Getting fixed-income planning right may be the biggest challenge – and responsibility – for advisors if the prediction of a zero per cent overnight rate comes true.
“With interest rates low, people will feel more comfortable spending and for clients on a fixed-income, it also changes the way we (will have to) think about long-term planning,” Scott Plaskett, an advisor with Ironshield Financial Planning, told WP. “GICS might carry too much risk so something like whole life insurance or the multi-strategy portfolio might be better for clients in retirement, or those who are disabled and rely on fixed income. “
Plaskett’s comments come after David Wolf, a former Bank of Canada advisor and portfolio manager with Fidelity Investments, predicted that Canada’s central bank will eventually join some of its global counterparts in cutting interest rates to zero in order to revive sagging economic output.
With weak oil prices, record levels of household debt and a weak dollar that still cannot draw global business investment, Wolf believes that Canada, the world’s 11th largest economy, will eventually join the pack of developed countries at a zero per cent interest rate.
“There’s a reason why rates are zero just about everywhere else in the developed world,” Wolf suggested in an article with the Financial Post, adding that zero per cent rates will eventually happen; it’s inescapable.
John DeGoey, a portfolio manager at Burgeonvest Bick Securities Ltd, said that while he wouldn’t go so far as to say “zero” is inevitable, he expects rates to continue to go down, not up anytime soon.
“Inescapable is a little too strong for my taste but if you look at global numbers combined with the fact there’s been no inflation, I expect rates (in Canada) to gradually go down as a result.”