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By Christian Charest | 04-25-2017

Wealthsimple re-launches RESP offerings

When it comes to registered accounts, should you stick to tradition or consider a robo-advisor?

Christian Charest: For Morningstar, I'm Christian Charest. Robo-advisors in Canada continue to fine-tune and expand their product lines beyond the basic RRSPs and nonregistered accounts and into more specialized products. I'm here today with Jason Goldlist, who is the general manager at Wealthsimple, which recently relaunched its Registered Education Savings Plan or RESP.

Jason, thank you very much for being with us today.

Jason Goldlist: Thanks for having me.

Charest: So, to start with, can you please tell us what's the main difference between investing in an RESP the traditional way, the way most people are used to, either through your bank or your discount broker, and doing it through a robo-advisor?

Goldlist: As you know, robo-advising is really all about simplifying the access to different types of accounts for clients. We do that through a couple of different ways, through offering mobile apps, web-based online sign-up that's entirely paperless. Now, if you've ever opened an RESP before, you know just how difficult it is to get this thing opened. There's tons of paperwork, tons of edge cases that need to be handled with, lots of back and forth with your fax machine or on the phone or in person with an advisor. So, what robo-advisors in the fintech industry are trying to do is really simplify this for all of Canadians. That's simplifying it with the fees, with bringing more transparency to the entire process, and of course, putting this process online, so it's entirely paperless.

Charest: Now, your press release that announced the launch said that your new app removes many of the frustrations Canadians have around RESP accounts. You've mentioned a few of those frustrations. How do they get fixed?

Goldlist: So, one of the things that we had the opportunity to do was to build our RESP system from the ground-up. So, traditionally, at most banks or financial institutions, this RESP system has been around for many years, which means that while it might have been built with the latest technology then, there's been a lot of movement in this space to allow for an easier process today.

So, a few examples, being able to customize exactly the information we request on a mobile phone or on a website to fill exactly the forms that are needed for the government, or for example, allowing people to easily sign up using their online banking credentials to link their bank accounts to make it simple to fund their RESP. So, this kind of technology that's available to us today was fully built into our RESP system.

Charest: Now, switching over to the portfolio itself, some of our viewers may be familiar with or may even already have an account with a robo-advisor such as Wealthsimple for an RRSP. How is the portfolio different for an RESP? Is there any way that the product is treated differently?

Goldlist: I think what's great at Wealthsimple is that we don't treat RESPs any differently than our other account types. So, it's the same paperless onboarding, it's the same low fees, it's actually the same exchange-traded fund portfolios that we're using in the TFSA or an RRSP, we're also using in an RESP. Now, there are a couple of differences when you're talking about an RESP account. One is, we'll ask for the beneficiary's information. So, typically, the child or the grandchild, to make sure the grants are going to the right place. And also, the product will be more tailored toward their lifetime. So, if they have a goal of going to school, for example, in 18 or 20 years, they'll be in a higher-risk portfolio than the parent who has maybe a shorter time horizon.

Charest: And do the portfolios get adjusted as you get closer to the target date? Do they switch over to a more conservative stance?

Goldlist: Ideally, a well-diversified portfolio would over time move to become a little bit more conservative and a little bit less risky closer and closer to the target date. Well, we don't offer the glide-path portfolios yet at Wealthsimple. It's something that would be ideally suited for RESPs and for many of our other account types. We are able to work together with each of our clients to make sure that the portfolio is always representing the beneficiary's target end date.

Charest: And what are the fees on the RESP product? Are they similar to what you offer on your other types of accounts?

Goldlist: It's great that at Wealthsimple they are similar to our other investment accounts which is our low fee of 0.5% for clients that have under $100,000 or 0.4% for clients that have over $100,000 with us, who we consider our Wealthsimple Black clients. Traditionally, RESPs are the more complicated and therefore more expensive account types at a lot of other financial institutions. And even if the fee appears to be lower, you can be sure that fee is being made up in the other products that people with RESPs are paying for.

So, for example, RESPs often have long lock-in periods where if you were to leave early, there is a stiff penalty. Or RESPs are often filled with mutual funds which could come with a high fee. So, what's great about Wealthsimple is we treat it exactly like our other account types which means there are no hidden fees, no lock-in periods and no minimums, just our one fee.

Charest: Jason, thank you very much for explaining all this to us today.

Goldlist: Thanks for having me.

Charest: For Morningstar, I'm Christian Charest. Thank you for watching.