Your Advisor Needs to Know About More Than Just Financial Things

Your Advisor Needs to Know About More Than Just Financial Things

For financial advisors, being able to adapt to the unique needs of clients is integral to deliver sound, relevant advice. Increasingly savvy clients with easy access to technology – online information, advice and investment tools – continue to challenge the financial industry to prove the value of professional, face-to-face advice.

At the same time, changing social and cultural norms are redefining certain needs advisors have historically associated with specific life stages and genders.

Each successive generation of Canadians is forcing us to reconsider our notions of things like wealth, marriage, homeownership and retirement.

Depending on your situation, finding an advisor who understands and can adapt to the evolving needs of different generations can be the key to realizing your financial goals.

Here are two groups of Canadians who are redefining societal norms and in doing so, challenging wealth management professionals to stay relevant.

Millennials

We have all read headlines like: “Millennials are killing the (blank) industry.” From diamonds to department stores, millennials have earned a reputation for rejecting industries and practices traditionally viewed as culturally important, even necessary.

Younger generations are approaching homeownership, marriage and divorce – key events when it comes to wealth management – differently than previous generations. When it comes to homeownership, many millennials are waiting longer to take the plunge: 30.6% of young adults aged 20-34 in 2001 lived with at least one parent whereas 34.7% did as of 2016.[1]

Younger adults are also putting off getting married and having children. This means when it comes to divorce, “Millennials tend to have fewer assets to divide, and they’re more likely to have similar incomes,” making spousal support a nonissue. Our society – advisors included – tends to view divorce as an event which should take a substantial financial toll on one or both partners.

When you combine inconsistent incomes due to freelance or “gig” work, high rates of student debt, and the cost of raising children, the reality is many married millennials can’t “afford to buy [their partner] out of the matrimonial home.”[2] Millennials’ finances are requiring them to be more frugal, even democratic, than previous generations and advisors should be prepared to accommodate their unconventional situations.

As the largest generation in Canada,[3] millennials have a huge impact on our economy and, despite their purported financial irresponsibility, spend a lot of time thinking about and managing their money. A 2019 report from BMO found, “millennials [are] outpacing [their] baby boomer counterparts” when it comes to retirement savings and “continue to hold higher amounts [in RRSPs] over time, accounting for the highest percentage increase with 87 percent since 2016 ($28,821 vs $15, 377 in 2016).”[4] Millennials may not be buying diamonds, but they are being mindful of their finances.

Women

Today, women account for approximately half of the labour force (up from less than a quarter in the 1950s[5]) and “directly control no less than $2.2 trillion of personal financial assets.” By 2028, that number is expected to rise to $3.8 trillion.[6]The archetypal investor – historically a man – is quickly changing to reflect the increased number of women, both married and unmarried, who are directly participating in the Canadian economy and making more household financial decisions.

In fact, a 2019 CIBC study found, “three-quarters (73 per cent) say they’re actively involved in their own long-term financial planning – a number that grows higher the older they get, rising to 82 per cent among women aged 55+.”[7]

Most Canadians need better-defined retirement plans (about 90% do not currently have an adequate one[8]) however, advisors should be prepared to provide advice which accurately reflects women’s needs, especially given their burgeoning control of financial assets.

Employed married women “in the core-working age demographic… now account for a record-high 47% of family income, almost double the share seen in the 1970s.”[9] Women also live, on average, four years longer than men[10] meaning many will likely inherit assets from their spouses later in life. 

Yet, despite women having more (control over) money, they are also more likely than men to forgo incomes and therefore pensions for the sake of their families. “Almost 1 in 3 (30 per cent) women say they’ve reduced or stopped saving as a direct consequence of childcare or eldercare responsibilities.”[11] A good financial plan will account for and work to minimize the impact these kinds of events have on women’s retirement savings.

Take Away

When it comes to wealth management, finding a professional who understands the unique situation and need of each individual client makes all the difference between stellar and just average financial advice. Millennials and women are two demographics frequently on the receiving end of stereotypes – most of which have the potential to impede their ability to achieve their financial goals if their advisor subscribes to them.

Advisors who approach common milestones like homeownership, marriage and divorce from an outdated standpoint and disregard the way social norms are changing, will likely have a harder time relating and remaining relevant to those clients whose circumstances challenge them to go above and beyond “business as usual.” Make sure your advisor is a fit for you.

Connect with us to learn how an advisor and a customized financial plan can benefit you.


[1] https://www12.statcan.gc.ca/census-recensement/2016/as-sa/98-200-x/2016008/98-200-x2016008-eng.cfm

[2] https://www.advisor.ca/my-practice/conversations/offering-money-advice-when-millennials-divorce/

[3] https://www150.statcan.gc.ca/n1/pub/11-627-m/11-627-m2019029-eng.htm

[4] https://newsroom.bmo.com/2019-01-29-BMOs-Annual-RRSP-Study-National-Attitude-Shifts-On-Retirement-As-Average-Amount-Held-Increases-by-21-Per-Cent-Since-2016

[5] https://www150.statcan.gc.ca/n1/pub/89-503-x/2015001/article/14694-eng.htm

[6] https://www.advisor.ca/my-practice/conversations/womens-growing-share-of-assets-to-change-wealth-management/

[7] http://cibc.mediaroom.com/2019-02-21-7-in-10-women-make-significant-financial-sacrifices-for-the-sake-of-others-new-CIBC-study-finds

[8] http://cibc.mediaroom.com/2018-02-08-Am-I-saving-enough-to-retire-Vast-majority-of-Canadians-just-dont-know-CIBC-poll

[9] https://www.advisor.ca/my-practice/conversations/womens-growing-share-of-assets-to-change-wealth-management/

[10] https://www.cibc.com/en/personal-banking/advice-centre/women-and-wealth.html

[11] http://cibc.mediaroom.com/2019-02-21-7-in-10-women-make-significant-financial-sacrifices-for-the-sake-of-others-new-CIBC-study-finds

Financial Planning is for Everyone

Financial Planning is for Everyone

With millennials entering the global workforce and baby-boomers on the cusp of retiring from it, the world is experiencing a substantial transition; one accompanied by rapidly changing technology and social norms.

It can become easy to focus on perceived generational differences instead of similarities with many generations of people interacting and working alongside each other. This is especially true with finances and financial planning.

Despite what media headlines might say, financial literacy – or the lack thereof – is not exclusive to one group of people. General unease with the intricacies of financial planning coupled with the highly complex emotions surrounding money means many Canadians of all ages are reluctant and/or unsure how to seek professional financial advice.

According to a September – October 2018 survey done by the Financial Planning Standards Council, “one-in-three Canadians fail the [financial] stress test, meaning they somewhat or strongly doubt their bank account can withstand a financial emergency… [and] nearly three-in-ten are not confident they will achieve their financial life goals.”

The same survey found “two-thirds of Canadians have not engaged the services of a professional financial planner.”[1] Many Canadians clearly share a reluctance to seek professional financial advice and this reluctance is having a serious impact on their sense of financial stability and well-being.

The survey listed the following reasons for why Canadians avoid seeking financial advice:

  • I don’t have a big enough portfolio
  • I do not know who to trust
  • It is too confusing and overwhelming for me to consider at this time
  • I’m embarrassed by my financial situation
  • I do not know where to find one

Although those who reported having never sought professional financial planning help were predominantly Gen X and Gen Y (18 – 44), a lack of financial know-how is not exclusive to younger generations.

50% of the respondents who had not sought financial advice stated not having a big enough portfolio as their reason why. This misconception was significantly more of a concern for individuals 45 years and older.

Remarkably, this tells us that from millennials to baby boomers, a major reason why Canadians are avoiding seeking financial advice is because of the misconception that they don’t have enough money to warrant it.

We only need to look at the reasons listed above to know guilt, shame and mistrust are emotions with a profound impact on our ability to make healthy financial decisions. Moreover, the way these emotions impact us can differ depending on social demographics.

For example, the survey found although significantly more women than men listed feeling too confused and overwhelmed to consider seeking financial advice, significantly more women than men also felt confident in their ability to achieve their financial goals and withstand a financial emergency. Likewise, significantly more people listed being too embarrassed by their financial situation to seek help if they made less than $40,000 annually.

The take away is: regardless of age, gender or income, many Canadians are stressed about their finances to the extent that it impacts their ability to secure their financial well-being. A good financial advisor will be understanding of the unique challenges faced by different generations and will craft a personalized plan based on his or her client’s lifestyle, timeline and goals.

If a fear of judgement is preventing you from seeking financial advice, you are not alone. Advisors understand the emotions experienced by investors and should take care to meet each person where they are today.

Connect with us to learn how you can start working towards securing your financial well-being.


[1] http://fpsc.ca/docs/default-source/FPSC/news-publications/fpsc-cross-country-checkup.pdf