Famous for being traditional, risk-averse and Canada-first, the nation’s investors have followed a very predictable path for generations. But those days are changing, says one leading investment analyst.
“It is a culture and Canadians are learning,” says Annamaria Testani, vice president, national sales for National Bank Investments
. “And over time we will be trending as most other countries on a home country bias.”
That can be attributed to education, Testani told WP
, as historically Canadians have proven to be risk-averse when it comes to investments.
“Should your clients have a stronger percentage of U.S. (investments) in there? Absolutely,” says Testani. “And that is something that we as Canadians – who have the strongest home-bias in equities of any nation – need to understand.”
Contributing to the cautiousness is growing up in a fixed-income environment, she says.
“If you are making your 10%-12% in fixed income – you’re not doing bad; you’re doing very well,” says Testani. “Unfortunately those days are gone, and you need to adapt to realize that you aren’t going to get those kinds of returns today.”
What may speed the move to expanding investment horizons is the transfer of wealth that is happening on an ever-increasing scale – and where that wealth is being directed.
“There is a lot more attention given to the transfer of wealth than there was 20 years ago,” says Testani. “Before, I could say when my parents were considering a transfer of wealth, it was just from them to me. Today, they are looking at me and saying, ‘You’re not going to get any – it is just going to go to your kids.’”
Another factor is that with the children being successful, many are considering donations to charity – which has more tax advantages for the estate than 20 years ago.
“There are strategies that you can implement today,” she says citing the group created by Warren Buffett for billionaires, where the only stipulation is that they give away half of their wealth to charity.
“In an interview, he said that he was surprised by how many billionaires he called that were not comfortable with that. How can you not live on $500 million?” asks Testani. “And he’s right. People are now starting to realize that there legacy is important.”
And that trend should only increase.
“Millennials are already very much in tune with that. Their concern with the environment, children – they are very sensitive to the overall health of society. The evolution of the investment platforms has to accommodate for the different needs; not just planning for retirement.”
“We have to evolve to cater to the customer that is constantly evolving,” says Testani. “It behooves an advisor to extend the services of what they offer, and step away from that monoline of ‘I just do this.’ That’s no longer enough. Robo advisors can do that.”