As the industry continues to examine whether an advice gap exists in Canada among mass market households, a new poll finds that a significant proportion of middle-income households aren’t working with financial advisors, with negative results.
The Primerica survey found that one in three middle-income Americans say credit card debt is their biggest financial concern. Williams says many families use credit cards to supplement their income. Because money is tight, they focus on just making the minimum payment. That is a big mistake.
No insight is offered, however, on why the lack of access exists. (Trust isn’t the issue: in line with other research, the poll revealed overwhelming trust in the information provided by financial professionals.)
What is clear is that the lack of access to professional advice is a problem. The poll found that 61% have made at least one costly financial decision, with an average loss of $29,000. Also, about half (47%) fear they aren’t saving enough for retirement.
Most of those surveyed who haven’t seen a financial professional believe they would benefit from seeing one (75%), and they’re likely right. The poll found that client outcomes are better for those who receive financial advice.
“It’s just a matter of understanding what they need to do,” Williams says. “What type of coverage? What amount of coverage? Ten times of the breadwinner’s income is what is needed to replace the income in the event of death.”
For example, 56% of middle-income Canadians who hadn’t met with financial professionals had also never invested their savings. Of those who had met with a financial professional, only 22% had failed to invest.
Further, a greater proportion of those who met with a financial professional scored a C or higher on various financial behaviours, such as saving and investing, relative to those who didn’t (82% versus 54%).
Working with a financial professional might be particularly important considering Canadians’ low rates of financial literacy. The survey found that only one-third of middle-income Canadians feel confident with general concepts such as saving and budgeting, and fewer than two in 10 could explain the concept of compound interest or how to invest in a financial product.
For more details, read the Primerica report.
About the poll: Conducted by Golfdale Consulting in February 2019, the online survey polled a representative sample of 1,000 Canadians aged 18 and older with household incomes between $20,000 and $100,000. All data was weighted to Canada Census (2016) based on age, gender and region. The margin of error is about 3%.