Financial stress alone is not enough to motivate Canadians to seek financial planning, according to a study completed recently by researchers at York University in Toronto. That’s because they must also have a certain level of confidence in their ability to succeed at following financial planning advice.
The study, entitled Self-efficacy, financial stress and the decision to seek professional financial planning help, found that those who were experiencing financial stress but were lacking in confidence were less likely to seek financial help. However, Canadians with higher levels of self-efficacy were more likely to ask for help, especially if they were very stressed about financial matters.
The goal of the study — which was conducted by Jodi Letkiewicz, Chris Robinson and Dale Domian of York University and funded by the Financial Planning (FP) Foundation in Toronto — was to determine what would motivate Canadians to seek financial advice outside of having a certain level of wealth and income, which is often connected to the likelihood of employing a financial advisor.
“With the value of financial planning fairly widely known among Canadians, this research provides an important clue as to why some consumers feel motivated to take the important step to start to plan for their financial futures,” says Derek Dedman, chairman of the FP Foundation’s research committee, in a statement. “And, just as importantly, it helps us understand why some don’t take that step, even when they are in real need of financial planning expertise.”
The FP Foundation released its own summary (http://issuu.com/fpsc/docs/financial_stress_and_self-efficacy_/1) of the study and some suggestions on how financial advisors, financial services institutions and other agencies that help Canadians with their financial matters can increase people’s confidence in this area.
The summary suggests that financial professionals encourage Canadians to establish simple goals that are likely to be met, as an accomplishment will increase levels of self-efficacy. For example, an advisor can talk to a client about setting a deadline to pay back all, or a certain level, of their credit card debt.
Helping clients establish a plan to meet their goals is also likely to decrease their anxiety around those objectives, which is important, as nervous people tend to have a weaker level of self-efficacy.
Encouraging words from financial professionals are also welcome, according to the summary.
“The planner must provide constructive feedback to build and maintain self-efficacy,” states the FP Foundation in its summary. “Verbal persuasion goes hand in hand with performance accomplishments. A little belief in someone can go a long way.”
And people who are shown scenarios in which others in a similar situation succeed are also likely to experience an increased level of confidence. These successful examples can be communicated through commercials, brochures, websites and other informative materials.
The results of York University’s report are based from research gathered by a separate study, Value of financial planning, which surveyed almost 15,000 Canadians (excluding those in Quebec) between 2009 and 2012 on their financial planning activities and the impact those activities have on their emotional and financial well-being. The Financial Planning Standards Council, in Toronto, and the Financial Planning Foundation commissioned the Value of financial planning.