While stable, solid, secure and diversified are still core givens in the highwire strategizing of wealth management, there are some changes happening.
Recent factors like the economy, inflation, financial flux, personal priorities and lifestyle trends like post-retirement careers are rejigging wealth management perspectives, approaches, as well as needs and expectations.
Experts caution that it can get daunting and confusing. Canadian investors are facing ongoing complexities in the global market, making investment decisions more challenging, while Canadian investors face growing complexity across formerly traditional wealth management priorities.
According to the 2023 EY Global Wealth Research Report about current Canadian wealth management trending, almost half of Canadians feel their investing needs have become more complicated over the last number of years. The finding is amplified among younger demographics, specifically Millennials, and those who already feel financially unprepared to meet their goals.
Retirement planning stands out, with 18 per cent more Canadians than their global peers saying the process has increased in complexity since 2021. As a result, today’s wealth management clients are shaking up traditional strategies.
The Report also cites that 45 per cent of Canadians are planning to switch or add new providers to uncover additional sources of value. “They are reversing a trend of consolidation that we’ve seen for the past number of years and are diversifying their assets across multiple providers and a broader array of products,” notes Dave Inglis, EY Canada associate partner, Wealth & Asset Management. “But one fact is consistent and for sure. Most Canadians still prefer in-person interactions for a range of services.”
Calgary wealth advisors underscore the effects of spiked inflation, the transformational impact of technology, aging, longevity and the growing trend of post-retirement work. Some things never change. Despite sophisticated technology, wealth management continues to rely on the critical professional and personal touch.
“Wealth management is becoming much more accessible to the mass market than it was before, and there is a lot of easy to access information out there,” notes Brett Phare, market lead and senior private wealth specialist with CWB Financial Group, the Alberta-based bank made up of 10 banking, lending, wealth and trust companies and serving clients both in Western Canada and in other provinces.
“Clients still want in-person, high-touch experiences and relationships. The harder the economic environment, the more clients will gravitate towards the advisor model. When markets go up, everyone can make money, because a rising tide lifts all boats. When the markets are down, that’s where the good wealth management firms and advisors shine. It’s easy to text, call, email, but going into turbulent times, clients will need the extra reassurance of being able to physically see and interact with their advisors.”
He adds that, although clients do show a willingness to engage in more virtual collaborations, more than half of Canadians would rather carry out account openings in person or through digital collaboration like video chat. They also prefer in-person discussions for agenda items including investment management, managing portfolios, or receiving advice on products, market trends and ongoing account management like general account updates and changes.”
Life expectancy and longevity are positive but unchangeable facts of life. They also significantly affect wealth management trends and decisions. Currently, about one-third of the population (about 12.7 million people) is between their mid-30s and late-50s – the prime working years. And the stats are undisputable. Canadians are living longer. Approximately 425,000 Canadians reach the traditional retirement age (65) every year.
For the first time, seniors now outnumber children in Canada. There are nearly seven million Canadians 65 and over, compared to six million Canadians 14 and under. The forecast that, by 2031, more than 25 per cent of Canadians will be over the age of 65, is a particularly relevant factor for effective wealth management in 2024.
The trends are unmistakable. The perception about retirement is evolving. More and more people are viewing retirement not as a complete exit from workforce, but as a transition to different type of work, influencing how people approach wealth management and emphasizing flexibility and adaptability.
Savvy financial advisors point out that the trend of delayed retirement or working post-retirement can shape individual’s attitudes towards wealth management, by influencing risk tolerance, investment choices and overall financial planning strategies.
“The uncertainty of the economy and heightened inflation has encouraged more people to engage in some type of work after they formally retire,” explains Stephanie Mann, AVP and private wealth specialist with CWB. “Extended careers like consulting, directorship or part-time work and other opportunities, with no planned end dates.
“As a result, people are looking for diverse investment strategies to secure their financial future in times of economic uncertainty as well as prolonged careers. We notice clients maintaining a more growth-oriented investment portfolio for longer than ever before. And since income is usually not a priority in the early years of retirement, planning a growth-oriented portfolio is often appropriate.”
Wealth management professionals emphasize the impact of inflation on wealth management planning. “It is an absolute must. Longevity must factor-in the important speedbump of inflation. When inflation rises, the value of money decreases,” she says.
Because Canada is now facing the impact of the highest rate of inflation in over 40 years, and since inflation is acknowledged as one of the biggest risks to retirement savings, Mann urges extra caution when deciding on an experienced and qualified wealth manager to protect and grow portfolios through proper diversification and asset allocation.
“Inflation has always been something we factor in when building our clients’ wealth strategies,” CWB’s Brett Phare points out. “Inflation is causing people to become more actively involved in their financial planning. They want to be aware of what their wealth strategy is and how it is going to outpace inflation, because inflation is eroding savings. It is draining resources.
Added to the wealth management impacts of inflation, as well as longevity and post-retirement work, today’s investors, analysts, and advisors are unanimous. Technology continues to be transformational for the art and science of wealth management.
Investor appetite for virtual advisor interactions has exploded, particularly since the start of the pandemic. The EY Report tracks that, in 2021, only 12 per cent of investors identified virtual consultations as their preferred advice channel. This figure now stands at over 40 per cent, rivaling in-person for the most preferred channel for planning and advice activities.
According to the Report, a large proportion of Canadian investors now expect to work with multiple providers by 2025, to support better performance and diversification. In fact, the EY numbers project that 40 per cent of investors are willing to increase or maintain their use of digital service providers – specifically FinTechs and digital asset offerings – in the next three years, to unlock the value they are looking for.
Many money experts suggest that 2024 is the year of new dynamics for wealth management.
Dave Inglis emphasizes, “Effective wealth management is a process that requires continuous evaluation, adjustment and alignment with an individual’s evolving financial circumstances and goals. He highlights some key elements, including clear goals and objectives, holistic planning (looking beyond investments and considering all aspects of financial well-being like budgeting, saving, taxes, insurance, estate planning and risk management), professional guidance, diversification and discipline.
The economy, inflation and technology combined with the trend of delayed retirements and post-retirement work are changing attitudes about wealth management. It is also triggering professional consensus that, from economic conditions to societal shifts, wealth management strategies need to be flexible, adaptive and comprehensive to address new multifaceted challenges and opportunities.
