The swelling costs of funding higher education are on the minds of a lot of folks lately. With the speed and magnitude at which fees for post-secondary tuition are growing, simply putting money aside for “junior’s” education may not be enough. It seems like even the savings have to go out and find a second job to support the idea of paying for post-secondary education.
RESP(ect), Find Out What it Means for Fees
One of the tools that Canadian parents have at their disposal when it comes to saving for their children’s post-secondary education is the Registered Education Savings Plan (RESP). Recently, despite the dark clouds of rising fees for schools, there was a silver lining from one of Canada’s major bank-owned discount brokerages. CIBC Investor’s Edge announced that they’re eliminating their annual RESP account administrative fees.
As can be seen in the comparison of registered account fees table, the cost per year for these accounts ranges typically from $25 to $50 for balances that range between $15,000 and $25,000. Prior to the announced change, CIBC Investor’s Edge, like many other Canadian discount brokerages, charged clients who had less than a certain balance (in this case it was $15,000) a $50 annual fee on the account. In the case of CIBC Investor’s Edge, this fee would normally have been charged at the beginning of every September, so the recent announcement is a bit of a bonus for those existing clients who would have had to pay.
All the cool kids are doing it
CIBC Investor’s Edge now joins the likes of Credential Direct and Questrade in providing no-fee RESP accounts that self-directed investors can manage.
While independent discount brokers such as Questrade and Credential Direct may not provoke the bank-owned discount brokerages into action, now that CIBC has eliminated this fee, other bank-owned discount brokerages might have to take notice.
Traditionally the ‘convenience’ factor has been a benefit that bank-owned brokerages could offer over the independent discount brokerages. This latest move by CIBC Investor’s Edge, however, may provoke the other bank-owned discount brokerages to get creative on how to sweeten their offers to self-directed investors who also enjoy the convenience of doing all of their banking and investing in one place.
Make sure to do your homework
Like all offers, however, it is important that those considering the offer understand what the associated costs are of doing business with any brokerage. Factors such as commission charges, inactivity fees, minimum trading requirements, exit costs and overall accessibility and support should still be taken into account when choosing a discount broker. There are also restrictions and regulations associated with RESPs that self-directed investors should understand ahead of deciding to use them.
Overall, the fee removal by CIBC Investor’s edge will benefit investors with smaller RESP balances (those less than $15,000). Hopefully the move will encourage more investors to consider the benefits of RESPs and making their savings work hard so that their kids won’t have to.
(Editor’s Note: At the time of publication, the fees and commissions schedule/section of the website for CIBC Investor’s Edge was not updated to reflect their announced offer, however they have been alerted to this discrepancy and are working to address it)
For further reading on RESPs:
As part of an ongoing study, Dalbar Canada, a leading financial services research firm, is gathering feedback from Canadian retail investors for the purpose of improving the content and design of financial investment statements (including RSP, pension, non-registered account statements, insurance etc) commonly used by Canadians.
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