Why you should start RESP conversations early

It’s possible that many of your clients’ children do not have RESPs.

In 2014, Statistics Canada found that only 48.5% of children had received the Canadian Education Savings Grant (CESG), which is calculated based on contributions made to RESPs. Further, a non-government survey published by the Bank of Montreal in the same year found that only 36% of Canadian children have an RESP.

Without an RESP, clients are giving up thousands in government subsidies. Further, B.C., Quebec and Saskatchewan offer additional RESP grants. But at the end of 2017, Saskatchewan will kill its RESP program.

Regardless of where you live, make sure clients know about RESP opportunities.

Maximize RESPs

RESP beneficiaries who are 16 and 17 years old are only eligible to receive the Canada Education Savings Grant (CESG) if one of the following two conditions are met by the end of the calendar year when the child turns 15:

While many clients may think RESPs are only for the wealthy, low-income families can also maximize the benefits, thanks to the first condition. When talking to low-income families, tell them to open an RESP when their child turns 12 at the latest. Then, have them contribute $100 each year for the next four years.

And, for families who can afford to contribute $2,000 and haven’t done so by the time their child turns 15, encourage them to do so in order to unlock CESG eligibility when the child is aged 16 and 17.

Also, consider that some teenagers may have part-time jobs. So be sure to tell clients with kids who have jobs that they can maximize their government grant amounts if they give the money to their parents (the subscribers) to contribute to their own RESPs (note that beneficiaries are not allowed to directly contribute to their own RESPs). The returns on investment can be powerful, as you’ll see in this example for a low-income family:

Family with $35,000 income

Contribution	$500
Add: CESG for low-income families @ 40%	$200
Add: Quebec grant, QESI, @ 10%	$50
Add: Quebec low-income grant (flat rate)	$50
Total (contribution plus grants)	$800
Return	60%

Further, any scholarship, bursary or grant received can also be contributed towards the plan. If suitable, some parents may want to take out a personal loan to contribute when their child is 16 or 17 years old in order to obtain CESG matching, as long as the return is higher than the interest costs.

It’s a good idea to involve the teenage children of your clients in these discussions. These conversations can be the first step in gaining yourself new clients. Within three or four years, these teenagers may call back with questions about their own finances — this happened to me.

Organize your RESP campaign

You have to approach your clients with a plan. First, create a list of all your client’s children along with their dates of birth. I use Microsoft Excel. Organize the sheets by these ages:

17 years old – the last year to obtain CESG, provided the conditions are met
16 years old – the second-last year to obtain CESG, provided the conditions are met
15 years old – the last year to open an RESP, and the last year to take advantage of condition 2
12 years old – the last year to start contributing to take advantage of condition 1

Then, contact these clients. Here’s the phone script I used for those with 16- and 17-year-old kids. Note that if the two parents are separated, you need to call each biological parent.

Hi [client’s name]. Is it a good time to talk about financial matters?

If yes, continue with this script. If no, ask when is a more convenient time to call.

I would like to talk to you about your children – specifically, their post-secondary education. I could help you get between $1,000 and $2,000 in grants for your child. Would you be interested in talking about that?

(The amount of money varies based on the family’s income, but at this point of your script, you should have your client’s interest.)

First of all, [client name], we need to meet two conditions, so I have a few questions:
Does your child already have an RESP open, and at what age was it opened? Aged 15, or younger?
How much money has been contributed so far?

If the client meets conditions 1 or 2:

You could qualify for these grants. In order for me to explain this to you in detail, we should meet face to face. I would also like your child to be present if you think he (or she) is old enough. When would it be possible to meet?

If the client doesn’t meet these requirements, take a few minutes more to check if there are other children you can help in the family. One more thing: Do not talk numbers on the phone. The call is over. You should have an appointment, which is the objective of the script.

For younger clients

When you are calling clients on your 15-year-olds list, change the green sentences accordingly:

Does your child have an RESP open? It is not too late.
15 years old is the very last year for these grants, so try to open one before year-end.

With low-income clients on the 12-year-olds list:

Does your child have an RESP open? (If not) You may think you don’t have enough money to invest in an RESP.
Well, there is a special rule that applies to 12-year-olds only, and your child qualifies.

At the meeting

During the meeting, ask other important points. When was the plan opened? By whom was it opened (e.g., parents, grandparents)? What is the family income?

The last question is important because subsidies are based on the biological family income. And you have to ask about the legal aspect of childcare. Who receives the child assistance payment from the federal government? Grants depend on the father’s and the mother’s annual income. If the parents divorced and remarry, the step-parent’s income is not considered. The parent who receives the child assistance payment is the key for the grants.

An interesting side effect

This RESP campaign could bring you a loyal future customer base. Why? According to a 2013 U.S. MFS Investing Sentiment Survey, 65% of kids have never met their parent’s financial advisor.

But with the parents’ approval, you could talk about money matters and budgeting with their teenagers. Then, these young adults will be more likely to think of you in a few years when they’ve started their careers.

Canada education savings grant summary chart

Net family income for 2017	Family net income up to $45,916	Family net income between $45,916 and $91,831	Family net income of more than $91,831
CESG on the first $500 of annual RESP contribution	40% = $200	30% = $150	20% = $100
CESG on $501 to $2,500 of annual RESP contribution	20% = $400	20% = $400	20% = $400
Maximum yearly CESG depending on income and contributions	$600	$550	$500
Lifetime maximum CESG for which you may qualify	$7,200	$7,200	$7,200

Source

The first edition of this article appeared on Conseiller. Bernard Viau, FCSI, is a retired financial advisor whose practice operated primarily in Quebec.