A spate of recent polls shows that Canadians’ retirement savings are lagging because of economic pressures, such as high cost of living, debt, and high mortgage rates.
One such survey by the Co-operators concluded that both renters and mortgage holders are mired by daily expenses. Of these two respondent categories, 77 per cent have either not started saving for retirement or have less than what they had planned for. In contrast, mortgage-free homeowners appear better positioned for retirement, with 76 per cent having saved as much or more than they had planned to by now. A small number of respondents, 32 per cent, have actually saved more for retirement than they had expected to.
These numbers, says Jessica Baker, executive vice president of retail wealth with the Co-operators, tell us that clients are anxious and stressed about savings.
The number one barrier
“That is the number one barrier for clients: anxiety. A common myth is that you have to have wealth to create wealth. “Nothing could be further from the truth,” she says, adding, a problem shared is a problem halved. And that’s where financial planners come in.
During the pandemic, Baker says, we recommended our advisors to get back to the fundamentals.Talk to clients about budgeting, even if it seems like a basic step. Secondly, she says, “Use a trusted, compliant, reliable, needs analysis tool. Advisors should educate themselves about all the technology prescribed by their company.”
Some statistically significant differences in behaviour between men and women has also come to the surface through the survey. Men, more than women, feel positively about their financial situation – 41 per cent v. 35 per cent. Men are also more likely to save the same amount each month – 48 per cent v. 43 per cent. Further, men feel confident in their ability to choose investment opportunities – 34 per cent v. 26 per cent.
Wage disparity
“Of course, there are larger issues at work here,” Baker says. “Gender norms, the ‘pink tax,’ wage disparity and so on.” The Co-operators survey, she says, is consistent with a lot of the existing scholarly research.
“Advisors have the expertise to drive equity in investing behaviour by sharing their knowledge, scaling risk, and personalizing a financial plan to the client – not just the numbers.”
Nick Giovannetti, managing partner at Waterloo, Ontario-based EastCap Wealth Planning Inc., agrees. Advisors need to become sounding boards for clients and build their psychological resilience, says the Advocis member.
Making the complex sound simple
“Advisors need to think of themselves as the buffer between the emotional connection and money,” he adds. “The key is making complex things sound simple. Advisors can worry about the technical behind the scenes.”
Clients don’t live in the financial investment world, Giovannetti says, it can be intimidating, so advisors shouldn’t just dump products on investors. Talk about goals and find efficient, optimized ways to avoid landmines and potholes, he adds. “One such obstacle is the invisible tax: inflation.”
Teach investors to outpace inflation and tuck away a piece of their earnings every month, Giovannetti says. Also pay attention to diversification, adds the certified financial planner.
An antidote to risk
“It can be an antidote to risk — to reduce volatility,” says Giovannetti. “Look at geographical regions and sectors and reduce the downside more than building the upside.”
The investment field also needs to change, he notes, for instance, advisors should self-reflect to determine their strengths and the kinds of clients they work well with.
“In my opinion, advisory firms should stop trying to be solo practitioners and work in teams, like family clinics,” Giovannetti says. “You want to know what’s in your wheelhouse and how you fill the gaps in your areas of expertise.”
Multiple licences
Baker says another way of increasing skill strength is investing in multiple licences. Not only does this help protect all of a client’s needs, she adds, but also helps advisors future-proof their business.
A second way advisors can develop themselves is by continually skilling up.
Continuous education
“The financial landscape is changing and advisors need to continuously educate themselves for a minimum of 30 to 40 hours a year,” says Giovannetti.
Life doesn’t stay the same and neither do people’s finances, so advisors should study trends and use technology to touch base with clients, so investing doesn’t fall to the wayside, he says.
“Use newsletters and stay top of mind with clients to do a pulse check. I see a lot of good personal financial management tool apps that advisors can use to nudge clients at different times during the year.” Baker agrees with this approach.
Using technology
“Investing in a CRM helps create a holistic 360 view of the holdings your clients have and to understand their preferences to engage with you.”
Advisors also need to have confidence in their lead generation and management software to understand how to continually meet clients’ needs with new products.
"Have all these tools connected so you can manage your clients and conversations wherever you are,” she says.
