The key role of planners during challenging times

All these factors have significant impacts for Canadians — not only on their finances but on their lives and well-being. Canadians will experience tangible impacts on their lifestyles and the things that matter to them — where they can afford to live, what they can afford to buy, how much they can save and when they’ll be able to retire.

Financial planners are in a unique position to help Canadians navigate this turmoil. Planners can help them understand what the current economic environment means for their unique situations, including both their short-term financial security and progress toward long-term goals.

The sudden spike in inflation, for example, means many households are spending far more than they budgeted on both everyday expenses and big-ticket items. Statistics Canada reported that inflation was 5.7% in February — the highest level since 1991. The jump has been even more drastic for essentials like groceries and gasoline. And, while wages are increasing, they’re not keeping up with inflation.

House prices also continue to rise at alarming rates, with the Canadian Real Estate Association reporting a more than 20% year-over-year increase in February. And rental affordability also continues to pose a significant challenge across the country, according to a February 2022 report from the Canada Mortgage and Housing Corporation.

Although low interest rates have made it very affordable for Canadians to borrow money over the past several years, rising rates and the need to service high levels of debt are an increasing challenge for consumers. Rising interest rates are especially concerning for those who stretched their budgets to buy a house in the current market.

Meanwhile, the recent stock market volatility certainly hasn’t helped those who are already worried about their financial situations. And all of this comes as many Canadians continue to struggle with the impacts of lockdowns and restrictions over the past two years.

In these next few months, Canadians will make hard decisions as they try to assess what sacrifices and trade-offs are needed as they face higher mortgage payments and bigger grocery and gas bills. Guidance from a professional who can offer objective advice and a voice of reason will be critical through this process.

Financial planners have a vital role to play. Many existing clients will find their financial plans in need of adjustments to reflect the new economic realities. And for Canadians who’ve never worked with a planner or developed a plan to reach their goals, this era of uncertainty might provide the motivation they need to initiate the conversation.

In some cases, difficult client conversations may be required about the need to dial back spending or make changes such as deferring retirement for a year or two to reach their goals. And discussions might need to cover the basics — helping clients understand the importance of things like budgeting and emergency savings.

Beyond financial advice, Canadians need guidance from trusted professionals who work in the best interest of their clients. They need advice from planners who consider all six pillars of their financial plans: managing cash flow, optimizing investments, understanding taxes, planning for retirement, leaving a financial legacy for loved ones and insuring against the unknown.

Research continues to show the benefits of working with a professional financial planner when it comes to Canadians’ financial well-being. All Canadians deserve to benefit from financial wellness, and professional advice will help them achieve it as they face a challenging future.

Tashia Batstone is president and CEO of FP Canada.