AVOID "Knowledge First Financial (KFF)" for RESP - A legal SCAM | General financial discussion | Discussion forum

Their disclosures may have been somewhat lacking and their fees far too high, but I would strongly recommend you remove the references to it being a "scam," especially a "legal" one. That is an unnecessary inflammatory and libelous statement. Whether it's an RESP investment plan dealer or segregated funds sold by a major Canadian life insurer, they all suffer from (a) overly confusing information packets, (b) less than transparent disclosure, and (c) overly high fees. This is nothing new, and isn't unique to Knowledge First Financial; the same could be said of Manulife or Empire Life in their sale of segregated funds. However, in neither case is it notionally a "scam."

Nevertheless, I'm sorry for your unfortunate investment losses. 🙁

Cheers,
Doug

I found earlier a 2008 study that was done for HRDC.

With some plans, the entire monthly payment is for fees until 50% of the fees are paid. Then, 50% of the monthly payment is for fees until the remaining fees are covered.

As well, I found those charts, suggesting 5% per annum returns going forward, were suspect given what the return was on government bonds that the plan could purchase with any new contributions.

Save2Retire@55's experience is not surprising. The HRDC study found there was "a significant risk that participants in group plans end up in a worse financial situation as a result of their participation."

I like OP's first sentence where he clearly takes responsibility for his predicament, but I don't agree that we need to hire more civil servants to get involved whenever grown-ups make what they later find to be poor financial choices for whatever reason. I've always preferred to put responsibility 100% on the guy in the mirror, and the result is I've rarely if ever been scammed, etc. Funnily enough the one I do remember is this one, being sold some scholarship deal shortly after the birth of my firstborn, can't remember the name, maybe it was CST, but I think I paid a one-time amount of about $1500 and ended up getting half-decent chunks when some of the kids went to university, it actually ended up not too bad if I recall.

I disagree with Bill's approach. There are many important safeguards that a society can, does and should put in place in order to make everyone's lives better. And this would be one of them.

Scams and scammers do not have an inherent right to exist, deceive and make off with people's money. They know exactly what they are doing; it is not in the public interest; and we have a right to put a stop to it. That's what government is for. OP would be doing us a great public service to pursue this and get rid of these vultures.

For the record, I have no personal interest in this subject.

AltaRed said
Unfortunately, too many salespeople are a slimy bunch and simply push product, sometimes misrepresenting it. Wise investors wised up and started buying term life insurance online bypassing sales folk, and started buying no fee bank mutual funds.

Despite all this, the commission model still exists for many products and some investors still need or want guidance. How does one accommodate that need?  

This is an actually an argument in favour of the approach of which Bill seems to be in favour and is arguing—that is, that, ultimately, market forces will force change more than added civil servants. I don't think the problem is with Knowledge First or CST alone; could their disclosures be enhanced, at the salesperson level? Almost certainly. Should their fees be lowered? Certain fees, definitely. Should they eliminate some? Yes. Should we force them to do all these things? No, principally because of the unintended consequences and because the problem isn't just with these scholarship trust plans, but rather with front-end and deferred sales charges. Instead of stipulating a maximum MER that can be charged, we should just get rid of front-end and back-end load fees and let market forces handle the MERs and other administrative fees.

We also have to consider how exceedingly difficult it is to get even that changed. The federal government is trying to takeover securities regulation, but such is within provincial jurisdiction. It takes the provinces signing over that jurisdiction to the federal government (some have conditionally agreed to do so, but others, notably Alberta, Manitoba, and several others in the atlantic provinces mainly have said "no way").

Cheers,
Doug

Loonie said
Don't make it sound more complicated than it is to rein these people in. How it's done can be discussed and deserves careful consideration, but where there's a will,, there's a way.

I don't think the problem is simply about commissions. Even if there weren't commissions, there would be other kinds of bonuses or promotions for selling more, whatever it is. But the "sky's the limit" and "anything goes as long as they sign on the dotted line" is not acceptable.

I suspect this business depends on churn, that their sales people don't stay long, and there is little repeat business. Once parents realize what is happening, they quit. And that, of course, is why they make you pay so much up front. A scam is a scam is a scam. Why would we allow them?  

Well, that's mostly true, especially about salesperson churn, but I think that's a separate problem. For many years, the Big 5 banks and credit unions didn't offer RESPs, so there weren't a lot of options. Of those that did, not all of them were compatible with government matching grants. It was very hodge-podge, as I recall. CST and Knowledge First saw an opportunity and seized upon it. CST is trying to pivot into operating more like a robo-advisor, albeit a much higher cost one, with their "CST Spark" RESP plan offering. ATB Financial, too, has a much higher cost robo-advisor offering across all registered plan types, called "ATB Prosper," yet no one complains about them.

I don't think they're so much as a "scam" as they are just a really high cost option. What we need is for people to be better educated and for better financial literacy programs. That's starting to change, but it still often involves well-meaning bank or credit union salespeople volunteering with organizations like Junior Achievement to teach these one-off financial literacy lessons!

Cheers,
Doug

I can appreciate what Doug is saying that there were fewer institutions offering RESPs in the beginning (and it wasn't a well known option). However, that's quite a long time ago now. I remember suggesting to friends that they get one for their baby son, which they did, and it was not a scam. I believe they did it at a bank. That baby is now 42 years old and holds a master's degree and a decent job. It worked out for them.

I get that Bill's fundamental belief is that everyone is totally responsible for whatever they sign on for, no matter how misleading etc. I accept that this is your position as you've stated it many times before.

However, if we went by that dictate, it would be the wild west in finance, not to mention lots of other consumer safety issues. We could just let the financial industry do whatever it thought was to its and its shareholders' best advantage, and it would all be the customer's fault if we didn't fully realize what we'd gotten into or how we'd been taken advantage of. The banks would love that, and things would get much worse than they are now for consumers.

Bill may not think it is a good idea, but as far as i know every province and the federal government has various kinds of laws and regulations to protect consumers in many ways, including many that affect financial matters. The Anti-Fraud Centre to which your link directs us is a case in point, a Federal Government agency. While it's certainly helpful, there is no guarantee that it is comprehensive. The current definition of fraud depends on current legislation, and legislation is subject to change.

In my view, a scam can be a scam while still tiptoeing around the edge of fraud without actually crossing that particular line. And if everyone who was tempted to sign up for this RESP fully understood what they were doing, the company would go out of business quickly. It is absolutely dependent on aggressive sales and I would not be at all surprised if people are lied to in the process.. I've been lied to by sales people at the major banks, never mind an unscrupulous outfit like this. I do think the banks have somewhat higher standards.

Thus, consumer protection is clearly a government responsibility. Many of those rules exist because citizens have advocated strongly for them. And that's what OP can do.

As I said above, which, as an astute reader of fine print, you would surely understand, the issue is not simply signing on the dotted line; "anything goes" gives the sales people licence to say whatever they feel they need to say in order to snag the sale. They certainly won't be pointing out how much money you are going to lose in fees.

Some of us believe in a very limited role for government, and others of us see a better life for Canadians if we are better protected by legislation. No point in belabouring that further.

If OP decides to go further with his advocacy plans, it may be useful for him to anticipate attitudes like Bill's as they are not original and will come up from time to time.

Consumer protection is an important function of government in many many ways, from food safety and restaurant inspections to automobile safety to the regulation of the financial and insurance industries, and more. They can do even more, but likely won't unless consumers show them why they should.

We could adopt the "nuclear" approach that's already (I think?) been adopted in the U.S. and require salespeople to be licensed under the fiduciary, or best interest, standard, instead of to the suitability standard. This would put a lot salespeople out of work, as they simply wouldn't be able to pass the Chartered Financial Analyst (CFA) or Chartered Investment Manager (CIM) required of them to be licensed as advising, as opposed to dealing, representatives, but perhaps that's the move we should make. Essentially, eliminating the suitability standard for all but exempt market investments.

We'd still have to have an exempt market dealer registration category held only to a suitability standard, for all exempt market investments that are, inherently, much higher risk, but this move would, overall, be more equitable to the banks, trust companies, credit unions, and scholarship plan dealers like.

Cheers,
Doug