Household financial assets will likely be growing more slowly in the years ahead but are still projected to top $11 trillion by 2032, according to new research from ISS Market Intelligence.
In the latest edition of the Investor Economics Household Balance Sheet Report, ISS MI forecasts that the investable assets of Canadian households will grow to $11.24 trillion by the end of 2032, up from $6.2 trillion at the end of 2022.
The projected compound annual growth rate of 6.2% over the period would represent a slowdown from the previous 10-year period when household assets grew at a 7.4% annual pace, it noted.
However, the prior period was boosted by the effects of the pandemic, which saw financial assets grow by $1.2 trillion between the end of 2019 and 2022 thanks to a combination of “robust market performance and increased savings,” the firm noted.
Looking ahead, households are facing the dual drags of inflation and higher interest rates, which are eating into their savings, ISS MI suggested.
“The net result is an expected slowdown in the financial wealth creation pattern for the household sector in the decade ahead, exacerbated by the progression of the final cohort of the vast baby-boomer generation into the retirement phase,” said Goshka Folda, managing director, global head of research at ISS MI, in a release.
Alongside the evolving savings picture, the demographic profile of household financial assets is expected to shift too, the firm said.
“By 2032, wealth held by those 55 years and older is projected to exceed $7.0 trillion, or 63% of the overall wealth of Canadian households,” ISS MI reported.
“This demographic shift presents abundant opportunities for retirement planners, given the increasing number of individuals either in or nearing the payout phase,” it said.
At the same time, the increasingly-affluent members of Generation Z “are likely candidates for transitioning into digital investment channels as they come into newfound inheritances,” it suggested.
Additionally, the report projects that the financially affluent category — households with over $1 million in investable assets — will grow by about 500,000 in the coming decade, boosting the category’s share of assets to 80.1% of total household wealth.