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Consumer Insights

Consumer Insights offers an exclusive series of articles analyzing the results of the on-going Financial Comfort Zone Study, conducted by Missis­sauga, Ont.-based Credo Con­sulting Inc. in partnership with Montreal-based TC Media's investment group. (Investment Executive is published by TC Media's investment group.) The survey, conducted monthly in English and French, is designed to gain insight into the relationships among financial advice, financial well-being and overall life satisfaction in Canadian society. The number of respondents is expected to grow to 12,000 within 12 months.

Retirement-focused clients who have an advisor are more optimistic about reaching their financial goals

By Rudy Mezzetta | October 2017

Having a financial advisor can have a positive effect on clients' attitudes toward their retirement, according to recent research by Mississauga, Ont.-based Credo Consulting Inc.

The research found that Canadians who identify "retirement planning" as a top financial concern and work with an advisor are much more likely to believe that they're ahead of their expectation; this belief compares with that of retirement-focused individuals who don't have an advisor. Among the survey participants who identified retirement as a top concern and who had an advisor, 24% said they felt "ahead" or "well ahead" of their financial expectations.

In comparison, just 15% of survey participants who identified retirement as a top concern but who did not have an advisor said they felt ahead or well ahead of their financial expectations.

These findings were drawn from research conducted by Credo for the Financial Comfort Zone Study, an ongoing national consumer survey, in partnership with Montreal-based TC Media's investment group. (TC Media publishes Investment Executive.)

"The real value that advisors bring to the table is a lot more than just creating an investment or retirement plan for clients," says Dan Nolan, an investment advisor with IPC Securities Corp. in Ottawa. "[An advisor] keeps them on track and committed to the plan, adjusting where necessary and guiding them through it all."

According to Credo's research, Canadians, in general, perceive retirement as the single most important financial matter in their lives. Survey participants gave "retirement" an average importance score of 8.07 out of 10, with 10 representing the highest possible importance. In comparison, survey participants rated "a house" at 7.64 in importance on average, "health care" at 7.56 and "budgeting" at 7.31.

"The fear of running out of money in retirement applies to every segment of clients, even high net-worth clients," says Sara Gilbert, founder of Montreal-based Strategist Business Development. "It's not about how much clients have; it's about how much they're spending, and whether they're going to be able to maintain their lifestyle."

As well, Canadians who said retirement is a top concern also were more likely to use an advisor than those who said retirement is not a top concern. Among survey participants who indicated retirement is a top concern, 57% had an advisor; among survey participants who indicated retirement was a low-level concern, only 25% had an advisor.

Little wonder, then, that Canadians who place a priority on retirement planning seek professional guidance, says Brent Allen, senior vice president of distribution operations with Investors Group Inc. in Toronto: "Having a plan really helps you benchmark your progress."

Retirement planning today involves taking into account many complex considerations, Allen says. These include increased client longevity, the decline in the availability of workplace pensions and the challenge of generating income in an era of low interest rates. Even designing a savings strategy during working years that will allow an individual to meet his or her retirement income goals can be difficult if undertaken without an advisor.

"How much you will need in retirement is really hard to quantify if you're trying to do it on your own," Allen says. "An advisor can help clients determine an appropriate amount of savings to set aside so that they're saving enough, but not so much that they're sacrificing their lifestyle today - and keep them disciplined in that savings regimen."

Credo's research also suggests a positive relationship between a client's interest in retirement planning and the level of trust he or she feels toward his or her advisor. Survey participants who indicated that retirement is a top concern gave an average score of 8.49 to the statement: "I trust my financial advisor completely."

In contrast, survey participants who indicated retirement is of low-level concern gave the same statement an average score of 7.80.

"When advisors create goals-based plans for clients, we get to know them more deeply than almost anyone else outside of their immediate families," Nolan says. "We get to know their families, their dreams, their concerns. And there's a tremendous amount of trust built up in that process."

Being proactive about engaging clients in conversations about retirement goals and expectations, and helping to craft a financial plan for achieving those goals, is also an effective way for an advisor to build a stronger business, says Greg Pollock, president and CEO of the Toronto-based Financial Advisors Association of Canada (a.k.a. Advocis): "Advisors who build plans for their clients [and] help them stick to their plans and review them regularly are the [advisors] who are doing well."

The online Financial Comfort Zone Study has polled 23,000 Canadians thus far. The survey is meant to gain insight into the relationships among financial advice, financial well-being and overall life satisfaction in Canadian society. Canadians are polled monthly, and the number of survey participants will increase each month.

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