The Investment Funds Institute of Canada is urging the Manitoba government to recognize the importance of financial advice as it considers strategies for strengthening the retirement income system.

IFIC has published its submission to Manitoba’s minister of finance in response to a request for comments on its consultation paper, Mechanisms for Expanding Pension Coverage and Retirement Income Adequacy in Canada.

The institute calls for reforms to look beyond pensions and consider a wider array of retirement savings solutions. It argues that much of the debate around the retirement income system so far has been overly focused on pension plans, and has ignored non-registered financial assets accumulated by Canadian households, such as tax-free savings accounts and other savings outside of RRSPs. IFIC estimates that these assets represent approximately $1.7 trillion in Canada.

Financial advice has also been overlooked in the debate, IFIC argues.

“Absent from many commentators’ views is the important role that personal advice plays in assisting individuals to make certain choices that are right for them and in encouraging them to follow through on their financial plans,” the submission says.

In particular, IFIC stresses the important role financial advice plays in:

• Engaging clients, obtaining their commitment to save and to keep saving from year to year;

• Helping Canadians to choose wisely among the growing number of tax-assisted savings plans, understand the variation between plans under federal and provincial pension and tax legislation, and cope with the major financial events that they will experience at some point in their lives; and

• Developing appropriate portfolios using an equity mix suitable to each client based on their personal time horizon and risk tolerance.

“There is no one size fits all approach that can be taken,” said Joanne De Laurentiis, IFIC president and CEO. “We should provide Canadians with retirement savings options, as well as support in selecting the most appropriate option, which can only come from professional financial advice.”

IFIC’s submission to the Manitoba government reiterates the recommendations that it has made to other provinces with respect to reforming the retirement income system. It recommends:

1) Making it easier and more appealing for employers — and particularly small-and medium-sized businesses — to establish retirement plans affordably and without liability;

2) Increasing the number of Canadians that participate and save enough in employer or individual retirement savings plans through the introduction of automatic enrollment and contribution escalation features and financial education;

3) Ensuring that those with RRSPs enjoy the same tax benefits as those with standard defined benefit and defined contribution plans, by increasing RRSP limits from 18% to 34% of earned income to achieve the average benefit value of the federal government employee plan benchmark;

4) Understanding the value of Canadians’ access to financial advice when comparing all-in costs and benefits of features available within government-provided, employer-sponsored and individual retirement plans and other savings.

IE