AVOID "Knowledge First Financial (KFF)" for RESP - A legal SCAM | Page 3 | General financial discussion | Discussion forum

Bill said
Just wondering, is it a given that an FI needs to allow RESP account transfers out? Or are they allowed to lock you in?  

Perhaps proprietary offerings would require one to go to cash first, but can't imagine they can prevent transfers out. May be a cost of course if it was a pooled offering, something like what CST does.

savemoresaveoften said

Thats like 20% fee upfront and yet people agreed ?!?!
The best hedge fund manager in the world charges 2% fee on asset and only 20% IF they make a profit for you. And thats 20% of the profit NOT the principal !!

People didn't actually agree. But, they did sign the legal agreement because the commissioned selling agent had the same skin colour and spoke the same foreign language.

In some cases, the selling agent was one of their children's school teachers!

Not sure how the rate of return was 6% per annum.

$37,860 = $31,860 of contributions + $6,000 of government grants.

$57,046 ending value after 18 years.

That works out to be

CAGR = ¹⁸√ $57,046 / $37,860 - 1 = 0.02304 = 2.304% per annum

Bill said
To me this is not a scam, there's no fraud here. Some grown-ups now regret they weren't careful enough before freely entering into a not-as-profitable-as-they-thought-it-would-be legal contract so now they throw out an accusation of scam, but sayin' it don't make it so.  

It may not be a scam cuz the fee is "clearly listed" maybe. Just because it may be "legal" in the eyes of law does NOT mean these companies are doing the "right" thing. Its not a fraud, but people who benefits from these outrageous fee should be ashamed of themselves. Thats no different from scamming a senior of their OAS..
My simple rule is you cant charge someone 20% and then result in a return thats is worse than GIC over a 18 year period.
One can argue "buyer beware", when one loses its conscience completely.

A financial advisor that puts all its clients' money into high fee mutual fund sb shameful, these RESP scheme are 100 times worse.

Save2Retire@55 said

The reason for it being legal scam is due to the 25% fees they charge.

How to get rid of them? I opened an RESP in QuestWealth (Roboadvisor) and moved the money there. Also Questrade covered all the transfer fees (Close to $300 for 2 accounts). Let me know if you'd like a sign up code for Questrade.
The transfer is easy. You just fill out an online application, sign it, and done.  

Thanks for the offer! I have been looking at WealthSimple and QuestTrade for my other children... a couple are still quite young so I can limit the damage somewhat. I am close to finishing the QuestTrade transfer paperwork for one of them 🙂 Thanks to this forum for cluing me in. When I first signed up with KFF 18 years ago, I did some searching to see if anybody else thought they were a scam, but all I came across were glowing reviews. I am thankful for this forum, because even now when you google them you don't come up with much (any?) negative chatter.

savemoresaveoften said

This is not true either cuz the full $38k was not invested from day 1.  

That's a great point!

I was not super happy about the final total on the "enrolement sales charge", which was $5000. However, that $5K "sales charge" is spread over 18 years, so really it's $277 per year.

I don't know. Over 18 years, I put in $32K, paid $277 per year, and am going to get out $56K at the end. Could I have done better with a robo-investor or actively managing it myself? Probably... a little? Maybe?

I am on the razor's edge about putting the remaining children's RESPs into QuestTrade or Wealthsimple, but am now having trouble seeing how I got scammed? I am definitely open to anybody explaining it to me, though!!

Norman1 said

trhaynes said

Interesting. I used an online investment calculator with my annual contributions and played with the rate or return until I got close to the final investment value that matched what I ended up with at KFF. I'm not entirely sure why the result is so different versus the CAGR formula.

See attachment for the results I got over at smartasset.com

…

As savemoresaveoften noted, the CAGR calculation I did is for a single contribution in Year #1. The calculation is different for multiple contributions.

The rate of return depends not only on the final value and the total contributions but also on the timings of the contributions! For example, rate of return will be higher for $1,000 initial and $1,000 in Year #17 than for $1,000 initial and $1,000 in Year #2 even though one ends up with the same $5,000 by Year #18.

Was your RESP contribution pattern $100 initial and $1,777 annually for 18 years as in that Investment Calculator screenshot?  

Thanks for helping me out! I double-checked and it was $150 per month. I changed that in the investment calculator, and got roughly similar numbers assuming a 6% rate of return. The total investment value from the investment calculator ($58K) lines up pretty well with the amount KFF is reporting to me ($57K).

Another problem/implication is about paying income tax. When you withdraw RESP, you don't pay tax on the principal amount but all others (20% government fund, returns on principal and government fund) are taxable. The commission they took is from your principal. When my son withdrew the fund, he paid ~23% tax on ~$22,000 RESP income over 3 years because his income exceeded basic tax exemption amount (~$13,000). If your child has a summer job or other part time job during the university years, it's easy to end up with paying income tax on RESP withdrawal. Basically, you return 20% government fund.