A growing number of Canadians intend to contribute to their registered retirement savings plans (RRSP) by the March deadline, according to a survey by Toronto-based BMO Financial Group, but advisors need to help clients do more with their savings.
“[Advisors] should certainly be encouraged that Canadians are being more prudent and…contributing to their RSP,” says Chris Buttigieg, senior manager, wealth planning strategy, BMO Financial Group. “[But advisors need to be] proactive and encourage their clientele to help them make the most of that contribution.”
According to BMO’s fifth annual national RRSP study, 42% of Canadians have already contributed to their plans this year — up from 35% last year. Furthermore, 37% of survey respondents said they plan to contribute and/or make an additional contribution before the deadline. On average, Canadians who have already contributed to their RRSPs deposited $3,738.
While the growing trend of contributions is positive, Buttigieg says the danger is that Canadians will “park the funds” and forget about them. “What that means is the money is sitting in a savings account earning very little interest and really not growing as much as it could,” he says.
Of course, investing to make the most of those contributions means having the right asset allocation given the clients’ retirement goals and expected expenses, says Buttigieg. As well, advisors can discuss the benefits of diversification of assets with clients feeling a little uneasy about markets in the wake of falling oil prices.
Close attention also needs to be paid to who exactly does or does not make a contribution this year. According to the BMO study, 74% of men will make an RRSP contribution by the deadline but only 55% of women intend to do the same. It’s difficult to pinpoint the exact reason for this large difference, says Buttigieg, but wage inequality and income lost due to time spent by women raising children could be to blame.
To help bridge this contribution gap, advisors need to engage with their female clients, says Buttigieg. For example, if working with a husband and wife make sure both spouses attend meetings. As well, advisors can offer resources, such as books or seminar sessions, to female clients who wish to learn more about their finances. Above all, advisors should talk to their female clients about why they may not be contributing to their RRSPs this year.
“Get down to the root of it,” says Buttigieg, “in terms of what are the issues at hand or the concerns, fears or misconceptions.”