with the bonus.
- the advantage becomes even wider with a market index product with MER of 1-1.5%
- additionally you won't be subject to all the conditions required to fulfill getting the bonus.

I keep seeing all these posts about "finding the lowest MER". That is not true.

Whenever you see the return% on a Fund Facts page, those returns are NET of MER fees.

So what's better a fund with a MER of 1% and a average return of 3% or a fund with a 3% MER and an 9% average return?

Always look at the return rates, forget the MERs as the returns is what you get AFTER the MERs have been deducted.

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Re: resp from industrial alliance

Post by Peculiar_Investor »

dzrp0003 wrote:I keep seeing all these posts about "finding the lowest MER". That is not true.
First things first, welcome to FWF. I think you'll find your statements will get a lot of push back here.

I would argue that it is indeed true, finding lows MERs is very important as Costs Matter.
Whenever you see the return% on a Fund Facts page, those returns are NET of MER fees.
Agreed.
So what's better a fund with a MER of 1% and a average return of 3% or a fund with a 3% MER and an 9% average return?

Always look at the return rates, forget the MERs as the returns is what you get AFTER the MERs have been deducted.

-MFDA Licensed Advisor
Past performance is no guarantee of future results. No one knows in advance what the annual return of a fund will be going forward. As FWF'er longinvest has previously posted
longinvest wrote:It's not a question of belief; it's a question of basic arithmetic. William Sharpe's theorem is worth reading:
If "active" and "passive" management styles are defined in sensible ways, it must be the case that
  1. before costs, the return on the average actively managed dollar will equal the return on the average passively managed dollar and
  2. after costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar
These assertions will hold for any time period. Moreover, they depend only on the laws of addition, subtraction, multiplication and division. Nothing else is required.

Of course, certain definitions of the key terms are necessary. First a market must be selected -- the stocks in the S&P 500, for example, or a set of "small" stocks. Then each investor who holds securities from the market must be classified as either active or passive.
  • A passive investor always holds every security from the market, with each represented in the same manner as in the market. Thus if security X represents 3 per cent of the value of the securities in the market, a passive investor's portfolio will have 3 per cent of its value invested in X. Equivalently, a passive manager will hold the same percentage of the total outstanding amount of each security in the market.
  • An active investor is one who is not passive. His or her portfolio will differ from that of the passive managers at some or all times. Because active managers usually act on perceptions of mispricing, and because such misperceptions change relatively frequently, such managers tend to trade fairly frequently -- hence the term "active."
However high MERs are always forever and the lower your costs, the greater your share of an investment's return. Thus for the most part FWF'ers know that they should minimize cost rather than speculate based on past results being repeatable in the future.

Added: The index versus active debate has been a contentious subject for decades, and there are strong opinions on both sides. The SPIVA Scorecards are the de facto scorekeepers of this debate. Here's the 2015 SPIVA® Canada Scorecard which states:
Over the longer term, such as the five-year investment horizon, the results are unequivocal across all domestic equity categories. The data show the losing pattern repeating across most categories, as the majority of active managers either underperformed or drew parity with their respective benchmarks.
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Re: resp from industrial alliance

Post by kabira990 »

Hello, I have done a lot of RESP for my clients through Diploma plan. Every one has been happy so far with it. Specially the 15% bonus is what attracts people. There is a higher MER but 15% bonus is what covers it all and makes it worth it.
Also I have had clients who were not happy with the customer service of major banks, but no one has ever complained of IA customer service.
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Re: resp from industrial alliance

Post by IntelQC »

kabira990 wrote: 19 Mar 2020 11:07 Hello, I have done a lot of RESP for my clients through Diploma plan. Every one has been happy so far with it. Specially the 15% bonus is what attracts people. There is a higher MER but 15% bonus is what covers it all and makes it worth it.
Also I have had clients who were not happy with the customer service of major banks, but no one has ever complained of IA customer service.
Sorry, your info is not accurate.
The 15% bonus paid at the end of the contract is far from covering the huge MER (3.61% MER, paid annually).

Also, you forgot to add:

"Administrative fees and/or surrender fees will apply in the following situations:
• late monthly PAC payments after the grace period
• surrenders or transfer of PAC payments
• transfer to another education savings plan
• reducing your monthly PAC payments"
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Re: resp from industrial alliance

Post by AltaRed »

Sounds very much like a commercial solicitation to me. Time for the individual to disclose.
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