Do you remember the scandal that rocked RESP provider Kaleido, then called Universitas, seven years ago? Basically, the rules of the game for determining how much money is paid to young people had changed in a way that was disadvantageous for those undertaking university studies. Their penalized parents have not forgotten it. Still bitter and indignant, some spent Monday at the Longueuil courthouse or on Teams to attend the start of the trial.
It is a special case in its form, because it is heard by the Small Claims Court, even if it concerns 90 Kaleido clients across the four corners of Quebec. Their files were grouped together. Since the parties cannot be represented by a lawyer, one of the parents pleads for the others. Dominic Bonin is an entrepreneur and father of four daughters.
Kaleido is represented by its head of transformation and vice-president of sales and business development, Hugo Côté.
PHOTO FRANÇOIS ROY, THE PRESS
Kaleido’s Chief Transformation Officer and Vice President of Sales and Business Development, Hugo Côté
He is supported by two lawyers seated in the back of the room who can advise him during breaks and possibly text him during proceedings. Moreover, Dominic Bonin stressed to the judge that he was not very comfortable with the opposing party using his smartphone…
The case concerns these 90 people, but also tens of thousands of other Quebecers, because it calls into question the credibility and good faith of Kaleido.
Its mission, academic perseverance, is noble. However, its ways of doing things raise doubts, and the operation of its collective registered education savings plans (RESPs) has sparked many harsh criticisms over the years.
The outcome of this matter will therefore be of high interest to all parents and grandparents who have invested in an RESP with Kaleido or who are considering doing so.
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The year 2017 is already far in the back of our memory, allow me to summarize (quickly, I promise) the events at the origin of the dispute and the functioning of the two collective RESPs that Kaleido sold at a certain time (Plan Universitas and Reeeflex ).
The main principle behind the two plans: the further a young person went in his studies, the more he obtained a large number of educational assistance payments (EAP). In a cohort born in the same year, young people who stopped at CEGEP therefore left money in the kitty for those who registered at university. This phenomenon was called “attrition”. And attrition was at the heart of the organization’s marketing and pitch for selling its RESPs. If your child goes to college, you’ll win big! we pleaded.
But it seems that some customers have complained about this formula. They wanted a greater number of young people to be able to receive several PAEs, for a CEGEP student to obtain as much as a university student. Kaleido held a vote on the issue. Flexibility won out. Since then, almost all types of studies give entitlement to the same amount. You know what happens when you divide a pie into 12 rather than 6…
“If it’s legal, how can it be legal?” That’s why I’m here, is to understand that,” Julie Tanguy, an actuary and mother of two teenagers who estimates her loss at nearly $25,000, told me. She still can’t believe that Kaleido was able to penalize parents who had understood the concept of the group RESP well to benefit those who had understood it less well and who, consequently, complained about it. “What a funny solution they found! »
After the vote, the Financial Markets Authority (AMF) undertook an investigation. Since Kaleido customers lacked the information to make an informed choice, a second vote was held in 2018. The result was the same.
PHOTO FRANÇOIS ROY, THE PRESS
Some of the people who believe they have been cheated came to the Longueuil courthouse to attend the first day of the trial against Kaleido on Monday, 7 years after the changes made to its group RESPs.
Ever since Dominic Bonin realized his pie slices were definitely going to be smaller than expected, he’s been fighting to have the changes to his contract declared illegal. Nothing in the documentation provided initially allowed him to believe that the very essence of his group RESP could change.
I was sold on attrition. If I could have known that they would remove attrition, I would have gone to the bank to open an RESP. There were no longer any distinctive advantages.
Dominic Bonin, entrepreneur and father of four daughters
The problem was that dissatisfied customers, once the votes had passed, could not jump ship and transfer their money into an RESP opened at the bank. The departures are so punishing that it is not an option. “I’m stuck in a bad position. When I contribute every month, it breaks my heart,” Julie Tanguy told me.
All the other parents I met in the corridors of the courthouse also spoke to me about this unpleasant feeling of being “handcuffed” to an organization that has “distorted” their child’s RESP by radically modifying its operation.
Kaleido’s representative, Hugo Côté, did not want to speak to me “out of respect for the legal process.” He must submit his argument on Wednesday, which is likely to be very informative and revealing of the values which drive the organization today.