Quebec lawsuit is the latest in a string of negative headlines for group RESPs
. A 2019 review of the experiences of low-income investors with group RESP providers by researchers at Queen’s University and the University of Winnipeg reported inaccurate marketing materials and high-pressure sales tactics by sales representatives.against three former sales representatives from Group RESP Corp., Knowledge First Financial and CST Consultants Inc.
The number of units parents buy determines the total cost of their sales charge, which is paid upfront. All of a parent’s contributions go toward the sales charge until half has been paid off, and then a portion of their contributions until it’s fully paid. CST chief operating officer Peter Lewis said in an e-mail to The Globe and Mail that over time it works out in parents’ favour, as the sales charge is coupled with a lower asset management fee. He said CST has compared the fees for an RESP holding units of the CST plan against one holding mutual funds, and found “the CST fees … are equivalent to mutual funds with a 1- to 1.5-per-cent [management expense ratio or MER].
The hefty cost of these plans is at the heart of the Quebec class-action lawsuit against CST, Knowledge First Financial and its subsidiary Heritage Educational Foundation, and three other scholarship plan providers. The lawsuit alleges the plan providers’ per-unit sales charge violates a 2005 Quebec regulation that caps group scholarship plan enrolment fees at $200 a plan, and is considered an “abusive clause” under the Quebec civil code.
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