What describes the function of pooled RESPs?

What describes the function of pooled RESPs?

• A. Allows individual management of each account
• B. Provides greater investment risk for beneficiaries
• C. Multitude of subsidiaries manage contributions for beneficiaries
• D. Requires high financial knowledge for contributions

Answer: (C)

The function of pooled Registered Education Savings Plans (RESPs) is aptly captured by the idea that a multitude of subsidiaries manage contributions for beneficiaries. Pooled RESPs allow multiple contributors to combine their savings into a single investment pool. This is particularly beneficial as it enables professional management and potentially enhances investment opportunities that individual accounts might not have access to. By pooling funds, beneficiaries can benefit from economies of scale, broader diversification, and expertise from the managing entities, which are typically experienced investment firms or financial institutions. This strategy can lead to a more effective growth of savings over time, optimizing the resources available for funding education. In contrast, the other options do not accurately reflect the essence or advantages of pooled RESPs. Individual management would defeat the purpose of pooling resources, and higher investment risk is generally not a characteristic to be associated with pooled plans, which aim to stabilize returns for benefactors. Additionally, while some level of financial knowledge can be beneficial, pooled RESPs are designed to make education savings accessible, not require advanced financial understanding from all contributors.

The function of pooled Registered Education Savings Plans (RESPs) is aptly captured by the idea that a multitude of subsidiaries manage contributions for beneficiaries. Pooled RESPs allow multiple contributors to combine their savings into a single investment pool. This is particularly beneficial as it enables professional management and potentially enhances investment opportunities that individual accounts might not have access to.

By pooling funds, beneficiaries can benefit from economies of scale, broader diversification, and expertise from the managing entities, which are typically experienced investment firms or financial institutions. This strategy can lead to a more effective growth of savings over time, optimizing the resources available for funding education.

In contrast, the other options do not accurately reflect the essence or advantages of pooled RESPs. Individual management would defeat the purpose of pooling resources, and higher investment risk is generally not a characteristic to be associated with pooled plans, which aim to stabilize returns for benefactors. Additionally, while some level of financial knowledge can be beneficial, pooled RESPs are designed to make education savings accessible, not require advanced financial understanding from all contributors.