Heritage Education Funds

Heritage Education Funds represents one of the leading providers of fixed-income Registered Education Savings Plan (RESP) in Canada. With almost 50 years of experience, over $2.2 billion in assets, 100 employees, and over 2,000 sales representatives across Canada, the company continues keeping on its single focus — RESPs. This single focus turned the company into industry experts passionate about making the most of people’s RESP savings by investing in lower risk securities with competitive annual returns, helping client to fund their children’s post-secondary education. The Canadian Business Journal spoke to Onofrio Loduca, CEO of Heritage Education Funds, about the company, investing, and the current state of the RESP industry in Canada.

Heritage Education Funds was established in 1965, and started offering its own education savings plan product in 1988. With the introduction of the Canada Education Savings Grant to the savings market in 1998 the industry has changed significantly. Loduca said, “Introduction of this grant has changed the industry as a whole across Canada, and Heritage Funds save significant changes. Our growth between 1997 and 1998 has doubled; so this government grant really given a boost to the industry, and the RESP industry has changed as a whole, because the numbers of those interested in establishing an RESP also grew substantially.”

To focus on what’s important to its clients, Heritage Education Funds offers one product — Registered Education Savings Plans; and two plans — Heritage Group RESP as well as a self-determined, Impression Plan. Its sole purpose is to help parents save funds for their children’s post-secondary education and provide a thorough education about RESPs to its clients. “From the nuances of our product, what appeals to our clients is the way our product is sold. Our representatives visit clients’ homes, and take the time to explain how the government grants work, whether it’s the CESG [Canada Education Savings Grant], ACES [Alberta Centennial Education Savings], or QESI [Quebec Education Savings Incentive]. You could compare this to the insurance representatives visiting your home, but our representatives only work in RESPs. This single focus allows them deeper knowledge of the RESP product and the application processes for the federal and provincial grants the client may be eligible to receive.”

According to Loduca, RESPs can be quite a complicated process, due to the government requirement in regards to grants, starting with the application process and ending with the withdrawal of the funds for education. The government implemented a thorough application processes and funds withdrawal due to the fact that the government wants to make sure that the funds go towards the child’s education. “Another interesting part about our RESP product is the fact that our product can be seen as a commitment plan. While I’m using the word ‘commitment’ loosely, our clients are making a commitment to us to invest a specific sum of money, creating a disciplined approach to the education savings. The idea is to invest early and invest often. However, we understand that life circumstances change, and we do offer several options that make the plan very flexible to accommodate life’s changes, as well as situations where children wish to pursue vocation schools, distance education and correspondence courses, or decide not to pursue a post-secondary education at all.”

The consistent investment approach from the side of the clients assures that the Heritage Education Fund’s money managers will not have to liquidate investment positions in short order, allowing them a long-term view, with the right types of secure investments. This allows Heritage Education Funds to invest in lower risk fixed-income type of investments. “We are focusing mainly on investing in government-type securities such as federal bonds, provincial bonds and municipal bonds. What our third party investment advisors look at is the market place where Heritage Education Funds can best take the advantage of the interest rate and the yield curves over a period of time. Again, because of our commitment plan, the advisors can make the right choices without making big bets and lower overall volatility of the investment.”

2008 Crisis

While the 2008 crisis had brought on an overall drawback for most of the investment companies, Heritage Education Funds and its focus on secure investments played into the company’s favour due to the fact that the bonds became more and more valuable, as the investment community was selling the equity investments and buying into fixed-income, government-type securities. “From the investment perspective, the crisis did indeed play into our favour. However, going forward, we do not expect this trend to continue, and we expect the equities to outperform bonds long term. But our value is not to outperform the equities; our value is to provide low volatility and solid return in the fixed income sphere.”

One of the largest challenges for the company is maintaining contact with its massive sales force across the country, and keeping each individual in the field motivated. Heritage Education Funds has developed a special system to recruit and retain sales representatives coming into the industry, and Heritage Education Funds works to build solid relationships with its sales force, as well as streamline its work and application processes using technology. To this, Loduca said, “We continue to focus on building our proprietary technologies for our representatives. Internally, we have designed and developed a web portal that allows our sales representatives to access all necessary information rather than being hardwired to our offices. We have also created a paperless version of our application process, and each application gets submitted electronically to our home office, including an iPad version of this application, which is the first of its kind.”

With almost 50 years of experience in the industry and by holding onto its single focus and niche, Heritage Education Funds continues to provide valuable expert RESP service to all Canadians.