Canada losing top G7 position, time to put clients’ money abroad?

Canada losing top G7 position, time to put clients’ money abroad?

Canada losing top G7 position, time to put clients’ money abroad?

Canada looks set to lose its top position among the Group of Seven industrial nations as, for the first time since the global financial crisis, the country won’t be leading the pack in terms of economic growth. Are your clients prepared?

Canada’s May GDP growth last week came in at a weaker than expected 0.2% in the month. In addition, Capital Economics issued a forecast suggesting that Canada would fall behind the U.S., Japan and possibly Germany in terms of growth with a meager 1.5% this year and an even softer 1% in 2014, as the country's over-built housing market moves from soft to crash landing.

Home-country bias is a phenomenon in every market, however it’s a tendency that may have been reinforced among Canadians given the country’s relatively solid performance since 2008. Investor sentiment survey regularly show that Canadians are strongly optimistic about their home market   even though advisors tend to believe growth will be stronger outside the country.

Jan Fraser of Jan Fraser and Partners in Winnipeg said she has already been encoutraging her clients to look for investments outside the country.

“I think that our clients are already quite well diversified and have a good portion of their investments outside the country,” said Fraser. “I don’t think this will change our recommendations or inclinations; we started in 2010 to really encourage [investment outside of Canada].”

Although many advisors have been guiding their clients into overseas markets, for some others client preference for domestic securities takes precedence.

“{My clients] are looking at the numbers and what they see all around them even in their own businesses and they see that things are slowing down to next to nothing,” said Robert Crandall of Jones Gabel and Co. in Fredericton, N.B. “I feel it’s prudent to be very cautious – it doesn’t help my own income, but it’s their money and they’ve worked hard for it, so if that’s what they feel comfortable with then so be it.”

Crandall says that with growth slowing in New Brunswick, clients are looking to keep their investments in highly liquid and secure instruments.

“I believe that people are keeping their cards close to their chest and keeping a lot of cash and short-term money on hand,” said Crandall. “We only go with companies that they really understand and that they feel comfortable with; for the Unites States, there is only so long that they can print new money and they’re still having new layoffs in the US.”

Have you found it challenging to get clients to diversify? Sound off in the comments.