Canadians are looking for help with their retirement planning and their retirement portfolios, according to a recent study by the asset-management arm of Toronto-based Bank of Montreal (BMO).
A survey of 1,003 Canadians conducted earlier this year found that the top retirement planning concern among 56% of participants is understanding what investments best suit their needs. In addition, 53% said they need help in understanding how their retirement portfolios will react in certain markets, as well as assistance in adjusting their portfolios to meet market conditions.
Canadians are confused about what investments should be – and what they have – in their retirement portfolios, says Robert Armstrong, vice president of managed solutions and registered plans strategy with BMO in Toronto: “There are a lot of great programs to help Canadians save, but people are overwhelmed. Financial advisors can provide a calming effect.”
Combined with that confusion, 51% of survey participants said they need help in deciding how much money they require for retirement. This is particularly relevant for baby boomers, says Ron Harvey, a senior financial advisor and branch manager with Investment Planning Counsel Inc. in Ottawa.”We live in a ‘now’ society. We don’t think we need to put money away today for tomorrow,” he says. “But as we get closer to retirement, we worry we won’t have enough.”
That worry is compounded by shifting demographics: Canadians are living longer. “One of the concerns people have today is outliving their money. You might work 30 years, then you might live another 30 years,” says Chris Dewdney, senior advisor and certified financial planner (CFP) with DWL Financial Services Inc. in Toronto.
The best place to start addressing these issues is by assessing risk tolerance, says Glen Rankin, financial planner with Rankin Financial Planning Ltd. in Truro, N.S.: “You need to set a ceiling on risk, factoring in the client’s practical risk tolerance, emotional risk tolerance and, finally, their goals and objectives. Once that is done, dial it back a notch, because clients normally think that their risk tolerance is higher than it is. In a bull market, everyone is a cowboy; not so much in a bear market.”
In fact, 48% of participants in the BMO survey said they need help with risk tolerance. For financial planners, helping clients to understand – then accept – their risk profile is a key role, Dewdney says: “Our job is to explain risk appetite and put them on an appropriate path.”
For example, aggressive clients with a healthy nest egg may need to be more conservative, he notes, while risk-averse clients with insufficient assets for retirement may have to accept more risk or adjust their retirement plans to live on less.
Media attention on the volatility of the market also has Canadians concerned about the sustainability of their retirement portfolios. “This gets more airtime than where the market is going,” Armstrong says. “Canadians need someone to bounce ideas off of. They want help.”
Client distress is no surprise to Peter Merrick, a CFP in Toronto and president of MerrickWealth.com: “It’s very difficult for most people to imagine what it will be like when they retire.” It’s the financial planner’s job, he adds, to help clients imagine that reality; as a result, conversations about available options may be difficult. “Be honest with clients, whether the person wants to hear it or not. Clients may have to reset goals and expectations.”
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