With every RRSP season comes another survey stating that Canadians still aren’t planning for retirement. The latest report, which was put out by TD Waterhouse, says a mere 14% of those surveyed have a retirement plan, while less than one-third have even attempted to determine what they’ll need to retire comfortably.
“It feels like I’m out there beating a drum,” says Patricia Lovett-Reid, TD Waterhouse’s senior vice-president. “The people I’m speaking to want that emotional and financial connection to retirement, but I just don’t think we’re there yet.”
Despite 87% of people owning an RRSP, Lovett-Reid says a main reason boomers aren’t saving is that they’re in denial about their impending retirement. She also says that the barrage of commercials aimed at clients is pushing people away. “Scare tactics don’t work,” she says. “The commercials sometimes force people to become skeptical of the whole concept. This isn’t a money grab by financial institutions; this is really something we need to face and need to take a hold of.”
Not only are people not saving, but they are less confident now than in 2007 about their financial futures. Only 73% of respondents said they are at least “somewhat confident” about their retirement finances, as opposed to 84% the year before.
Lovett-Reid chalks up the falling number to the current market volatility. She says advisors should talk to clients about long-term goal setting and not make rash moves in the short term.
But advisors need to do a lot more than calm fears about upset markets, says Robert Abboud, president of Orleans, Ont.-based Wealth Strategies. He puts the blame for the dearth of retirement planning squarely on the shoulders of advisors. “I blame the financial services industry for this,” he reveals. “Retirement planning should be part of the basic service that people get when they walk into a local bank.”
He says coming up with a financial projection, which would reveal what a person needs to save each month for retirement, takes 10 minutes at the most. All advisors need to do is utilize free software and plug in things like when their clients want to retire, how much they’ll need to live on each month and how much money they have. Add on inflation and rate of return, and advisors should be able to determine what their clients need to save.
So why aren’t advisors taking the 10 minutes to create a projection? Abboud says its laziness. “It surprises me the little bit of work people wish to do in our industry,” he says. “It’s easier to collect revenue on investments than spend time working on a financial plan.”
While Abboud’s clients all have financial plans now, they didn’t when they came to see him for the first time. He says that in 16 years of business, he’s never once been handed a financial plan from a new client. “It’s unbelievable,” he says. “I have to put this back on advisors. We’re very well paid — on average 1% of everything we manage — so we have to add this to our base.”
Lovett-Reid doesn’t go as far as Abboud in blaming advisors, but she does say that those in the profession need to take their existing practices a step further. “We have to start talking about whole life plans before we even talk about the numbers. When you do that, it becomes future value calculations, which becomes easy to calculate.”
She adds that advisors are the “coaches that help them make it happen” but that clients have to assume some responsibility as well.
But Abboud says clients shouldn’t be expected to know what to do when it comes to retirement. “If we go see a doctor, and he doesn’t tell us to watch out for this or don’t eat that, we wouldn’t know to do it. It’s the same with financial services.”
Even with a simple retirement projection, many Canadians will still have trouble saving. A new Vanier Institute of the Family survey says that total household debt is, on average, $80,000 and that 200,000 more Canadians are poor today than in 1990.
“It’s hard to focus on savings when you’re under a pile of debt,” says Lovett-Reid. “But at some point or another, you have to retire whether you want to or not.”
Abboud agrees that we’re in the midst of a “spendemic,” but part of what’s driving that is if people don’t know how much they need to save for retirement, they’ll just end up spending their extra cash. “People are in a drunken spending spree,” he says. “So if no one ever tells them to save $600 a month, they’re just going to spend the money.”
And that’s the big problem with advisors and, more specifically, bank advisors. When someone walks into the bank to put $1,000 on an RSP, no one recommends paying down a credit card instead, even though that might benefit the client more than a plan contribution.
“Debt’s got to go before retirement savings,” says Abboud. “Banks don’t tell clients that either. [They don’t say] ‘Wouldn’t you rather use the $1,000 to pay that credit card off?’ We don’t ask enough questions, and I generally lay it squarely on our industry.”