The Value of Advice

The Investment Funds Institute of Canada (IFIC) released a report in July 2010 called The Value of Advice. This report is designed to set the record straight for public policy debate in the area of retirement savings for Canadians. Certain stakeholders have claimed that public plans are preferable to private plans as they cost less. However the value of advice has been largely ignored in these claims. The report used fact-based, independent, third-party research available from credible published sources to illustrate what advice means to the financial well-being of Canadians and their confidence in the future.

Statistics Canada reports that there are 288,000 Canadians employed in the financial and investment advisory business. Most Canadians say that they lack the financial knowledge or the time required to research all the options available to them. The role of the financial advisor is to assist Canadians with setting goals, selecting the right investment vehicles to meet those goals and recommending an asset allocation matched to client needs.

Ipsos Reid surveyed 1030 households who worked with an advisor and 1371 households who didn’t. The data showed that advised households had more savings, 5 times more in certain categories, than non-advised households. This finding was proven in all age and income levels.

Advised households had double the participation in tax assisted programs such as Registered Retirement Savings Plans, (RRSPs) and Tax Free Savings Accounts, (TFSAs). This number almost tripled with participation in Registered Retirement Income Funds (RRIFs) and Registered Educations Savings Plans, (RESPs).

Advised households are coached to include the right asset mix suitable for an individual’s circumstance, objectives and risk tolerance. Without advice Canadians are easily swayed by the mass media to be over-cautious or under-cautious and very often at precisely the wrong times.

Advised households were more confident about their financial future than non-advised households. They were more secure about a comfortable retirement; they were more satisfied about their current financial situation; they were more comfortable about their debt situation; and they felt they would be financially better off a year from now than they are today. These results were the same regardless of financial wealth.

Advised households are 33% more likely to feel empowered and educated than non-advised households. They were also much less likely to be the targets of fraud. It was found that when times get tough, advised households went to their advisor for advice – even on financial matters that were outside their immediate business relationship.

This has been a brief summary of the report. If you would like access to the full eighteen page report you can visit the IFIC website at https://www.ific.ca/Content/Document.aspx?id=5906. The report is available as a PDF document that you can download and save to your personal computer.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail rick@invested-interest.ca. Mutual Funds provided through FundEX Investments Inc.