Recently, the Conference Board of Canada released a paper in which it imagined that very scenario: where more Canadians had financial advisors. Then they crunched some numbers to back it up. The results were compelling: for retirees and the broader economy.

The report suggested that working with a financial advisor could boost retirement savings by 55 to 60 per cent overall. The modelling also suggested that retirement consumption could increase by 23 to 25 per cent. The report found that financial advice is crucial to boosting retirement readiness. It’s also important to begin saving at an early age.

The need for financial advice is great, growing larger against the backdrop of an aging population. Every day, more than 1,000 Canadians turn 65.1  A 2015 report by McKinsey & Company concluded that nearly one in six Canadian households were not financially prepared for retirement.2 In 2016, the Investor Office of the Ontario Securities Commission funded a study on the retirement readiness of Canadian pre-retirees over age 50. The study found that over half did not have a plan for retirement savings. Of those who did, one third felt behind in their plan. Most troubling was that over 20 per cent of pre-retirees had not yet started saving for retirement.3

Financial advice can help build confidence around preparing for retirement and remove some uncertainty. In the Conference Board of Canada report, it found that early savers who start at 25 and don’t use an advisor spend 3% more during their working years and have 19% less savings in retirement. A financial advisor could have helped an early saver increase their savings by 55%, which could then increase retirement consumption by 23%. Late savers who start at 35 and don’t use an advisor were assumed to spend 3% more during their working years, ending with 20% less savings in retirement. Late savers could have had 60% more retirement savings and 23% more retirement consumption had they worked with an advisor. So, young savers who choose to work with an advisor sacrifice a bit of consumption in the present in order to buy a gift – greater retirement savings – for their future selves.

Financial advice also contributes to the economy. If the number of people who use an advisor increased by 10 per cent, the report suggests household wealth would rise by $2 billion, real GDP would increase by $900 million and tax contributions would grow by $7 billion.

The last point I’ll make is about advisors and demographics. Like the rest of Canada, the majority of financial advisors working in this country are older. The average age of an advisor is 49 according to the Advisor Perception Study4 – and just 27% of advisors are under 40. The opportunity is there for the next generation of financial advisors to move into the essential role of helping Canadians prepare for retirement. It can be very rewarding to build long-term relationships with clients and watch them achieve different goals over the course of their financial lives. 

At Sun Life Global Investments, we believe strongly in the value of advice. And the most important advice we can give is to work with a financial advisor. We’re proud to stand shoulder-to-shoulder with advisors, ready to help with different products and strategies that can help plan for the future.

  1. Data tables, 2016 Census of Population, Statistics Canada. For this Census, 481,820 Canadians were age 61, meaning an average of 1320 would turn age 65 every day in 2020.
  2. McKinsey & Company, Building on Canada’s Strong Retirement Readiness.
  3. Innovative Research Group. “Retirement Readiness, Canadians 50+.”
  4. Advisor Perception Study, August 2019, Environics Research.

This article contains information in summary form for your convenience, published SLGI Asset Management Inc. Although this article has been prepared from sources believed to be reliable, SLGI Asset Management Inc. cannot guarantee its accuracy or completeness and is intended to provide you with general information and should not be construed as providing specific individual financial, investment, tax, or legal advice. The views expressed are those of the author and not necessarily the opinions of SLGI Asset Management Inc. Please note, any future or forward looking statements contained in this article are speculative in nature and cannot be relied upon. There is no guarantee that these events will occur or in the manner speculated. Please speak with your professional advisors before acting on any information contained in this article.

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