Registered Education Savings Plan (RESP) is a tax-advantaged investment account that lets parents save and invest for their children’s post-secondary education.
This post provides an RBC RESP review and covers the available investment options and how it compares to the other RESP providers in Canada.
RBC Royal Bank is Canada’s largest bank by market capitalization. Like many of its Big Bank peers, it offers an RESP that can be opened and invested at many of its subsidiaries.
Whether you’re an existing client or just thinking of opening an RESP account at the bank, this post will help you decide the RESP at RBC is right for you.
RESP Investment Options at RBC
With RBC, you have several ways to invest in your RESP. These include:
The RBC RESP can be held in a Registered Savings Deposit that has a current interest rate of 0.025% on balances below $5,500 and 0.05% for higher deposits.
There are no minimum deposit, making them a perfect fit for someone just starting or yet to decide on where or how to invest their money.
But should you keep your RESP in a savings account?
Unless you have a few more years to go before you’ll start making withdrawals, putting your RESP in a savings account is a bad idea.
Even when this is the case, investing in a short-term GIC may be a better idea.
Guaranteed Investment Certificates (GICs) are also available for your RBC RESP. With GICs, both principal and interest are guaranteed.
RBC has several GIC variants, but the ones below can be held in an RESP:
- Non-redeemable GICs: Not redeemable before maturity with a minimum investment of $500 for RESP. Offers both short term GICs (1 to 364 days) and longer-term GICs (1-5, 7 or 10 years)
- Redeemable GICs: Same features as the non-redeemable GICs but they can be liquidated before maturity. However, the rates are much lower to account for this flexibility.
- RBC MarketSmart GICs: These are index-linked GICs. It combines the benefits of the safety of GICs and the higher returns potential of equity investments. The minimum investment is $1,000 and the terms range from 2 to 5 years.
Check here for the RBC GIC Rates.
Mutual Funds make it simple and easy to invest in a professionally managed and diversified portfolio. RBC provide several funds to suite each investor’s risk tolerance and time horizon.
Want a low-risk, conservative portfolio, or an aggressive portfolio with only equities? There’s probably something that’ll suite your needs.
You’ll need an initial investment amount of $500 to start investing with RBC RESP mutual funds.
One drawback with mutual funds is that their management expense ratio (MER) can be quite high. The MER for the RBC mutual funds vary widely.
For example, the RBC Canadian Bond Index Fund has an MER of just 0.16%. But there are several others with MER above 1% and even higher than 2%.
RBC Portfolio Solutions are to mutual funds what asset allocation ETFs (like VEQT) are to ETFs.
You may still have to buy several mutual funds to build a balanced portfolio that reflects your risk tolerance.
But with the Portfolio Solutions, you get a well diversified portfolio with a single investment – saving you time and effort in the process.
Related Post: How Asset Allocation ETFs Work
RBC Direct Investing
If you want more control over the type of investments you can hold, you can also open an RBC Direct Investing RESP Account.
RBC Direct Investing is RBC’s investing platform for self-directed investors. If you’re already using the trading platform and looking to open an RESP at RBC, then adding the RESP account may be a good idea.
Trading costs a $9.95 flat fee with no minimum balance requirements. But you pay a quarterly maintenance fee of $25 if the combined asset across all your accounts at RBC Direct Investing is below 15,000.
Both individual and Joint RESP accounts are available.
How to Invest in RBC RESP
In most cases, you’ll need to visit a branch and meet with an RBC Advisor to open a new RBC RESP account.
For RBC mutual funds or Portfolio Solutions, an account can be opened online if you have an Investor Profile that has been updated within the last 12 months. Otherwise, you’ll need to call or visit your local branch to create one.
The Investor Profile shows your investment objectives, risk tolerance and time horizon. You can set a different one for each of your investment accounts.
And if you’re going with RBC Direct Investing RESP, you can complete the application for a new account completely online in about 10 minutes.
Once the account is opened, you can easily contribute to your new RESP account through RBC Online Banking from your RBC Chequing or Savings account.
RBC also lets you setup automatic contributions from your bank account (Savings and Chequing) using RBC RESP-Matic®.
RBC RESP Fees
The fees you pay for RBC RESP will depend on the investment option you select. For example, there are no fees for the savings account or GIC investments.
With the mutual funds, you’ll pay the management expense ratio for the funds you select. As mentioned earlier, these fees can vary widely depending on the funds you choose.
For RBC Direct Investing, there’s a trading fee of $9.95 per trade. This can quickly add up if, like many other Canadians, you invest small amounts each month. There also the quarterly maintenance fee of $25 if your total assets in below $15,000.
Finally, if you decide to transfer your RESP to another non-RBC subsidiary, you’ll pay a service fee between $25 – $50.
RESP Grants Available at RBC
One of the key benefits of saving for your children’s education using an RESP is the government grants and bonds you get.
- Canada Education Savings Grant: 20% government match on the first $2,500 RESP contribution per year. Lower-income families can also qualify for the additional CESG of up to 20% on the first $500 annually. Subject to a lifetime limit of $7,200.
- Canada Learning Bond: Available to modest income families. A payment of $500 in the first year and $100 in each subsequent year the family continues to meet the income eligibility criteria. The lifetime limit is $2,000. No contributions are required to receive the payment. Read more: Guide to Canada Learning Bond
- Quebec Education Savings Incentive (QESI): For lower-income families that are residents of Quebec – It pays 5% to 10% on the first $500 in annual RESP contributions.
- British Columbia Training and Education Savings Grant (BCTESG): One-time payment of $1,200 for BC residents.
- Saskatchewan Advantage Grant for Education Savings (SAGES): The grant was temporarily suspended in 2017. It matches annual RESP contribution by 10% up to $250.
Related Post: RESP Contribution Limit
How Does RBC RESP Compare?
So how does RBC RESP compare to some of the other RESP Providers in Canada?
RBC RESP vs Robo-Advisors
You can also open an RESP at many of the robo-advisors to get access to a well-diversified portfolio at a lower cost.
The portfolios are built using ETFs with low MERs, and not mutual funds, so you get to keep more of your money.
And if you’re interested in Wealthsimple, you can check this Wealthsimple RESP Review.
RBC Direct Investing RESP vs Questrade Self-Directed RESP
Questrade offers both a robo-advisor service, Questwealth Portfolios, and a self-directed brokerage service.
With the Questrade Self-directed RESP, the trading fees start at $4.95 but capped at $9.95. In addition, you can buy ETFs for free.
That means, you can basically build an RESP portfolio commission-free. This is important if you’ll only be contributing little amounts monthly.
With $9.95 per trade at RBC Direct Investing, building a DIY RESP portfolio will be costly.
Check this post for a low-cost RESP model portfolio that you can build using a single all-in-one ETF.
FAQs: RBC RESP Review
You can hold several investment types in your RESP account including savings account, GICs, mutual funds, stocks, bonds and so on. The right one will depend on your investment goals, risk tolerance and time horizon.
You can receive all the federal and provincial grants in your RBC RESP. These include CESG, CLB, BTCESG, QESI and SAGES (suspended)
You can open an account by visiting your local branch. For some of the investment types, you may also be able to open an account online.
Starting to set money aside in a RESP for your children is a smart way of giving them a head start and protecting your loved ones’ financial future.
Whether you decide to go with RBC RESP or any of the other RESP providers in Canada, it is important to start early, save regularly and keep an eye on those investment cost.
Your future self will thank you for it!
If you liked this RBC RESP review, also check the other RESP posts below: