Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 5 - Evidence - February 6, 2014
OTTAWA, Thursday, February 6, 2014
The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:30 a.m. to study the ability of individuals to establish a registered disability savings plan (RDSP), with particular emphasis on legal representation and the ability of individuals to enter into a contract.
Senator Irving Gerstein (Chair) in the chair.
[English]
The Chair: Today the committee is holding its seventh meeting as part of its study on Registered Disability Savings Plans, RDSPs, with particular emphasis on legal representation and the ability of individuals to enter into a contract. The committee commenced its study in December and has heard so far from the Minister of State, officials of the Department of Finance, and several disability advocacy groups, financial institutions and financial planning institutions.
This morning the committee will continue to learn more on the experiences and perspectives of financial institutions regarding RDSPs, particularly credit unions.
On behalf of the committee, I am pleased to welcome, from Credit Union Central of Canada, Anna Hardy, Regulatory Affairs Regional Director, Central 1 Credit Union; and Ryan Fontaine, Senior Wealth Consultant, Assiniboine Credit Union.
My understanding is that both of you have introductory remarks. I will ask Ms. Hardy to proceed first, to be followed by Mr. Fontaine.
Ms. Hardy, the floor is yours.
[Translation]
Anna Hardy, Regulatory Affairs Regional Director, Central 1 Credit Union, Credit Union Central of Canada: Thank you, Mr. Chair and honourable senators, for having me here today. I am pleased and honoured to be here. I am the Regulatory Affairs Regional Director at Central 1 in Vancouver. Unfortunately, as we are in RRSP season, my colleague who is the expert in registered savings plans could not be with us today. Should there be any questions in this area, I will follow up with the committee clerk.
[English]
Central 1, formed by the merger of B.C. Central Credit Union and Credit Union Central of Ontario in 2008, is the central financial facility and trade association for the B.C. and Ontario credit union systems. We act as the collective voice of our member credit unions — 44 in B.C. and 96 in Ontario.
Central 1 represents a consumer-oriented, full-service retail financial system that services 3.3 million members and collectively holds more than $90 billion in assets.
As an organization, we have nearly 600 employees and hold more than $13 billion in assets, and we are proud to be a cooperative. As member-owned organizations, credit unions exist for the sole benefit of their members and the communities that they serve, and in many of those communities we are the only financial institution. Frankly, in some of those villages and districts, it might be easier to go the way of banks and close down bricks and mortar branches. But credit unions are there, and we stay there because our focus is on serving people, not just on profits.
With offices in Vancouver, Mississauga and Toronto, Central 1 provides liquidly management, direct banking and payment service solutions, as well as a wide range of trade services to our credit union owners in B.C. and Ontario. Some products and services are offered to a wider range of credit unions and even to some non-member credit unions.
Central 1's financial services empowers credit unions to better serve their members by expanding their product offerings to include products such as the Registered Disability Savings Plan. Today's credit union members expect the same comprehensive products and services available from the conventional ``big banks'' and Central 1 supports our members in competing with these big players.
With limited volume, the RDSP does not play a major role in income generation for our members, but credit unions pride themselves in being caring and community-minded. Helping persons with disabilities and their families by offering this product helps us to achieve that goal, and Central 1 is proud to be able to offer this service to our members. We are a trustee and administrator for the RDSP plan for credit unions under the Financial Institutions Act in British Columbia. In other provinces, including in Manitoba and Ontario, and more recently in Alberta and the Atlantic provinces, credit unions have the same options to offer RRSPs, RRIFs, TFSAs and RESPs through Central 1 Trust Company, a federal trust company. RDSPs have been available through Central 1 since 2010.
I'd also like to note that credit unions can source RDSPs from various other providers. I cannot speak to the experience of these other providers, but I am pleased to share with you Central 1's experience with respect to our offering of this product.
Our development of this product involved considerable time and effort to design and implement an RDSP administrative support system that met the specifications of the former Human Resources and Skills Development Canada and the Canada Revenue Agency.
[Translation]
Presently, Central 1's RDSP products account for a total of more than $4 million deposited in 339 accounts in the provinces of British Columbia, Ontario and Manitoba.
[English]
We were very pleased when Minister Flaherty announced a review of the program in 2011 and we actively participated in the consultation process. Further, we thank the government for implementing the recommended changes in the program as part of the 2012 budget. These changes have improved the program's accessibility to Canadians who need it most by providing greater access for small withdrawals, replacing the requirement to repay the Canada Disability Savings Grant and the Canada Disability Savings Bond that had been paid into the RDSP within 10 years preceding a withdrawal from the plan, and a requirement to repay the CDSG and CDSB at a fixed ratio to the amount withdrawn.
[Translation]
Unfortunately, challenges remain.
[English]
Many of our member credit unions are smaller financial institutions, particularly many of the credit unions located in rural areas. Their staff may not have access to expertise in their branches to explain the intricacies of this complex program to their members. This is an ongoing obstacle to extending the program to persons with disabilities in rural areas. As I have already mentioned, in some communities a credit union is the only financial institution. Central 1 is gratified to have already partnered with the federal government in addressing this challenge.
[Translation]
Since February 2013, Central 1 has been participating in an RDSP advisory group with Employment and Social Development Canada as well as the Canada Revenue Agency.
[English]
This advisory group recently conducted a training needs analysis and found that front-line employees in the financial industry, whether it be in a credit union, a bank or an investment company, needed additional training and knowledge on the administration of RDSPs, the grant and the bond to be able to explain it properly to their customers.
As one of our member credit unions explained, the RDSP is a fairly complicated account and there is still is a lack of understanding within the public, as well as the financial services community, as to how it works. This makes people less comfortable in promoting it and the public less likely to ask for it.
Furthermore, many smaller institutions have to dedicate significant resources to navigation of an increasingly complex regulatory framework and therefore have fewer resources to dedicate to training staff on this program.
As a result of this analysis, the advisory group has launched the development of a new training program with RDSP education geared towards three audience groups: back-office managers, investment advisers and front-line tellers. This includes the development of online training tools called Info-Capsules — and I have an example here — that will be introduced this spring. Central 1 believes this will be an invaluable tool for increasing the understanding and knowledge of this product.
To conclude, credit unions and caisses populaires across Canada are proud to be able to count on the government as a partner in our success.
I would like to offer the following recommendations: to encourage the government to continue working with financial institutions to develop comprehensive training programs; to encourage the federal government to work with the provinces to ensure consistency in the legal representation issue; to take a holistic view of financial institution regulations when seeking opportunities to reduce complexity of product administration; and to continue existing targeted outreach to individuals qualifying for the Disability Tax Credit.
[Translation]
Honourable senators, thank you for your attention.
[English]
Central 1 is committed to helping the government ensure long-term financial security for persons with disabilities and welcomes opportunities to assist the ministry of finance in achieving this goal.
[Translation]
I would be pleased to reply to your questions concerning the Central 1 role regarding this important program.
[English]
Ryan Fontaine, Senior Wealth Consultant, Assiniboine Credit Union, Credit Union Central of Canada: Thank you and good morning. I am a Senior Wealth Consultant with the Assiniboine Credit Union in Winnipeg, Manitoba. Assiniboine serves approximately 110,000 members from 24 branch locations in Manitoba, with an asset base of more than $3.5 billion.
Assiniboine is proud to have been the second Canadian financial institution to be invited to join the Global Alliance for Banking on Values, a collection of 25 banks that are primarily dedicated to values-based banking and triple bottom line accountability.
Our mission is to provide financial services for the betterment of our members, employees and communities. As part of this mission, we look for opportunities to provide financial services that make a difference in the lives of people and communities not well served by mainstream financial institutions. The discussion of Registered Disability Savings Plans is relevant to our mission.
Every year since its introduction, and as awareness increases, more of our members have been asking us about RDSPs. I'm pleased to be here before you today to inform you that Assiniboine Credit Union is now offering this plan to our membership.
We first inquired into RDSPs in 2009, but we were told that as a complex offering with an unknown market it would be some time before credit unions would be able to bring RDSPs to market. In 2012, when we heard about the ability to do this through a partnership with Central 1, we took the steps and finally were able to roll it out to our members.
My role with the credit union is to act as a financial adviser for our members. I am a certified financial planner, and I have been helping Manitobans plan for and manage their retirements for over 10 years.
I would like to give you an idea of the effectiveness of the program and where I think there's room for improvement.
I found that the volume of inquiries has increased last year when we started saying ``yes'' to our members. This has been such a positive experience for us and our membership. I have had even more inquiries now that the Canada Revenue Agency is directly notifying qualified individuals of their eligibility. The direct notification highlights some of the plan incentives and encourages action. It is working.
I believe there is still a lack of awareness by Canadians who could be taking advantage of the benefits of this plan. We are trying to inform our members through our branch network and our member and employee communications.
Most of our inquiries are from parents asking on behalf of their children because they are in a position to save for them. We have had no difficulties in setting up these plans with parents as account holders or as joint plan holders. Whether the child is over or under the age of 18, a conversation regarding the benefits of the plan, with both the parent and the beneficiary, is ideal.
One concern these parents share is the issue of plan continuity should an account holder pre-decease the beneficiary. In many of these cases, it has been the parent who has determined that their child is not capable of managing their own affairs. They would like the ability to nominate a secondary plan holder at the account level.
Another situation comes from members over the age of 49, who, if they did open a plan, wouldn't qualify for any grants or bonds due to their age. They understand the 10-year rule but would like the opportunity to save now and wait the 10 years, regardless of their age today. I am not referring to retirees but to some of our members in their early fifties, with plans for a normal retirement at age 65. They would like more time to save and have opted to look at other plan options.
Another challenge I hear about is that Canadians have only the option to hold one plan with one institution. This is a challenge for us at the credit union and for our members, as admittedly we are a little late bringing this product to market.
Credit union members are owners of their financial co-op and, therefore, overall, they are loyal. Many of our members simply waited for this option to become available through their credit union and are grateful that we are finally able to offer them an RDSP.
However, other members have already opened a plan at another institution and would like to open one today with us. They cannot have multiple plans. Some are waiting until their existing plans mature, opting not to add anything further until they can make the switch over to us.
This is different from any other registered plan option in Canada — RRSP, RESP or TFSA. With these plans, we have the ability to open a plan with any and all financial institutions we feel best meet our needs.
The credit union typically offers better deposit rates than our bank competitors. Our members would like to do their business with us rather than go to another institution they don't feel comfortable with. Their challenge now is that they are either locked into term deposits with their bank programs or they have plans held through mutual fund companies in the adviser channels and they would like to diversify their portfolios now by adding credit union GICs.
I'd like to conclude by saying that we are proud to be able to offer such a great program and will continue to promote it for the well-being of our members. Thank you.
The Chair: Thank you very much to both of you for your opening statements.
Ms. Hardy, a focus of our study has been the inability of some disabled Canadians to enter into a contract for the purposes of establishing a RDSP. We understand that British Columbia is a jurisdiction that has successfully handled the subject matter, while Ontario, despite studying the issue, has not implemented any changes to its contract law. Could you give us some insight from your perspective, as you operate in both of the provinces, as to the differences and how you see the subject?
Ms. Hardy: This is a problem we see not just with this program in particular. Consistency across provinces is an ongoing issue for the credit union system as a provincially regulated system.
Ideally, I would ask that the federal government work in cooperation with the provinces as much as possible to ensure that the rules are the same across all of the provinces.
The Chair: But from your perspective, do you see the situation working effectively in British Columbia for your credit unions?
Ms. Hardy: I think it's better, but to be honest, what we are seeing is that that is not the major hurdle with this program. It's something to be addressed, but I think the other issues in terms of awareness and understanding are probably the two major issues.
The Chair: I will start with my list of questions, starting with Senator Massicotte.
Senator Massicotte: Chair, I must compliment you for an excellent question because that was my question.
Senator Tkachuk: Yes, mine, too. I have a follow-up question, so don't take my follow-up.
[Translation]
Senator Massicotte: Ms. Hardy, I believe you live in Vancouver. As you know, the province has amended its legislation in order to make it easier to name a guardian.
The question everyone has is the following: has this solved the problem?
You say that there are other issues, but do you think that what has been done in British Columbia is satisfactory, adequate? And if the other provinces followed suit, would that solve their problem?
[English]
Ms. Hardy: I think British Columbia is probably setting a precedent. I would be happy if the other provinces followed suit.
Senator Massicotte: We had testimony saying ``very good''; we had other testimony from B.C. saying ``it hasn't resolved anything,'' but you haven't experienced that. You have no difficulty with that legislation?
Ms. Hardy: I don't but, like I said, I think there are other problems.
Senator Massicotte: You are across Canada: more in some provinces. Can you tell me, in the sense of your whole portfolio, what percentage of our Canadian population could benefit from this program and what percentage is being used relative to your own institution?
Ms. Hardy: It's very small. I believe the statistic is roughly 15 per cent of people eligible nationwide for the RDSP are currently signed up for it.
In terms of the credit union system, to clarify, at Central 1 we provide the program in British Columbia, Ontario currently and Manitoba. We just got approval to move into Alberta and the Atlantic provinces. Credit unions in other provinces would be offering this program outside of Central 1. I wouldn't actually have their numbers, though they'd be using outside service providers.
We are seeing the number of contracts at credit unions growing more and more. I would say it's very encouraging post-2012. We're seeing many more people asking for it and many more credit unions are approaching us and asking to offer it through us.
Senator Massicotte: Mr. Fontaine, can you talk to us about Manitoba? How many people are eligible for the program and how many have made use of it?
Mr. Fontaine: I can't speak to the market. I don't know what the size or potential size is. I know that we're marketing this as best we can within our member system and within our financial institution, communicating the benefits of this program with our employees so that they can share the basics with our members so they know that we offer it and can provide it, if the inquiry is there.
There is still a lot of work to be done, I think, on the level of general awareness in our province. I'm not sure what the size of the market would be, though.
Senator Massicotte: How many of these accounts are open with Assiniboine Credit Union?
Mr. Fontaine: We are now probably close to 30.
Senator Massicotte: How many members do you have?
Mr. Fontaine: We have about 110,000.
Senator Massicotte: So you have a lot of work to do.
Mr. Fontaine: We do.
Senator Massicotte: When did you start selling this program?
Mr. Fontaine: In 2012, last year.
Senator Massicotte: As you said earlier, you people are very close to your members; you're there to satisfy the needs of your members.
Mr. Fontaine: That's right.
Senator Massicotte: I'm sure many members or potential members are handicapped, so I think if you want to best satisfy your moral responsibilities as an organization, you have to get out there and sell this program.
Mr. Fontaine: Absolutely.
Senator Tkachuk: I would like a bit more information on legal representation. What is it that B.C. is doing that other witnesses have said was a better group of regulations, as far as legal representation is concerned, compared to other provinces, say Manitoba?
Ms. Hardy: I would try to explain it, but I'm not a lawyer. I understand you guys do have lawyers coming before the committee next week, so I might defer that question to them.
Senator Tkachuk: That's fair enough.
On the question of the multiple plans issue that you raised, Mr. Fontaine, I think it's a good idea if someone can have more than one. First, what do you think is the reason why the legislation now does not provide for having multiple plans? Second, would you advise that they simply be able to transfer the plan or establish a new one? It seems to me that to have two of them would cost more than having one. Then you would want to just leave the money there.
Mr. Fontaine: Currently we are able to transfer plans. When the plan was first established, we weren't able to even transfer a member's plan from one institution to another. That has now changed and we have the ability to transfer plans.
Senator Tkachuk: Just so I'm clear, if one of your customers was established at the Royal Bank before you offered it, they can transfer that plan from the Royal Bank to your institution?
Mr. Fontaine: That's correct, they can now.
Senator Tkachuk: So what's the problem?
Mr. Fontaine: The problem now is that they might be at another financial institution and face fees, penalties, for redeeming early if they're in an adviser-channelled program, or they may be locked into a GIC. If they're comfortable with term deposits, they have a maturity date five years from now.
They may say, ``I don't want to invest with them at an inferior rate; I'd rather invest in my credit union.'' They are members; they are owners of their cooperative. They want their money in their credit union and they can't because they have a plan open, established somewhere else, so they are waiting.
One of the complex points here in having multiple plans is that when you have one plan it makes things easy because the grants and bonds are directed to this one central plan. If you were to have multiple plans, now we need to give direction to HRSDC as to where the grants and bonds are to be directed. So there is another layer of complexity that will be added to an already complex product.
We're able to do it for RESPs. We can open multiple RESP plans for our children's education —
Senator Tkachuk: Or TFSAs.
Mr. Fontaine: — while an RESP has grants coming in for the kids. If I can already establish multiple plans, then reason stands that I should be able to do this for an RDSP. It's just very complicated.
Senator Tkachuk: Ms. Hardy, you mentioned that 15 per cent of those eligible within your membership are in this program. Do I have that number right?
Ms. Hardy: No. I believe I read a statistic about people eligible Canada-wide. I'm sure you've heard this from other witnesses: We aren't exactly sure how many of our members are eligible for the program. The inherent nature of disabilities is that they are very broad; a lot of them are invisible. We don't have statistics on who is getting the tax credit, and there are many privacy issues as well. It's an uncomfortable conversation for a lot of banks to have with their members, who may or may not consider themselves disabled.
We aren't exactly sure how many members qualify for the program at this point, but we are fairly certain that we aren't capturing everybody who is.
Senator Tkachuk: This is a national statistic, this 15 per cent?
Ms. Hardy: Yes, I believe so.
Senator Tkachuk: Do you know what would it be for an RRSP or a TFSA nationally? If you don't know, that's okay. I'd be surprised if you did, but I thought I'd ask anyway.
Ms. Hardy: We do know that people generally come into branches and ask for RRSPs and TFSAs. People are much more aware of them. I think even within the disabled community you guys have heard that it's not a very well-known product.
The Chair: That concludes our questions to Ms. Hardy and Mr. Fontaine. On behalf of the Standing Senate Committee on Banking, Trade and Commerce, I wish to express our great appreciation for your appearance today.
(The committee adjourned.)