Even financially squeezed Canadians are saving, opening opportunity for advisors

Understanding pressure on client savings

The Scotiabank poll made a point of grasping exactly why Canadians feel pressure on their decision to save each month. 71 per cent of Millennials and Gen X said that the cost of living and every day expenses are major obstacles to their savings. A further 32 per cent of Millennials cite debt repayment as a big obstacle, the highest rate of any of the generations surveyed.

Chak believes that understanding these pressures is key to helping these generations of clients. Advisors need to reckon with the high cost of housing and the significant debt that people take on to own a home in a major Canadian city. They need to understand that these generations don’t necessarily have the pension access that their parents or grandparents did, making retirement savings a greater source of pressure. Chak notes, too, that advisors should try to understand what these clients are saving for, the time horizon of their goals, and the prospects that they have for turning monthly saving into meaningful wealth building.

Turning savings habits into wealth

Chak admits that the survey didn’t explore how much was being saved each month by those Canadians making consistent contributions. He emphasized, however, that the consistency of savings can form the foundation of greater wealth building. He says that advisors can play an instrumental role in turning savings into wealth through appropriate portfolio selection and discussions about the rates of return needed to achieve short, medium, and long-term goals.

Many of the savings accounts that Canadians contribute to don’t necessarily pay out rates that would even begin to match the pace of inflation. While Chak believes advisors can help with allocations to faster growing or higher yielding securities for long-term investment, he also calls attention to a new savings account from his bank which offers an everyday return rate of 2.2 per cent, which he says is ideally suited for emergency funds and other cash savings.

While advisors are incentivized to chase more established and wealthier clients with more assets to invest upfront, Chak believes that these cohorts of more pressured Canadians who still want to save can be a valuable client base. He likens the time advisors spend with those clients to portfolio diversification, saying that these clients should be viewed as a long-term investment. He notes that these clients typically don’t come with the high-touch complexity of more affluent investors, but that setting them up with a robust plan can help create a new wealthy client to serve down the road. There’s an opportunity, he says, in connecting with the young Canadians who want to save.