An open (rant) letter to Canadian banks

Right after my daughter was born we opened an RESP for her, a family RESP as we were planning to have more children. We opened it at TD Canada Trust because the MER on their e-Series funds is practically non-existent.

And all was good (well almost, read Mike Holman’s blog or his book
for details on the convoluted process of opening an RESP at TD for e-Series funds).

And then our son was born and we dropped by the bank to add him as a beneficiary to the family RESP. Unfortunately we stopped there and I didn’t follow-up closely enough with TD.

Now I have an issue with TD and issue with banks in general over their handling of RESP’s!

Even though our Family RESP is converted to an e-Series account and my daughter’s investments are all e-Series investments it appears that my son can’t invest in e-Series funds until I convert his account as well!!! WTF?! Do they have meetings at TD to brainstorm ways of making things complicated for their customers?! Do they think this is good for business?! Are they just throwing darts at a board without considering the over-all user experience!?

There were a few other blunders and fails on their part (TD couldn’t spell RESP if you tatooed it on your forehead). So one of my new year’s resolutions (motivated in part by bigcajunman’s saga) was to do away with TD.

The rest of our accounts are with RBC and they also have some really low cost funds so I figured it was a no-brainer to move over there. I visited RBC today and found out that they too split a Family RESP into separate individual sub-accounts for each child! So I can’t pool all my money and simplify my investments and have more flexibility (i.e.: you often need over $1,000 initial investment which is easier when all your money is pooled).

Hey, listen up Canadian banks: if a dumb-ass klutz like me can add a column to a spreadsheet called “Beneficiary” and write my daughter’s or son’s name in there when I make a contribution (or a withdrawl) then why can’t your fancy-shmancy computers do that too!? Why do you force me to have separate accounts?! While the money is “in” the RESP why can’t it just be one big pool?! The government only needs to know going-in and coming-out who the beneficiary is – not while the money is in the account!

So at this point I need to weigh the value of continuing my battle with TD or moving to the same structure but with better customer support at RBC. Any third options out there?

UPDATE Jan 6, 2011: A friend who understands this finance stuff better than me has explained that pooled is the wrong term to use when referring to funds in a Family RESP. Investopedia defines pooled funds as:

Funds from many individual investors that are aggregated for the purposes of investment, as in the case of a mutual or pension fund.

The advisor at RBC that I had been dealing with also left me a voice-mail correcting his earlier statement and confirming that a Family RESP does indeed combine all the contributions so they can be invested together and I can benefit from the flexibility and simplicity. So it looks like I’ll be moving our RESP over to RBC in the end!

UPDATE Jan 10, 2011: The folks behind @TD_Canada have contacted me through Twitter (via Direct Message) so I’ll let you know if leads to anything. The core issue I’m having though is the structure of their Family Plan RESP and I’m not sure that can be resolved quick enough for me – but we’ll see!

UPDATE Jan 11, 2011: I’m talking to a few folks and re-reading my post. I don’t think I made it clear that although TD Canada Trust has an overly convoluted process to open an e-Series RESP and their customer support is un-prepared for e-Series and RESP questions the ultimate issue the way they structure a Family RESP: each child’s investments are separate. So if you contribute $500 for one child and $500 for a second child you will have to invest each $500 separatelyNOT as a $1,000 single investment. Although it’s a Family RESP and you can (theoretically) transfer money between the kids this separate investment arrangement makes things complicated and reduces your flexibility as each child will need to have enough funds to make the minimum initial purchase when you want to start putting money in a new mutual fund (for example, when the kids get older and the investing horizon gets closer).

Cross-posted to Schultzter’s blog at An open (rant) letter to Canadian banks


  1. I actually think the rules governing RESPs dictate that they have to be handled that way. I’m not an expert, though I do have kids and they have RESPs and I believe that is how it was explained to me by my financial advisor. I’m on your side, however, it would be easier for us as parents to manage this if it was all pooled together.

  2. Very odd. I would imagine that adding a beneficiary at all banks, involves some work – but starting a new account and having to convert it to e-series is downright bizarre.

    Between you and Big Cajun Man, it sounds like TD has a few problems with their RESP process.


  3. Banks need to track which one of your kids the contribution is for and at the other end who you’re withdrawing for. But inside the RESP it shouldn’t be a problem. Historically though – as I was schooled by a more financially wise friend yesterday – RESP were only available as individual plans so it depends when you opened the RESPs and whether your financial institution had developed the ability to handle Family plans. It may be that TD suffers from the double issue of not having fully implemented Family plans in their systems AND not having properly integrated e-Series accounts either. End of the day, TD’s amazingly low MER products are suffering and I’m seriously looking to move my money!!!

  4. Uhhh, isn’t it necessary to track which kid gets which money so that the Banks can apply to the Government for the matching grants?  If you just dump in $1000 without dividing it between children, the Government would likely assume it is all going to one child, which means you would hit your ceiling on the matching money for that child but would get no matching funds for the other child.

    I have no problem transfering twice — one for each kid.  It keeps the accounting clean.

  5. I should clarify.  What you seem to be missing is that the government does not only need to track the initial contribution, but also all of the interest made, etc.  In the event that one of your children doesn’t go to University (or equivalent), you are entitled to take out your own contributions, but you must return all of the matching grants AND YOU ARE TAXED ON ALL OF THE INTEREST AT YOUR MARGINAL RATE + 20%.  So, it actually IS important to know which dollars are assigned to which student WHILE they are in the account.  

    Yes, there are ways around this penalty (in kind contribution to RRSP, for example), but it is still necessary to know which money is tagged to which student (including not only your money and the government’s matching funds, but also the associated interest).

  6. Hi schultzer, just wanted to ask for an update on this — did you transfer from td to rbc, and how did they actually compare to one another?

    I was earlier dead set on going with td mutual funds, we went to meet with a financial planner a few days back but apparently she was’t very knowledgeable about it (or appeared like so). Im not quite convinced yet and looking for other options such as rbc, scotia,etc.

    Hope you can shed some light into this. Thanks.

  7. I did indeed transfer the RESP to RBC.  They were great! I went to a branch near my office (rather than the branch where my chequeing accounts are) and it wasn’t a problem for them and it was really convenient for me.

    All the family money is one account so I have a lot more flexibility – I just have to indicate who the beneficiary is when I make the contribution (or setup the automatic contributions).I do everything on line now and even get my statements electronically so there’s really no difference from the e-Series in those terms.  The MER at RBC is a bit higher (still, at just over 0.5% it’s not a deal-breaker) but the service is much much better.

    BTW, you should definitely do all your homework before going to the bank. Make sure you know what funds they offer, their eligibility, what your objectives are and what your comfort level is for handling your investing choices. Make sure you’re driving the conversation or the advisor will slip into salesperson mode!