Distrust a hurdle to sound retirement planning

By Vikram Barhat | February 23, 2012 | Last updated on February 23, 2012
3 min read

As the 2011 RRSP deadline draws closer, there seems to be an alarming spike in data that points to Canadians’ confusion and lack of confidence about retirement planning.

Desjardins Financial Security’s 2012 Retirement survey provides yet more evidence that Canadians are skeptical about financial institutions and advisors and therefore are more likely to view retirement planning as confusing and difficult.

These Canadians also tend to have lower incomes, smaller savings and are less likely to seek financial information, the study noted. They are, for these reasons, more likely to have a dim view of their own financial security.

The opposite is true for those respondents who had the highest levels of confidence in institutions and advisors.

“This widespread lack of trust in financial institutions and advisors is not surprising, given the financial market instability of the last several years,” said André Langlois, vice-president marketing and product development, individual insurance and savings at Desjardins. “But by allowing this scepticism to create such profound disengagement, these respondents are putting their futures in jeopardy.”

Langlois suggests that this cohort of Canadians needs support to turn their situation around.

“The survey results clearly demonstrate that the more informed you are about financial planning, the more confidence you have in financial institutions, and the more successful you are at planning your future. This is why financial literacy is so important,” he said.

Some of the key findings of the survey reveal that those with the lowest levels of confidence in financial advisors are more confused by retirement planning (60.7%) and less engaged in retirement planning (56.5% engagement) than those with the highest level of confidence (28.4% and 92%, respectively.)

Distrust in advisors was also found to be associated with a lack of confidence among 39.7% of the participants’ in their ability to make enough money to live comfortably during retirement compared to 75.5% of those with the highest level of trust in financial advisors.

Negative articles in the mainstream media often fuel peoples’ concerns and make them doubt the integrity of financial experts, says Michael Aziz, regional vice-president of individual insurance product sales at Desjardins Financial Security. As a result, many Canadians lose out on sound financial advice and resources that are readily available.

“[Many Canadians] are trying to meet their day-to-day needs that they can’t think of retirement,” said Aziz. “They need an advisor to sit down with them and find out where they can take some of their assets, cash or income and put it towards their [retirement] goal.”

People need to be educated so they can make informed decisions.

“They don’t understand OAS or how CPP works; who will qualify and who’ll be clawed back. They don’t understand their funeral needs or long-term care needs. People are not educated, they are losing out and when they lose out, society loses out.”

One of the ways advisors can help some of the less affluent clients is through seminars, which Aziz says is an effective use of advisors’ time. “They can get more people in the room, educate them and work with people who are willing to seek help, without scaring them.”

Part of the blame for the lack of trust, he says, goes to advisors’ lack of soft skills.

“Advisors ought to work with their clients [by] being sympathetic and empathetic to their needs and understanding where they are coming from and their challenges. It’s about asking the right questions and showing them there’s a bright light [at the end of the tunnel].”

Aziz also calls for rigorous licensing requirements as a way to counter the growing negative view clients have of advisors and banks. “We need to be a professional group [with specialized training] so when clients know they are dealing with a trained professional. We need to have a scoring system like doctors.”

Read: What kind of planner are you?

The good news is that regardless of a person’s age or situation, sound financial information is available. “It’s never too late to start making positive changes,” said Langlois.

Vikram Barhat