Leaders gathered for the most recent Investment Funds Institute of Canada (IFIC) 2023 Annual Leadership Conference say they’re looking at the effect mental health has on effective financial decision making, in part because different cohorts are being faced with dramatic trade-offs if they want to save. This has implications for the investment industry, they add, as do trends related to decumulation of client assets.

While the intergenerational transfer of wealth has long garnered the attention of industry experts – 45 per cent of all Canadian investable assets are reportedly held by those over age 65 – in this panel, Carol Lynde, president and CEO of Bridgehouse Asset Managers departed from the theme to point out that life is notably difficult for a lot of Canadians, many faced with the prospect of stagnant incomes, who could potentially be clients.

“That can be pretty daunting, when you think about that younger cohort of investors who have just graduated and thinking about the future and (that) they may not attain the same level of success their parents have,” says Lynde.

“I think we’d be remiss if we didn’t acknowledge that you’ve got to have money to be able to save to invest,” adds Kathy Bock, principal with the Vanguard Group, managing director with Vanguard Investments Canada. “We’ve got a population of people who are faced with making some really difficult trade offs if they want to be able to save. I think that’s a big consideration for the investment community – to try and help those people understand and help them through some of the tradeoffs. Because they’re tough tradeoffs.” 

Lynde meanwhile says her firm is intently focused on the impact mental health has on effective financial decision making.

She says the company has been focused on the issue since 2016, working with the Canadian Mental Health Association to build tools, techniques and strategies for advisors. “One in two Canadians under the age of 40 will have a diagnosed mental illness. Those are huge numbers,” she adds. “For a financial advisor, of course, they must be working with (these) clients within their group.” Age related dementia, Alzheimer’s, anxiety, depression, substance abuse and problem gambling were all raised as possible concerns.

“We know that time in the market is the most critical factor of investing success. If people are making decisions that are not in their best interests because of some event that’s happening in their life or a mental health concern, how can we help them stay the course?” Lynde asks.

“I think high net worth investors are taken care of,” Bock concludes. “They have people paying attention to them and I think it’s really incumbent on all of us to make sure we’re figuring out ways to help people on the other end of the spectrum with savings.” 

Finally, the “maturation” of the industry also took up some of the executives’ time in the discussion, with Neil Kerr, head of Scotia Global Asset Management and president of 1832 Asset Management LP pointing out that the industry is in a transition from accumulation to the decumulation of client assets. “It wasn’t too long ago that the biggest driver of growth for our industry was net new contributions to investment solutions by clients and by prospects. Today, and looking forward, really the primary driver of growth is going to be how well we manage the $2.4-trillion that we have.” 

He also points out that the industry is less evolved and the products available are less developed in the decumulation space. “There’s been significantly less development to this point in those types of solutions to solve what is actually, probably the hardest problem that our investors face,” he says.