A new report from the C.D. Howe Institute shows that Canadians are wealthier than ever before but face complex financial choices with less guidance than in the past. The report, Learning to Fly: How Canadians Can Navigate a More Complex Financial Landscape, advocates for the use of artificial intelligence (AI) to boost financial literacy, alongside increased use of financial advisors, to help households navigate their choices.
“Over the past 30 years, household wealth has more than doubled, while traditional supports like workplace pensions have faded,” they write. “People have to make more choices on their own – about saving, investing and when to retire. Most people aren’t fully prepared for those choices. Financial literacy in Canada remains low.”
They say AI could help make financial learning and advice more accessible and affordable. The report recommends regulatory bodies or professional organizations like FP Canada develop their own AI-powered tools using large language models (LLMs) trained on the expertise of financial planners. They add that one avenue could be for regulators to then mandate financial institutions to inform their customers about the existence of such tools.
AI as a productivity booster
They also discuss AI as a productivity booster for advisors. “It could be very useful in other contexts, such as decumulation solutions where a mix of insurance and investment products needs to be considered. In these cases, even experienced advisors may find themselves not fully versed in these more complex solutions and default to simpler ones,” they add.
“Governments and regulators should set clear leadership and guardrails for AI in personal finance, support quality advice and make financial education a bigger part of helping Canadians chart their course and reach financial security.”
Where managing finances was once simple – people faced only a few important choices at different moments in life and choice was generally limited – the range of financial decisions households must make today goes beyond retirement planning, they write.
“Mortgages, debt, insurance and investments have also become more complex. While greater flexibility and a wider array of financial products offer clear benefits, they also create a more complicated decision-making environment. As a result, households are more likely than ever to make choices with significant long-term consequences they may not fully understand.”
Behavioural considerations
The report looks in detail at financial literacy in Canada, at the challenges Canadians face when trying to convert savings into income in retirement and at behavioural considerations for those interested in helping Canadians navigate their many options. It also looks at default enrollment, choice architecture and nudging.
They add that advice is often presented as a substitute for financial literacy, but they point out that financially literate clients are more likely to seek advice and are more likely to get more out of the experience.
“The challenge is not simply giving Canadians more tools but ensuring they can use them wisely,” the report concludes. “Financial literacy, complemented by advice and technology, must be the foundation of a system that helps households.”
