Individual and macroeconomic analyses show long-term increases in wealth, GDP, and retirement savings
Financial advice positively impacts individual efforts to save, as well as the broader economy, according to a new report released by the Investment Funds Institute of Canada (IFIC).
The study, titled Saving for the Future: Impacts of Financial Advice on the Canadian Economy and produced by the Conference Board of Canada, shows how increased savings from financial advice enable Canadians to be retirement-ready and help strengthen the country’s economy.
“This research demonstrates the important long-term benefits of saving money with the guidance of a financial advisor,” said IFIC President and CEO Paul Bourque.
Based on a comparison of two hypothetical savers – one who works with a financial advisor and one who doesn’t – the Conference Board found that getting financial advice could result in a 55% to 60% increase in retirement savings. It also estimated that compared to their unadvised counterparts, Canadians working with advisors have more retirement income, allowing them to spend 23% to 25% more during retirement.
The report also confirmed that advice plays an important role in the broader economy. To determine this, the Conference Board analysed a hypothetical case in which 10% of individuals who did not use to have a financial advisor started a relationship with one, thus increasing their savings rate. Using its national forecasting model, the Board quantified the impacts of the increase in savings over a period from 2020 through 2060.
It estimated that by 2060, the increased savings from having 10% more Canadian investors working with a financial advisor would lead to an increase in household wealth amounting to $2 billion; a rise in GDP of $900 million; and $7 billion more in tax contributions.
“Saving for retirement involves making small changes that have a significant impact over time,” said Sheila Rao, principal research associate at The Conference Board of Canada. “While higher savings means less spending in the short term, in the long run we see an increase in consumption, more business investment, and increased output.”