Canadian pioneer in education savings builds on decades-long expertise with next-generation platform
For many, the arrival of 2020 is the perfect time to radically re-evaluate their priorities. In contrast, one major Canadian organization is welcoming the new decade by doubling down on its core mission.
“Created as a non-profit organization in 1960, Canadian Scholarship Trust Foundation (CST) pioneered a movement to make post-secondary education accessible for all Canadians,” said Bernadette MacPherson, Vice President Digital at CST Spark. “Nearly 60 years later, our mission to help families achieve their post-secondary dreams remains the same.”
CST has helped over half a million students achieve higher education over its history, and as Canada’s original RESP provider, it has no plans of stopping there. But as MacPherson noted, it’s moving forward with its mandate by taking on a new strategy.
“Given shifts in demographics and increasing preferences to transact digitally, we felt it was time for us to be a leader in digital innovation,” she told Wealth Professional. “Thus, we created CST Spark, a wholly owned subsidiary dedicated to the growing segment of digital adopters.”
Combining disruptive digital technology with professional education savings support and expertise honed through the decades, CST’s digital business model was originally implemented in Ontario under “test mode” in 2018. As adoption gained traction over the succeeding year, CST seized the opportunity and officially launched CST Spark to all of Canada on November 4th of last year.
“I’m thrilled with the uptake in beneficiary sales since that date,” MacPherson said. “We’ve enrolled more beneficiaries in the last two months than we had in all prior months of 2019.”
The November launch also brought expanded access to CST Spark’s Bright Plan, its newest prospectus product aimed at helping Canadian parents build bright futures for their children. “We believe Bright Plan represents the next generation of RESPs,” MacPherson said.
Those familiar with target-date funds should have no trouble understanding the plan’s underlying investment strategy. Managed by CST in partnership with BlackRock, Bright Plan leverages ETFs to maximize growth in the early years through equities exposure, and gradually de-risks to preserve gains with fixed-income securities.
“When your child is a baby, around 90 per cent of your contributions and government grants are invested in growth-oriented Exchange Traded Funds (ETFs),” MacPherson said. “Over the years, we lower the equity exposure and increase bond exposure, so that when the child is 9 years old, the mix is 68 per cent equities and 32 per cent fixed income. By the time the child is 18, and ready to enroll in post-secondary education and withdraw the money, less than 20 per cent of the funds are invested in the stock market.”
Customer response to the product has reportedly been positive, particularly with respect to its simplicity and flexibility. Compared to the traditional paper-based process that normally involves waiting in banks, changing contribution amounts — which can be as little as $10 a month — is quick, easy, and secure through CST Spark’s website. Parents can also control the frequency of their investments.
“When someone asks me who our competition is, I say it’s every financial obligation a customer has,” MacPherson said. “We compete for wallet share, which is increasingly tough to capture as young families struggle to save. By giving parents choice of how much they contribute as well as making contributions automatic, we believe our plan effectively encourages education savings.
“We also work closely with customers to help them understand the rules, make the most of government grants, and avoid tax penalties,” MacPherson added, noting that people still want to talk to a real person for assistance as they navigate the intricacies of RESPs. “Our team of Direct Dealing Representatives is a key differentiator for us – they are very knowledgeable, professional and truly care about our customers.”
While RESPs are widely used by Canadians to benefit their children, they can alternatively choose to name a friend’s child or a grandchild as a beneficiary. Owners of an RESP should also be mindful of different opportunities to access grant money: aside from the Canada Education Savings Grant (CESG), under which the government matches 20 per cent of the RESP holder’s contributions up to $500 per year and to a maximum of $7,200, those in British Columbia and Quebec can also avail of provincial grants.
Some may ask what the best time is to make RESP contributions — whether it’s the start of a new year, in the months leading up to the start of school, or some other window. But to MacPherson, the important thing is to just start, especially as earnings in the plan will grow tax-free for as long as plan holders keep their money in it.
“It’s still early days, but our average annual contributions and lump sum contributions have exceeded our expectations … I see a big change in online adoption and trust in our platform,” MacPherson said. “We’re excited to help Canadian parents build the foundation for their children’s future, especially since you can save for your child at any age.”
