In the past couple of years, Canadians have seemingly forgotten how to save. Content to see the value of their houses climb and the size of their stock portfolios swell, they have stopped putting much of anything away for a rainy day. Financial advisors should be helping them to revive their saving habits, and making those savings much smarter, too.

Recent returns for both residential real estate and equity markets have been much fatter than usual. As a result, many Canadians are feeling flush and, understandably, they are spending their windfalls. Traditional savings have almost dropped to nil.

There’s nothing wrong with enjoying a little good fortune, but these salad days aren’t likely to last. Economists predict that, in the long run, realistic returns from real estate are in the low single digits — and will trend lower as the population ages. Similarly, portfolios of financial assets are also expected to return mid- to high-single digits over the long run.

As returns revert to the mean, Canadians are either going to have to ramp up their savings significantly or face some grim choices — depressingly austere retirements or longer working lives. But, with a little foresight, they can preserve some financial flexibility. More saving is the obvious solution, which may require workers to sacrifice current consumption. That’s the bad news. The good news is that there is also plenty of scope for smarter saving.

For one, the cost of investing must become a central concern for investors. There is some evidence that investors have become increasingly sensitive to costs but not sensitive enough. Investors are still sold overpriced products that don’t deliver nearly enough value and destroy their returns in the process. Conscientious advisors will help their clients steer clear of industry gimmicks to choose investments that deliver superior value. And, if investors flock to cost-effective products, the industry may expend more effort developing them.

Many Canadians are also vastly over-invested in the Canadian market. Not only is Canada a tiny slice of the global capital market, but it is also heavily concentrated in resources and financials. Broader diversification will deliver more bang for clients’ bucks.

Most investors need help making these hard decisions — to save more, abandon emotional attachments to homegrown companies and weed out products that aren’t worth the cost. If advisors help then do that, they will easily earn their keep.