The confidence inspired by Canada’s relatively strong economic performance following the 2008 economic crisis may be waning, as Canadians are less optimistic about their financial future than they were last year, and less optimistic than their counterparts globally, according to the second annual Global Investor Pulse Survey from New York-based BlackRock, Inc.
The survey also showed that while Canadians recognize the importance of long-term financial goals, the high cost of living and competing financial pressures are making it hard for them to take action toward achieving those goals.
While more than half of Canadian investors (52%) are feeling positive about their financial prospects, this represents a 3% decline from confidence levels in 2013, and is below the global average of 56%. The results are a reversal from last year, when Canadians were more financially optimistic than their global counterparts. As well, only one in seven Canadians (13%) see the economy getting better, compared with 22% globally.
According to the global survey — the largest of its kind, covering 1,000 Canadian investors at a range of income levels, and 27,500 investors across 20 countries — the top priorities for Canadians are “saving money” (53%), followed by “saving for retirement” (42%) and “paying off debt” (41%). By a wide margin, the predominant financial risk respondents identified was the high cost of living in Canada: 68% said it was the biggest threat to their financial future, compared with just 46% for inflation and 45% for the state of the economy.
The survey found that use of a financial advisor was directly correlated with the level of investor optimism. Nearly seven in 10 Canadian investors who use an advisor are optimistic about their financial future, compared with only 45% of those who do not get advice.
The survey found that only 29% of Canadians use a financial advisor, but virtually all of those who do (96%) are either very or somewhat satisfied with the service they receive. And a similarly high proportion — four in five — say that their advisors deliver excellent or good value for money.
However, three in 10 (29%) Canadians who use an advisor admit that they have no idea how their advisor is paid for giving them advice, and 42% say they have only a general idea with no specifics.
Financial planning for life events
Although six in 10 (61%) Canadians say that they take financial planning seriously, this doesn’t necessarily mean that they act when faced with their own life events, the survey found.
Four-fifths of respondents experienced some form of “life event” over the past 10 years, from buying a home or starting a family to getting a divorce or retiring. Yet relatively few respondents say they are taking concrete steps to financially prepare for those events. Of those who retired, only 19% sought professional financial advice, and one in three did nothing at all.
While the average Canadian spends two hours a month reviewing their savings and investments, one in five (21%) respondents said that they spend no time at all doing so. Adding to this, fewer than half (45%) are maximizing contributions to their workplace pension plans, and nearly half (46%) do not know what the maximum contribution is.
“While Canadians seem to place a high priority on long-term planning, their short-term actions could hinder making these goals a reality,” said Noel Archard, Managing Director, Head of BlackRock Canada.
“Concerns about debt and the cost of living, including housing, are high in Canada, and that seems to have put many in a situation where they are not taking advantage of some relatively simple things, like maximizing their workplace pension plans. Clearly, there’s plenty of room for investor education and advice. More Canadians need to see that they do have options.”
The survey, executed with the support of Cicero Group, an independent research company, took place in August 2014. For the Canada sample of 1,000 respondents, the margin of error is plus or minus 3.1%.