Canadians with low incomes lack access to the financial help they need, according to Prosper Canada.
A new report from the financial literacy organization found that access to relevant, high-quality financial advice is often associated with greater financial health and resilience, but not all Canadians have access to the financial services they need. According to the report, 800,000 low-income Canadian households were unable to access financial help in 2022.
“Not only are people with low incomes experiencing increased levels of financial vulnerability and stress, but they are also unable to find the support they need to help them with their finances and financial challenges,” the report said.
One of the barriers preventing low-income individuals from accessing relevant and affordable services is that most institutions lack the necessary tools and training, Prosper said. As a result, financial professionals who are competent in meeting the needs of middle- and higher-income clients lack understanding of the specific needs of people with low incomes to serve them appropriately. For example, it said few are familiar with the public income support and subsidy programs that people with low incomes rely on.
In addition, Canadians with low incomes are generally less trusting of financial professionals and institutions.
The report found that most commercial financial services are not designed for people with low incomes, even if they are technically available to most customers. Comprehensive services, such as financial planning, are even less accessible.
These services are often only available to wealth management clients who have a threshold amount of investable assets, the report said.
“Services that are not affordable may be inaccessible to people with low incomes, and those that are not appropriate or trustworthy risk undermining their financial health,” the report said.
Another problem, according to the report, is that there is not a strong business case for serving clients with low incomes due to limited profit generation opportunities. People with low incomes often cost more to serve and do not generate as much revenue. As a result, financial service providers have less financial incentive to attract customers with low incomes.