Many Canadians are going it alone when it comes to making big financial decisions — or at least without a financial advisor — according to a new study released Wednesday by market research firm Leger.
Financial Compass: The Great $1 Trillion Wealth Transfer was based on an online survey of more than 5,000 Canadians in July. The survey found that only 27% of Canadians who plan to give would seek financial advice in the event of a windfall, while one in five said they wouldn’t consult anyone. Nearly half (48%) of respondents said they don’t have a financial advisor, and nearly as many (42%) don’t have a financial strategy.
So why are advisors being cut out of decision-making, and where are these Canadians turning for advice?
“When we look at where Canadians would turn for information, it appears it could potentially be as simple as [advisors] not being part of that consideration set,” Susan Sanei-Stamp, senior vice-president of the financial services sector team, said in an interview.
Instead, many Canadians are seeking information online, or turning to friends and family for their views on what should happen with inheritances.
This trend has implications for both Canadians’ finances and advisors’ client rosters amid the ongoing great wealth transfer. This transfer has already seen an estimated hundreds of billions of dollars change hands, with another $120 billion to $150 billion expected to transfer over the next two years.
Nearly half of survey respondents (45%) said they had already received assets, and one third of the younger Canadians surveyed — Gen Z and Millennials — said they expect to receive an inheritance.
While many advisors and wealth management firms are chasing high-net-worth clients, younger Canadians who are still building wealth could be valuable additions to client rosters over time, Sanei-Stamp said.
“Having those relationships perhaps earlier would benefit both parties,” she said. “Are we overlooking the opportunity to build the relationship earlier so that when [young Canadians] achieve that higher net worth… the trust is already [established]?”
Across all respondents, more Canadians expected to leave an inheritance (61%) than expected to receive one (35%). So, there could be many in the latter group who are unprepared to handle the wealth coming their way.
“So we’re looking now at a group of Canadians that may be in line for an inheritance and are simply unaware, which limits their ability to plan for that,” Sanei-Stamp said.
In addition, the study shows advisors are most at risk of losing clients in the mass-affluent category — defined as those with up to $500,000 in assets, not including their primary residence. Many of these clients have already received one inheritance and expect to receive another, or have already received and expect to give. More than half (60%) of this group have advisors, Leger confirmed in an email, but they’re also the clients with the highest churn, with 68% thinking about switching or leaving.
Values-driven advice
Despite many respondents saying they don’t intend to seek professional advice, the study suggested they still have opinions on what type of advice they’d prefer.
Canadians are looking for a meaningful relationship with the person advising them, preferring someone who takes the time to understand their values, rather than a transactional relationship, Sanei-Stamp said.
The vast majority (80%) of respondents say any advice they receive should take into account their values, with that result rising among those who expect to leave an inheritance and among those expecting to receive one. More than half (55%) of those polled said investing in socially responsible companies is important.
One bright spot for advisors: Canadians may go online for information, but more than half of respondents (53%) said they prefer to make decisions in person. As well, when making decisions, only 28% would consider using AI-generated financial advice, suggesting an opening for advisors and human-led advice.
For Canadians giving or inheriting wealth, relationships with professionals are especially important, Sanei-Stamp said.
“These are intensely personal, meaningful moments,” she said. “The size and nature of the inheritance may vary. But by and large, [the transaction is] very personal, very meaningful, [and] tied to a legacy of love and kindness.”
The study was based on an online survey of 5,016 adult Canadians, conducted between July 7 and 20. No margin of sampling error can be calculated for online surveys, but the survey was weighted by age, gender and region to ensure a more accurate representation.