Canada’s debt-to-disposable income ratio is the worst among OECD countries. And our “year-round Boxing Day sale” on debt doesn’t help matters, Blake Goldring, chairman and CEO, AGF Management Ltd., told the Economic Club of Canada last week.
Problem is, more spending means low investment.
“When Canadians become successful savers, they are far more likely to become investors,” says Goldring.
Read: Canadians at risk of inadequate retirement savings
But there’s another problem: clients’ risk aversion.
“In this long-term, low-interest rate environment, fixed-income investment just won’t cut it,” he cautions. “Those on the sidelines could be hurt, as T-bills, GICs and savings accounts will be slowly eroded by inflation, the silent killer.”
Some industry experts say the aversion to stocks may last a generation. Goldring rejects this view, pointing to record equity inflows in the early weeks of 2013.
But “these positive signs don’t make up for the [long-term] problem facing the retirement and financial health of Canadians.”
For Canadians to have better financial futures, “Compulsory [savings] seems extreme, but we are facing an extreme issue,” he says. “If we are serious about getting Canadians to save and invest earlier in their lives, we should consider all options.”
Compulsory savings programs have enjoyed enormous success in Australia, Chile and Singapore.
Read: Fewer Canadians will retire at 66
The role of financial education, too, can’t be underestimated. Goldring is disappointed that Canadians “spend far more time planning their next vacation” than planning for their retirements.
He’s also concerned about the growing trend of DIY investing and stresses financial advice as an indispensable tool to empower Canadians.
The investment fund industry needs to do a better job of connecting the dots between mutual funds, associated fees, and the advisory services.
“We need to remind investors that the mutual fund, along with a healthy and long-term relationship with a financial advisor, remains the most democratic investment vehicle for the average retail investor,” says Goldring. And the industry “needs to fully understand [investors’] risk tolerances and risk capacities, which is the amount of risk they need to assume to reach their goals.”
Investment firms and professionals who fail to help clients succeed should not be in business, he adds.