How to help clients save? Make it routine

Laura Parsons, a Calgary-based personal finance expert, Bank of Montreal, says for people to reach their savings target, financial advisors need to have clients look at three things: spending, employer savings plans and an automatic contribution plan to a registered retirement savings plan (RRSP) or tax-free savings account (TFSA).

If clients don’t have a budget or are not tracking their spending, says Parsons, they’re probably overspending, which can take a toll on savings.

Secondly, many people either don’t understand or ignore how employer benefit programs can help with saving, she says.

For example, an employee savings plan takes money automatically from a client’s pay cheque, meaning that the client doesn’t even have to make a decision about putting those funds aside. As well, many employers will match or contribute to a person’s savings as part of the plan.

Finally, one of the best ways to be disciplined in reaching an annual savings goal, says Parsons, is by setting up automatic contributions, much like the employer benefits option, to an account. To make sure clients stick to a contribution plan, advisors can frame it as one more debt to pay. “If you pay your bills, this is quite easy,” says Parsons, “because it’s a bill to yourself.”

Like the BMO study, the annual RBC RRSP poll also emphasizes the importance of regular RRSP contributions to reaching a savings target. For instance, six out of 10 Canadians who either already have or intend to contribute to their RRSPs in 2012 have regular contribution plans in place, the RBC poll found.

While it’s often easy for an advisor to tell clients that they need to keep a better eye on spending or to make regular contributions to an RRSP or TFSA, says Bernie Clermont, regional financial planning consultant, RBC Financial Planning, in Ottawa, the real key to convincing clients is with a visual example.

“The major goal of a financial planner and an investment advisor is to actually show the clients the benefits of making regular contributions as opposed to maybe making irregular contributions, possible once a year,” says Clermont. “Put those [examples] into a financial plan or use calculators to show them the benefit of things like dollar cost averaging into the market every two weeks or every month.”

It’s not only long-term savings goals, such as retirement, that Canadians need to be disciplined about, according to BMO. The BMO study shows that Canadians are in fact saving for numerous things. For example, 53% of people are saving for a trip, 42% for retirement, 29% for renovations, 19% for a child’s education and another 42% are putting money aside for a rainy day.