Scotiabank poll finds that while Canadians think nobody’s saving, the vast majority are, the next challenge is turning savings into wealth
Canadians think that nobody else is saving, when almost everyone is. A recent Scotiabank poll found that while 28 per cent of Canadian believe that people save consistently each month, 71 per cent of Canadians with savings or investment accounts are contributing to them on at least a monthly basis. That number rises to 73 per cent for Gen X and 78 per cent for Gen Z and Millennials, despite the fact that these generations are in the most financially squeezed life stage, when kids, housing, family care, all put pressure on incomes. For Kingsley Chak, SVP of Retail Deposits and Investments at Scotiabank, the fact that Canadians are saving despite these pressures is heartening. He believes it offers a new opportunity for advisors.
Saving is one thing, but building wealth is something different. Chak explained how understanding the pressures that Canadians, especially younger Canadians, are still under can help advisors connect with and serve this growing client base. He takes their consistent monthly contributions as evidence that this client base will continue to grow more valuable for advisors and argues that helping them navigate their saving and spending pressures now can result in deep client relationships in the future.
“Millennials and Gen X are being squeezed by their life stage, starting a family, building their careers, but they want to save. They are about their financial pressure but they’re under pressure,” Chak says. “Those are the clients who need personalized financial advice. The discussion is probably less about the type of investment they need to get the highest return, it’s more about how they make the trade off between the things they need and want today and what they need in the future. That’s where folks want more help.”
Understanding pressure on client savings
The Scotiabank poll made a point of grasping exactly why Canadians feel pressure on their decision to save each month. 71 per cent of Millennials and Gen X said that the cost of living and every day expenses are major obstacles to their savings. A further 32 per cent of Millennials cite debt repayment as a big obstacle, the highest rate of any of the generations surveyed.
Chak believes that understanding these pressures is key to helping these generations of clients. Advisors need to reckon with the high cost of housing and the significant debt that people take on to own a home in a major Canadian city. They need to understand that these generations don’t necessarily have the pension access that their parents or grandparents did, making retirement savings a greater source of pressure. Chak notes, too, that advisors should try to understand what these clients are saving for, the time horizon of their goals, and the prospects that they have for turning monthly saving into meaningful wealth building.
Turning savings habits into wealth
Chak admits that the survey didn’t explore how much was being saved each month by those Canadians making consistent contributions. He emphasized, however, that the consistency of savings can form the foundation of greater wealth building. He says that advisors can play an instrumental role in turning savings into wealth through appropriate portfolio selection and discussions about the rates of return needed to achieve short, medium, and long-term goals.
Many of the savings accounts that Canadians contribute to don’t necessarily pay out rates that would even begin to match the pace of inflation. While Chak believes advisors can help with allocations to faster growing or higher yielding securities for long-term investment, he also calls attention to a new savings account from his bank which offers an everyday return rate of 2.2 per cent, which he says is ideally suited for emergency funds and other cash savings.
While advisors are incentivized to chase more established and wealthier clients with more assets to invest upfront, Chak believes that these cohorts of more pressured Canadians who still want to save can be a valuable client base. He likens the time advisors spend with those clients to portfolio diversification, saying that these clients should be viewed as a long-term investment. He notes that these clients typically don’t come with the high-touch complexity of more affluent investors, but that setting them up with a robust plan can help create a new wealthy client to serve down the road. There’s an opportunity, he says, in connecting with the young Canadians who want to save.
“The younger generations are actually super interested in savings and they're doing it,” Chak says. “There’s a lot of information out there that they’re reading and learning from, but having a trusted voice to cut through all that noise and give them advice is important. Providing that in-person advice that people can trust is more important than ever.”
