Checking in with New Brunswick: Economy, compliance and pensions

Checking in with New Brunswick: Economy, compliance and pensions

Checking in with New Brunswick: Economy, compliance and pensions

It can be hard to know what to think about the constant stream of economic reports that flow through the mediasphere each week. There are so many, they sometimes seem at odds.

Consider last week: A public policy analyst at a think tank suggested the New Brunswick economy is barrelling toward bankruptcy. Another report from BMO, released the same week, suggestes the province will return to growth by late 2014 before rising to 1.7% by 2015.

What to think? Is the economy doing well, or not?

To answer the question WP put in a call to New Brunswick financial advisor, Barry Dennis, principal of Dennis Financial. He understands the see-saw nature of the provincial economy.  

“Not too bad, not too good,” he says, when asked if the economy was doing well. “It’s doing well for those who are doing well.”

As is the nature of east coast provincial economies there is a growing divide between private sector folks who are struggling to save for retirement and those with government jobs who enjoy protected, defined benefit pension plans. Anyone who lives in one of the east coast economies will understand the problem—there is a real and growing divide between those who have good guaranteed pensions and the rest.

“I think there is a growing resentment. You can see that,” says Dennis. “Whether it will turn into a backlash, I don’t know.”

But Dennis is dealing with the kinds of issues that any advisor across the country are familiar with. Interest rates are low, and that means conservatively invested portfolios are not doing well. This is leading to worries about future retirement wealth. “The ones who have gone to market have done okay. But those who didn’t take any risk, they’re falling behind,” says Dennis. “KYC. You have to do what they say. But I worry about my clients.”

According to the experts the challenges in the region will only mount in the years ahead. Richard  Saillant, a former vice-president of the Université de Moncton, recently released a book suggesting the province is headed for bankruptcy. “[the] Median New Brunswicker right now is about 44 years old. Twenty-five years ago, the median New Brunswicker was like 24 years old. Whereas 20 years from now, it will be golden age." According to Saillant the growing costs of an agining population will see the province's net debt, now about $11 billion, jump to $62 billion by 2035.

Adding a new level of complexity for those trying to solve the retirement puzzle are the new rules around CRM2 coming into play this spring. Dennis mentions the new compliance efforts, wonders if the new costs of compliance are not about to fall fully on the advisor. If there is one link in the chain between product and client already desperate to maintain a positive cash flow, it is the advisor. “There is so much talk about CRM2, which is at the advisor level…I accept that. But there is no talk about fees. Assante, IPC, these are the firms doing all the compliance. I’ve been thinking about this the last couple of weeks. I’ve been calling it a deflection,” he says. “All the focus is on the firms, but what about the manufacturers? Are they getting a free pass?”

Very good point: Any comments?