I seem to have collected a few dedicated readers who continue to struggle with the RDSP (Registered Disability Savings Plan) vehicle (as do we all). From one of them, I got the following e-mail:
Thanks! There are some non-independent advisors out there (associated with a bank or other financial institution) who have developed a specialty in RDSPs out of personal interest, but I have yet to meet an independent one. So far independent advisors know less about RDSPs than we do.
This e-mail came in response to an answer I had written about the ability to slide funds from an RESP to an RDSP (should the child involved not go to a registered training program for which the RESP could be used). If you are looking for more information on this, read the CRA page, RDSP Bulletin No. 4, which explains the rules around this.
I try very hard to help folks with RDSPs as best I can, but sometimes I am out of my league. With most of my advice, I tell folks they should check with the CRA or another trained professional. It is disheartening to hear that most independent advisors don’t know about the RDSP program.
I continue to harass the big banks about this, but the RDSP is not on their radar scopes. TD Directline offers an RDSP account that is as good as it gets for folks who want to have finer control on the investments. This means not just using Bank Mutual Funds. Directline continues to have shortcomings, too. One is unable to set up an automatic savings schedule transferring money from a checking account directly to the RDSP account. There is a workaround now for this problem.
A friend of this site Ellen Roseman continues to try to help out as well, and for that, I am thankful.
Related RDSP Pages
- The RDSP Page is the Overview of all articles I have written about the RDSP (including DTC and other areas).
- RDSP : Laying the Ground Work (first things first)
What needs to be done BEFORE you can apply for a Registered Disability Savings Plan? A major aspect of this is the Disability Tax Credit (DTC), make sure you click on this page to get started.
- RDSP : Working with The Account
Now that you have succeeded in getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank or such, but how is that done? It is not as easy as you might think. This page outlines many of the issues that have arisen for my family working with an RDSP account.
- Disability Tax Related Topics
Thanks for my RDSP and DTC work I then had to learn a great deal about the tax implications of having a disabled child.
- Autism Specific Articles
Being the proud Father of a child on the Autism Spectrum I also ended up writing a great deal about Autism specific things as well.
- RDSP : Laying the Ground Work (first things first)
I would like to suggest that maybe you set up a list of knowledgeable Advisors by Province that your readers could look up. As an Advisor myself I do not do RDSPs as my knowledge is not enough to provide the comprehensive explanation that many would need so I refer to someone that does have the expertise (I get nothing for referring). It would at least be a starting point for those seeking advice. Start with reader recommended Advisors as they will be the best gauge of the level of service and knowledge the Advisors apply.
There’s a couple of problems with independent advice around RDSP’s.
First is lack of education. There’s no good books on the subject, despite my repeated pestering/encouraging you to write one. Outside of that, the financial industry has little to no information or training on this stuff. In all my years in the industry, I don’t recall ever seeing a presentation on the subject. Can’t sell what you don’t know. So, another call to the site owner to write a book on the subject :).
Second is money. I suspect there’s little money in it. It’s a specialized product that has two drawbacks financially – first is, how many clients can one independent advisor get? A couple maybe? I don’t know the numbers, but it’s a smaller number than RESP’s I best. So, no volume. Secondly, what’s the markup on an RDSP? Again, don’t know, but if you do it right then fees should be minimized as much as possible. Combine low fees with low volume, high needs (I suspect RDSP’s require a lot of hand holding) and how’s anyone supposed to make money? And we don’t expect expert advice from someone not making any money, right?
If you’re a financial advisor, you look at that business model and immediately think “I’ll take a pass, and do what everyone else does – start going after clients with $1MM in investable assets”. Way more money faster than targetting RDSP’s. I don’t mean that in a negative light, it’s just a reasonable expectation that people are going to build businesses where there’s a strong expectation of making money. RDSP’s may not be that.
So if I’m correct and education and money are the two reasons stopping RDSP’s from having a strong foothold, how does one overcome those?
I am working with someone on a side project in the area, but writing a book may have to wait until my retirement, we shall see. Might start harassing my MPs about this see if I can get them to notice too.
I am an independent advisor and I manage close to 90 RDSP accounts. There is a business case for specializing in RDSPs, but the return on investment does not solely depend on income from selling and managing RDSP accounts because they are only the tip of the iceberg.
I specialize in working with families who have children (be they minors or adult children) who have a disability. Purchasing an RDSP is only a small piece of what they need. Like everybody else, they also would like to retire. Unlike everybody else, they often have a much more pressing need for estate planning. Estate planning when you have a child with a disability who is also receiving provincial government benefits like the Ontario Disability Support Program (ODSP) requires some very different strategies. To do it properly, you need an understanding of ODSP, which I have honed over the years.
You are right most people, including independent advisors do not understand the RDSP and most don’t have the time or inclination. What they also do not understand is that it is not simply a niche product; it is a niche market that is not easy to break into, but once you do, as I have, the opportunities are sound from a business perspective and the work is satisfying. I have built great relationships with clients, not simply based on selling an RDSP, but much more so on providing comprehensive advice reflecting their relatively unique needs and circumstances.
What irks me is that the social service employees who deal with people who could most benefit from this are not sharing this info. Especially in regard to the free money available and the estate planning for parents to roll over their RRSPs. I have a friend whose wife just died after over a decade of slow death and he did not k ow about the benefits of the RDSP. His comment was they had nothing to invest so it was never on their radar.
I’m an independent advisor, I tell a lot of people about RDSPs, set them up, and manage them. Kathy is correct – they’re not simple, overall the numbers invested are small, and the hassle is big.
But they’re amazing for the right people!
The CRA puts out lots of info for RDSP providers, but it is confusing for the lay person http://www.edsc.gc.ca/eng/disability/savings/issuers/index.shtml
I agree with you about the RDSP. It can help so many people. I think the problem is that there are a lot of paperwork involved (ensuring right contribution amount for the grant, etc) so there’s no incentive for the banks (and some non-bank investing companies) as well as needing to keep the money in safer investments (so lower fees).
When I was living in another town, I went to RBC (at time, only banks offered it) as BMO never even heard of it but the advisor at RBC was actually specialized in it. He was a huge help and always acted in my best interest and held workshops around town to educate people.
When I moved to another town, I found a non-bank advisor who also specialized in this himself and he still struggles to stay on top of the changes that seem to happen quietly. He along with other non-bank advisors often team up together and hold workshops at places like Community Living to educate the parents.
I’ve had the RDSP for several years now and I still have a hard time myself trying to follow the annoying changes without announcements.
There are some advisors like myself that specialize in the RDSP, but there are not many of us. The banks (at least some of them) have toll-free numbers staffed by people with a strong understanding of the RDSP, but you can’t count on advice tailored specifically to your situation from them. They are more of a help line to answer technical/factual questions, rather than questions surrounding how you should invest the money and how much should you contribute based not only on government contribution calculations, but also on your own financial circumstances and competing priorities.
I don’t think the banks will ever get to the point where they can really offer consistent and personalized advice across the board (i.e. at the branch level). I wrote an article about this for my blog, http://www.ronmalis.com/where-to-open-an-rdsp/
I have been helping clients with these for about 7 years. They are not simple. I have just seen new contributions get coded as a transfer and its take 2 years to get grants corrected. When kids turn 18 there is hassle. many people don’t realize it has to stay in for 10 years.
The grants are huge and if a young person is not making much they will qualify for lots.
I get the feeling the big institutions are not interested as the numbers invested are small and the hassle big. The same with our provincial grant on RESP SASGES few will help.
Feel free to get in touch!
Ellen Rosemanis a great campaigner around many aspects of financial services