A Case for Change: The Evolving Scholarship Plan Dealer Landscape

Group RESPs. Scholarship Plan Dealers (SPDs). For some investors, the two terms are used inter-changeably to mean restrictive rules and a rigid approach to helping Canadians save for post-secondary education. Without a doubt, these are valid reasons why SPDs have struggled over the last decade, but it’s now time to de-couple the group product from the RESP provider category, and focus on why consumers still consider SPDs in today’s market of abundant choice.

The reality is that the remaining SPDs in operation today have prevailed by successfully evolving their business model to meet the changing needs and preferences of post-secondary students.  For example, when it comes to a university degree, less than half (48%) of students do so within the traditional four years¹. Enrolment in university, college and other post-secondary programs, on a full-time or part-time basis, continues to rise² – with Canada offering the greatest variety of short-cycle programs¹. Amid so many options, RESPs must provide flexibility to withdraw funds regardless of which post-secondary path a student takes.

For most SPDs, the new business model has meant saying good-bye to group RESPs in favour of individual RESPs that provide the flexibility that consumers expect. In 2012, Knowledge First Financial lead this change with the introduction of an individual RESP with unique additional benefits. The Flex First Plan was also the first investment product in Canada with a refundable fee. As of May 1, 2020, Knowledge First Financial only sells individual RESPs.

As more consumers look to align their purchasing power with organizations that ‘do more,’ SPDs offer a great RESP option. Three of the four SPDs are owned by not-for-profit foundations and maintain a single product line focused on RESPs. For Knowledge First Financial, this has created a true ‘purpose-built’ organization through profit-sharing in the form of supplementary payments and scholarship opportunities for its student beneficiaries.

Having a sole focus on RESPs also provides consumers with a unique level of expertise. This translates to better advice and product knowledge to support customers throughout their saving lifecycle. For instance, Knowledge First has systems and processes to ensure customers obtain all eligible grants and help them maximize their grants.  As well, a good plan for withdrawing funds is key to managing education finances. Sole focus makes room for the continual evolution and innovation, a key to maintaining market share in today’s competitive environment. For example, Knowledge First has been successful in gaining approval from regulators for the asset mix in their portfolios to provide better diversification and potentially improve returns.

At the end of the day what matters most to consumers is ensuring they get the best value, advice and returns for their RESP.  Today, what differentiates Scholarship Plan Dealers has changed and so too should perceptions of this RESP provider category. Many have risen to the challenge, changed their products and provide great value and advice. Knowledge First Financial’s commitment to education savings remains unchanged, as to is their focus on helping consumers make the best choice for their situation and ensuring they maximize the value of their RESP. This commitment, combined with unique value through single product focus and not-for-profit ownership, make a compelling argument why SPDs should remain on the RESP consideration set.

R. George Hopkinson is President and CEO, Knowledge First Financial Inc. since 2009.

¹Education at a Glance 2019 (OECD 2019)
²Canadian postsecondary enrolments and graduates, 2016/2017 (Statistics Canada, Nov 28, 2018)