Investors save a higher percentage of their income with a financial advisor than those without one, according to a report released by The Investment Funds Institute of Canada (IFIC), resulting in positive effects on the Canadian economy.
The report’s economic impact analysis is based on a hypothetical scenario in which 10 per cent of individuals who did not previously use a financial advisor begin a relationship with one and started saving at a higher rate. The Conference Board’s national forecasting model was used to quantify the impacts of the increase in savings over an extended period of time, spanning from 2020 until 2060.
Increase in household wealth, real GDP and tax contributions
The report indicates that:
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By 2060, an increase in savings when 10 per cent more Canadian investors use a financial advisor leads to:
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An increase of $2 billion in household wealth;
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An increase of $900 million in real GDP; and
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An increase of $7 billion in tax contributions.
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At an individual level, having a financial advisor leads to an increase of 55 to 60 per cent in retirement savings.
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In the same scenario, spending during retirement increases by 23 to 25 per cent.
Higher savings means more in the long run
“Saving for retirement involves making small changes that have a significant impact over time,” said Sheila Rao, Principal Research Associate at The Conference Board of Canada. “While higher savings means less spending in the short term, in the long run we see an increase in consumption, more business investment and increased output.”
The study also states that many in Canada’s baby boomer generation are not financially prepared for retirement, noting it’s essential for investors to begin saving at an early age for retirement.
