I can’t bite my tongue any longer.
You want to open a Registered Disability Savings Plan (RDSP), but where? You have choices, but not many. There are the major banks, credit unions, a few other financial institutions and mutual fund companies through financial advisors like myself. To see the full list, click here. Great, now you know where you can open an RDSP. So which one should you choose?
The question isn’t where, but with whom? I can’t really tell you which financial institution is better, but I do not think where you open your RDSP is the right question to ask and answer. WHO should open (and then manage) your RDSP is a much more valuable question.
It is a complex savings plan. To manage an RDSP account properly, you need to know how much you should contribute to maximize the government contributions. You need to understand whose income the government contributions will be based on. When should the “beneficiary” (the person with the disability) be the account holder and when it should be another person? Who is eligible to be an account holder? How do you calculate carry forward amounts (retroactive government contributions)? There are penalties for premature withdrawals; how do they work? And this is only the tip of the iceberg.
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Most of the major banks have done a good job of implementing the processes and systems that support RDSP accounts. They were the first ones to offer the RDSP and should be commended for that. But processes and systems are not enough.
When you step into a bank to open an RDSP, the quality of your experience will largely depend on the bank employee serving you. Now my dad
told me I should never slam the competition, but I can’t help myself on this one. Sorry dad. Bank employees have more products to sell than they can shake a stick at. They can’t learn them all. So they learn the ones they need to learn. Often times, the RDSP is not high on the product list. Why? How many RDSP accounts will the average retail bank employee open? Very few. So what would drive them to understand how RDSPs work? You learn what you have to learn or what you really want to learn.
There are bank employees who do understand the RDSP and will provide you with the service and advice you hope for. Some do exist. If you find one, you are good to go, regardless of the bank you are at. Just keep in mind that you are the bank’s client. If that employee moves to a different branch, a or a different bank, you will be served by a new face the next time you go into your branch and there is no guarantee they will understand how to manage an RDSP account or provide you with sound advice.
Most of the banks have toll-free numbers staffed by bank employees who are specifically trained on RDSPs. If you have questions, you can call these numbers and your questions will be answered. They know RDSPs, but they don’t know you. Unless you know what questions to ask, you can’t expect them to give you the information you may need to make informed decisions. They may ask you some questions, but likely isolated ones. They won’t ask you about other aspects of your finances and they won’t have much advice with respect to social benefits like the ODSP, even if you tell them you are receiving it.
I really don’t know how many times new clients have told me they first went to open an RDSP account at the bank and the bank employee had to make multiple phone calls just to figure out how to fill out the paperwork correctly. Not really a confidence builder. Look, I am not trying to slam bank employees. They are there to service all clients and the vast majority of those clients do not qualify for an RDSP. All I am trying to say is that you shouldn’t assume you will get the service and guidance that you need for your RDSP account when you walk into a bank.
Even if the banks provided their retail branch employees with in depth training on the RDSP, I still think the service would be spotty. Training is great but only if you apply that knowledge on a regular basis. Use it or lose it.
If you are financially literate and prepared to spend a lot of time reading about the RDSP, the bank may be the place for you. If you are not comfortable managing an RDSP investment account or unwilling to spend the time, seek out a professional who has experience opening and managing RDSP accounts.
…and here’s my shameless plug.
I am a financial advisor and I specialize in working with people with disabilities and their families. Most of my clients have RDSP accounts. There isn’t a day in the office where I am not talking about the RDSP, dealing with a client’s RDSP account or opening up a new account. And it is not only about opening the account; its about managing it on an ongoing basis. You can open an account and never look at it again, but I think most of us know that is not the best strategy. I reach out to clients when it is time to make another contribution or if I think an adjustment should be made to the investments in the account. Don’t expect the bank to call you.
I normally write articles I believe provide valuable information and hesitate to promote my business so unabashedly, but I am growing so tired of the poor service, guidance and advice people are receiving from the banks. Prospective clients come to me with their RDSP account statements from the bank. Some haven’t received any government grants because they haven’t been set up properly. Others have investment selections that make very little sense. Some accounts have languished because the client is not sure how much to contribute and when. Granted there have been other situations where the RDSP account at the bank were in good shape, but I think it is safe to say that is not always the case.
Many of my clients who have transferred the RDSP they initially opened up at a bank to my management didn’t fully realize the gaps in advice or service they received. How would they if they don’t understand how an RDSP really works? Clients put their trust not only in the institution holding their money; they also put their trust in the actual person giving them advice. We expect that person has a strong enough understanding of RDSP to help us make informed decisions. It is not until I review their account statements and explain what I see (and don’t see) do they understand what has been lacking. At the very least, people should know what to expect when they walk into a bank. People should understand they will have to take a very proactive role in the management of their RDSP account at a bank because they can’t expect the bank will be proactive.
People who qualify for the RDSP and their families generally have much larger financial challenges. A disproportionate number of people with disabilities are unemployed or underemployed and their expenses are higher. Parents of children with disabilities earn less and have a far greater financial burden, especially if their children are not able to earn an income or live independently as adults. So the RDSP is such a crucial savings plan. We are talking about the health and welfare of people with disabilities AND their families. In my view, maximizing a RDSP is incredibly important.
So I write this article because proper account management is so very important when it comes to the RDSP. It is an incredibly generous plan, attracting significant contributions from the government. Money that can really make a difference for a marginalized segment of our society.
Should you be able to rely upon consistent service from the banks? Sure. People with disabilities should be able to rely on better and consistent service in all sorts of areas, but that doesn’t mean it will materialize. Or maybe the RDSP shouldn’t be so complicated. For now this is the reality. The RDSP is complex and not many people in the financial services sector have spent the time to fully understand it, which are some of the reasons I do what I do.
My practice is very “niche”. I like it that way. It makes good business sense, but that’s not the only reason I chose my focus. I have great clients. I like it when they call and I think they like it when I call them. People with disabilities and their families deserve expertise and guidance that reflects their needs and circumstances. That’s my stated purpose. To provide the advice and stewardship my clients need…and that includes a very strong understanding of the RDSP, which (sadly) is difficult to find….even at the bank.
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Fantastic article Ron! I love each and every one of my RDSP clients. They make my days worth getting out of bed to do some good. The comments I have received from clients or soon to be clients about the bank not following up on why they have not received any grants for the past four years is horrifying. We seem to be hard to find for people to get the correct information, but I think that is changing.
Cheers to a great 2015 year of serving our RDSP clients!
Ron, great post. The ‘who’ is just as important, if not more so, than the ‘where’ when it comes to something as complex and requiring as much care of stewardship as an RDSP. Your clients are lucky to have you!