The value of financial advice has gotten a much-needed leg-up as strong evidence has emerged linking financial planning to emotional well-being.
An online study involving 7,300 English-speaking Canadians proves there are tangible benefits for those who're engaged in compressive financial planning. The results of the study, commissioned by the Financial Planning Standards Council (FPSC), were revealed at a Financial Planning Week event in Toronto.
Comprehensive financial planning benefits people both financially and emotionally, said Tamara Smith, VP, marketing and consumer affairs, FPSC. "In Canada its need has never truly been easy to prove," said Smith. "With this in mind, we developed a comprehensive study to evaluate Canadians financial planning activities and to measure the impact of financial planning or lack thereof on peoples' lives."
While the study clearly establishes the benefits of planning, what may be surprising is just how profound these results are and the relationship between financial planning and emotional well-being of Canadians, regardless of their age or net worth.
"There is real empirical evidence that Canadians engaged in financial planning are far better off that those who are not," said Smith. "The study revealed those who were doing no financial planning were almost twice as likely to feel the stress of feeling that they barely get by every month."
Those lacking a financial plan are also twice as likely to feel their finances are out of control. The negative impact financial stress can have on Canadians' lives, their health and their relationships has been well-documented.
"Canadians with comprehensive financial planning are almost three times as likely to feel they do not gave to worry about money than those who're doing nothing."
Those with comprehensive financial plans feel they are better prepared to deal with financial emergencies and manage through difficult economic times, this according to the study. Integrated financial planning is also said to instill confidence about reaching a wide spectrum of life goals and affords a better understanding of individual financial needs.
"These results further underscore how salient comprehensive financial planning can be for one's financial and emotional well-being and not just in good times but particularly through the tougher times as Canadians have recently experienced," said Smith.
For the first time since the early 70s, Canadians' personal saving rates are at an all time low, yet as debt soars these folks stand out. "Those that are engaged in a planning report have better saving habits than those who don't have a plan."
Those with a plan are saving for a variety of things that are important to them. The same goes for those saving for retirement and emergency situations.
"Canadians who engage in comprehensive financial planning are more than twice as likely to be saving for their retirement," said Smith adding they are also almost twice as likely to be saving for an emergency fund. "It is important to note these Canadians are saving for both short and long-term goals. They are balancing their needs and wants, and finding the right mix of living for today as well as saving for tomorrow.
People who are wealthier tend to be more optimistic about their finances. "Of course, we also know that the wealthier you are the more likely you are engaged in financial planning in a meaningful way."
The survey evaluated the results of high-net worth participants separately to eliminate net worth as a potential influencer. One of the key findings from this study reveals that regardless of the net worth, financial planning tended to increase optimism and confidence.