Canadians need to first save, and then invest with advice, in order to get their finances back on track and to reach their long term financial goals, suggests the chairman and CEO of Toronto-based AGF Management Ltd. (TSX:AGF.B).

Speaking at an Economic Club of Canada event on Wednesday in Toronto, Blake Goldring said that to follow those steps, financial advisors, the financial industry and the government need to encourage people to save more and more often, and to educate retail investors on financial basics, as well as risk.

To meet the first step, said Goldring, Canadians must take advantage of savings vehicles such as registered retirement savings plans (RRSP) tax-free savings accounts (TFSA). To make sure Canadians make full use of these vehicles, Goldring suggests that Canada look to the example of countries that have adopted compulsory savings program.

“We should not ignore the lessons from other countries that have tackled the issue [of saving],” he said. “Australia, Chile and Singapore have met with success using compulsory savings programs.”

For example, Australia’s compulsory savings and investment schemes have reached a total net worth of AUD$1.2 trillion over the past two decades.

To get Canadians to then invest their savings, Goldring believes advisors need to re-introduce clients to risk, particularly in regards to equity markets.

As a result of the 2008 market collapse, people have become completely averse to investment risk. However, the reality is that those same people must take on equity risk, he said, in order to reach their retirement goals.

As well as developing a higher tolerance and understanding of risk, Canadians need to be educated about finances and the sooner the better, according to Goldring.

One of the most important recommendations made by the government’s Task Force on Financial Literacy, said Goldring, is to make financial education a life long endeavor by including it in school curriculums.

While financial literacy in schools will help future generations, Goldring believes advisors cannot wait to remind current retail investors, who have perhaps become do-it-yourself investors, about the importance of professional advice.

“People need to understand what advisors bring to the table,” said Goldring, “and what the return on investment is when they pay for professional advice.”

To show clients their value, advisors and their firms, specifically in the mutual funds industry, need to follow these six points, Goldring said:

  1. Do a better job of educating people on the value of advice and financial goals set by financial advisors in wealth creation;
  2. Connect the dots between mutual funds and their associated fees and advisor services provided to reach goals;
  3. Show how mutual funds are the most democratic of investment vehicles;
  4. Encourage better regulation and transparency across the entire sector;
  5. Raise standards and practices in the industry to rebuild trust with investors; and
  6. Introduce new and innovative products.

“Those investment firms and investment professionals who are unable to meet the standard shouldn’t be in the business,” he said, “the stakes are too high for Canadian investors.”